CREATIVITY
INNOVATION
EFFICIENCY
2021 ANNUAL REPORT
$2.7 BILLION
145 MILLION
48%
63%
Developers working
in game development
and 26 studios
around the world
One of the most
critically-acclaimed
and commercially
successful video
games of all time
with over
Participation levels
reached an all-time
high for new and
returning players, and
recurrent consumer
spending grew
Net Bookings from recurrent
consumer spending grew
to a new record
and accounted for
of total Net Bookings
units sold-in to date
Generated significant cash flow and ended the year with
in cash and short-term investments
Digitally-delivered
Net Bookings grew
to a new record
and accounted for
of total Net Bookings
27%
Sold-in over 10 million
units and recurrent consumer
spending for the
NBA 2K series grew
73%
87%
5,000+
31%
$3.6 BILLION
$912 MILLION
Delivered record operating results, including
Net Bookings of approximately
Net Cash from Operating Activities of
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
1
Fiscal 2021 was an exceptional year for Take-Two. We delivered a diverse array
of content, provided innovative ways for our audiences to remain captivated
and engaged, and enabled our communities to stay connected with
f
amily
and friends. We achieved record operatin
g
results, includin
g
Net Bookin
g
s of
approximatel
y
$3.6 billion – representing 19% growth compared to the prior
y
ear – and Net Cash from Operating Activities of $912 million. Net revenue
g
rew 9% to $3.4 billion.
DEAR
SHAREHOLDERS,
Throu
g
h the efforts of our collea
g
ues around the world, we achieved these results despite si
g
nificant,
unforeseen and prolonged challenges, which was truly a reflection of our collective resilience and singular
commitment to excellence. We are immensely grate
f
ul to our teams
f
or their pro
f
essionalism and passion
a
s we navi
g
ate
d
t
h
e COVID-19 pan
d
emic to
g
et
h
er
.
ENHANCING OUR ORGANIZATION FOR THE FUTURE
During the
y
ear, we enhanced our organization for the long term. We bolstered the depth of our creative
teams by hiring more than 700 new developers, including through the acquisition o
f
several talented
studios. We invested in IT and infrastructure, which will support us throu
g
h our next phase of
g
rowth. In
a
ddition, we deepened our
f
ocus on data analytics, which is helping us better understand our players’
b
ehaviors and pre
f
erences.
To meet the needs of our diverse pla
y
er base, we broadened our portfolio of offerings and capitalized on
d
iverse business models, including new
f
ree-to-play and standalone online titles. We also made several o
f
our
g
ames available on streamin
g
and subscription services and
f
urther established our direct-to-consumer
p
latforms to offer more variety and convenience for our players
.
Our strong balance sheet is a key competitive advantage, and we leveraged our solid
fi
nancial position to
a
cquire several development studios during the year, including Playdots, Ru
ffi
an Games, HB Studios, and
HookBan
g
. We ended our Fiscal 2021 with $2.7 billion in cash and short-term investments, which enabled
us to continue our strategy o
f
pursuing select inorganic growth opportunities, such as the acquisitions o
f
Nordeus and D
y
namix
y
z during the first half of Fiscal 2022. We are excited about the capabilities that each
b
rin
g
to our
b
usiness
.
In addition, we used the past year to strengthen our culture and expand our philanthropic e
ff
orts. We came
to
g
ether with our labels to initiate new fundraisin
g
efforts, which supported charities dedicated to COVID-19
r
elie
f
e
ff
orts, as well as initiatives that seek to enhance diversity, equity, and inclusion within our industry and
to help eradicate racial injustice within our communities.
We are proud of our collective accomplishments and are ver
y
excited about what the future holds for
our Company. As a result o
f
the actions we initiated this past year, we believe that Take-Two is in the
strongest position in our Company’s history, and that we will deliver sustainable, pro
fi
table growth
f
or our
shareholders
f
or years to come.
2
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
OUR KEY ACHIEVEMENTS
Q
We delivered record digitally-delivered net revenue and Net Bookings. Digitally-delivered
n
et revenue grew 23% to $2.9 billion and digitally-delivered Net Bookings grew 27% to
$3.1 billion
.
Q
We
g
enerated record net revenue and Net Bookin
g
s
f
rom recurrent consumer spendin
g
(
“RCS”
)
. RCS accounted
f
or 62% o
f
total net revenue and 63% o
f
total Net Bookings
.
Q
NBA
2
K
21
exceeded our expectations, with strong unit sales and RCS growing 73%
1
.
Consumer en
g
a
g
ement wit
h
NBA 2
K
was outstanding, with approximately
K
2.1 m
illi
on users
playing the game dail
y
. In A
p
ril 2021, 2K and Visual Conce
p
ts ex
p
anded the NBA 2
K
f
ran
c
his
e
with th
e
r
e
l
e
as
e
of
NBA
2
K
21
for Apple Arcade – our first offering for the
1
plat
f
orm that quickly became one o
f
its most popular title
s
.
Q
G
rand Th
ef
t Aut
o
continued to expand its audience and set new benchmarks. Grand The
ft
A
uto Online’s participation levels reached an all-time high
f
rom both new and returning
pl
a
y
ers, an
d
RCS
g
rew 31%
,
ac
hi
ev
i
n
g
a new annua
l
recor
d
. Sal
e
s
o
f
G
rand The
f
t Auto
V
also surpassed our expectations, and in calendar 2020
,
more copies o
f
G
rand Th
ef
t Aut
o
V
were sold than in any other year except
f
or when it
fi
rst launched in 2013
.
Q
R
e
d D
e
ad
O
nlin
e
grew its audience, with active players increasing signi
fi
cantly and RCS
per
f
ormin
g
above our plans. The title’s success was due in
p
art to our release o
f
a standalone
v
e
rsi
o
n
of
Re
d
Dea
d
On
l
in
e
that
f
or the
fi
rst time, allowed players who did not already own
Red Dead Redemption
2
to exper
i
ence
R
ed Dead Onlin
e
, includin
g
access to all
f
uture
content up
d
ates
.
Q
P
G
A T
O
UR 2K2
1
surpassed our expectations. To drive momentum in the series further, 2K
1
entered into an exclusive
,
lon
g
-term a
g
reement with
g
ol
f
le
g
end and icon
,
Ti
g
er Wood
s
,
to serve as its Executive Director an
d
consu
l
tant. We
b
e
l
ieve t
h
is partners
h
ip wi
ll
en
h
ance
t
h
e series’ ongoing innovation an
d
aut
h
enticity
.
