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What changed in Take-Two Interactive's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Take-Two Interactive's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+484 added−400 removedSource: 10-K (2023-05-26) vs 10-K (2022-05-17)

Top changes in Take-Two Interactive's 2023 10-K

484 paragraphs added · 400 removed · 297 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+18 added−27 removed35 unchanged
Biggest changeRockstar Games continues to expand on our established series by developing sequels, offering downloadable episodes, and additional content. Rockstar Game's titles are published across all key platforms, including Mobile. 2K. Our 2K label has published a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports and family/casual entertainment.
Biggest changeOur 2K label has published a variety of popular entertainment properties across all key platforms and across a range of genres including shooter, action, role-playing, strategy, sports, and family/casual entertainment. In recent years, 2K has expanded its offerings to include several new franchises that are expected to diversify its slate of games and provide opportunities for sequels and post-launch monetization.
("Sony") PlayStation®4 ("PS4") and PlayStation5 ("PS5"), Microsoft Corporation ("Microsoft") Xbox One® ("Xbox One") and Xbox Series X|S ("Xbox Series X|S"), and Nintendo's Switch TM ("Switch"), as well as personal computers ("PC"), and mobile, including, smartphones and tablets ("Mobile"). We deliver our products through physical retail, digital download, online platforms, and cloud streaming services. Our website address is www.take2games.com.
("Sony") PlayStation®4 ("PS4") and PlayStation5 ("PS5"), Microsoft Corporation ("Microsoft") Xbox One® ("Xbox One") and Xbox Series X|S ("Xbox Series X|S"), and Nintendo's Switch TM ("Switch"), as well as personal computers ("PC"), and mobile, including, smartphones and tablets. We deliver our products through physical retail, digital download, online platforms, and cloud streaming services. Our website address is www.take2games.com.
Specific efforts we take include company-sponsored service projects in the communities in which we operate; providing financial and other support to organizations working to eradicate social and racial injustice as well as providing educational, athletic, and other opportunities to underserved communities; working with organizations to support the rights of the LGBTIQ community; endeavoring to expand the diversity of our industry’s candidate pool through scholarships to minority game design students and contributions to organizations providing STEM opportunities to children in underserved communities; delivering interview training and career counseling to young adults in those same communities; and celebrating cultural differences through various employee affinity groups and company events and offerings.
Specific efforts we take include company-sponsored service projects in the communities in which we operate; providing financial and other support to organizations working to eradicate social injustice as well as providing educational, athletic, and other opportunities to underserved communities; working with organizations to support the rights of the LGBTIQ+ community; endeavoring to expand the diversity of our industry’s candidate pool through scholarships to minority game design students and contributions to organizations providing STEM opportunities to children in underserved communities; delivering interview training and career counseling to young adults in those same communities; and celebrating cultural differences through various employee affinity groups and company events and offerings.
We also provide a comprehensive benefits package that includes traditional offerings, such as medical, dental vision, retirement, disability, accident and life insurance, prescription drugs, and leaves, and also includes programs such as well-being, fitness reimbursement, mental health benefits, mental health awareness training for Human Resources personnel and managers throughout the Company, and charitable giving with a company match.
We also provide a comprehensive benefits package that includes traditional offerings, such as medical, dental vision, retirement, disability, accident and life insurance, prescription drugs, and leaves, and also includes programs such as well-being, 7 fitness reimbursement, mental health benefits, mental health awareness training for Human Resources personnel and managers throughout the Company, and charitable giving with a company match.
We regularly review our compensation and benefits packages from both an internal and external standpoint to ensure competitiveness, including through industry benchmarking analysis. We seek to link compensation (including annual changes in compensation) 7 to our overall and business unit performance, as well as each individual’s contribution to the results achieved.
We regularly review our compensation and benefits packages from both an internal and external standpoint to ensure competitiveness, including through industry benchmarking analysis. We seek to link compensation (including annual changes in compensation) to our overall and business unit performance, as well as each individual’s contribution to the results achieved.
The agreements require us to submit products to Microsoft for approval and to make royalty payments to Microsoft based on the number of units manufactured or revenue from digitally downloaded content. In addition, products for the Xbox consoles are required to be manufactured by Microsoft-approved manufacturers.
The agreements require us to submit products to Microsoft for approval and to make royalty 4 payments to Microsoft based on the number of units manufactured or revenue from digitally downloaded content. In addition, products for the Xbox consoles are required to be manufactured by Microsoft-approved manufacturers.
From time to time, we also receive marketing support from hardware manufacturers in connection with their own promotional efforts. 5 We market titles by: • Implementing public relations campaigns, using social, digital, online, television, outdoor, and print marketing, including certain performance marketing programs.
From time to time, we also receive marketing support from hardware manufacturers in connection with their own promotional efforts. We market titles by: • Implementing public relations campaigns, using social, digital, online, television, outdoor, and print marketing, including certain performance marketing programs.
Games are generally shipped within two to three weeks of receipt of our purchase order and all materials. 4 Our software titles typically carry a 90-day limited warranty.
Games are generally shipped within two to three weeks of receipt of our purchase order and all materials. Our software titles typically carry a 90-day limited warranty.
The competition is intense among an increasing number of newly introduced entertainment software titles and hardware for adequate levels of shelf space and promotional support. • Other forms of entertainment such as motion pictures, television, social networking, online computer programs, and other forms of entertainment, which may be less expensive or provide other advantages to consumers.
The competition is intense among an increasing number of newly introduced entertainment software titles and hardware for adequate levels of shelf space and promotional support. • Other forms of entertainment such as motion pictures, television, social networking, online computer applications, and other forms of entertainment, which may be less expensive or provide other advantages to consumers.
We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto , Max Payne , Midnight Club , Red Dead Redemption , and other popular franchises, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment.
We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto , LA Noire , Max Payne , Midnight Club , Red Dead Redemption , and other popular franchises, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment.
We believe that Rockstar Games has established a uniquely original, popular cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 375 million units worldwide.
We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 395 million units worldwide.
Diversity, Equity, and Inclusion. We firmly believe that diverse teams are more valuable and effective, and that diversity is key to our success. We are committed to enhancing workforce diversity at Take-Two, and we strive to provide an inclusive workplace in which everyone feels respected, heard, and safe.
We firmly believe that diverse teams are more valuable and effective, and that diversity is key to our success. We are committed to enhancing workforce diversity at Take-Two, and we strive to provide an inclusive workplace in which everyone feels respected, heard, and safe.
The term of the agreement, as amended, expires on March 31, 2023, with automatic one-year renewal terms thereafter (unless one party gives the other notice of termination). Sony may terminate the agreement for any or no reason upon 30 days’ notice.
The term of the agreement, as amended, expires on March 31, 2024, with automatic one-year renewal terms thereafter (unless one party gives the other notice of termination). Sony may terminate the agreement for any or no reason upon 30 days’ notice.
The term of Xbox 360 Agreement expires on March 31, 2023, and the term of the Xbox Next Gen Agreement expires on March 31, 2023, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).
The term of Xbox 360 Agreement expires on March 31, 2024, and the term of the Xbox Next Gen Agreement expires on March 31, 2024, each with automatic one-year renewal terms thereafter (unless one party gives the other advance notice of non-renewal).
Segment and Geographic Information We have one operating and reportable segment. See Notes 1 , 2 , and 9 to our Consolidated Financial Statements. 6 Human Capital Human Capital Management. One of Take-Two’s most important assets is our people.
Segment and Geographic Information We have one operating and reportable segment. See Notes 1 , 2 , and 8 to our Consolidated Financial Statements. Human Capital Human Capital Management. One of Take-Two’s most important assets is our people.
Leverage Emerging Technologies, Platforms, and Distribution Channels, Including Digitally-Delivered Content. Interactive entertainment played online and on Mobile, presents opportunities to enhance our growth and profitability. In addition, the interactive entertainment software industry is delivering a growing amount of content for traditional platforms through digital download.
Leverage Emerging Technologies, Platforms, and Distribution Channels, Including Digitally-Delivered Content. Interactive entertainment, played online and on mobile, presents significant opportunities to enhance our growth and profitability. In addition, the interactive entertainment software industry is delivering the majority of content for traditional platforms through digital download.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including the Company) file electronically with the SEC. The SEC's website is www.sec.gov . Strategy Overview.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information that issuers (including the Company) file electronically with the SEC.
We have 6,042 employees working in game development in studios around the world, including some of the most well-known names in the business. The creative teams at Rockstar Games and 2K are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
We have 8,894 employees working in game development in studios around the world, including some of the most well-known names in the business. The creative teams at Rockstar Games, 2K, Private Division, and Zynga are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
As of March 31, 2022, we had a research and development staff of 6,042 employees with the technical capabilities to develop software titles for all major consoles, PCs, and mobile platforms in multiple languages and territories.
As of March 31, 2023, we had a research and development staff of 8,894 employees with the technical capabilities to develop software titles for all major consoles, PCs, and mobile platforms in multiple languages and territories.
In addition, we were included on Fortune’s Great Places to Work list for the past three years and were recently honored by Gay Gaming Professionals in 2021 as a DEI&B leader in the interactive entertainment industry. Compensation and Benefits.
In addition, we were included on Fortune’s Great Places to Work list in 2020, 2021, and 2022 and were recently honored by Gay Gaming Professionals in 2021 as a DEI&B leader in the interactive entertainment industry. Compensation and Benefits.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and establish an online gaming presence, especially in China and South Korea. 2K has secured a multi-year license from the NBA to develop an online version of our NBA simulation game in China, Taiwan, South Korea and Southeast Asia.
We are continuing to execute on our growth initiatives in Asia, where our strategy is to build on our licensing relationships and also broaden the distribution of our existing products and expand our online gaming presence, especially in China and South Korea. 2K has secured a multi-year license from the NBA to develop an online version of our NBA simulation game in China, Taiwan, Hong Kong, and Macau.
With 7,799 full-time employees as of March 31, 2022, of which 3,812 were employed outside of the United States, we are constantly focused on our teams – their success, their structure and how best to support them given their particular needs and projects. 47% of our employees are located in North America, 37% in Europe, and 16% in the Asia-Pacific region; 77% of our employees are focused on product development.
With 11,580 full-time employees as of March 31, 2023, of which 7,064 were employed outside of the United States, we are constantly focused on our teams – their success, their structure, and how best to support them given their particular needs and projects. 46% of our employees are located in North America, 37% in Europe, and 17% in the Asia-Pacific region; 77% of our employees are focused on product development.
We also distribute our titles, add-on content, and in-game purchases through direct digital download to consoles and PCs, including smartphones and tablets.
We also distribute our titles, add-on content, and in-game purchases through direct digital download to consoles, PCs, and mobile devices.
We work hard to ensure that development opportunities are individually tailored and that all decisions regarding hiring, career progression, and compensation are based on qualifications, work ethic, and job performance. Beyond formal performance management, we check in with our teams throughout the year with global town hall meetings, "pulse" surveys, culture assessments and team qualities and values workshops.
We work hard to ensure that development opportunities are individually tailored and that all decisions regarding hiring, career progression, and compensation are based on qualifications, work ethic, and job performance. Beyond formal performance management, we stay connected with our teams throughout the year with global town hall meetings, engagement and "pulse" surveys, culture assessments and employee round tables.
Our product investment review process 2 includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles.
Our product investment review process includes reviews of each project at various stages of development by our executive management team and the senior management of our publishing labels and also includes coordination between our sales and marketing personnel before the launch of titles. This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles.
The latest installment, Grand Theft Auto V , has sold-in over 160 million units worldwide and includes access to Grand Theft Auto Online . Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 40 million units worldwide to date.
Our most recent installment, Grand Theft Auto V , which was released in 2013, has sold-in over 180 million units worldwide and includes access to Grand Theft Auto Online . Red Dead Redemption 2 , which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 50 million units worldwide to date.
This disciplined approach to product investment is expected to enhance the competitiveness and profitability of our titles. We develop our products using a combination of our internal development teams and external development resources acting under contract with us. We typically select external developers based on their track record and expertise in developing products in the same category or genre.
We develop our products using a combination of our internal development teams and external development resources acting under contract with us. We typically select external developers based on their track record and expertise in developing products in the same category or genre.
We expect 2K to continue to develop new, successful franchises in the future. 2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Mafia , Sid Meier's Civilization , and XCOM series. 2K also publishes externally developed franchises such as Borderlands . 2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, and PGA TOUR 2K . 2K has announced a multi-year partnership with the National Football League encompassing multiple future video games that will be non-simulation football game experiences. 2K also publishes mobile titles, such as WWE SuperCard .
We expect 2K to continue to develop new, successful franchises in the future. 2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock , Mafia , Sid Meier's Civilization , and XCOM franchises. 2K also publishes externally developed franchises such as Borderlands and Tiny Tina's Wonderlands . 2K's realistic sports simulation titles include our flagship NBA 2K series, which continues to be the top-ranked NBA basketball video game, the WWE 2K professional wrestling series, and PGA TOUR 2K .
Private Division. Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher and owner of Kerbal Space Program and OlliOlli World . Kerbal Space Program 2 is planned for release in fiscal year 2023. Private Division also released The Outer Worlds and Ancestors: The Humankind Odyssey .
Private Division. Our Private Division label is dedicated to bringing titles from the industry's leading creative talent to market and is the publisher, developer, and owner of Kerbal Space Program and OlliOlli World . Kerbal Space Program 2 was released for early access in fiscal year 2023.
We continue to engage in evolving business models such as online gaming, virtual currency, add-on content, and in-game purchases, and we expect to continue to generate incremental revenue from these opportunities. Rockstar Games. Software titles published by our Rockstar Games label are primarily internally developed.
We continue to engage in evolving business models such as online gaming, virtual currency, add-on content, and in-game purchases, and we expect to continue to generate incremental revenue from these opportunities. We also generate revenue from advertising within our software products. Rockstar Games.
While we retain title to all intellectual property, in some regions, local publishers, under license agreements, are responsible for localization of software content, distribution, and marketing of the products in their respective local markets. We intend to continue to build on our licensing relationships and also continue to expand on distribution strategies to grow our international business.
While we retain title to all intellectual property, in some regions, local publishers, under license agreements, are responsible for localization of software content, distribution, and marketing of the products in their respective local markets.
NBA 2K Online , our free-to-play NBA simulation game that is based on the console edition of NBA 2K , which was co-developed by 2K and Tencent, is the top online PC sports game in China with over 56 million registered users. We have released two iterations of NBA 2K Online and continue to enhance the title with new features.
Our first such title, NBA 2K Online , a free-to-play NBA simulation game based on the console edition of NBA 2K , 2 which was co-developed by 2K and Tencent, is the top online PC sports game in China with over 60 million registered users.
Despite the challenges of the ongoing pandemic, creativity and innovation remained two of the core tenets of our organization and the lifeblood of our ongoing success. The creative teams at our labels are renowned for their consistent ability to deliver games that set new benchmarks for excellence.
Our hybrid approach to the workplace, where appropriate, enables our continued focus on creativity and innovation as two of the core tenets of our organization and the lifeblood of our ongoing success. The creative teams at our labels are 6 renowned for their consistent ability to deliver games that set new benchmarks for excellence.
In certain international markets, we also provide volume rebates to stimulate continued product sales. • Employing various other marketing methods designed to promote consumer awareness, including social media, in-store promotions and point-of-purchase displays, direct mail, cooperative advertising, attendance at trade shows as well as product sampling through demonstration software distributed via the Internet or the digital online services.
In certain international markets, we also provide volume rebates to stimulate continued product sales. • Employing various other marketing methods designed to promote consumer awareness, including social media, in-store promotions and point-of-purchase displays, direct mail, cooperative advertising, attendance at trade shows as well as product sampling through demonstration software distributed via the Internet or the digital online services. • We have been able to build a large community of players, particularly for mobile titles, through players discovering of our games in platform storefronts, the viral and social features built into the network effects of our games, as well as the cross-promotion of our games to our existing audience.