Q
We announced a partnership with OneTeam Partners and the National Football Lea
g
ue
P
l
ayers Assoc
i
at
i
o
n
t
h
at wi
ll
a
ll
ow 2K to inc
l
u
d
e t
h
e names, num
b
ers, ima
g
es, an
d
l
i
k
enesses
for over 2,000 current NFL players in its non-simulation football games that are currently in
development and planned to launch in the coming
fi
scal years.
Q
Pr
i
vat
e
D
i
v
i
s
io
n
co
nt
i
nu
ed
t
o
co
ntr
ib
ut
e
t
o
o
ur r
e
su
l
ts an
d
n
o
w
h
as t
h
r
ee
t
i
t
le
s t
h
at
h
av
e
so
ld
-
i
n over 1 m
illi
on un
i
t
s
. T
h
is inc
l
u
d
es
,
A
ncestors: T
h
e Human
k
in
d
O
d
yssey
,
K
er
b
a
l
Space
Pro
g
ram
(
w
h
ic
h
h
as so
ld
-in over 5 mi
ll
ion units
)
an
d
Th
e
O
uter Wor
ld
s
(
w
h
ic
h
h
as so
ld
-in
over 3 mi
ll
ion units). Private Division si
g
ne
d
new pu
bl
is
h
in
g
a
g
reements wit
h
top in
d
epen
d
ent
developers Moon Studios and Roll7, with the
fi
rst title,
Oll
iO
ll
i Wor
ld
, expecte
d
to
l
aunc
h
t
h
is
winter
d
urin
g
Fisca
l
2022
.
Q
We experienced stren
g
th in our mobile
g
ames
,
with
Dragon City
and
y
Monster Le
g
end
s
exceedin
g
our expectations
.
Stron
g
seasonal content and
f
eatures, as well as increased
m
arketin
g
investments, helped drive Net Bookin
g
s
g
rowth of 44% for Social Point durin
g
the year
.
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
3
OUR COMMITMENT TO ENVIRONMENTAL,
SOCIAL, AND GOVERNANCE (ESG) ACTIVITIES
This past year has been like no other in our history and reflected the increasing need for corporations to
operate responsibly and responsively to help address both the societal challenges o
f
today and those that
we may
f
ace in the
f
uture
.
Now more than ever, we are
f
ocusin
g
on and measurin
g
the impact o
f
our ESG activities, which is critical
for all of our various stakeholders – our consumers, employees, business partners, stockholders, and more.
Key highlights
f
rom the year include:
Q
Our number one priority has remained the health and sa
f
ety o
f
our employees and their
f
amilies
:
All o
f
our o
ffi
ces moved largely to work-
f
rom-home environments by mid-March 2020, and our
unwavering practice has been that we will not sacri
fi
ce sa
f
ety
f
or speed. As we begin to open many
o
f
our o
ffi
ces in the comin
g
months, we are
f
ollowin
g
strict protocols
f
rom local
g
overnments and
health o
ffi
cials to ensure that we are adhering to their sa
f
ety standards.
Q
We enhanced our philanthropic e
ff
orts: Roc
k
star Games
,
2K
,
Private Division
,
an
d
Socia
l
Point
joined together and donated nearly $20 million, providing support to approximately 200 organizations
throu
g
hout the world. Our e
ff
orts supported COVID-related charities and other causes
.
Q
We supported educational pro
g
rams
f
or students
:
We believe that to enact meanin
g
ful, sustainable
change, especially
f
or those in underserved and underrepresented communities, there needs to be a
continuum of activism and en
g
a
g
ement, with educational pro
g
rams servin
g
as a core foundation. We
support a variety o
f
organizations that provide STEM and entry game design programs
f
or students
in elementary, middle and high school. This is in addition to providing
fi
nancial support and endowing
scholarship programs with a variety o
f
key partners in our industry.
Q
We leveraged our balance sheet to unlock shareholder value through strategic
acquisitions
,
includin
g:
•
P
laydots
(
Se
p
tember 2020
)
– a mobile
g
ame develope
r
b
e
st kn
o
wn
fo
r Tw
o
D
o
ts
,
which
h
as been downloaded approximatel
y
100 million times since its launch six
y
ears ago.
•
Sco
tland-bas
e
d Ru
ffi
an
G
am
e
s
(
October 2020
)
– now o
p
erates under the name o
f
R
ockstar Dundee to support the label’s pro
j
ects in development.
•
H
B Stu
dio
s
(
Marc
h
2021
)
– developer o
f
P
G
A T
O
UR 2K2
1
, un
d
erscorin
g
2K’s commitment
t
o our successful and
g
rowin
g
g
olf franchise
.
•
H
oo
k
Ban
g
’s Aust
i
n-
b
ase
d
v
id
eo
g
ame
di
v
i
s
i
on
(
Marc
h
2021
)
– rename
d
Visua
l
Conce
p
ts
A
ustin to hel
p
collaborate on the NBA 2
K
series.
K
•
No
rd
e
us
(
June 2021
)
– mobile
g
ame develope
r
b
e
st kn
o
wn
fo
r
T
o
p
Eleven
,
the
world’s most success
f
ul mobile soccer mana
g
ement
g
ame with over 240 million
re
g
istered user
s
.
•
D
ynamixyz (July 2021) – Fran
ce
-bas
e
d w
o
rld-
c
lass l
e
ad
e
r in vid
eo
-bas
e
d
f
a
c
ial
a
nimati
o
n s
e
rvi
ce
s that will be providin
g
its cutting-edge proprietar
y
technolog
y
exclusively for our publishing labels and development studios
.
4
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
Q
We enhanced our focus on diversit
y
, equit
y
, and inclusion across our offices, industr
y
, and societ
y
:
We are committed to enhancing workforce diversit
y
at Take-Two and strive to provide an inclusive
workplace in which ever
y
one
f
eels respected, heard, and sa
f
e. We believe that our e
ff
orts will help
m
ake us both a better societ
y
and industr
y
–
f
or toda
y
, and more importantl
y
,
f
or tomorrow. These
initiatives also enable us to make better entertainment experiences that are authentic, culturally
r
elevant, and re
fl
ective o
f
the audiences that enjoy them. In addition, we provide
fi
nancial and other
support to organizations working to eradicate social and racial injustice; provide educational, athletic,
and other opportunities to underserved communities; and work with or
g
anizations to support the
r
ights o
f
the LGBTIQ community
.