We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games. Our products are currently designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc.
General We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, Private Division, and Zynga. Our products are currently designed for console gaming systems, including, but not limited to, the Sony Computer Entertainment, Inc.
We view digital distribution as an important growth opportunity for our industry and Company; however, we expect that packaged goods and traditional retailers will continue to be a significant channel for the sale of our console products for the foreseeable future.
We view digital distribution as an important growth opportunity for our industry and Company; however, we expect that packaged goods and traditional retailers will continue to be an important channel for the sale of our console products for the foreseeable future, particularly in connection with the release of certain titles for consoles or certain regions where digital distribution is not as well established.
Marketing Our marketing and promotional efforts are intended to maximize consumer interest in our titles, promote brand name recognition of our franchises, assist retailers and properly position, package and merchandise our titles.
Marketing Our marketing and promotional efforts are intended to acquire new users, maximize consumer interest in our titles, promote brand name recognition of our franchises, assist retailers and to properly position, package and merchandise our titles. Marketing is particularly important for our mobile titles to build a large community of players.
We also publish an expanding variety of titles for Mobile, which are delivered to consumers through digital download. We will continue to invest in emerging opportunities in mobile and online gameplay, particularly for our wholly-owned franchises, as well as downloadable content and microtransactions that enable gamers to pay to download additional content to enhance their game playing experience.
Virtually all of our products are available through direct digital download (from websites we own or third-party websites). We will continue to invest in emerging opportunities in mobile and online gameplay, particularly for our wholly-owned franchises, as well as downloadable content and microtransactions that enable gamers to pay to download additional content to enhance their game playing experience.
Sales to our five largest customers during the fiscal year ended March 31, 2022, accounted for 79.0% of our net revenue, with Sony and Microsoft each accounting for more than 10.0% of our net revenue during the fiscal year ended March 31, 2022.
We are dependent on a limited number of customers that account for a significant portion of our sales. Sales to our five largest customers during the fiscal year ended March 31, 2023, accounted for 79.6% of our net revenue, with Sony, Google, Apple, and Microsoft each accounting for more than 10.0% of our net revenue.
We have established a portfolio of proprietary software content for the major hardware platforms in a wide range of genres, including action, adventure, family/casual, role-playing, shooter, sports and strategy, which we distribute worldwide.
Most of our intellectual property is internally owned and developed, which we believe best positions us financially and competitively. We have established a portfolio of proprietary software content for the major hardware and mobile platforms in a wide range of genres, including action, adventure, family/casual, hyper-casual, role-playing, shooter, social casino, sports, and strategy, which we distribute worldwide.
Focus on Core Strength of Producing High Quality Titles. We focus on publishing a number of high-quality titles based on internally owned and developed intellectual properties. We and our subsidiaries currently own the intellectual property rights to 30 proprietary brands. In addition, we selectively develop titles based on licensed properties, including sports leagues, and also publish externally developed titles.
We currently own the intellectual property rights to 44 proprietary brands. In addition, we selectively develop titles based on licensed properties, including sports leagues, and also publish externally developed titles.
Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., Ubisoft Entertainment S.A., and Embracer Group AB. • Sony, Microsoft, and Nintendo for the sale of interactive entertainment software.
Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., Embracer Group AB, Playrix, Playtika, Roblox, Scopely, Tencent, and Ubisoft Entertainment S.A. We also expect new competitors to enter the market and existing competitors to allocate more resources to develop and market competing games and applications. • Sony, Microsoft, and Nintendo for the sale of interactive entertainment software.
Manufacturing Platform manufacturers, such as Sony, Microsoft, and Nintendo, either manufacture or control the selection of approved manufacturers of software products sold for use on their respective hardware platforms.
In addition, we license and include console manufacturer technology in our products on a non-exclusive basis, which allows our games to be played on their respective hardware systems. Manufacturing Platform manufacturers, such as Sony, Microsoft, and Nintendo, either manufacture or control the selection of approved manufacturers of physical copies of software products sold for use on their respective hardware platforms.
We have internal development studios located in Australia, Canada, China, Czech Republic, Hungary, India, Serbia, South Korea, Spain, the United Kingdom (U.K.), and the United States (U.S.).
Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs. We have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom (U.K.), and the United States (U.S.).
Due to COVID-19's continued impact, this past year was a challenging one for our employees, and, given the largely remote working environment, we continued programs to make sure our people felt supported in their roles, including enhanced manager training to help strengthen teams despite the physical distance, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they could and spending a lot of time listening to employee feedback.
In that vein, we are continuing existing programs and identifying others to ensure our people feel supported in their roles, including enhanced manager training to help strengthen teams despite the varied approaches to working, broadening our wellness and mental health offerings, encouraging people to step away from their screens when they can and spending a lot of time listening to employee feedback and encouraging employees to collaborate in person where appropriate and effective.
The feedback generated through these tools helps to ensure we are providing a supportive, dynamic, and stimulating work environment for all of our employees. These efforts and more contributed to Take-Two being named one of The Wall Street Journal’s Best Managed US Companies and included in Forbes' Best Mid-Size Employers list four years in a row, beginning in 2018.
These efforts and more contributed to Take-Two being named one of The Wall Street Journal’s Best Managed US Companies in 2018, 2019, and 2020, and included in Forbes' Best Mid-Size Employers list in 2019, 2021, and 2022.
We attempt to protect our software and production techniques under copyright, patent, trademark, and trade secret laws as well as through contractual restrictions on disclosure, copying, and distribution. We also enter into content license agreements, such as those with sports leagues, players associations, music labels and musicians.
We believe that content ownership facilitates our internal product development efforts and maximizes profit potential. We attempt to protect our software and production techniques under copyright, patent, trademark, and trade secret laws as well as through contractual restrictions on disclosure, copying, and distribution.
T2 Mobile Games T2 Mobile Games includes Socialpoint, Playdots, and Nordeus, which publish popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising. T2 Mobile Games' titles include Dragon City , Monster Legends , Two Dots , and Top Eleven .
Private Division also previously released The Outer Worlds and Ancestors: The Humankind Odyssey . 3 Zynga. Our Zynga label, which includes our former T2 Mobile Games label (which included Socialpoint, Playdots, and Nordeus) publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising.
For the fiscal years ended March 31, 2022, 2021 and 2020, we earned 40.1%, 40.2% and 42.5%, respectively, of our net revenue outside the United States.
Competition for our titles is influenced by the timing of competitive product releases and the similarity of such products to our titles. International Operations International sales are a significant part of our business. For the fiscal years ended March 31, 2023, 2022 and 2021, we earned 37.2%, 40.1% and 40.2%, respectively, of our net revenue outside the United States.
Rockstar Games confirmed that active development for the next entry in the Grand Theft Auto franchise is well underway with more details to be shared over time. Rockstar Games is also well known for developing brands in other 3 genres, including the LA Noire , Bully, and Manhunt games.
Rockstar Games confirmed that active development for the next entry in the Grand Theft Auto franchise is well underway with more details to be shared over time. Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and additional content. Rockstar Games' titles are published across all key platforms, including mobile. 2K.
We sell our products globally and have sales operations in Australia, Canada, France, Germany, Japan, the Netherlands, New Zealand, Singapore, South Korea, Spain, Taiwan, the United Kingdom, and the United States. We are dependent on a limited number of customers that account for a significant portion of our sales.
Sales We sell software titles both digitally and physically through direct relationships with digital storefronts and platform partners, large retail customers, and third-party distributors. We sell our products globally and have sales operations in Australia, Canada, France, Germany, Japan, the Netherlands, Singapore, South Korea, Spain, Taiwan, the United Kingdom, and the United States.
We focus on building compelling entertainment franchises by publishing a select number of titles for which we can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases. Most of our intellectual property is internally owned and developed, which we believe best positions us financially and competitively.
Rockstar Games' strategy is to develop a limited number of titles that are known for their quality and longevity in the market for which they can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases. Software titles published by our Rockstar Games label are primarily internally-developed.
Whether expanding our portfolio of franchises, launching new intellectual property, or providing innovative ways for audiences to remain captivated and engaged, we prioritize producing the highest quality entertainment experiences. We support our teams by focusing on talent acquisition and retention, and our label structure enables us to target distinct market segments and opportunities.
We support our teams by focusing on talent acquisition and retention, and our label structure enables us to target distinct market sectors and opportunities. Focus on Core Strength of Producing High Quality Titles. We focus on publishing a number of high-quality titles based on internally owned and developed intellectual properties.
In addition, Private Division is dedicated to bringing titles from top independent developers to market, and T2 Mobile Games further enhances our development capabilities with a track record of producing multiple hits in the free-to-play mobile sector.
In addition, Private Division is dedicated to bringing titles from top independent developers to market. Our teams balance the art and science of game making by combining creative innovation with a player-centric, data driven approach to delight players.
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Item 1. Business Recent Developments Pending Acquisition. On January 9, 2022, we entered into a definitive merger agreement to acquire Zynga Inc. ("Zynga"), a leading developer of mobile games.
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Item 1. Business Recent Developments Zynga Acquisition. On May 23, 2022, we completed our acquisition of Zynga Inc. ("Zynga"), a global leader in interactive entertainment that develops, markets, and operates social games as live services played on mobile platforms, with a mission to connect the world through games. Refer to Note 2 0 - Acquisitions for additional information.
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Under the terms and subject to the conditions of the merger agreement, Zynga stockholders will receive $3.50 in cash and a number of shares of our common stock equal to the exchange ratio for each share of Zynga common stock outstanding at the closing.
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Also, in connection with the Zynga Acquisition, we entered into several debt transactions (refer to Note 11 - Debt ). Subsequent to our fiscal year end, in April 2023, we issued additional bonds and paid off our Term Loan (refer to Note 2 1 - Subseq uent Events ).
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The transaction is valued at $9.86 per share of Zynga common stock based on the market closing as of January 7, 2022, implying an enterprise value of $12.7 billion.
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The SEC's website is www.sec.gov . 1 Strategy Overview. Our strategy is to be the most creative, innovative, and efficient company in the evolving interactive entertainment industry. With our diverse portfolio that spans all key platforms and numerous genres, we strive to create the highest quality, most engaging interactive entertainment franchises and captivate our global audience.
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The transaction includes a collar mechanism on the equity consideration, so that if the volume weighted average price ("VWAP") of Take-Two common stock on the Nasdaq Global Select Market for the consecutive period beginning at 9:30 a.m. New York time on the twenty-third trading day immediately preceding the closing date of the transaction and concluding at 4:00 p.m.
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We have released two iterations of NBA 2K Online and continue to enhance the title with new features. We are also a direct publisher in Japan and South Korea.
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New York time on the third trading day preceding such closing date is in a range from $156.50 to $181.88, the exchange ratio would be adjusted to deliver total consideration of $9.86 per Zynga share.
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Our Businesses We derive substantially all of our revenue from the sale of our interactive entertainment content, which includes the sale of internally developed software titles and software titles developed by third parties, the sale of in-game virtual items and advertising, and live services on console, PC, and mobile.
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If the VWAP of our common stock for the period noted in the prior sentence exceeds the higher end of that range the exchange ratio would be 0.0350 per share, and, if the VWAP is below the lower end of that range, the exchange ratio would be 0.0406 per share.
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In March 2020, 2K announced a multi-year partnership with the National Football League encompassing multiple future video games that will be non-simulation football game experiences. 2K also publishes mobile titles, including WWE SuperCard . We have expanded our relationship with the NBA through the NBA 2K League , a groundbreaking competitive gaming league jointly owned by us and the NBA.
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The transaction, which is currently anticipated to close on Monday, May 23, 2022, is subject to approval by Take-Two and Zynga stockholders and the satisfaction of the other customary closing conditions.
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Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft launch and worldwide launch based on the achievement of various milestones and KPI thresholds.
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In connection with the transaction, on April 14, 2022, we completed our offering and sale of $2.7 billion aggregate principal amount of our senior notes, consisting of $1.0 billion principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600 million principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600 million principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”) and $500 million principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Notes”).The Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).
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Zynga's diverse portfolio of popular game franchises has been downloaded more than 6 billion times, including CSR Racing , Dragon City , Empires & Puzzles , FarmVille , Golf Rival , Harry Potter: Puzzles & Spells , Merge Dragons , Merge Magic , Monster Legends , Toon Blast , Top Eleven , Toy Blast , Two Dots , Words With Friends , Zynga Poker , and a high volume of hyper-casual mobile titles, including Fill the Fridge!, Parking Jam 3D , Pressure Washing Run , and Pull the Pin .
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The Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300%. The 2025 1 Notes mature on April 14, 2025 and bear interest at an annual rate of 3.550%.
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Zynga is also an industry-leading next-generation platform with the ability to acquire new users, cross-promote games, apply live services content updates, and optimize programmatic advertising and yields at scale through Chartboost, its leading mobile advertising and monetization platform. Intellectual Property Our business is highly dependent on the creation, acquisition, licensing, and protection of intellectual property.
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The 2027 Notes mature on April 14, 2027 and bear interest at an annual rate of 3.700%. The 2032 Notes mature on April 14, 2032 and bear interest at an annual rate of 4.000%. We will pay interest on the 2024 Notes semiannually on March 28 and September 28 of each year, commencing September 28, 2022.
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We also enter into content license agreements, such as those with sports leagues, players associations, copyrighted fictional characters and entertainment brands, car manufacturers, music labels, and musicians. These licenses are typically limited to the use of the licensed rights in products for specific time periods.
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We will pay interest on each of the 2025 Notes, 2027 Notes and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022. General We are a leading developer, publisher and marketer of interactive entertainment for consumers around the globe.
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We also sell advertising within a number of our games. Our advertising offerings provide creative ways for marketers and advertisers to reach and engage with our players and are generally essential for our free-to-play titles.
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We endeavor to be the most creative, innovative, and efficient company in our industry. Our core strategy is to capitalize on the popularity of video games by developing and publishing high-quality interactive entertainment experiences across a range of genres.
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Our advertising offerings include banner and interstitial advertisements, engagement advertisements and offers in which players can participate in watch-to-earn engagements or other offer engagements, branded virtual items and sponsorships that integrate relevant advertising and messaging within game play, and advertising networks through which we offer a unified advertising platform that includes a demand side platform and supply side platform, as well as mediation capabilities.
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We provide a variety of digitally-delivered products and offerings, which typically have a higher gross margin than physically-delivered products. Virtually all of our titles that are available through retailers as packaged goods products are also available through direct digital download (from websites we own or third-party websites).