Q
We support our local communities and volunteer: Our initiatives included a company-sponsored and
-matching emplo
y
ee charitable giving platform; funding the deliver
y
of nutritious food and medical
supplies to shelters in impoverished communities; and enacting employee volunteer service projects
in the re
g
ions in which we operate
.
We will continue to
f
ocus on maintaining our leading culture and driving our corporate responsibility e
ff
orts
f
orward. Our e
ff
orts are bein
g
reco
g
nized, with
F
ortun
e
listin
g
us on its “Fastest Growin
g
Companies” list in
2020, its “Best Places to Work in NYC” list (Small and Medium Emplo
y
ers) in 2020 and 2021 and recognizing
us as a “
G
r
e
at P
l
a
ce
t
o
W
o
r
k
” in 2
0
21.
POSITIONING OUR BUSINESS TO REACH NEW RECORD LEVELS
We are very optimistic about our multi-year growth trajectory. As a result o
f
our company-speci
fi
c growth
drivers, combined with strong industr
y
tailwinds, we expect to achieve new record levels of operating results
in t
h
e coming years.
The interactive entertainment industr
y
has been experiencing outsized growth, with the global video game
mar
k
et ac
h
ieving a 19% 5-year CAGR
1
and reaching approximately $208 billion in 2020
2
. As we
l
oo
k
a
h
ea
d,
we believe that the pandemic initiated a trans
f
ormational shi
f
t in entertainment consumption, revealin
g
the
value of interactive entertainment to a much broader market. While we ex
p
ect our Fiscal 2022 results to
show a moderation o
f
the trends that bene
fi
tted our industry during the pandemic, we anticipate that the
overall addressable market for our industr
y
will be notabl
y
larger going forward than it was pre-COVID-19.
We believe that this will be bene
fi
cial
f
or our business, as new players discover our beloved
f
ranchises and
as we captivate existing p
l
ayers wit
h
new re
l
eases an
d
content up
d
ates.
OUR CORE TENETS
OUR STRATEGY
To develop the highest-qualit
y
, most compelling interactive
entertainment franchises in the business and deliver them
on any platform
that is r
e
l
e
vant t
o
o
ur audi
e
n
ce
.
CREATIVITY INNOVATION EFFICIENCY
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
5
Additionall
y
, we believe that we are well-positioned to achieve long-term growth due to our
compan
y
-specific growth levers:
Q
We have the strongest multi-
y
ear pipeline in our Compan
y
’s histor
y
: We ex
p
ect to deliver
approximately 20 titles per year for the next several years, through a combination of new and
existing franchises. This is a new paradigm for our Compan
y
, as it represents a greater number
of annual releases than we have delivered in the past, particularl
y
as it relates to our largest
“immersive core” releases. This pipeline has been
y
ears in the making, and to prepare our enterprise
we have been investin
g
in talent and infrastructure, conceptualizin
g
new
g
ames and ensurin
g
that our
teams and plat
f
orms can handle a lar
g
er release schedule. The scope o
f
our business has expanded
over the
y
ears, with Private Division becoming a notable contributor coupled with a significant
enhancement o
f
our mobile capabilities. Our aspiration is to levera
g
e our proven port
f
olio o
f
owned
intellectual property and to create success
f
ul new
f
ranchises that captivate players globally and have
l
ongevity in t
h
e mar
k
etp
l
ace.
Q
We are expanding our mobile free-to-pla
y
offerings
:
The mobile
g
amin
g
market reached
approximatel
y
$86 billion
3
in 2020 and is the lar
g
est and fastest-
g
rowin
g
se
g
ment within our
industr
y
. Our recent acquisitions of Pla
y
dots and Nordeus have significantl
y
enhanced our mobile
ta
l
ent an
d
expertise, an
d
b
ot
h
are
h
ig
hly
comp
l
ementar
y
to Socia
l
Point. We
b
e
l
ieve t
h
at we can
meaningfully increase our Net Bookings from mobile by growing our existing titles, including
acquiring new p
l
a
y
ers an
d
more
d
eep
ly
engaging our existing p
l
a
y
ers wit
h
new content.
A
dd
itiona
lly
, we expect to
d
e
l
iver over 20 new mo
b
i
l
e tit
l
es across our
d
ivisions over t
h
e next
few
y
ears.
Q
Continued RCS growth is a meaningful opportunit
y:
Durin
g
Fisca
l
2021, RCS
g
rew 48% an
d
represented 63% o
f
our total Net Bookin
g
s. In addition to bein
g
a hi
g
h-mar
g
in business, RCS
helps diversif
y
our financial performance. Offering post-launch content is becoming increasingl
y
important to us and is a consideration
f
or each title upon conception. As we continue to enhance
our data anal
y
tics, we are deepening our understanding of our pla
y
er base and how the
y
prefer to
interact wit
h
our
g
ames, w
h
ic
h
is
h
e
l
pin
g
us
d
eve
l
op t
h
e most
d
esira
bl
e pro
d
ucts, expansions, an
d
new content u
pd
ates
.
Q
We are explorin
g
emer
g
in
g
distribution channels and business models: Our strateg
y
is to
d
evelop the highest-qualit
y
, most compelling interactive entertainment franchises in the business
and deliver them on platforms that are relevant to our audience. To meet our pla
y
ers’ needs, we
continue to capita
l
ize on new
b
usiness mo
d
e
l
s, inc
l
u
d
in
g
c
l
ou
d
g
amin
g
,
d
irect-to-consumer,
streamin
g
, an
d
su
b
scription.
Q
eSports cont
i
nues to
g
a
i
n momentum
:
We are ver
y
pleased with the ongoing progress of the
NBA
2
K Lea
g
u
e
,
our
j
oint-venture with the NBA, which kicked off its fourth season in Ma
y
2021
wit
h
2
3
t
e
ams. T
he
L
ea
g
u
e
has been steadil
y
building its portfolio of high-profile partnerships and
sponsors
h
ips, inc
l
u
d
ing a
l
an
d
mar
k
, mu
l
ti-year
d
ea
l
wit
h
Sony Interactive Entertainment to ma
k
e
the Pla
y
Station 5 its official console for all teams during the season. We believe that the Lea
g
ue
ha
s
the long-term potential to enhance engagement, and drive profitabilit
y
for our Compan
y
.
Q
Geograp
hi
c expans
i
on represents an
i
mportant
l
ong-term growt
h
opportun
i
t
y
: W
e
bel
i
e
v
e
t
h
at
we can grow our
b
usiness internationa
lly
, particu
l
ar
ly
in Asia, w
h
ic
h
represente
d
approximate
ly
7%
of our Net Bookin
g
s in Fiscal 2021. In addition to offerin
g
NBA 2K
O
nlin
e
,
durin
g
Fiscal 2021 we
expanded our success
f
ul partnership with Tencent throu
g
h the release o
f
Kerbal Space Pro
g
ram
o
n
their WeGame distribution plat
f
orm as a premium PC
g
ame. We are excited about WeGame and the
opportunity to grow our business in China. We continue to explore other emerging markets as well
.
6
TAKE-TWO INTERACTIVE SOFTWARE, INC. 2021 ANNUAL REPORT
July 16, 2021
Karl Slatoff
Presi
d
en
t
Strauss Zelnick
Chairman and Chie
f
Executive O
ffi
ce
r
1. Source: IDG Consultin
g
.
2. Source: IDG Consulting, February 2021. Includes mobile, digital PC, Digital Console, Physical Software (Console and PC). Excludes hardware.
3. Source: Newzoo
.
OUR FUTURE
We are extremel
y
proud that Take-Two remains the home
f
or our industr
y
’s most creative and passionate
talent. We believe that our culture is truly unique and we empower our teams to pursue their passions, which
we believe is a key competitive advantage and a strong contributor o
f
our success. Their vision and ability
to captivate audiences – includin
g
incredible standalone entertainment experiences and live services that
en
g
a
g
e communities around the world – both rede
fi
nes the possibilities o
f
interactive entertainment and
forms the foundation for our continued success. As we continue to grow, we are highl
y
focused on preserving
our culture and maintainin
g
a stron
g
entrepreneurial spirit.
We are incredibly excited about the many opportunities
f
or our Company and believe that Take-Two is
exceedingly well positioned to generate value to consumers, as well as growth and margin expansion
f
or
our s
h
are
h
o
ld
ers over t
h
e
l
on
g
term.
We would like to thank our colleagues
f
or delivering another outstanding year
f
or our organization. To our
shareholders, we want to express our appreciation for your continued support.
Sincerely
,
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended March 31, 2021
OR
☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
Commission file number 001-34003
TAKE-TWO INTERACTIVE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
51-0350842
(I.R.S. Employer
Identification No.)
110 West 44th Street
New York, New York
(Address of principal executive offices)
10036
(Zip Code)
Registrant's Telephone Number, Including Area Code: (646) 536-2842
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol Name of each exchange on which registered
Common Stock, $.01 par value TTWO NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer ý Accelerated filer o Non-accelerated filer o
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ý
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold,
or the average bid and asked price of such common equity, as of the last business day of the Registrant's most recently completed second fiscal quarter was approximately
$13,938,279,654.
As of May 5, 2021, there were 115,656,093 shares of the Registrant's Common Stock outstanding, net of treasury stock.
Documents Incorporated by Reference:
Portions of the registrant's definitive proxy statement for the 2021 Annual Meeting of Stockholders
are incorporated by reference into Part III herein.
INDEX
PAGE
PART I
Item 1. Business 1
Item 1A. Risk Factors 7
Item 1B. Unresolved Staff Comments 22
Item 2. Properties 22
Item 3. Legal Proceedings 22
Item 4. Mine Safety Disclosures 22
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
23
Item 6. Selected Financial Data 25
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35
Item 9A. Controls and Procedures 35
Item 9B. Other Information 36
PART III
Item 10. Directors, Executive Officers and Corporate Governance 37
Item 11. Executive Compensation 37
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
37
Item 13. Certain Relationships and Related Transactions, and Director Independence 37
Item 14. Principal Accounting Fees and Services 37
PART IV
Item 15. Exhibits, Financial Statement Schedules 38
Item 16. Form 10-K Summary 42
Index to Financial Statements 43
Signatures 83
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
The statements contained herein which are not historical facts are considered forward-looking statements under
federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans," "potential," "predicts," "projects," "seeks," "should," "will," or words of similar meaning and include, but are not
limited to, statements regarding the outlook for Take-Two Interactive Software, Inc.'s ("Take-Two," the "Company," "we," "us,"
or similar pronouns) future business and financial performance. Such forward-looking statements are based on the current
beliefs of our management as well as assumptions made by and information currently available to them, which are subject to
inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Actual outcomes and results may vary
materially from these forward-looking statements based on a variety of risks and uncertainties including the uncertainty of the
impact of the COVID-19 pandemic and measures taken in response thereto; the effect that measures taken to mitigate the
COVID-19 pandemic have on our operations, including our ability to timely deliver our titles and other products, and on the
operations of our counterparties, including retailers, including digital storefronts and platform partners, and distributors; the
effects of the COVID-19 pandemic on consumer demand and the discretionary spending patterns of our customers; the impact
of reductions in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio;
the impact of potential inflation; volatility in foreign currency exchange rates; as well as, but not limited to, the risks and
uncertainties discussed under the heading "Risk Factors" included in Part I, Item 1A herein. All forward-looking statements are
qualified by these cautionary statements and speak only as of the date they are made. The Company undertakes no obligation to
update any forward-looking statement, whether as a result of new information, future events or otherwise.
PART I
Item 1. Business
General
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, Social Point, and Playdots. Our
products are currently designed for console gaming systems, including, but not limited to, the Sony Computer
Entertainment, Inc. ("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"), 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. We make all of our filings with the Securities and Exchange
Commission ("SEC") available free of charge on our website under the caption "Financial Information—SEC Filings." Included
in these filings are our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports, which are available as soon as reasonably practicable after we electronically file or furnish such
materials with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. 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. 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 r ange of genres. 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. 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. We believe that our commitment to creativity and innovation is a distinguishing strength, enabling us to
differentiate our products in the marketplace by combining advanced technology with compelling storylines and characters that
provide unique gameplay experiences for consumers. We have created, acquired, or licensed a group of highly recognizable
brands to match the broad consumer demographics that we serve, ranging from adults to children and game enthusiasts to
casual gamers. Another cornerstone of our strategy is to support the success of our products in the marketplace through
innovative marketing programs and global distribution on platforms and through channels that are relevant to our target
audience.
1
Support World-Class Creative Teams. Creativity and innovation remain the core tenets of our organization and are
the lifeblood of our ongoing success. We have 5,079 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. In addition, Private Division is dedicated to
bringing titles from top independent developers to market, and Social Point and Playdots further enhance our development
capabilities with a track record of producing multiple hits in the free-to-play mobile sector. 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 retention and
acquisition, and our label structure enables us to target distinct market segments and opportunities.