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However, we also acquire our players through paid 5 advertising channels. We advertise our mobile games primarily within other mobile applications and on social networks, often through in-app and other advertising partners such as Facebook and Google. As of March 31, 2023, we had a sales and marketing staff of 1,336 people.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

127 edited+113 added−30 removed189 unchanged
Biggest changeSummary of Risk Factors Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to: Risks relating to our business and industry • Results of operations may be impacted by COVID-19 • Our industry is highly competitive • Uncertainty of achieving market acceptance, delays or disruptions for our products may have an adverse effect • We face development risks and must adapt to changes in software technologies • Increased competition for retailer support could increase expenses • Increasing importance of digital sales exposes us to risks of that business model • Our ability to develop successful products for current video game platforms • We require approval of hardware licensors to publish titles • Potential adverse impact of inadequate consumer data protection • Potential adverse impact of security breaches • Dependence on key management and product development personnel • Offensive consumer-created content can harm our results of operations or reputation • We rely on software development arrangements with third parties • Reliance on channel partners to distribute our games on their platforms • Increasing importance of free-to-play games exposes us to the risks of that business model • Our acquisitions and investments may not have the anticipated results • International operations risks • Connectivity issues could affect our profitability and online services • Reliance on complex information technology systems and networks • The loss of server capacity or lack of sufficient bandwidth could cause our business to suffer • Use of open-source software exposes us to risks • Our software is susceptible to errors • The continued ability to acquire and maintain license to intellectual property is key • We may experience fluctuations in the recurring portion of our business • Uncertainty of expansion into new products and services • We are dependent on the timing of our product releases • We are dependent on the future success of our Grand Theft Auto products and other “hit” titles • Adverse effects of price protection, returns, and used game sales • A limited number of customers account for a significant portion of our sales 8 • Content policies could negatively affect sales • Entertainment Software Rating Board ratings for our products could negatively affect our ability to distribute and sell • The competitive position and value of our products could be adversely affected by unprotected intellectual property • Contractual covenants can place certain limitations on our business Risks related to legal or regulatory compliance • Government regulation of the internet can affect our business • Legislation could limit the retail market of our products • Failure to comply with laws and regulations, including data privacy, could harm our business • Adverse effect of alleged or actual infringement on the intellectual property rights of third parties Risks related to financial and economic condition • Provisions in our charter documents and debt agreements may impede or discourage a takeover • Adverse effects of changes in tax rates and additional tax liabilities • We are subject to risks and uncertainties of international trade, including foreign currency fluctuations • Potential adverse effects of existing or future accounting standards • Adverse effects of declines in consumer spending and changes in the economy General Risk Factors • Additional issuances of equity securities would cause dilution and could affect the market price of our common stock • We are subject to risks related to corporate and social responsibility and reputation • Climate change may have a long-term impact on our business • We may be adversely affected by the effects of inflation Risks Related to our Pending Acquisition of Zynga • The Zynga acquisition may not be completed • The Zynga acquisition presents risks before and after closing Risks relating to our business and industry Our results of operations may be materially adversely impacted by the coronavirus pandemic (COVID-19).
Biggest changeSummary of Risk Factors Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to: Risks relating to our business and industry • Results of operations may be impacted by COVID-19 • Our industry is highly competitive • Uncertainty of achieving market acceptance, delays or disruptions for our products may have an adverse effect • We face development risks and must adapt to changes in software technologies • Increased use of mobile devices for gaming will drive future growth of mobile gaming • Increased competition for retailer support could increase expenses • Our ability to develop successful products for current video game platforms • We require approval of hardware licensors to publish titles • Reliance on complex information technology systems and networks and potential adverse impact of security breaches • Potential adverse impact of inadequate consumer data protection • Dependence on key management and product development personnel • Attracting, managing, and retaining our talent is critical to our success • Offensive consumer-created content can harm our results of operations or reputation • We rely on software development arrangements with third parties • Increasing importance of digital sales and free-to-play games exposes us to the risks of that business model • We must compete for advertisements and offers that are incorporated into our free-to-play games • Our acquisitions and investments may not have the anticipated results • International operations risks • The loss of server capacity, lack of sufficient bandwidth, or connectivity issues could cause our business to suffer • Use of open-source software exposes us to risks • Our software is susceptible to errors • The continued ability to acquire and maintain license to intellectual property is key • We may experience fluctuations in the recurring portion of our business • Uncertainty of expansion into new products and services • We are dependent on the timing of our product releases • We are dependent on the future success of our Grand Theft Auto products and other “hit” titles • Adverse effects of price protection, returns, and used game sales • A limited number of customers account for a significant portion of our sales • Content policies could negatively affect sales • Entertainment Software Rating Board ratings for our products could negatively affect our ability to distribute and sell • The competitive position and value of our products could be adversely affected by unprotected intellectual property • We have a significant amount of outstanding debt • The value of our virtual items is highly dependent on how we manage the economies in our games • There is potential for unauthorized or fraudulent transactions of accounts and virtual items outside of our games 8 Risks related to legal or regulatory compliance • Government regulation of the internet can affect our business • Legislation could subject us to claims or otherwise harm our business • Failure to comply with laws and regulations, including data privacy, could harm our business • Adverse effect of alleged or actual infringement on the intellectual property rights of third parties Risks related to financial and economic condition • Provisions in our charter documents and debt agreements may impede or discourage a takeover • Adverse effects of changes in tax rates and additional tax liabilities • We are subject to risks and uncertainties of international trade, including foreign currency fluctuations • Potential adverse effects of existing or future accounting standards • Adverse effects of declines in consumer spending and changes in the economy General Risk Factors • Additional issuances of equity securities would cause dilution and could affect the market price of our common stock • We are subject to risks related to corporate and social responsibility and reputation • Climate change may have a long-term impact on our business • We may be adversely affected by the effects of inflation • We are and may become involved in legal proceedings that may result in adverse outcomes Risks relating to our business and industry Our results of operations may be materially adversely impacted by the coronavirus pandemic (COVID-19).
Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to rapid technological changes affecting software development, such as cloud-based game streaming, and evolving business models, such as free-to-play and subscription-based access to a portfolio of interactive content, to stay competitive.
Additionally, in order to stay competitive, our internal development studios must anticipate and adapt to rapid technological changes affecting software development, such as cloud-based game streaming, and evolving business models, such as free-to-play and subscription-based access to a portfolio of interactive content.
Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in countries where practices which violate such laws may be customary, will not take actions in violation of our policies.
Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all our employees, contractors and agents, as well as those companies to which we outsource certain of our business operations, including those based in countries where practices which violate such laws may be customary, will not take actions in violation of our policies.
We are subject to certain privacy and data protection laws, including those in the U.S. Certain activities related to processing the personal data of individuals in the E.U. are conducted by our U.K.-based data controller or our local entities in the E.U. The U.S.
We are subject to certain privacy and data protection laws, including those in the U.S. Certain activities related to processing the personal data of individuals in the U.K. and E.U. are conducted by our U.K.-based data controller or our local entities in the E.U. The U.S.
Further, random digital item mechanics may become subject to regulations in various jurisdictions.
Further, random digital item mechanics may become subject to further regulations in various jurisdictions.
Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should the ultimate tax liability exceed estimates, our income tax provision and net income or loss could be materially affected.
Additionally, tax determinations are regularly subject to audit by tax authorities, and developments in those audits could adversely affect our income tax provision. Should the ultimate tax liability exceed estimates, our income tax provision and net (loss) income or loss could be materially affected.
Even if we do succeed in acquiring or investing in a business, intellectual property or other asset, such acquisitions and investments involve a number of risks, including: • retaining key employees and maintaining the key business and customer relationships of the businesses we acquire; • cultural challenges associated with integrating employees from an acquired company or business into our organization; • the possibility that the combined company would not achieve the expected benefits, including any anticipated operating and product synergies, of the acquisition as quickly as anticipated or that the costs of, or operational difficulties arising from, an acquisition would be greater than anticipated; • the potential for the acquired business to underperform relative to our expectations and the acquisition price; 14 • unexpected tax consequences from the acquisition, or the tax treatment of the acquired business's operations going forward, giving rise to incremental tax liabilities that are difficult to predict; • significant acquisition-related accounting adjustments, particularly relating to an acquired company's deferred revenue, that may cause reported revenue and profits of the combined company to be lower than the sum of their stand-alone revenue and profits; • significant accounting charges resulting from the completion and integration of a sizable acquisition and increased capital expenditures, including potential impairment charges incurred to write down the carrying amount of intangible assets generated as a result of an acquisition; • the possibility that significant acquisitions, when not managed cautiously, may result in the over-extension of our existing operating infrastructures, internal controls and information technology systems; • the possibility that we will not discover important facts during due diligence that could have a material adverse effect on the value of the businesses we acquire, including the possibility that a change of control of a company we acquire triggers a termination of contractual or intellectual property rights important to the operation of its business; • the need to integrate an acquired company's accounting, management information, human resource and other administrative systems to permit effective management and timely reporting, and the need to implement or remediate controls, procedures and policies appropriate for a public company in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies; • litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of, an acquisition, including claims from terminated employees, customers or other third parties; and • to the extent that we engage in strategic transactions outside of the U.S., we face additional risks, including risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. • the need to implement controls, procedures and policies appropriate for a larger, U.S.-based public company at companies that prior to acquisition may not have as robust controls, procedures and policies, particularly, with respect to the effectiveness of cyber and information security practices and incident response plans, compliance with data privacy and protection and other laws and regulations protecting the rights of players and customers, and compliance with U.S.-based economic policies and sanctions which may not have previously been applicable to the acquired company’s operations.
Even if we do succeed in acquiring or investing in a business, intellectual property or other asset, such acquisitions and investments involve a number of risks, including: • retaining key employees and maintaining the key business and customer relationships of the businesses we acquire; • cultural challenges associated with integrating employees from an acquired company or business into our organization; • the possibility that the combined company would not achieve the expected benefits, including any anticipated operating and product synergies, of the acquisition as quickly as anticipated or that the costs of, or operational difficulties arising from, an acquisition would be greater than anticipated; • the potential for the acquired business to underperform relative to our expectations and the acquisition price; • unexpected tax consequences from the acquisition, or the tax treatment of the acquired business's operations going forward, giving rise to incremental tax liabilities that are difficult to predict; • significant acquisition-related accounting adjustments, particularly relating to an acquired company's deferred revenue, that may cause reported revenue and profits of the combined company to be lower than the sum of their stand-alone revenue and profits; • significant accounting charges resulting from the completion and integration of a sizable acquisition and increased capital expenditures, including potential impairment charges incurred to write down the carrying amount of intangible assets generated as a result of an acquisition; • the possibility that significant acquisitions, when not managed cautiously, may result in the over-extension of our existing operating infrastructures, internal controls and information technology systems; • the possibility that we will not discover important facts during due diligence that could have a material adverse effect on the value of the businesses we acquire, including the possibility that a change of control of a company we acquire triggers a termination of contractual or intellectual property rights important to the operation of its business; • the need to integrate an acquired company's accounting, management information, human resource and other administrative systems to permit effective management and timely reporting, and the need to implement or remediate controls, procedures and policies appropriate for a public company in an acquired company that, prior to the acquisition, lacked these controls, procedures and policies; • litigation or other claims in connection with, or inheritance of claims or litigation risks as a result of, an acquisition, including claims from terminated employees, customers or other third parties; and • to the extent that we engage in strategic transactions outside of the U.S., we face additional risks, including risks related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. • the need to implement controls, procedures and policies appropriate for a larger, U.S.-based public company at companies that prior to acquisition may not have as robust controls, procedures and policies, particularly, with respect to the effectiveness of cyber and information security practices and incident response plans, compliance with data privacy and protection and other laws and regulations protecting the rights of players and customers, and compliance with U.S.-based economic policies and sanctions which may not have previously been applicable to the acquired company’s operations.
While we anticipate growth in this area of our business, consumer demand is difficult to predict as a result of a number of factors, 18 including satisfaction with our products and services, our ability to provide engaging products and services, third parties offering their products and services within our subscription, partners that provide, or don’t provide, access to our subscription, products and services offered by our competitors, reliability of our infrastructure and the infrastructure of our partners, pricing, the actual or perceived security of our and our partners information technology systems and reductions in consumer spending levels.
While we anticipate growth in this area of our business, consumer demand is difficult to predict as a result of a number of factors, including satisfaction with our products and services, our ability to provide engaging products and services, third parties offering their products and services within our subscription, partners that provide, or don’t provide, access to our subscription, products and services offered by our competitors, reliability of our infrastructure and the infrastructure of our partners, pricing, the actual or perceived security of our and our partners information technology systems and reductions in consumer spending levels.
These third-party networks, as well as our own internal systems and websites, and the related security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our 12 customers' information or our data — including our intellectual property and other confidential business information — or our information technology systems.
These third-party networks, as well as our own internal systems and websites, and the related security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and result in someone obtaining unauthorized access to our customers' information or our data, including our intellectual property and other confidential business information, or our information technology systems.
Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments. We face risks from our international operations.
Any of the foregoing factors could harm our financial condition or prevent us from achieving improvements in 18 our financial condition and operating performance that could have otherwise been achieved by us on a stand-alone basis. Our stockholders may not have the opportunity to review, vote on or evaluate future acquisitions or investments. We face risks from our international operations.
Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse effect on our business, financial condition and operating results.
Furthermore, uncertainty and adverse changes in the economy could also increase the risk of material losses on our investments, increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts, any of which could have a material adverse 30 effect on our business, financial condition and operating results.
While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately apply to us could have an adverse impact on our business. 24 We are subject to risks and uncertainties of international trade, including fluctuations in the values of local foreign currencies against the dollar.
While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately apply to us could have an adverse impact on our business. We are subject to risks and uncertainties of international trade, including fluctuations in the values of local foreign currencies against the dollar.
Certain of our customers may decline to carry products containing mature content. The loss of our relationships with principal customers or a decline in sales to principal customers, including as a result of a product being rated "AO" (age 18 and over), could materially adversely affect our business, financial condition, and operating results.
Certain of our customers may decline to 22 carry products containing mature content. The loss of our relationships with principal customers or a decline in sales to principal customers, including as a result of a product being rated "AO" (age 18 and over), could materially adversely affect our business, financial condition, and operating results.
If we or these third parties are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business, financial condition and operating results.
If we or these third parties are subject to data security breaches, we may have a loss in sales or increased costs arising from the restoration or implementation of additional security measures which could materially and adversely affect our business, 13 financial condition, and operating results.
We have entered into agreements with third parties to acquire the rights to publish and distribute interactive entertainment software as well as to use licensed intellectual properties in our titles. These agreements typically require us to make development payments, pay 13 royalties, and satisfy other conditions.
We have entered into agreements with third parties to acquire the rights to publish and distribute interactive entertainment software as well as to use licensed intellectual properties in our titles. These agreements typically require us to make development payments, pay royalties, and satisfy other conditions.
In some instances, we may have to modify our products in order to market them under the target 20 rating, which could delay or disrupt the release of our products. In addition, some of our titles may not be sold at all or without extensive edits in certain countries.
In some instances, we may have to modify our products in order to market them under the target rating, which could delay or disrupt the release of our products. In addition, some of our titles may not be sold at all or without extensive edits in certain countries.
While we believe that we can reliably estimate price protection and returns, 19 if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results.
While we believe that we can reliably estimate price protection and returns, if price protection and return rates for our products exceed our reserves, our revenue could decline, which could have a material adverse effect on our business, financial condition, and operating results.
Although we have implemented and continue to develop programs reasonably designed to prevent such negative impacts, the abuse or exploitation of our virtual economies can include the illegitimate generation and sale of virtual items in black markets.
Although we have implemented and continue to develop programs reasonably designed to prevent such negative impacts, the abuse or exploitation of our virtual economies can include the illegitimate generation and sale of accounts and/or virtual items in black markets.
Such events could decrease the demand for our products and services, make it difficult or impossible for us to 15 deliver products and services to certain of our customers, or result in restrictions in trade, all of which could negatively affect our business.
Such events could decrease the demand for our products and services, make it difficult or impossible for us to deliver products and services to certain of our customers, or result in restrictions in trade, all of which could negatively affect our business.
For example, certain of our 2K products include rights licensed from major sports leagues and players' associations. Similarly, some of our other titles are based on licenses of popular entertainment products. Competition for these licenses is intense.
For example, certain of our 2K products include rights licensed from major sports leagues and players' associations. Similarly, some of our other titles are based on licenses of popular products and entertainment brands. Competition for these licenses is intense.
The extent to which COVID-19 has an impact on our business, operations, or financial results will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic; economic activity and related actions taken in response to the pandemic; the effect on consumer demand for our products and the discretionary spending patterns of our customers, including the ability of our customers to pay for our products; our ability to develop, market, and sell our products, including as a result of travel restrictions and people working from home; the impact on the operations of our counterparties, including the physical retail, digital download online platforms, and cloud streaming services we rely on for the distribution of our products, the suppliers who manufacture our physical products, and other third parties with which we partner (e.g. to market or ship our products); any closures of our, our customers', and counterparties' offices and facilities; additional volatility in exchange rates; the impact of potential inflation; and the impact of reductions in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio.
The extent to which COVID-19 has an impact on our business, operations, or financial results will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic; economic activity and related actions taken in response to the pandemic; the effect on consumer demand for our products and the discretionary spending patterns of our customers, including the ability of our customers to pay for our products; our ability to develop timely, market, and sell our products, including as a result of travel restrictions and people working from home; the impact on the operations of our counterparties, including the physical retail, digital download online platforms, and cloud streaming services we rely on for the distribution of our products, the suppliers who manufacture our physical products, and other third parties with which we partner (e.g. to market or ship our products); any closures of our, our customers', and counterparties' offices and facilities; additional volatility in exchange rates; the impact of inflation; and the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio.
Any of these considerations described above could cause or contribute to the risks described elsewhere herein and could materially adversely affect our business, financial condition, results of operations or stock price.
Any of the considerations described above could cause or contribute to the risks described elsewhere herein and could materially adversely affect our business, financial condition, results of operations or stock price.
Our titles also compete with other forms of entertainment, such as social media and casual games, in addition to motion pictures, television and audio and video products featuring similar themes, online computer programs and other entertainment, which may be less expensive or provide other advantages to consumers.
Our titles also compete with other forms of entertainment, such as social media, in addition to motion pictures, television and audio and video products featuring similar themes, online computer programs and other entertainment, which may be less expensive or provide other advantages to consumers.
In addition, we believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on 23 the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.
In addition, we 28 believe that interactive entertainment software will increasingly become the subject of claims that such software infringes on the intellectual property rights of others with both the growth of online functionality and advances in technology, game content and software graphics as games become more realistic.
There remains unavoidable uncertainties and risks to our business related to Brexit and the new relationship between the U.K. and E.U., which will continue to be developed and defined. We are preparing to mitigate those risks with operational and commercial changes to the extent possible and warranted.
There remains unavoidable uncertainties and risks to our business related to Brexit and the new relationship between the U.K. and E.U., which will continue to be developed and defined. We are seeking to mitigate those risks with operational and commercial changes to the extent possible and warranted.
Because sales associated with an initial product launch generally constitute a high percentage of the total sales associated 10 with the life of a product, delays in product releases or disruptions following the commercial release of one or more new products could have a material adverse effect on our business, financial condition, and operating results and therefore cause our operating results to be materially different from our expectations.
Because sales associated with an initial product launch on console or PC generally constitute a high percentage of the total sales associated with the life of a product, delays in product releases or disruptions following the commercial release of one or more new products could have a material adverse effect on our business, financial condition, and operating results and therefore cause our operating results to be materially different from our expectations.
We cannot be certain that our new products will consistently achieve best seller status. Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles. Competitors with more extensive lines and more popular titles may have greater bargaining power with retailers.
We cannot be certain that our new products will consistently achieve bestseller status. Competition for retail shelf space is expected to continue to increase, which may require us to increase our marketing expenditures to maintain desirable sales levels of our titles. Competitors with more extensive lines and more popular titles may have greater bargaining power with retailers.
A resulting perception that our products or services do not adequately protect the privacy of personal information could result in a loss of current or potential consumers and business partners. In addition, if any of our business partners experience a security incident that leads to disclosure of consumer information, our reputation could be harmed, resulting in loss of revenue.
A resulting perception that our products or services 14 do not adequately protect personal information could result in a loss of current or potential consumers and business partners. In addition, if any of our business partners experience a security incident that leads to disclosure of consumer information, our reputation could be harmed, resulting in loss of revenue.
It is possible that a number of laws and regulations may be adopted or construed to apply to us in the U.S. and elsewhere that could restrict the interactive entertainment industry, including player privacy, advertising, taxation, content suitability, copyright, distribution, and antitrust.
It is possible that a number of laws and regulations may be adopted or construed to apply to us in the U.S. and elsewhere that could restrict the interactive entertainment industry, including player privacy, advertising, taxation, content suitability, and moderation, online safety, copyright, distribution, and antitrust.
Our systems, processes and technologies, and the systems, processes and technologies of our business partners or our third-party service providers, may not be adequate against all eventualities. In addition, the costs to respond to, mitigate, or notify affected parties of cyber-attacks and other security vulnerabilities are significant.
Our systems, processes and technologies, and the systems, processes and technologies of our business partners or our third-party service providers, have not been and in the future may not be adequate against all eventualities. In addition, the costs to respond to, mitigate, or notify affected parties of cyber-attacks and other security vulnerabilities are significant.
Consumer purchases of our games and services may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our games and services, our ability to improve and innovate our annualized titles, our ability to adapt our games and services to new platforms, outages and disruptions of online services, the games and services offered by our competitors, our marketing and advertising efforts or declines in consumer activity generally as a result of economic downturns, for example, as a result of COVID-19, among others.
Consumer purchases of our games and services may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our games and services, our ability to improve and innovate our annualized titles, our ability to adapt our games and services to new platforms, outages and disruptions of online services, the games and services offered by our competitors, our marketing and advertising efforts or declines in consumer activity generally as a result of economic downturns, among others.
If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of COVID-19, we may not be able to release titles according to our schedule and at budgeted costs.
If we or our third-party developers experience unanticipated development delays, financial difficulties, or additional costs, for example, as a result of COVID-19 or other unforeseen circumstances, we may not be able to release titles according to our schedule and at budgeted costs.
These risks are not presented in order of importance of probability of occurrence.
These risks are not presented in order of importance or probability of occurrence.
Additionally, we compete with other forms of entertainment and leisure activities. While we monitor general market conditions, significant shifts in consumer demand that could materially alter public preferences for different forms of entertainment and leisure activities are difficult to predict. Failure to adequately identify and adapt to these competitive pressures could have a negative impact on our business.
While we monitor general market conditions, significant shifts in consumer demand that could materially alter public preferences for different forms of entertainment and leisure activities are difficult to predict. Failure to adequately identify and adapt to these competitive pressures could have a negative impact on our business.
In recent years, we have continued to invest in emerging opportunities in interactive entertainment played on mobile platforms, including tablets and smartphones, and online platforms, including social networks.
In recent years, we have continued to invest in emerging opportunities in interactive entertainment played on mobile platforms, including tablets and smartphones, and online platforms.
A security incident that leads to disclosure of consumer information (including personal information) could harm our reputation, compel us to comply with disparate breach notification laws in various jurisdictions and otherwise subject us to liability under laws that protect personal information, any of which could result in increased costs or loss of revenue.
A security incident, such as the Cybersecurity Incident, that leads to disclosure of consumer information (including personal information) could harm our reputation, compel us to comply with disparate breach notification laws in various jurisdictions and otherwise subject us to liability under laws that protect personal information, any of which could result in increased costs or loss of revenue.
If we fail to comply with our posted privacy policy, EULA, or terms of service, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.
If we fail to comply with our posted privacy policy, EULA, or TOS, or if we fail to comply with existing privacy or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, affect our financial condition, and harm our business.
However, the techniques used to exploit, disable, damage, disrupt or gain access to our networks, our products and services, supporting technological infrastructure, intellectual property and other assets change frequently, continue to evolve in sophistication and volume, and often are not detected for long periods of time.
However, the techniques used to exploit, disable, damage, disrupt or gain access to our networks, our products and services, supporting technological infrastructure, intellectual property and other assets change frequently, continue to evolve in sophistication and volume, and may not be detected for long periods of time.
Sales to our five largest customers during the fiscal year ended March 31, 2022 accounted for 79.0% of our net revenue, with Sony and Microsoft each accounting for more than 10.0%. Our sales are made primarily without long-term agreements or other commitments, and our customers may terminate their relationship with us at any time.
Sales to our five largest customers during the fiscal year ended March 31, 2023 accounted for 79.6% of our net revenue, with Sony, Google, Apple, and Microsoft each accounting for more than 10.0%. Our sales are made primarily without long-term agreements or other commitments, and our customers may terminate their relationship with us at any time.
If these were to occur, we might be required to seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.
If this were to occur, we might be required to alter some of our games to address these additional requirements or seek licenses, authorizations, or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, such as reporting to regulators, all of which could significantly increase our operating costs.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to amortize them pursuant to IRC Section 174.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the ability to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them pursuant to IRC Section 174.
We may be adversely affected by the effects of inflation Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
Inflation has the potential to adversely affect our business, results of operations, financial position and liquidity by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.
The inability of our products to achieve significant market acceptance, delays in product releases or disruptions following the commercial release of our products may have a material adverse effect on our business, financial condition and operating results.
The inability of our products to achieve significant market acceptance, the failure to retain existing players, delays in product releases or disruptions following the commercial release of our products may have a material adverse effect on our business, financial condition and operating results.
The life cycle of a title generally involves a relatively high level of sales during the first few months after introduction followed by a rapid decline in sales.
The life cycle of a console or PC title generally involves a relatively high level of sales during the first few months after introduction followed by a rapid decline in sales.
For example, we may offer games that do not attract sufficient purchases of virtual currency, which may cause our investments into this product space, such as through our acquisitions of Social Point and Playdots or our pending acquisition of Zynga, to fail to realize the expected benefits.
For example, we may offer games that do not attract sufficient purchases of virtual currency, which may cause our investments into this product space, such as through our acquisitions of Zynga, Social Point, Playdots, Nordeus, and Popcore, to fail to realize the expected benefits.
Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products.
Any theft and/or unauthorized use or publication of our trade secrets and other confidential business information because of such an event could adversely affect our competitive position, reputation, brand, and future sales of our products.
If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic. We may not be able to identify, negotiate or finance any future acquisition or investment successfully.
If appropriate opportunities present themselves, we may acquire or make investments in businesses, intellectual properties and other assets that we believe are strategic, such as our acquisition of Zynga. We may not be able to identify, negotiate or finance any future acquisition or investment successfully.
Although Congress is considering legislation that would defer the capitalization and amortization requirement to later years, we have no assurance that the requirement will be deferred, repealed or otherwise modified. The requirement was effective for the Company for fiscal year 2023, beginning April 1, 2022.
Although Congress is considering legislation that would defer the capitalization and amortization requirement to later years, we have no assurance that the requirement will be deferred, repealed or otherwise modified. The requirement was effective for us beginning April 1, 2022.
GDPR and DPA 2018 contain 22 significant penalties for non-compliance. Countries in the E.U. are still enacting national laws that correspond to certain portions of the GDPR. The U.K. also implemented an Age Appropriate Design Code that applies to how personal data is used for individuals up to age 18.
GDPR and DPA 2018 contain significant penalties for non-compliance, which have been imposed by regulators. Countries in the E.U. are still enacting national laws that correspond to certain portions of the GDPR. The U.K. also implemented an Age Appropriate Design Code that applies to how personal data is used for individuals up to age 18.
In addition, certain of our products are online enabled. The ability of our products to offer online functionality, and our ability to offer content through a video game platform's digital distribution channel, is dependent upon the continued operation and security of such platform's online network.
In addition, certain of our products include online functionality. The ability of our products to enable this functionality, and our ability to offer content through a video game platform's digital distribution channel, is dependent upon the continued operation and security of such platform's online network.
Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
Such events may adversely impact critical infrastructure, have the potential to disrupt our business, our third-party suppliers, or the business of our customers, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations. We may be adversely affected by the effects of inflation.
We may also face sophisticated attacks, referred to as advanced persistent threats, which are cyber-attacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.
We have faced and in the future could face sophisticated attacks, including attacks referred to as advanced persistent threats, which are cyber-attacks aimed at compromising our intellectual property and other commercially sensitive information, such as the source code and game assets for our software or confidential customer or employee information, which remain undetected for prolonged periods of time.
The sale of substantial amounts of our 25 common stock could adversely affect its price. The sale or the availability for sale of a large number of shares of our common stock in the public market could cause the price of our common stock to decline. We are subject to risks related to corporate and social responsibility and reputation.
The sale or the availability for sale of a large number of shares of our common stock in the public market could cause the price of our common stock to decline. We are subject to risks related to corporate and social responsibility and reputation.
Further, our business may be negatively impacted if: (1) we are unable to encourage new and existing consumers to purchase our virtual items; (2) we fail to offer monetization features that appeal to these consumers; (3) our platform providers make it more difficult or expensive for players to purchase our virtual items; (4) we cannot encourage significant additional consumers to purchase virtual items in our game and/or (5) our free-to-play releases reduce sales of our other games.
Further, our business may be negatively impacted if: (i) we are unable to encourage new and existing consumers to purchase our virtual items, (ii) we fail to offer monetization features that appeal to these consumers, (iii) our platform providers make it more difficult or expensive for players to purchase our virtual items, (iv) we cannot encourage significant additional consumers to purchase virtual items in our game, or (v) our free-to-play releases reduce sales of our other games.
As such, we are increasingly exposed to the risks of the free‑to‑play business model. For example, we may invest in the development of new free‑to‑play interactive entertainment products that do not achieve significant commercial success, in which case our revenues from those products likely will be lower than anticipated and we may not recover our development costs.
For example, we may invest in the development of new free‑to‑play interactive entertainment products that do not achieve significant commercial success, in which case our revenues from those products likely will be lower than anticipated and we may not recover our development costs.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net revenue. For the fiscal year ended March 31, 2022, 40.1% of our net revenue was earned outside the U.S.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net revenue. For the fiscal year ended March 31, 2023, 37.2% of our net revenue was earned outside the U.S.
A number of software publishers who compete with us have developed and commercialized or are currently developing online games. As technological advances significantly increase the availability of online games and as consumer acceptance of online gaming grows substantially, it could result in a decline in our platform-based software sales and negatively affect sales of such products.
A number of software publishers who compete with us have developed and commercialized or are currently developing online and mobile games. Technological advances that significantly increase the availability of online and mobile games could result in a decline in our platform-based software sales and negatively affect sales of such products.
In addition, we could experience similar issues related to services we host on our internal servers. Such issues also could affect our ability to provide game-related services and could have a material adverse effect on our business, financial condition, and operating results. 16 We rely on complex information technology systems and networks to operate our business.
In addition, we could experience similar issues related to services we host on our internal servers. Such issues also could affect our ability to provide game-related services and could have a material adverse effect on our business, financial condition, and operating results.
Any failure to prevent or mitigate security breaches or cyber risks, or detect or respond adequately to a security breach or cyber risk, could result in a loss of anticipated revenue, interruptions to our products and services, our having to incur significant remediation and notification costs, degrade the user experience, cause consumers to lose confidence in our products and services, and significant legal and financial costs.
Failures to prevent or mitigate security breaches or cyber risks, or detect or respond adequately to a security breach or cyber risk, could result in a loss of anticipated revenue, interruptions to our products and services, our having to incur significant remediation and notification costs, a degradation of the user experience, causing consumers to lose confidence in our products and services, prompting regulatory inquiries and significant legal and financial costs.
Additionally, while we have seen increased demand for our products due to stay-at-home orders, the curtailment of certain other forms of entertainment, and other pandemic-related factors that make consumers more inclined to spend time at home, benefiting our financial results and operating metrics, the trends in fiscal year 2021 with respect to our revenues, net income, and other financial results and operating metrics may not be indicative of results for future periods, particularly if these pandemic-related factors become less significant.
Additionally, while we saw increased demand for our products due in part to stay-at-home orders, the curtailment of certain other forms of entertainment, and other pandemic-related factors that made consumers more inclined to spend time at home, benefiting our financial results and operating metrics, any such trends with respect to our revenues, net (loss) income, and other financial results and operating metrics may not be indicative of results for future periods, particularly as these pandemic-related factors become less significant.
The development cycle for new titles generally ranges from 12 months for annual sports releases, to multiple years for certain of our top-selling titles. Therefore, our development costs can be substantial.
The development cycle for new titles generally ranges from 12 months or less for most mobile titles and annual console/PC sports releases, to multiple years for certain of our top-selling titles. Therefore, our development costs can be substantial.