Focus on Core Strength of Producing High Quality Titles. We focus on publishing a select number of high-quality
titles based on internally owned and developed intellectual properties. We currently own the intellectual property rights to 27
proprietary brands. In addition, we selectively develop titles based on licensed properties, including sports leagues, and also
publish externally developed titles.
We use a product investment review process to evaluate potential titles for investment, to review existing titles in
development, and to assess titles after release by measuring their performance in the market and the return on our investment.
We apply this process to all of our products, whether internally or externally developed. The 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.
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. One developer will generally produce the same game for multiple platforms and will
also produce sequels to the original game. We believe that selecting and using development resources in this manner allows us
to leverage the particular expertise of our internal and external development resources, which is designed to maintain our
quality standards for our products.
Leverage Emerging Technologies, Platforms, and Distribution Channels, Including Digitally Delivered
Content. Interactive entertainment played online and on mobile platforms, such as tablets and smartphones, 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. 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). We also publish an expanding variety of titles for tablets and smartphones, 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. 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.
Expand International Business. The global market for interactive entertainment continues to grow, and we seek to
increase our presence internationally, particularly in Asia, the Middle East, and Latin America. We are continuing to execute on
our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online
gaming presence, especially in China and South Korea. We are a direct publisher in Japan and South Korea. 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.
Our Businesses
Our revenue is primarily derived from the sale of internally developed software titles and software titles developed by
third parties. 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, Hungary, India, South Korea, Spain, the United Kingdom (U.K.), and the United
States (U.S.). As of March 31, 2021, we had a research and development staff of 5,079 employees with the technical
capabilities to develop software titles for all major consoles, PCs, and mobile p latforms in multiple languages and territories.
2
Agreements with third-party developers generally give us exclusive publishing and marketing rights and require us to
make development payments, pay royalties based on product sales, and satisfy other conditions. Development payments for
software titles are typically recoupable against royalties otherwise due to developers based on software sales. Our agreements
with third-party developers generally provide us with the right to monitor development efforts and to cease making
development payments if specified development milestones are not satisfied. We also regularly monitor the level of
development payments in light of the expected sales for the related titles.
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
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 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 335 million units worldwide. The latest installment, Grand Theft Auto V, has sold-in over
145 million units worldwide and includes access to Grand Theft Auto Online. Red Dead Redemption 2, which has been a
critical and c ommercial success that set numerous entertainment industry records, has sold-in more than 35 million units
worldwide to date. Rockstar Games is also well known for developing brands in other genres, including the LA Noire, Bully,
and Manhunt franchises. Rockstar Games continues to expand on our established franchises by developing sequels, offering
downloadable episodes, and additional content.
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. We expect 2K t o
continue to develop new, successful franchises in the future. 2K's internally owned and developed franchises include the
critically acclaimed, m ulti-million unit selling BioShock, Mafia, Sid Meier's Civilization,andXCOM 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. 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.
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. Private Division also released The Outer Worlds and
Ancestors: The Humankind Odyssey, based on new IP from renowned industry creative talent. Kerbal Space Program 2 is
planned for release in fiscal year 2023.
Social Point. Social Point develops and publishes popular free-to-play mobile games that deliver high quality,
deeply-engaging entertainment experiences, including its two most successful games, Dragon City and Monster Legends.In
addition, Social Point has a robust development pipeline with a number of exciting games planned for launch in the coming
years.
Playdots. On September 4, 2020, we acquired privately held Playdots, Inc. ("Playdots") for consideration having an
acquisition date fair value of $195.5 million, consisting of $97.8 million in cash and the issuance of 0.6 million shares of our
common stock. (See Note 22 - Acquisitions of our Consolidated Financial Statements.) Founded in 2013 and based in New
York, New York, Playdots builds mobile games with unique and thoughtful designs. Playdots is best known for Two Dots,
which has been downloaded over 80 million times since its launch six years ago and continues to deeply engage audiences
throughout the world.
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. 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 52 million registered users. We have
released two iterations of NBA 2K Online and continue to enhance the title with new features.
We have expanded our relationship with the NBA through the NBA 2K League. T his groundbreaking competitive
gaming league is jointly owned by us and the NBA and consists of teams operated by actual NBA franchises. The NBA 2K
League follows a professional sports league format: head-to-head competition throughout a regular season, followed by a
bracketed playoff system and a finals match-up that was held in August in each of the NBA 2K League's first three seasons.
The NBA 2K League's fourth season is set to take p lace in calendar year 2021.
3
Intellectual Property
Our business is highly dependent on the creation, acquisition, licensing and protection of intellectual property. The
intellectual property rights we have created or acquired for our internally-owned portfolio of brands include BioShock, Bully,
Carnival Games, Dragon City, Grand Theft Auto, Kerbal Space Program, L.A. Noire, Mafia, Manhunt, Max Payne, Midnight
Club, Monster Legends, Red Dead, Sid Meier's Civilization, Two Dots,andXCOM. 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.
We also enter into content license agreements, such as those with sports leagues, players associations, music labels and
musicians. These licenses are typically limited to use of the licensed rights in products for specific time periods. 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 software products sold for use on their respective hardware platforms. We place a purchase order for
the manufacture of our products with Sony, Nintendo, or Microsoft's approved replicator and then send software code to the
manufacturer, together with related artwork, user instructions, warranty information, brochures and packaging designs for
approval, defect testing and manufacture. 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.
Arrangements with Platform Manufacturers
We have entered into license agreements with Sony and Microsoft to develop and publish software in Asia, Australia,
Europe, North America, and certain Latin American, Middle Eastern, and African countries. We are not required to obtain any
licenses from hardware manufacturers to develop titles for the PC.
Sony. Effective March 23, 2017, we entered into a PlayStation Global Developer and Publisher Agreement with Sony
Computer Entertainment, Inc. and certain of its affiliates, pursuant to which Sony granted us the right and license to develop,
publish, have manufactured, market, advertise, distribute and sell PlayStation compatible products for all PlayStation systems.
The agreement requires us to submit products to Sony for approval and for us to make royalty payments to Sony based on the
number of units manufactured or revenue from digitally downloaded content. In addition, products for PlayStation systems are
required to be manufactured by Sony-approved manufacturers. On September 30, 2020, we entered into a PlayStation 5
Amendment, with an effective date of May 1, 2020 (the “PS5 Amendment”), to our existing PlayStation Global Developer and
Publisher Agreement. The PS5 Amendment amends the existing agreement to include the PlayStation 5 interactive
entertainment system in the definition of systems in the agreement and to extend all of the terms and conditions of the existing
agreement to our PlayStation 5 products and services.