Grand Theft Auto products contributed 30.9% of our net revenue for the fiscal year ended March 31, 2022, and the five best-selling franchises (including Grand Theft Auto ), which may change year over year, in the aggregate accounted for 83.2% of our net revenue for the fiscal year ended March 31, 2022.
Grand Theft Auto products contributed 14.6% of our net revenue for the fiscal year ended March 31, 2023, and the five best-selling franchises (including Grand Theft Auto ), which may change year over year, in the aggregate accounted for 52.9% of our net revenue for the fiscal year ended March 31, 2023.
Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows. Climate change may have a long-term impact on our business.
Any harm to our reputation could impact employee engagement and retention and the willingness of customers and our partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows. Negative reactions to our products and services may not be foreseeable.
Widespread consumer adoption of these new platforms for games and other technological advances in and/or new business or payment models in online or mobile game offerings could negatively affect our sales of console and traditional PC products before we have an opportunity to develop profitable businesses in such markets.
Widespread consumer adoption of these new platforms for games and other technological advances in and/or new business or payment models in online or mobile game offerings could negatively affect our sales of console and traditional PC products.
As expected, during fiscal year 2022, we experienced a moderation in engagement from the all-time highs experienced in fiscal year 2021, but overall engagement continued to be notably higher than it was pre-pandemic The interactive entertainment software industry is highly competitive.
We have experienced a moderation in engagement from the all-time highs experienced during certain periods of the pandemic, particularly in fiscal year 2021, but overall engagement continues to be higher than it was pre-pandemic. 9 The interactive entertainment software industry is highly competitive.
These kinds of activities and the steps that we take to address and prevent these issues may result in a loss of anticipated revenue, interfere with players’ enjoyment of a balanced game environment and cause reputational harm. We depend on servers and Internet bandwidth to operate our games and digital services with online features.
These kinds of activities and the steps that we take to address and prevent these issues may result in a loss of anticipated revenue, interfere with players’ enjoyment of a balanced game environment and cause reputational harm.
All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyber-attacks, computer viruses, malicious software, security breaches, energy blackouts, natural disasters, terrorism, war, and telecommunication failures.
All information technology systems and networks are potentially vulnerable to damage or interruption from a variety of sources, including but not limited to cyber-attacks, computer viruses, malicious software, security breaches, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We securely store the source code for our interactive entertainment software products as it is created.
If any of our games are re-rated by the ESRB or other foreign-based ratings organizations, we could be exposed to litigation, administrative fines and penalties and other potential liabilities, and our operating results and financial condition could be significantly affected.
If any of our games are re-rated by the ESRB or other foreign-based ratings organizations, we could be exposed to litigation, administrative fines and penalties and other potential liabilities, and our operating results and financial condition could be significantly affected. 23 We have implemented processes to comply with the requirements of the ESRB and other ratings organizations and properly display the designated rating symbols and content descriptions.
Any significant system or network disruption could have a negative impact on our business. We rely on the efficient and uninterrupted operation of complex information technology systems and networks, some of which are within Take-Two and some of which are managed or hosted by third-party providers.
We rely on the efficient and uninterrupted operation of complex information technology systems and networks, some of which are within Take-Two and some of which are managed or hosted by third-party providers.
In addition, the gaming, technology/internet, and entertainment industries have converged in recent years and larger, well-funded technology companies are pursuing and strengthening their interactive entertainment capabilities, as evidenced, for example, by Microsoft's pending acquisition of Activision Blizzard.
In addition, the gaming, technology/internet, and entertainment industries have converged in recent years and larger, well-funded technology companies are pursuing and strengthening their interactive entertainment capabilities.
The effects of the U.K.'s future trade agreements with the E.U. or other nations could potentially disrupt the markets we serve and may cause us to lose customers, distributors, and employees.
Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace and replicate. 19 The effects of the U.K.'s future trade agreements with the E.U. or other nations could potentially disrupt the markets we serve and may cause us to lose customers, distributors, and employees.
A decision by the Chinese government to revoke its approval for any of our games or to decline to approve any products we desire to sell in China in the future could have a negative impact on our business.
A decision by the Chinese government to revoke its approval for any of our games or to decline to approve any products we desire to sell in China in the future could have a negative impact on our business. China has also enacted a new privacy law that may affect how we structure our business and process of personal information.
Companies in our industry have experienced issues related to game and service quality during the work-from-home period. While we are reintroducing teams of employees to the workplace, this process could introduce operational risk, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business.
While we are reintroducing teams of employees to the workplace, this process could introduce operational risk, negatively impact productivity, and give rise to claims by employees or otherwise adversely affect our business.
Privacy and data protection laws and industry terms are rapidly changing and likely will continue to do so for the foreseeable future, which could have an impact on our approach to operating and marketing our games and which may harm the sales of our products or decrease the size of our potential audience. For example, the E.U.
Privacy and data protection laws and industry terms are rapidly changing and likely will continue to do so for the foreseeable future, which may be difficult to comply with and which could have a negative impact on or materially change our approach to the sale and marketing of our products. For example, the E.U.
Quality third-party developers are continually in high demand, and those who have developed titles for us in the past may not be available to develop software for us in the future.
Our success depends on our ability to continually identify and develop new titles timely. We rely on third-party software developers for the development of some of our titles. Quality third-party developers are continually in high demand, 15 and those who have developed titles for us in the past may not be available to develop software for us in the future.
If we underestimate the amount of server capacity our business requires or if our business were to grow more quickly than expected or if Internet bandwidth becomes limited, for example as a result of COVID-19-related increased worldwide demand, our consumers may experience service problems, such as slow or interrupted gaming access.
If we underestimate the amount of server capacity our business requires, if our business were to grow more quickly than expected, or if Internet bandwidth becomes limited, our consumers may experience service problems, such as slow or interrupted gaming access. Insufficient server capacity may result in decreased sales, a loss of our consumer base and adverse consequences to our reputation.
We rely on a limited number of channel partners some of whom influence the fee structures for online distribution of our games on their platforms.
We cannot publish our titles without the approval of hardware licensors that are also our competitors, and we rely on a limited number of channel partners, some of whom influence the fee structures for online distribution of our games on their platforms.
We compete for both licenses to properties and the sale of interactive entertainment software with Sony and Microsoft, each of which is a large developer and marketer of software for its own platforms. We also compete with game publishers, such as Activision Blizzard, Inc., Electronic Arts Inc., Ubisoft Entertainment S.A., and Embracer Group AB.
We compete for both licenses to properties and the sale of interactive entertainment software with Sony and Microsoft, each of which is a large developer and marketer of software for its own platforms.
We derive most of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PS4 and PS5 and Microsoft's Xbox One and Xbox Series X|S, which comprised 72.2% of our net revenue by product platform for the fiscal year ended March 31, 2022.
We derive a significant portion of our revenue from the sale of products made for video game platforms manufactured by third parties, such as Sony's PlayStation consoles and Microsoft's Xbox consoles, which comprised 43.1% of our net revenue 11 by product platform for the fiscal year ended March 31, 2023.
Some of our competitors have greater financial, technical, personnel, and other resources than we do and are able to finance larger budgets for development and marketing and make higher offers to licensors and developers for commercially desirable properties.
Some of our competitors have greater financial, technical, personnel, and other resources than we do and are able to finance larger budgets for development and marketing, make higher offers to licensors and developers for commercially desirable properties, adopt more aggressive pricing policies to develop more commercially successful video game products than we do, recruit our key creative and technical talent or otherwise disrupt our operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe lease expires in June 2023 with respect to approximately 59,000 square feet and July 2025 with respect to approximately 64,000 square feet.
Biggest changeThe lease expires in October 2033 with respect to approximately 59,000 square feet and July 2025 with respect to approximately 64,000 square feet. Zynga corporate office occupy approximately 62,000 square feet of leased office space in San Mateo, California. The lease expires in June 2032.
We also lease approximately 64,000 square feet of space under a lease expiring in March 2023 at 622 Broadway, New York, New York.
We also lease approximately 64,000 square feet of space under a lease expiring in March 2030 at 622 Broadway, New York, New York.
In addition, our other subsidiaries lease office space in Sydney and Pyrmont, Australia; Halifax, Oakville, Montreal, Parksville, and Vancouver, Canada; Chengdu, Hong Kong, and Shanghai, China; Brno and Prague, Czech Republic; Cesson-Sévigné and Paris, France; Munich, Germany; Budapest, Hungary; Bangalore, India; Dublin, Ireland; Tokyo, Japan; Breda, Netherlands; Auckland, New Zealand; Belgrade, Serbia; Singapore; Seoul, South Korea; Barcelona, Madrid, and Valencia, Spain; Luzerne, Switzerland; Taipei, Taiwan; Brighton, Dundee, London, Lincoln, Leeds, and Oxford, United Kingdom; and, in the United States: Agoura Hills, Carlsbad, Foothill Ranch, Petaluma, Moorpark, San Jose, and San Mateo, California; Sparks, Maryland; Andover and Westwood, Massachusetts; Las Vegas, Nevada; Bethpage and New York, New York; Austin, Texas; and Kirkland and Seattle, Washington.
In addition, our other subsidiaries lease office space in Sydney and Pyrmont, Australia; Halifax, Oakville, Montreal, Parksville, Toronto, and Vancouver, Canada; Chengdu, Beijing, Hong Kong, and Shanghai, China; Brno and Prague, Czech Republic; Helsinki, Finland; Cesson-Sévigné and Paris, France; Munich and Berlin, Germany; Budapest, Hungary; Bangalore, India; Dublin, Ireland; Tel Aviv, Israel; Tokyo, Japan; Amsterdam and Breda, Netherlands; Belgrade, Serbia; Singapore; Seoul, South Korea; Barcelona, Madrid, and Valencia, Spain; Luzerne, Switzerland; Taipei, Taiwan; Istanbul, Turkey; Brighton, Dundee, London, Lincoln, Leeds, and Oxford, United Kingdom; and, in the United States: Agoura Hills, Carlsbad, Foothill Ranch, Petaluma, Moorpark, San Jose, Irvine, and San Mateo, California; Chicago, Illinois; Sparks, Maryland; Andover and Westwood, Massachusetts; Las Vegas, Nevada; Bethpage and New York, New York; Eugene, Oregon; Austin, Texas; and Kirkland and Seattle, Washington.
For information regarding our lease commitments, see Note 14 - Leases to our Consolidated Financial Statements.
For information regarding our lease commitments, see Note 1 3 - Leases to our Consolidated Financial Statements.
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In addition, Zynga leases approximately 185,000 square feet for its former corporate headquarters located in San Francisco, California, which is now closed. The lease expires in June 2031.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The table setting forth this information is included in Part III—Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The table setting forth this information is included in Part III—Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . Issuer Purchases of Equity Securities Share Repurchase Program —Our Board of Directors has authorized the repurchase of up to 21.7 shares of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock trades on the NASDAQ Global Select Market under the symbol "TTWO." The number of record holders of our common stock was 54 as of May 5, 2022. Dividend Policy We have never declared or paid cash dividends.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders Our common stock trades on the NASDAQ Global Select Market under the symbol "TTWO." The number of record holders of our common stock was 345 as of May 5, 2023. Dividend Policy We have never declared or paid cash dividends.
Summary Table —The table below details the share repurchases that were made by us during the three months ended March 31, 2022: Period Shares purchased Average price per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the repurchase program January 1 - 31, 2022 — — — 10,000 February 1 - 28, 2022 — — — 10,000 March 1 - 31, 2022 — — — 10,000 29 Item 6.
Summary Table —The table below details the share repurchases that were made by us during the three months ended March 31, 2023: Period Shares purchased Average price per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the repurchase program January 1 - 31, 2023 — — — 10.0 February 1 - 28, 2023 — — — 10.0 March 1 - 31, 2023 — — — 10.0 Item 6. [Reserved]
During the fiscal years ended March 31, 2022, 2021, and 2020, we repurchased 1,260,447, 0, and 0 shares of our common stock in the open market, respectively, for $200.0 million, $0.0 million, and $0.0 million, respectively, including commissions, as part of the program.
During the fiscal years ended March 31, 2023, 2022, and 2021, we repurchased 0.0, 1.3, and 0.0 shares of our common stock in the open market, respectively, for $0.0, $200.0, and $0.0, respectively, including commissions, as part of the program.
As of March 31, 2022, we had repurchased a total of 11,659,976 shares of our common stock under the program, and 10,000,000 shares of our common stock remained available for repurchase under the share repurchase program. All of the repurchased shares are classified as Treasury stock in our Consolidated Balance Sheets.
As of March 31, 2023, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program. All of the repurchased shares are classified as Treasury stock in our Consolidated Balance Sheets.
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Stock Performance Graph This performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Exchange Act or the Securities Act of 1933.
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The following line graph compares, from March 31, 2017 through March 31, 2022, the cumulative total stockholder return on our common stock with the cumulative total return on the stocks comprising the NASDAQ Composite Index and the stocks comprising a peer group index consisting of Activision Blizzard, Inc. and Electronic Arts Inc.
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The comparison assumes $100 was invested on March 31, 2017 in our common stock and in each of the following indices and assumes reinvestment of all cash dividends, if any, paid on such securities.
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We have not paid any cash dividends and, therefore, our cumulative total return calculation is based solely upon stock price appreciation and not upon reinvestment of cash dividends.
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Historical stock price is not necessarily indicative of future stock price performance. 28 Comparison of 5 Year Cumulative Total Return* Among Take-Two Interactive Software, Inc., the NASDAQ Composite Index and a Peer Group March 2022 * The graph and chart assume that $100 was invested on March 31, 2017 in the applicable stock or index and that all dividends were reinvested.
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March 31, 2017 2018 2019 2020 2021 2022 Take-Two Interactive Software, Inc. $ 100.00 $ 164.97 $ 159.22 $ 200.12 $ 298.13 $ 259.39 NASDAQ Composite Index 100.00 120.76 133.60 134.52 233.26 252.05 Peer Group 100.00 135.75 101.36 117.31 174.69 155.70 Issuer Purchases of Equity Securities Share Repurchase Program —Our Board of Directors has authorized the repurchase of up to 21,659,976 shares of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth, for the periods indicated, our statements of operations, net revenue by geographic region, net revenue by platform, net revenue by distribution channel, and net revenue by content type: Fiscal Year Ended March 31, 2022 2021 2020 Net revenue $ 3,504,800 100.0 % $ 3,372,772 100.0 % $ 3,088,970 100.0 % Cost of goods sold 1,535,401 43.8 % 1,535,085 45.5 % 1,542,450 49.9 % Gross profit 1,969,399 56.2 % 1,837,687 54.5 % 1,546,520 50.1 % Selling and marketing 516,429 14.7 % 444,985 13.2 % 458,424 14.8 % General and administrative 510,855 14.6 % 390,683 11.6 % 318,235 10.3 % Research and development 406,566 11.6 % 317,311 9.4 % 296,398 9.6 % Depreciation and amortization 61,105 1.7 % 55,596 1.6 % 48,113 1.6 % Business reorganization 849 — % (272) — % 83 — % Total operating expenses 1,495,804 42.7 % 1,208,303 35.8 % 1,121,253 36.3 % Income from operations 473,595 13.5 % 629,384 18.7 % 425,267 13.8 % Interest and other, net (14,212) (0.4) % 8,796 0.3 % 38,505 1.2 % Gain (loss) on long-term investments, net 6,015 0.2 % 39,636 1.2 % (5,333) (0.2) % Income before income taxes 465,398 13.3 % 677,816 20.1 % 458,439 14.8 % Provision for income taxes 47,376 1.4 % 88,930 2.6 % 53,980 1.7 % Net income $ 418,022 11.9 % $ 588,886 17.5 % $ 404,459 13.1 % Fiscal Year Ended March 31, 2022 2021 2020 Net revenue by geographic region: United States $ 2,100,237 59.9 % $ 2,015,885 59.8 % $ 1,775,682 57.5 % International 1,404,563 40.1 % 1,356,887 40.2 % 1,313,288 42.5 % Net revenue by platform: Console $ 2,528,857 72.2 % $ 2,516,993 74.6 % $ 2,308,602 74.7 % PC and other 572,506 16.3 % 581,702 17.2 % 594,619 19.2 % Mobile 403,437 11.5 % 274,077 8.1 % 185,749 6.0 % Net revenue by distribution channel: Digital online $ 3,148,957 89.8 % $ 2,972,403 88.1 % $ 2,405,097 77.9 % Physical retail and other 355,843 10.2 % 400,369 11.9 % 683,873 22.1 % Net revenue by content: Recurrent consumer spending $ 2,271,171 64.8 % $ 2,151,952 63.8 % $ 1,448,191 46.9 % Full game and other 1,233,629 35.2 % 1,220,820 36.2 % 1,640,779 53.1 % 33 Fiscal Years ended March 31, 2022 and 2021 (thousands of dollars) 2022 % of net revenue 2021 % of net revenue Increase/(decrease) % Increase/(decrease) Net revenue $ 3,504,800 100.0 % $ 3,372,772 100.0 % $ 132,028 3.9 % Internal royalties 619,902 17.7 % 637,652 18.9 % (17,750) (2.8) % Software development costs and royalties(1) 417,431 11.9 % 396,797 11.8 % 20,634 5.2 % Licenses 254,203 7.3 % 260,721 7.7 % (6,518) (2.5) % Product costs 243,865 7.0 % 239,915 7.1 % 3,950 1.6 % Cost of goods sold 1,535,401 43.8 % 1,535,085 45.5 % 316 — % Gross profit $ 1,969,399 56.2 % $ 1,837,687 54.5 % $ 131,712 7.2 % (1) Includes $48,381 and $8,707 of stock-based compensation expense in fiscal year 2022 and 2021, respectively.
Biggest changeThe following table sets forth, for the periods indicated, our statements of operations, net revenue by geographic region, net revenue by platform, net revenue by distribution channel, and net revenue by content type: Fiscal Year Ended March 31, 2023 2022 2021 Total net revenue $ 5,349.9 100.0 % $ 3,504.8 100.0 % $ 3,372.8 100.0 % Cost of revenue 3,064.6 57.3 % 1,535.4 43.8 % 1,535.1 45.5 % Gross profit 2,285.3 42.7 % 1,969.4 56.2 % 1,837.7 54.5 % Selling and marketing 1,592.6 29.8 % 516.4 14.7 % 445.0 13.2 % Research and development 892.5 16.7 % 406.6 11.6 % 317.3 9.4 % General and administrative 843.1 15.8 % 511.7 14.6 % 390.4 11.6 % Depreciation and amortization 122.3 2.3 % 61.1 1.7 % 55.6 1.6 % Total operating expenses 3,450.5 64.5 % 1,495.8 42.7 % 1,208.3 35.8 % (Loss) income from operations (1,165.2) (21.8) % 473.6 13.5 % 629.4 18.7 % Interest and other, net (141.9) (2.7) % (14.2) (0.4) % 8.8 0.3 % (Loss) gain on fair value adjustments, net (31.0) (0.6) % 6.0 0.2 % 39.6 1.2 % (Loss) income before income taxes (1,338.1) (25.0) % 465.4 13.3 % 677.8 20.1 % (Benefit from) provision for income taxes (213.4) (4.0) % 47.4 1.4 % 88.9 2.6 % Net (loss) income $ (1,124.7) (21.0) % $ 418.0 11.9 % $ 588.9 17.5 % Fiscal Year Ended March 31, 2023 2022 2021 Net revenue by geographic region: United States $ 3,360.0 62.8 % $ 2,100.2 59.9 % $ 2,015.9 59.8 % International 1,989.9 37.2 % 1,404.6 40.1 % 1,356.9 40.2 % Net revenue by platform: Mobile $ 2,538.6 47.5 % $ 403.4 11.5 % $ 274.1 8.1 % Console 2,303.8 43.1 % 2,528.9 72.2 % 2,517.0 74.6 % PC and other 507.5 9.5 % 572.5 16.3 % 581.7 17.2 % Net revenue by distribution channel: Digital online $ 5,085.7 95.1 % $ 3,149.0 89.8 % $ 2,972.4 88.1 % Physical retail and other 264.2 4.9 % 355.8 10.2 % 400.4 11.9 % Net revenue by content: Recurrent consumer spending $ 4,180.4 78.1 % $ 2,271.2 64.8 % $ 2,152.0 63.8 % Full game and other 1,169.5 21.9 % 1,233.6 35.2 % 1,220.8 36.2 % Fiscal Years ended March 31, 2023 and 2022 (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Total net revenue $ 5,349.9 100.0 % $ 3,504.8 100.0 % $ 1,845.1 52.6 % Software development costs and royalties (1) 1,604.8 30.0 % 417.4 11.9 % 1,187.4 284.5 % Product costs 714.0 13.3 % 243.9 7.0 % 470.1 192.7 % Internal royalties 438.9 8.2 % 619.9 17.7 % (181.0) (29.2) % Licenses 306.9 5.7 % 254.2 7.3 % 52.7 20.7 % Cost of revenue 3,064.6 57.3 % 1,535.4 43.8 % 1,529.2 99.6 % Gross profit $ 2,285.3 42.7 % $ 1,969.4 56.2 % $ 315.9 16.0 % (1) Includes $(9.5) and $48.4 of stock-based compensation expense in fiscal year 2023 and 2022, respectively. 38 For the fiscal year ended March 31, 2023, net revenue increased by $1,845.1, as compared to the prior year.
When compared to the statutory rate of 21%, the effective tax rate of 10.2% for the fiscal year ended March 31, 2022 was due primarily to a $30.9 million benefit from tax credits anticipated to be utilized, $14.6 million in excess tax benefits from employee stock compensation, an $11.6 million benefit due to an increase to the net deferred tax asset that arose from a step up in tax basis related to the Federal Act on Tax Reform and AVH (Old-Age and Survivors Insurance) Financing ("TRAF") enacted in Switzerland, discussed below, and an $8.0 million benefit from our geographic mix of earnings, partially offset by a $10.1 million nondeductible expense due to an increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus.
When compared to the statutory rate of 21%, the effective tax rate of 10.2% for the fiscal year ended March 31, 2022 was due primarily to a $30.9 benefit from tax credits anticipated to be utilized, $14.6 in excess tax benefits from employee stock compensation, an $11.6 benefit due to an increase to the net deferred tax asset that arose from a step up in tax basis related to the Federal Act on Tax Reform and AVH (Old-Age and Survivors Insurance) Financing ("TRAF") enacted in Switzerland, discussed below, and an $8.0 benefit from our geographic mix of earnings, partially offset by a $10.1 nondeductible expense due to an increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus.
We believe that our current cash and cash equivalents, short-term investments, and projected cash flow from operations, along with availability under our Credit Agreement will provide us with sufficient liquidity to satisfy our cash requirements for working capital, capital expenditures, and commitments on both a short-term and long-term basis.
We believe that our current cash and cash equivalents, short-term investments, and projected cash flow from operations, along with availability under our 2022 Credit Agreement will provide us with sufficient liquidity to satisfy our cash requirements for working capital, capital expenditures, and commitments on both a short-term and long-term basis.
Off-Balance Sheet Arrangements As of March 31, 2022 and 2021, we did not have any material relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements As of March 31, 2023 and 2022, we did not have any material relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax credits, and changes in our geographic mix of earnings could have a significant impact on our effective tax rate in the future. In addition, we are regularly examined by domestic and foreign taxing authorities.
We anticipate that additional excess tax benefits or shortfalls from employee stock compensation, tax credits, changes in valuation allowance, and changes in our geographic mix of earnings could have a significant impact on our effective tax rate in the future. In addition, we are regularly examined by domestic and foreign taxing authorities.
The new Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles), which could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products.
The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles), which could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products.
For the comparison of fiscal year 2021 to fiscal year 2020, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended March 31, 2021.
For the comparison of fiscal year 2022 to fiscal year 2021, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended March 31, 2022.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2019 and state income tax returns for periods prior to the fiscal year ended March 31, 2018.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2020 and state income tax returns for periods prior to the fiscal year ended March 31, 2019.
Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivables and the concentration of purchasing power among the remaining large retailers.
Bankruptcies or consolidations of our large retail customers could seriously hurt our business, due to uncollectible accounts receivable and the concentration of purchasing power among the remaining large retailers.
With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2015 through March 31, 2019.
With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2021.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2022 and 2021.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2023 and 2022.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Our Business We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Our Business We are a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop, operate, and publish products principally through Rockstar Games, 2K, Private Division, and Zynga.
As of March 31, 2022, we had repurchased a total of 11.7 million shares of our common stock under the program, and 10.0 million shares of our common stock remained available for repurchase under the share repurchase program.
As of March 31, 2023, we had repurchased a total of 11.7 shares of our common stock under the program, and 10.0 shares of our common stock remained available for repurchase under the share repurchase program.
During the fiscal years ended March 31, 2022, 2021, and 2020, we repurchased 1.3 million, zero, and zero shares of our common stock, respectively, in the open market for $200 million, $0.0 million, and $0.0 million, respectively, including commissions as part of the program.
During the fiscal years ended March 31, 2023, 2022, and 2021, we repurchased 0.0, 1.3, and 0.0 shares of our common stock, respectively, in the open market for $0.0, $200.0, and $0.0, respectively, including commissions as part of the program.
A majority of our trade receivables are derived from sales to major retailers, including digital storefronts and platform partners, and distributors. Our five largest customers accounted for 79.0%, 78.4%, and 71.5% of net revenue during the fiscal years ended March 31, 2022, 2021, and 2020, respectively.
A majority of our trade receivables are derived from sales to major retailers, including digital storefronts and platform partners, and distributors. Our five largest customers accounted for 79.6%, 79.0%, and 78.4% of net revenue during the fiscal 43 years ended March 31, 2023, 2022, and 2021, respectively.
Gain/(loss) on long-term investments, net Gain/(loss) on long-term investments, net for the fiscal year ended March 31, 2022 was a gain of $6.0 million compared to a gain of $39.6 million in the prior year period.
Gain/(loss) on long-term investments, net Gain/(loss) on long-term investments, net for the fiscal year ended March 31, 2023 was a loss of $31.0 compared to a gain of $6.0 in the prior year period.
As of March 31, 2022, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $657.2 million. These balances are dispersed across various locations around the world. We believe that such dispersion meets the business and liquidity needs of our foreign affiliates.
As of March 31, 2023, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $329.7. These balances are dispersed across various locations around the world. We believe that such dispersion meets the business and liquidity needs of our foreign affiliates.
For the fiscal years ended March 31, 2022, 2021 and 2020, 40.1%, 40.2% and 42.5%, respectively, of our net revenue was earned outside the United States.
For the fiscal years ended March 31, 2023, 2022 and 2021, 37.2%, 40.1% and 40.2%, respectively, of our net revenue was earned outside the United States.
We provide a variety of online delivered products and offerings. Virtually all of our titles that are available through retailers as packaged goods products are also available through direct digital download (from websites we own and others owned by third parties) as well as a large selection of our catalog titles.
Virtually all of our titles that are available through retailers as packaged goods products are also available through direct digital download (from digital storefronts we own and others owned by third parties) as well as a large selection of our catalog titles.
The Credit Agreement provides for an unsecured five- 37 year revolving credit facility with commitments of $250 million, including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $25 million and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros, and Canadian Dollars in an aggregate principal amount of up to $25 million.
The 2022 Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of $500.0, including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $100.0 and (ii) borrowings and letters of credit denominated in Pounds Sterling, Euros, and Canadian Dollars in an aggregate principal amount of up to $100.0.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2022, and 2021. The economic environment has affected our customers in the past, and may do so in the future, including as a result of the COVID-19 pandemic.
We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2023, and 2022. The economic environment has affected our customers in the past, and may do so in the future.
Net revenue from PC and other decreased by $9.2 million and accounted for 16.3% of our total net revenue in the fiscal year ended March 31, 2022, as compared to 17.2% in the prior year.
Net revenue from PC and other decreased by $65.0 and accounted for 9.5% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 16.3% in the prior year.
Short-term Investments As of March 31, 2022, we had $820.1 million of short-term investments, which are highly liquid in nature and represent an investment of cash that is available for current operations. From time to time, we may purchase additional short-term investments depending on future market conditions and liquidity needs.
Short-term Investments As of March 31, 2023, we had $187.0 of short-term investments, which are readily marketable in nature and represent an investment of cash that is available for current operations. From time to time, we may purchase additional short-term investments depending on future market conditions and liquidity needs.
Noire . Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2022 was 56.2%, as compared to 54.5% in the prior year.
Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2023 was 42.7%, as compared to 56.2% in the prior year.
Net revenue from digital online channels increased by $176.6 million and accounted for 89.8% of our total net revenue for the fiscal year ended March 31, 2022, as compared to 88.1% in the prior year.
Net revenue from digital online channels increased by $1,936.7 and accounted for 95.1% of our total net revenue for the fiscal year ended March 31, 2023, as compared to 89.8% in the prior year.
As of March 31, 2022 and 2021, five customers accounted for 72.8% and 77.6% of our gross accounts receivable, respectively. Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 63.8% and 48.8% of such balances at March 31, 2022 and 2021, respectively.
As of March 31, 2023 and 2022, five customers accounted for 61.1% and 72.8% of our gross accounts receivable, respectively. Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 50.3% and 63.8% of such balances at March 31, 2023 and 2022, respectively.
As of March 31, 2022, and 2021, five customers comprised 72.8% and 77.6% of our gross accounts receivable, respectively, with our significant customers (those that individually comprised more than 10% of our gross accounts receivable balance) accounting for 63.8% and 69.2% of such balance at March 31, 2022, and 2021, respectively.
As of March 31, 2023, and 2022, five customers comprised 61.1% and 72.8% of our gross accounts receivable, respectively, with our significant customers (those that individually comprised more than 10% of our gross accounts receivable balance) accounting for 50.3% and 63.8% of such balance at March 31, 2023, and 2022, respectively.
We derive most of our revenue from the sale of products made for video game consoles manufactured by third parties, which comprised 72.2% of our net revenue by product platform for the fiscal year ended March 31, 2022.
We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties, which comprised 43.1% of our net revenue by product platform for the fiscal year ended March 31, 2023.
As of March 31, 2022, we had gross unrecognized tax benefits, including interest and penalties, of $176.0 million, of which $65.8 million would affect our effective tax rate if realized. For the fiscal year ended March 31, 2022, gross unrecognized tax benefits increased by $8.5 million.
As of March 31, 2023, we had gross unrecognized tax benefits, including interest and penalties, of $294.8, of which $137.2 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2023, gross unrecognized tax benefits increased by $118.8.
For the fiscal year ended March 31, 2022, we recorded a net tax benefits of $11.6 million due to an increase in the deferred tax asset of $13.2 million offset by an increase in the valuation allowance of $1.6 million, as it is more-likely-than-not that such deferred tax assets would be realized.
For the fiscal year ended March 31, 2023, we recorded a net tax benefit of $5.7 due to an increase of the deferred tax asset of $20.6, offset by an increase in the valuation of allowance of $14.9, as it is more-likely-than-not that such deferred tax assets would be realized.
The decrease was due to a decrease in net revenue from our Borderlands , Mafia , PGA TOUR 2K , NBA 2K , and Red Dead Redemption franchises , partially offset by an increase in net revenue from our Grand Theft Auto franchise and Tiny Tina's Wonderlands .
The decrease was due to a decrease in net revenue from our Grand Theft Auto , Borderlands, and Red Dead Redemption franchises, partially offset by an increase in net revenue from The Quarry , Zynga, and our WWE 2K franchise.