The term of the agreement, as amended, expires on March 31, 2022, 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 agreement may also be terminated by Sony immediately in the event of a breach by us or our bankruptcy or
insolvency. Upon expiration or termination of the agreement, we have certain rights to sell off existing inventories.
Microsoft. Under the terms of the license agreements that we have entered into with Microsoft Corporation and its
affiliates, Microsoft granted us the right and license to develop, publish, have manufactured, market, a dvertise, distribute and
sell Xbox compatible products. 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.
Effective as of November 17, 2005, we entered into an Xbox 360 Publisher License Agreement with Microsoft for the
Xbox 360 console (the “Xbox 360 Agreement”). Effective as of July 1, 2020, we entered into an Xbox Console Publisher
License Agreement with Microsoft for the Xbox Series X|S and Xbox One consoles (the “Xbox Next Gen Agreement” and
together with Xbox 360 Agreement, the “Xbox Agreements”). The term of Xbox 360 Agreement expires on May 31, 2022, 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). These Xbox Agreements may be terminated by Microsoft
immediately in the event of a b reach by us, and the Xbox Next Gen Agreement may also be terminated by Microsoft
4
immediately in the event of our bankruptcy or insolvency. Upon expiration or termination of each of the Xbox Agreements, we
have certain rights to sell off existing inventories.
Sales
We sell software titles both physically and digitally through direct relationships with large retail customers, including
digital storefronts and platform partners, and third-party distributors. Our top customers include, among others, Sony,
Microsoft, Steam, GameStop, Epic, Apple, and Google. 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 to our five
largest customers during the fiscal year ended March 31, 2021 accounted for 78.4% 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, 2021.
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 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.
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. 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. We believe that we label and market our products in accordance
with the applicable principles and guidelines of the Entertainment Software Rating Board, or the ESRB, an
independent self-regulatory body that assigns ratings and enforces advertising guidelines for the interactive software
industry.
• Stimulating c ontinued sales by reducing the wholesale prices of our products to retailers, digital storefronts, and
platform providers at various times during the life of a product. Price protection may occur at any time in a product's
life cycle, but typically occurs three to nine months after a product's initial launch. 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.
As of March 31, 2021, we had a sales and marketing staff of 651 people.
Product Procurement
We procure products from suppliers principally using standard purchase orders based on our assessment of market
demand. We carry inventory quantities that we believe are necessary to provide rapid response to retailer and distributor orders.
We utilize electronic data interchange with many of our customers to enhance the efficiency of placing and shipping orders and
receiving payments.
Competition
In our business, we compete with:
• Other interactive entertainment companies, including those offering mobile games, that range in size and cost structure
from very small with limited resources to very large with greater financial, marketing, technical, and other resources
than ours. Examples of our competitors include Activision Blizzard, Inc., Electronic Arts Inc., and Ubisoft
Entertainment S.A.
• Sony, Microsoft, and Nintendo for the sale of interactive entertainment software. Each of these competitors is a large
developer and marketer of software for their own platforms and has the financial resources to withstand significant
price competition and to implement extensive advertising campaigns.
5
• Other software, hardware, entertainment, and media for limited retail shelf space and promotional resources. 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.
Competition in the entertainment software industry is based on innovation, features, playability, product quality, brand
name recognition, compatibility with popular platforms, access to distribution channels, price, marketing, and customer service.
Our business is driven by hit titles, which require increasing budgets for development and marketing. For physical sales,
competition for our titles is influenced by the timing of competitive product releases and the similarity of such products to our
titles and may result in loss of shelf space or a reduction in sell-through of our titles at retail stores.
International Operations
International sales are a significant part of our business. For the fiscal years ended March 31, 2021, 2020 and 2019, we
earned 40.2%, 42.5% and 46.5%, respectively, of our net revenue outside the United States. We are continuing to execute on
our growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online
gaming presence, especially in China and South Korea. We are subject to risks inherent in foreign trade, including increased
credit risks, tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political,
regulatory and economic developments, all of which can have a significant effect on our operating results. See Notes 1 and 2 to
our Consolidated Financial Statements.
Segment and Geographic Information
We have one operating and reportable segment. See Notes 1, 2, and 9 to our Consolidated Financial Statements.
Human Capital
Human Capital Management. One of Take-Two’s most important assets is our people. With 6,495 full-time
employees as of March 31, 2021, of which 3,341 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. 49% of our
employees are located in North America, 35% in Europe, and 16% in the Asia-Pacific region; 77% of our employees are
focused on product development.
Due to COVID-19, this past year was a challenging one for our employees, and, given the largely remote working
environment, we implemented programs to make sure our people felt supported in their roles, providing 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.
Despite the challenges of the pandemic, creativity and innovation remained 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. We support our creative and corporate teams by focusing on talent retention and
acquisition, including through: offering job development and skills training initiatives, extensive employee benefits and
numerous well-being programs, and partnering with the leadership at our labels to foster the types of cultures our leaders
believe best support and grow the creative processes for their particular teams.
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 believe our culture of compassion and respect
fosters a warm, welcoming environment for all qualified candidates and colleagues. 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 c ounseling to
young adults in those same communities; and celebrating cultural differences through various employee affinity groups and
company events and offerings.
Talent Assessment & Development and Employee Experience. We strongly believe in internal growth opportunities
and career development tracks. We also recognize the importance of our employees staying current in an ever-changing
industry. To that end, our global Learning & Development team curates a wide variety of training materials and programs
6
targeting both hard skills development and career progression as well as programs in leadership development and employee
round tables. Further, our compliance training program seeks to ensure that our employees recognize and report any signs of
harassment, discrimination, retaliation, or other inappropriate behaviors in the workplace and that they understand and abide by
our Code of Business Conduct and other internal policies.
Our learning and development programs are designed to be closely aligned with our performance management process
and succession planning. Our formalized performance management process provides the platform for evaluating each
individual employee’s contributions to the team and our success, with a focus on regular communication and transparency. 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. 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
in 2018, included among EM360’s Top 10 Companies with the Best Employee/Employer Relations in 2019, and listed on
Fortune’s Great Places to Work list in 2019 and 2021 and Best Places to Work in NYC list in 2020.
Compensation and Benefits. The main objectives of our compensation and benefit programs are to attract, retain,
motivate, and reward our employees, who operate in a highly competitive and technologically challenging environment. We
offer competitive compensation packages designed to incentivize high individual and company performance. 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 emphasis on
our overall performance is intended to align our employees’ financial interests with the interests of our shareholders. In addition
to awarding Restricted Stock Units to employees at certain levels, we also offer an Employee Stock Purchase Plan to further
align the interests of our employees with our shareholders.