Accordingly, our strategy is to focus our development efforts on a select number of the highest quality titles for these platforms, while also expanding our offerings for other platforms such as tablets, smartphones, and online games. Online Content and Digital Distribution. The interactive entertainment software industry is delivering a growing amount of content through digital online delivery methods.
Accordingly, our strategy for these platforms is to focus our development efforts on a select number of the highest quality titles. Online Content and Digital Distribution. The interactive entertainment software industry is delivering a growing amount of content through digital online delivery methods. We provide a variety of online delivered products and offerings.
Diluted earnings per share for the fiscal year ended March 31, 2022 was $3.58, as compared to Diluted income per share of $5.09 for the fiscal year ended March 31, 2021.
Diluted loss per share for the fiscal year ended March 31, 2023 was $(7.03), as compared to Diluted earnings per share of $3.58 for the fiscal year ended March 31, 2022.
In addition, throughout the year, we expect our labels to deliver new content for our franchises. We will also continue to invest in opportunities that we believe will enhance and scale our business and have the potential to drive growth over the long-term.
We will also continue to invest in opportunities that we believe will enhance and scale our business and have the potential to drive growth over the long term.
We expect to rely on cash and cash equivalents as well as on short-term investments, funds provided by our operating activities, and our Credit Agreement to satisfy our working capital needs.
We expect to rely on cash and cash equivalents as well as on short-term investments, funds provided by our operating activities, and our 2022 Credit Agreement to satisfy our working capital needs. Refer to Note 11 - Debt for additional discussion of our outstanding debt obligations.
The COVID-19 pandemic has led, and may continue to lead, to increased consolidation as larger, better capitalized competitors will be in a stronger position to withstand prolonged periods of economic downturn and sustain their business through the financial volatility.
There has been increased consolidation in our industry, as larger, better capitalized competitors will be in a stronger position to withstand prolonged periods of economic downturn and sustain their business through the financial volatility. Hardware Platforms.
As of March 31, 2022, based on the composition of our investment portfolio and actions taken in recent years by central banks around the world to cut interest rates, including the U.S. Federal Reserve, in response to the COVID-19 pandemic and related adverse economic conditions, we anticipate investment yields to remain low, which would lower our future interest income.
As of March 31, 2023, based on the composition of our investment portfolio and actions taken in recent months by central banks around the world, including the U.S. Federal Reserve, in response to the rising inflation and related adverse economic conditions, we anticipate investment yields may increase, which could increase our future interest income.
Net revenue from console games increased by $11.9 million and accounted for 72.2% of our total net revenue in the fiscal year ended March 31, 2022, as compared to 74.6% in the prior year.
Net revenue from console games decreased by $225.1 and accounted for 43.1% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 72.2% in the prior year.
The Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300%. The 2025 Notes mature on April 14, 2025 and bear interest at an annual rate of 3.550%.
The Senior Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee. The Senior Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300%.
Net revenue from full game and other increased by $12.8 million and accounted for 35.2% of net revenue for the fiscal year ended March 31, 2022, as compared to 36.2% for the prior year.
Net revenue from full game and other decreased by $64.1 and accounted for 21.9% of net revenue for the fiscal year ended March 31, 2023, as compared to 35.2% for the prior year.
We had two customers who accounted for 43.5% and 20.3% of our gross accounts receivable as of March 31, 2022, and two customers who accounted for 50.4% and 18.8% of our gross accounts receivable as of March 31, 2021.
We had three customers who accounted for 21.6%, 14.5%, and 14.2% of our gross accounts receivable as of March 31, 2023, and two customers who accounted for 43.5% and 20.3% of our gross accounts receivable as of March 31, 2022.
We had two customers who accounted for 43.5% and 20.3% of our gross accounts receivable as of March 31, 2022 and two customers who accounted for 50.4%, and 18.8% of our gross accounts receivable as of March 31, 2021.
We had three customers who accounted for 21.6%, 14.5%, and 14.2% of our gross accounts receivable as of March 31, 2023 and two customers who accounted for 43.5%, and 20.3% of our gross accounts receivable as of March 31, 2022.
In connection with the transaction, on April 14, 2022, we completed our offering and sale of $2.7 billion aggregate principal amount of our senior notes, consisting of $1.0 billion principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600 million principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600 million principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”) and $500 million principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Notes”).The Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).
Senior Notes On April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our senior notes, consisting of $1,000.0 principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600.0 principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600.0 principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”), and $500.0 principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Senior Notes”).
The ARPA did not have a material impact on our Consolidated Financial Statements for the fiscal year ended March 31, 2022. We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.
We continue to evaluate the potential impact the ARPA may have on our operations and Consolidated Financial Statements in future periods.
At March 31, 2022, we had $2,195.3 million of Cash and cash equivalents and Restricted cash and cash equivalents, compared to $2,060.2 million at March 31, 2021.
At March 31, 2023, we had $1,234.6 of Cash and cash equivalents and Restricted cash and cash equivalents, compared to $2,195.4 at March 31, 2022.
The increase was due to an increase in net revenue from our Grand Theft Auto franchise, Tiny Tina's Wonderlands , and our WWE 2K franchise, partially offset by a decrease in net revenue from our Mafia , Borderlands , PGA TOUR 2K , Red Dead Redemption , and BioShock franchises, The Outer Worlds , and our Civilization and NBA 2K franchises.
The decrease was due to a decrease in net revenue from our Grand Theft Auto and Red Dead Redemption franchises, partially offset by an increase in net revenue from The Quarry , which released in June 2022 and our WWE 2K franchise.
In connection with the transaction, on April 14, 2022, we terminated our Bridge Loan and completed our offering and sale of $2.7 billion aggregate principal amount of our senior notes, consisting of $1.0 billion principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600 million principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600 million principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”) and $500 million principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the 2027 Notes, the “Notes”).The Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”).
On April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our senior notes, consisting of $1,000.0 principal amount of our 3.300% Senior Notes due 2024 (the “2024 Notes”), $600.0 principal amount of our 3.550% Senior Notes due 2025 (the “2025 Notes”), $600.0 principal amount of our 3.700% Senior Notes due 2027 (the “2027 Notes”), and $500.0 principal amount of our 4.000% Senior Notes due 2032 (the “2032 Notes” and, together with the 2024 Notes, the 2025 Notes and the2027 Notes, the “Senior Notes”).
The increase was due to an increase in net revenue from Two Dots , Top Eleven , and our Grand Theft Auto and NBA 2K franchises, partially offset by a decrease in net revenue from our Borderlands franchise.
The decrease was due to a decrease in net revenue from our Borderlands , Grand Theft Auto , and Red Dead Redemption franchises, partially offset by an increase in net revenue from Zynga and Marvel's Midnight Suns .
Our Net revenue increased to $3,504.8 million, an increase of $132.0 million or 3.9% compared to the fiscal year ended March 31, 2021. For the fiscal year ended March 31, 2022, our Net income was $418.0 million, as compared to $588.9 million in the prior year.
Our net revenue increased to $5,349.9, an increase of $1,845.1 or 52.6% compared to the fiscal year ended March 31, 2022. For the fiscal year ended March 31, 2023, our net loss was $(1,124.7), as compared to net income of $418.0 in the prior year.
Net revenue from physical retail and other channels decreased by $44.5 million and accounted for 10.2% of our total net revenue for the fiscal year ended March 31, 2022, as compared to 11.9% for the prior year.
Net revenue from mobile increased by $2,135.2 and accounted for 47.5% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 11.5% in the prior year.
The 2027 Notes mature on April 14, 2027 and bear interest at an annual rate of 3.700%. The 2032 Notes mature on April 14, 2032 and bear interest at an annual rate of 4.000%. We will pay interest on the 2024 Notes semiannually on March 28 and September 28 of each year, commencing September 28, 2022.
The 2026 Notes mature on March 28, 2026 and bear interest at an annual rate of 5.000%. The 2028 Notes mature on March 28, 2028 and bear interest at an annual rate of 4.950%. We will pay interest on the 2026 Notes and 2028 Notes semi-annually on March 28 and September 28 of each year, commencing September 28, 2023.
Our changes in cash flows were as follows: Fiscal Year Ended March 31, (thousands of dollars) 2022 2021 2020 Net cash provided by operating activities $ 257,984 $ 912,318 $ 685,678 Net cash provided by (used in) investing activities 139,216 (806,724) 4,049 Net cash used in financing activities (256,813) (57,338) (77,453) Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash and cash equivalents (5,303) 18,599 (10,868) Net change in cash, cash equivalents, and restricted cash and cash equivalents $ 135,084 $ 66,855 $ 601,406 At March 31, 2022, we had $2,195.3 million of Cash, cash equivalents, and restricted cash and cash equivalents, compared to $2,060.2 million at March 31, 2021.
Our changes in cash flows were as follows: Fiscal Year Ended March 31, (millions of dollars) 2023 2022 2021 Net cash provided by operating activities $ 1.1 $ 258.0 $ 912.3 Net cash (used in) provided by investing activities (2,876.3) 139.2 (806.8) Net cash provided by (used in) financing activities 1,930.3 (256.8) (57.4) Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash and cash equivalents (15.9) (5.2) 18.6 Net change in cash, cash equivalents, and restricted cash and cash equivalents $ (960.8) $ 135.2 $ 66.8 At March 31, 2023, we had $1,234.6 of Cash, cash equivalents, and restricted cash and cash equivalents, compared to $2,195.4 at March 31, 2022.
Our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 30.9% of our net revenue for the fiscal year ended March 31, 2022. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis.
Our financial results are affected by the timing of our product releases and the commercial success of those titles. Our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 14.6% of our net revenue for the fiscal year ended March 31, 2023.
Our five largest customers accounted for 79.0%, 78.4% and 71.5% of net revenue during the fiscal years ended March 31, 2022, 2021 and 2020, respectively.
Additionally, our business is dependent upon a limited number of customers that account for a significant portion of our revenue. Our five largest customers accounted for 79.6%, 79.0% and 78.4% of net revenue during the fiscal years ended March 31, 2023, 2022 and 2021, respectively.
Net income and earnings per share For the fiscal year ended March 31, 2022, our net income was $418.0 million, as compared to $588.9 million in the prior year. Diluted earnings per share for the fiscal year ended March 31, 2022 was $3.58, as compared to $5.09 for the fiscal year ended March 31, 2021.
Net (loss) income and (loss) earnings per share For the fiscal year ended March 31, 2023, our Net loss was $1,124.7, as compared to income of $418.0 in the prior year.
In addition, the Credit Agreement provides for certain events of default such as nonpayment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency and default on indebtedness held by third parties (subject to certain limitations and cure periods).
In addition, the 2022 Credit Agreement provides for events of default customary for a credit facility of this size and type, including, among others, non-payment of principal and interest when due thereunder, breaches of representations and warranties, noncompliance with covenants, acts of insolvency, cross-defaults to material indebtedness, and material judgment defaults (subject to certain limitations and cure periods).
Research and development Research and development expenses increased by $89.3 million for the fiscal year ended March 31, 2022, as compared to the prior year, due primarily to increased personnel expense due to increased headcount including related to our recent acquisitions.
Research and development Research and development expenses increased by $485.9 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to an increase in (i) personnel expenses due to increased headcount, including related to our acquisition of Zynga and (ii) production and development expenses related to Zynga.
Our products are currently designed for console gaming systems and PC, including smartphones and tablets. We deliver our products through physical retail, digital download, online platforms and cloud streaming services. Recent Developments Pending Acquisition. On January 9, 2022, we entered into a definitive merger agreement to acquire Zynga Inc. ("Zynga"), a leading developer of mobile games.
Our products are currently designed for console gaming systems, PC, and mobile including smartphones and tablets. We deliver our products through physical retail, digital download, online platforms, and cloud streaming services.
Recurrent consumer spending is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, and in-game purchases. Net revenue from recurrent consumer spending increased by $119.2 million and accounted for 64.8% of net revenue for the fiscal year ended March 31, 2022, as compared to 63.8% for the prior year.
Net revenue from recurrent consumer spending increased by $1,909.2 and accounted for 78.1% of net revenue for the fiscal year ended March 31, 2023, as compared to 64.8% for the prior year.
The effective tax rate in the current year was lower compared to the prior year primarily due an increased benefit to the net deferred tax asset related to TRAF, increased benefits from tax credits and excess tax benefits from employee stock compensation partially offset by a nondeductible expense due to an increase in fair value of the contingent consideration liability associated with the acquisition of Nordeus.
The effective tax rate in the current year was higher compared to the prior year primarily due to increased benefits from tax credits and reduced benefits from excess tax benefits from employee stock compensation, partially offset by increased expense related to an increase in our valuation allowance, increased expense from nondeductible costs, and the impact of geographic mix and foreign earnings.
As of March 31, 2022, there was $247.5 million available to borrow under the Credit Agreement and we had $2.5 million of letters of credit outstanding. At March 31, 2022, we had no outstanding borrowings under the Credit Agreement.
As of March 31, 2023, there were no borrowings under the 2022 Credit Agreement, and we had approximately $499.5 available for additional borrowings.
These increases were partially offset by a decrease in charitable contributions, primarily related to our COVID-19 response and relief efforts in the prior fiscal year. General and administrative expenses for the fiscal years ended March 31, 2022 and 2021 include occupancy expense (primarily rent, utilities and office expenses) of $37.2 million and $27.5 million, respectively, related to our development studios.
General and administrative expenses for the fiscal years ended March 31, 2023 and 2022 include occupancy expense (primarily rent, utilities and office expenses) of $66.8 and $37.2, respectively, related to our development studios.
General and administrative General and administrative expenses increased by $120.2 million for the fiscal year ended March 31, 2022, as compared to the prior year, due primarily to increases in (i) personnel expenses for additional headcount and higher incentive compensation, (ii) the fair value of the contingent earn-out liability related to our acquisition of Nordeus (refer to Note 22 - Acquisitions ), (iii) professional fees related to acquisitions, including our pending acquisition of Zynga, (iv) IT expenses, primarily for cloud-based services, and (v) rent expenses for additional locations and lease renewals.
General and administrative General and administrative expenses increased by $331.4 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to increases in (i) professional fees related to our acquisition and integration of Zynga, (ii) personnel expenses for additional headcount, including our acquisition of Zynga, (iii) higher rent expense for additional locations and lease renewals, including our acquisition of Zynga, and (iv) right-of-use asset impairment expense related to Zynga's San Francisco office (see Note 1 3 - Leases ).
Economic Environment and Retailer Performance. We continue to monitor economic conditions, including the impact of the COVID-19 pandemic, that may affect our businesses, such as consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.
The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. Economic Environment and Retailer Performance. We continue to monitor various macroeconomic and geopolitical factors that may affect our business in several areas, including consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.
Fiscal 2022 Financial Summary We acquired Nordeus Limited ("Nordeus") on June 1, 2021, for initial consideration having an acquisition date fair value of $289.8 million, consisting of $132.9 million in cash, the issuance of 0.5 million shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $153.0 million in cash if Nordeus achieves certain performance measures over the 12- and 24-month periods following the closing (refer to Note 22 - Acquisitions ).
Popcore Acquisition We acquired Popcore on November 16, 2022 for initial consideration of $116.9 in cash, 0.6 shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $105.0 in cash if Popcore achieves certain performance measures over each of the three calendar years following the closing.
Interest and other, net (thousands of dollars) 2022 % of net revenue 2021 % of net revenue Increase/(decrease) % Increase/(decrease) Interest income $ 17,622 0.5 % $ 18,701 0.6 % $ (1,079) (5.8) % Interest expense (18,628) (0.5) % (6,207) (0.2) % (12,421) 200.1 % Foreign currency exchange gain (loss) (7,289) (0.2) % 727 — % (8,016) (1,102.6) % Other (5,917) (0.2) % (4,425) (0.1) % (1,492) 33.7 % Interest and other, net $ (14,212) (0.4) % $ 8,796 0.3 % $ (23,008) (261.6) % Interest and other, net was expense of $14.2 million for the fiscal year ended March 31, 2022, as compared to income of $8.8 million for the fiscal year ended March 31, 2021.