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 have hosted 100+ company-wide bootcamps to
promote physical fitness and employee comradery.
Item 1A. Risk Factors
Our business is subject to many risks and uncertainties, which may affect our future financial performance. Because of
the risks and uncertainties described below, as well as other factors affecting our operating results and financial condition,
past financial performance should not be considered to be a reliable indicator of future performance and our business and
financial performance could be harmed and the market value of our securities could decline.
Risks relating to our business and industry
Our results of operations may be materially adversely impacted by the coronavirus pandemic (COVID-19).
Our results of operations may be materially adversely affected by COVID-19. The global spread of COVID-19 has
created significant uncertainty, resulting in volatility and economic disruption. 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.
7
Further, “shelter-in-place,” quarantine, or other such initiatives by governmental entities could also disrupt our
operations. In such situations, if employees or third-party developers who cannot optimally perform their responsibilities from
home are not able to or are unwilling to report to work, we may experience material interruptions in product development and
delays in bringing products to market. Such circumstances may also impact the effectiveness of our quality controls and game
testing measures. An increase in the number of employees working remotely also increases the potential adverse impact of risk
associated with information technology systems and networks, including cyber-attacks, computer viruses, malicious software,
security breach, and telecommunication failures, both for systems and networks we control directly and for those that
employees and third-party developers rely on to work remotely. Any failure to prevent or mitigate security breaches or cyber
risks or detect, or respond adequately to, a security breach or cyber risk, or any other disruptions to our information technology
systems and networks, can have adverse effects on our business. The spread of COVID-19 has caused us to modify our business
practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events
and conferences), and we may take further actions as may be required by government authorities or that we determine are in the
best interests of our employees, customers and business partners. Further, key personnel could contract COVID-19, hindering
their availability and productivity.
Additionally, sports organizations' operations and seasons have and may be altered based on the response to
COVID-19. Such events could affect the demand for our sports titles.
While we have developed and continue to develop plans to help mitigate the negative impact of the pandemic on our
business, these efforts may not be effective, and a protracted economic downturn may limit the effectiveness of our mitigation
efforts. 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. 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.
We are dependent on the future success of our Grand Theft Auto products, and we must continue to publish "hit" titles or
sequels to such "hit" titles in order to compete successfully in our industry.
Grand Theft Auto and certain of our other titles, such as Red Dead Redemption or NBA 2K, are "hit" products and have
historically accounted for a substantial portion of our revenue. Grand Theft Auto products contributed 29.2% of our net revenue
for the fiscal year ended March 31, 2021, and the five best-selling franchises (including Grand Theft Auto), which may change
year over year, in the aggregate accounted for 84.1% of our net revenue for the fiscal year ended March 31, 2021. If we fail to
continue to develop and sell new commercially successful "hit" titles or sequels to such "hit" titles or experience any delays in
product releases or disruptions following the commercial release of our "hit" titles or their sequels, our revenue and profits may
decrease substantially and we may incur losses. In addition, competition in our industry is intense and a relatively small number
of hit titles account for a large portion of total revenue in our industry. Hit products offered by our competitors may take a
larger share of consumer spending than we anticipate, which could cause revenue generated from our products to fall below our
expectations. If our competitors develop more successful products or services at lower price points or based on payment models
perceived as offering better value, or if we do not continue to develop consistently high quality and well-received products and
services, our revenue and profitability may decline. In addition, both the online and mobile games marketplaces are
characterized by frequent product introductions, relatively low barriers to entry, and new and evolving business methods,
technologies and platforms for development. 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.
The interactive entertainment software industry is highly competitive.
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., and Ubisoft Entertainment S.A. As our business is dependent upon our ability
to develop hit titles, which require increasing budgets for development and marketing, the availability of significant financial
resources has become a major competitive factor in developing and marketing software games. 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. 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.
8
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.
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.
We are subject to product development risks which could result in delays and additional costs, and we must adapt to changes
in software technologies.
We depend on our internal development studios and third-party software developers to develop new interactive
entertainment software within anticipated release schedules and cost projections. 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. 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. There can be no assurance that our products will be sufficiently successful so that we can
recoup these costs or make a profit on these products.
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. Any inability to respond to
technological advances and implement new technologies could render our products obsolete or less marketable. Further, the
failure to pursue the development of new technology, platforms, or business models that obtain meaningful commercial success
in a timely manner may negatively affect our business, resulting in increased production or development costs and more
strenuous competition.
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.
New products may not achieve significant market acceptance, generate sufficient sales, or be introduced in a timely
manner to permit us to recover development, manufacturing and marketing costs associated with these products. 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. Because sales associated with an initial product launch 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.
Our business is subject to our ability to develop commercially successful products for the current video game 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 74.6% of our net
revenue by product platform for the fiscal year ended March 31, 2021. The success of our business is subject to the continued
popularity of these platforms and our ability to develop commercially successful products for these platforms.
In 2020, Sony and Microsoft each launched their respective next generation consoles. Historically, when next
generation consoles are announced or introduced into the market, consumers have typically reduced their purchases of products
for prior-generation consoles in anticipation of purchasing a next-generation console and products for that console. During
these periods, sales of the products we publish may decline until new platforms achieve wide consumer acceptance. Console
transitions may have a comparable impact on sales of downloadable content, amplifying the impact on our revenues. This
decline may not be offset by increased sales of products for the next-generation consoles. In addition, as console hardware
moves through its life cycle, hardware manufacturers typically enact price reductions, and decreasing prices may put downward
pressure on software prices. During console transitions, we may simultaneously incur costs both in continuing to develop and
market new titles for prior-generation video game platforms, which may not sell at premium prices, and also in developing
products for next-generation platforms, which may not generate immediate or near-term revenues. As a result, our business and
operating results may be more volatile and difficult to predict during console transitions than during other times.
9
Connectivity issues could affect our profitability and our ability to sell and provide online services for our products.
We rely upon third-party digital delivery platforms, such as Microsoft's Xbox Live, PlayStation Network, Steam, Epic,
and other third-party service providers, to provide connectivity from the consumer to our digital products and our online
services. Connectivity issues could prevent customers from accessing this content and our ability to successfully market and sell
our products could be adversely affected. Given the increasing global usage of online platforms, in part as a result of the
COVID-19 pandemic, the risks of connectivity issues may be heightened. 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.