Interest and other, net (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Interest income $ 33.8 0.6 % $ 17.6 0.5 % $ 16.2 92.0 % Interest expense (129.6) (2.4) % (18.6) (0.5) % (111.0) 596.8 % Foreign currency exchange gain (loss) (31.8) (0.6) % (7.3) (0.2) % (24.5) 335.6 % Other (14.3) (0.3) % (5.9) (0.2) % (8.4) 142.4 % Interest and other, net $ (141.9) (2.7) % $ (14.2) (0.4) % $ (127.7) 899.3 % Interest and other, net was expense of $141.9 for the fiscal year ended March 31, 2023, as compared to $14.2 for the fiscal year ended March 31, 2022.
Liquidity and Capital Resources Our primary cash requirements have been to fund (i) the development, manufacturing and marketing of our published products, (ii) working capital, (iii) acquisitions and (iv) capital expenditures.
See Note 12 - (Loss) Earnings P er Share to our Consolidated Financial Statements for additional information. Liquidity and Capital Resources Our primary cash requirements are to fund (i) the development, manufacturing and marketing of our published products, (ii) working capital, (iii) capital expenditures, (iv) debt and interest payments, (v) acquisitions, and (vi) tax payments.
Results of Operations In this section, we discuss the results of our operations for the fiscal year ended March 31, 2022 compared to the fiscal year ended March 31, 2021.
This increase was partially offset by a decrease in Net Bookings from our Grand Theft Auto and Borderlands franchises. 37 Results of Operations In this section, we discuss the results of our operations for the fiscal year ended March 31, 2023 compared to the fiscal year ended March 31, 2022.
The decrease was due primarily to the sale of one of our investments in the prior year period (see Note 4 - Fair Value Measurements ). Provision for income taxes Our income tax expense was $47.4 million for the fiscal year ended March 31, 2022 as compared to $88.9 million for the fiscal year ended March 31, 2021.
Provision for income taxes Our benefit from income taxes was $213.4 for the fiscal year ended March 31, 2023 as compared to income tax expense of $47.4 for the fiscal year ended March 31, 2022.
Critical Accounting Policies and Estimates Our most critical accounting policies, which are those that require significant judgment, include revenue recognition; price protection and allowances for returns; capitalization and recognition of software development costs and licenses; fair value estimates including valuation of goodwill, and intangible assets; valuation and recognition of stock-based compensation; and income taxes.
To a lesser extent, the net decrease was also partially offset by Net cash provided by operating activities from sales of our products, primarily from the previously mentioned titles , partially offset by working capital requirements used in the development, sale, and support of our products, including for personnel, as well as payments for interest on our debt and transaction-related costs related to our Zynga Acquisition. 36 Critical Accounting Policies and Estimates Our most critical accounting policies, which are those that require significant judgment, include revenue recognition; price protection and allowances for returns; capitalization and recognition of software development costs and licenses; fair value estimates including valuation of goodwill, and intangible assets; valuation and recognition of stock-based compensation; and income taxes.
In addition, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through virtual currency, add-on content, and in-game purchases. We also publish an expanding variety of titles for Mobile, which are delivered to consumers through digital download.
In addition, we aim to drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles through virtual currency, add-on content, and in-game purchases. As disclosed in our "Results of Operations," below, net 35 revenue from digital online channels comprised 95.1% of our net revenue for the fiscal year ended March 31, 2023.
Loans under the Credit Agreement will bear interest at a rate of (a) 0.250% to 0.750% above a certain base rate (3.50% at March 31, 2022) or (b) 1.125% to 1.750% above LIBOR (approximately 0.45% at March 31, 2022), which rates are determined by reference to our consolidated total net leverage ratio.
Loans under the 2022 Credit Agreement will bear interest at a rate of (a) 0.000% to 0.625% above an alternate base rate (8.00% at March 31, 2023) or (b) 1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 4.80% at March 31, 2023, which rates are determined by the Company's credit rating.
We will pay interest on each of the 2025 Notes, 2027 Notes and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022. Our Board of Directors has authorized the repurchase of up to 21.7 million shares of our common stock.
During the fiscal year ended March 31, 2023, we made interest payments of $31.5. We will pay interest on each of the 2025 Notes, 2027 Notes, and 2032 Notes semi-annually on April 14 and October 14 of each year, commencing October 14, 2022. During the fiscal year ended March 31, 2023, we made interest payments of $31.8.
Operating Expenses (thousands of dollars) 2022 % of net revenue 2021 % of net revenue Increase/(decrease) % Increase/(decrease) Selling and marketing $ 516,429 14.7 % $ 444,985 13.2 % $ 71,444 16.1 % General and administrative 510,855 14.6 % 390,683 11.6 % 120,172 30.8 % Research and development 406,566 11.6 % 317,311 9.4 % 89,255 28.1 % Depreciation and amortization 61,105 1.7 % 55,596 1.6 % 5,509 9.9 % Business reorganization 849 — % (272) — % 1,121 (412.1) % Total operating expenses $ 1,495,804 42.7 % $ 1,208,303 35.8 % $ 287,501 23.8 % Includes stock-based compensation expense, which was allocated as follows (in thousands): 2022 2021 Selling and marketing $ 30,027 $ 18,348 General and administrative $ 66,443 $ 56,830 Research and development $ 38,118 $ 26,587 Foreign currency exchange rates increased total operating expenses by $5.5 million in the fiscal year ended March 31, 2022 as compared to the prior year.
Changes in foreign currency exchange rates decreased net revenue and gross profit by $34.1 and $18.3, respectively, in the fiscal year ended March 31, 2023 as compared to the prior year. 39 Operating Expenses (millions of dollars) 2023 % of net revenue 2022 % of net revenue Increase/(decrease) % Increase/(decrease) Selling and marketing $ 1,592.6 29.8 % $ 516.4 14.7 % $ 1,076.2 208.4 % Research and development 892.5 16.7 % 406.6 11.6 % 485.9 119.5 % General and administrative 843.1 15.8 % 511.7 14.6 % 331.4 64.8 % Depreciation and amortization 122.3 2.3 % 61.1 1.7 % 61.2 100.2 % Total operating expenses $ 3,450.5 64.5 % $ 1,495.8 42.7 % $ 1,954.7 130.7 % Includes stock-based compensation expense, which was allocated as follows (in millions): 2023 2022 Selling and marketing $ 95.2 $ 30.0 Research and development 116.6 38.1 General and administrative 115.5 66.5 Foreign currency exchange rates decreased total operating expenses by $72.0 in the fiscal year ended March 31, 2023 as compared to the prior year.
The percentage increase was due primarily to lower development royalties due primarily to the timing of releases, partially offset by impairments recognized against some of our capitalized software balances (refer to Note 8 - Software Development Costs and Licenses ). 34 Net revenue earned outside of the United States increased by $47.7 million and accounted for 40.1% of our total net revenue in the fiscal year ended March 31, 2022, as compared to 40.2% in the prior year.
Net revenue earned outside of the United States increased by $585.3 and accounted for 37.2% of our total net revenue in the fiscal year ended March 31, 2023, as compared to 40.1% in the prior year.
The Notes are the Company’s senior unsecured obligations and rank equally with all of our other existing and future unsubordinated obligations. The 2024 Notes mature on March 28, 2024 and bear interest at an annual rate of 3.300%. The 2025 Notes mature on April 14, 2025 and bear interest at an annual rate of 3.550%.
The Senior Notes were issued under an indenture between the Company and The Bank of New York Mellon, as trustee (the “Trustee”). The 2024 Notes mature on March 28, 2024, and bear interest at an annual rate of 3.300%. The 2025 Notes mature on April 14, 2025, and bear interest at an annual rate of 3.550%.
For the fiscal year ended March 31, 2022, net revenue increased by $132.0 million, as compared to the prior year.
Net Bookings were as follows: Fiscal Year Ended March 31, 2023 2022 Increase/(decrease) Increase/(decrease) % Net Bookings $ 5,283.6 $ 3,408.2 $ 1,875.4 55.0 % For the fiscal year ended March 31, 2023, Net Bookings increased by $1,875.4 as compared to the prior year.
Depreciation and amortization Depreciation and amortization expenses increased by $5.5 million for the fiscal year ended March 31, 2022, as compared to the prior year, due primarily to an increase in costs related to IT infrastructure. 35 Business Reorganization During the fiscal year ended March 31, 2022, business reorganization expense increased by $1.1 million as compared to the prior year period and was not material.
Depreciation and amortization Depreciation and amortization expenses increased by $61.2 for the fiscal year ended March 31, 2023, as compared to the prior year, due primarily to acquired intangible assets and depreciation expense related to Zynga.
When compared to the statutory rate of 21%, the effective tax rate of 13.1% for the fiscal year ended March 31, 2021 was primarily due to a $29.1 million tax benefit from tax credits anticipated to be utilized, a $21.4 million tax benefit from our geographic mix of earnings and $13.7 million in excess tax benefits from employee stock compensation.
When compared to the statutory rate of 21%, the effective tax rate of 15.9% for the fiscal year ended March 31, 2023 was due primarily to an expense of $84.0 from an increase in the U.S. valuation allowance, expense of $39.7 from our geographic mix and foreign earnings, and $20.2 nondeductible expense relating to compensation expense related to covered employees pursuant to Section 162(m) and loss on the redemption of convertible debt, partially offset by a $76.8 benefit from tax credits anticipated to be utilized.
The TRAF allows the cantons to establish transition rules, the implementation of which may be subject to a ruling from the canton. On March 31, 2020, we recorded a deferred tax asset of $45.3 million offset by a valuation allowance of $33.4 million arising from the Swiss cantonal tax basis step-up.
The TRAF allows the cantons to establish transition rules, the implementation of which may be subject to a ruling from the canton.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeUnder our Credit Agreement, loans will bear interest at our election of (a) 0.250% to 0.750% above a certain base rate (3.50% at March 31, 2022) or (b) 1.125% to 1.750% above the LIBOR (approximately 0.45% at March 31, 2022), with the margin rate subject to the achievement of certain average liquidity levels.
Biggest changeHistorically, fluctuations in interest rates have not had a significant effect on our operating results. 45 Under our 2022 Credit Agreement, loans will bear interest at our election of (a) 0.000% to 0.625% above a certain base rate (8.00% at March 31, 2023) or (b) 1.000% to 1.625% above Secured Overnight Financing Rate ("SOFR"), approximately 4.80% at March 31, 2023, which are determined by the Company's credit rating.
Changes in market rates may affect our future interest expense if there is an outstanding balance on our line of credit. At March 31, 2022, there were no outstanding borrowings under our Credit Agreement. Foreign Currency Exchange Rate Risk We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates.
Changes in market rates may affect our future interest expense if there is an outstanding balance on our line of credit. At March 31, 2023, there were no outstanding borrowings under our 2022 Credit Agreement. Foreign Currency Exchange Rate Risk We transact business in foreign currencies and are exposed to risks resulting from fluctuations in foreign currency exchange rates.
Interest Rate Risk Our exposure to fluctuations in interest rates relates primarily to our short-term investment portfolio and variable rate debt under the Credit Agreement. We seek to manage our interest rate risk by maintaining a short-term investment portfolio that includes corporate bonds with high credit quality and maturities less than two years.
Interest Rate Risk Our exposure to fluctuations in interest rates relates primarily to our short-term investment portfolio and variable rate debt under the Credit Agreement. We seek to manage our interest rate risk by maintaining a short-term investment portfolio that includes corporate bonds with high credit quality and maturities of less than two years.
For the fiscal years ended March 31, 2022, 2021 and 2020, we recorded a gain of $5.9 million, a loss of $3.6 million, and a loss of $1.0 million, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.
For the fiscal years ended March 31, 2023, 2022 and 2021, we recorded a loss of $15.1, a gain of $5.9, and a loss of $3.6, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of Operations.
The available-for-sale securities were recorded at fair market value with unrealized gains or losses resulting from changes in fair value reported as a separate component of Accumulated other comprehensive income (loss), net of tax, in Stockholders' equity. We also had $1,732.0 million of cash and cash equivalents that are comprised primarily of money market 40 funds and bank-time deposits.
The available-for-sale securities were recorded at fair market value with unrealized gains or losses resulting from changes in fair value reported as a separate component of Accumulated other comprehensive (loss) income, net of tax, in Stockholders' equity. We also had $827.4 of cash and cash equivalents that are comprised primarily of money market funds and bank-time deposits.
In our opinion, a substantial portion of this fluctuation would be offset by cost of goods sold and operating expenses incurred in local currency.
In our opinion, a substantial portion of this fluctuation would be offset by cost of revenue and operating expenses incurred in local currency.
We recognized a foreign currency exchange transaction loss of $7.3 million, a gain of $0.7 million, and a loss of $3.6 million for the fiscal years ended March 31, 2022, 2021, and 2020, respectively, in Interest and other, net in our Consolidated Statements of Operations.
We recognized a foreign currency exchange transaction loss of $31.8, a loss of $7.3, and a gain of $0.7 for the fiscal years ended March 31, 2023, 2022, and 2021, respectively, in Interest and other, net in our Consolidated Statements of Operations.
We do not enter into derivative financial contracts for speculative or trading purposes. At March 31, 2022, we had $75.8 million of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $132.8 million of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
We do not enter into derivative financial contracts for speculative or trading purposes. At March 31, 2023, we had $51.2 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $224.3 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
As of March 31, 2022 and 2021, the fair value of these outstanding forward contracts was a loss of $0.2 million and a loss $0.1 million, respectively, and is included in accrued and other current liabilities.
As of March 31, 2023 and 2022, the fair value of these outstanding forward contracts was a gain of $2.5 and a gain of $0.2, respectively, and is included in accrued and other current liabilities.
For the fiscal year ended March 31, 2022, 40.1% of our revenue was generated outside the United States. Using sensitivity analysis, a hypothetical 10% increase in the value of the U.S. dollar against all currencies would decrease revenue by 4.0%, while a hypothetical 10% decrease in the value of the U.S. dollar against all currencies would increase revenue by 4.0%.
For the fiscal year ended March 31, 2023, 37.2% of our revenue was generated outside the United States. Using sensitivity analysis, a hypothetical 10% increase in the value of the U.S. dollar against all currencies would decrease revenue by 3.7%, while a hypothetical 10% decrease in the value of the U.S. dollar against all currencies would increase revenue by 3.7%.
We do not currently use derivative financial instruments in our short-term investment portfolio. Our investments are held for purposes other than trading. As of March 31, 2022, we had $820.1 million of short-term investments, which included $688.3 million of available-for-sale securities.
We do not currently use derivative financial instruments in our short-term investment portfolio. Our investments are held for purposes other than trading. As of March 31, 2023, we had $187.0 of short-term investments, which included $145.2 of available-for-sale securities.
At March 31, 2021, we had $92.1 million of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $140.5 million of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
At March 31, 2022, we had $75.8 of forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $132.8 of forward contracts outstanding to sell foreign currencies in exchange for U.S. dollars all of which have maturities of less than one year.
For the fiscal years ended March 31, 2022 and 2021, our foreign currency translation adjustment was a loss of $43.6 million and a gain of $51.3 million, respectively.
For the fiscal years ended March 31, 2023 and 2022, our foreign currency translation adjustment was a loss of $58.9 and a loss of $43.6, respectively.
We determined that, based on the composition of our investment portfolio, there was no material interest rate risk exposure to our Consolidated Financial Statements or liquidity as of March 31, 2022. Historically, fluctuations in interest rates have not had a significant effect on our operating results.
We determined that, based on the composition of our investment portfolio, there was no material interest rate risk exposure to our Consolidated Financial Statements or liquidity as of March 31, 2023.

Other TTWO 10-K year-over-year comparisons