We may experience declines or fluctuations in the recurring portion of our business.
Our business model includes revenue that we expect to be recurring in nature, such as revenue from our annualized
titles and associated services, and ongoing mobile businesses. While we have been able to forecast the revenue from these areas
of our business with greater certainty than for new offerings, we cannot provide assurances that consumers will purchase these
games and services on a consistent basis. F urthermore, we may cease to offer games and services that we previously had
deemed t o be recurring in nature. 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. Any decline or fluctuation in this
portion of our business may have a negative impact on our financial and operating results.
We rely on complex information technology systems and networks to operate our business. 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. 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 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. Information technology system disruptions, network failures, or security breaches could negatively
affect our business continuity, operations and financial results. These risks extend to the networks and e-commerce sites of
console platform providers and other partners who sell or host our content online. The risk of such threats may be heightened as
a result of an extended period of remote work arrangements due to COVID-19. Along with our partners, we have expended, and
expect to continue to expend, financial and operational resources to implement certain systems, processes and technologies to
guard against cyber risks and to help protect our data and systems. 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. 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. 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. Additionally, applicable insurance policies may be insufficient to reimburse us for all such losses, and it is
uncertain whether we will be able to maintain the current level of insurance coverage in the future on reasonable terms or at all.
Successful exploitation of our systems can have other negative effects upon the products, services and user experience
we offer. In particular, the virtual economies that we have established in many of our games are subject to abuse, exploitation
and other forms of fraudulent activity that can negatively affect our business. Virtual economies involve the use of virtual
currency or virtual assets that can be used or redeemed by a player within a particular game or service. 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. 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.
10
Our business could be adversely affected if our consumer data protection measures are not seen as adequate or there are
breaches of our security measures or unintended disclosures of our consumer data.
We are collecting and storing consumer information, including personal information. We take measures to protect our
consumer information from unauthorized access or disclosure. It is possible that our security controls over consumer
information may not prevent the improper access or disclosure of personal information. In addition, due to the high-profile
nature of our products, we may draw a disproportionately higher amount of attention and attempts to breach our security
controls than companies with lower profile products. 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 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.
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. 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. Because the techniques used to obtain unauthorized access, or to sabotage systems, change
frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or
to implement adequate preventative measures. If an actual or perceived breach of our safeguards occurs, we may lose business,
suffer irreparable damage to our reputation, and/or incur significant costs and expenses relating to the investigation and possible
litigation of claims relating to such event.
Security breaches involving the source code for our products or other sensitive and proprietary information could adversely
affect our business.
We securely store the source code for our interactive entertainment software products as it is created. A breach,
whether physical, electronic or otherwise, of the systems on which such source code and other sensitive data are stored could
lead to damage or piracy of our software. In addition, certain parties with whom we do business are given access to our
sensitive and proprietary information in order to provide services and support our team. These third parties may misappropriate
our information and engage in unauthorized use of it. 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. 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. Our business could be subject to significant
disruption, and we could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.
Our efforts to expand into new products and services may subject us to additional risks.
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. We have also grown our product
offerings that are available through digital download, including virtual currency, through our existing franchises such as Grand
Theft Auto and NBA 2K, as well as through our mobile product offerings. We are actively investing to capitalize on these trends
in order to diversify our product mix, reduce our operating risks, and increase our revenue. There are risks and uncertainties
associated with these efforts, particularly in instances where the markets are not fully developed. There is no assurance that we
will be able to attract a sufficiently large number of customers or recover costs incurred for developing and marketing any of
these new products or services. 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, to fail
to realize the expected benefits. External factors, such as competitive alternatives and shifting market preferences, may also
have an impact on the successful implementation of any new products or services. Failure to successfully manage these risks in
the development and implementation of new products or services could have a material adverse effect on our business, financial
condition and operating results.
We depend on our key management and product development personnel.
Our continued success will depend to a significant extent on our senior management team and our relationship with
ZelnickMedia Corporation ("ZelnickMedia"). Our Executive Chairman/Chief Executive Officer and President are partners of
ZelnickMedia. We are also highly dependent on the expertise, skills and knowledge of our key creative personnel responsible
11
for content creation and development of our Grand Theft Auto and other hit titles and titles based on other brands. We may not
be able to continue to retain these personnel at current compensation levels, or at all.
The loss of the services of our executive officers, ZelnickMedia, or certain key creative personnel could significantly
harm our business. In addition, if one or more key employees were to join a competitor or form a competing company, we may
lose additional personnel, experience material interruptions in product development, delays in bringing products to market and
difficulties in our relationships with licensors, suppliers and customers, which would significantly harm our business. Failure to
continue to attract and retain qualified management and creative personnel could adversely affect our business and prospects.
Our quarterly and annual operating results are dependent on the release of "hit" titles and therefore dependent on the
timing of our product releases, which may cause our quarterly operating results to fluctuate significantly.
We have experienced and may continue to experience wide fluctuations in quarterly operating results. The release of a
"hit" title typically leads to a high level of sales during the first few months after introduction followed by a rapid decline in
sales. In addition, the interactive entertainment industry is highly seasonal, with sales typically higher during the fourth calendar
quarter, due primarily to increased demand for games during the holiday season. Demand for and sales of titles in our NBA 2K
series are also seasonal in that they are typically released just prior to the start of the NBA season. If a key event or sports
season to which our product release schedule is tied were to be delayed or interrupted, as has happened as a result of
COVID-19, our sales might also suffer disproportionately. Our failure or inability to produce "hit" titles or introduce products
on a timely basis to meet seasonal fluctuations in demand could adversely affect our business, financial condition and operating
results. The uncertainties associated with software development, manufacturing lead times, production delays and the approval
process for products by hardware manufacturers and other licensors make it difficult to predict the quarter in which our
products will ship and therefore may cause us to fail to meet financial expectations.
Price protection granted to our customers and returns of our published titles by our customers, or sales of used video games,
may adversely affect our operating results.
We are exposed to the risk of price protection and product returns with respect to our customers. Our distribution
arrangements with customers generally do not give them the right to return titles to us or to cancel firm orders. However, we
sometimes accept product returns from our distribution customers for stock balancing and negotiate accommodations for
customers, which include credits and returns, when demand for specific products falls below expectations. We grant price
protection and accept returns in connection with our publishing arrangements, and revenue is recognized after deducting
estimated price protection and reserves f or returns. 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. Certain of our larger customers sell used video games,
which are generally priced lower than new video games. If our customers increase their sales of used video games, it could
negatively affect our sales of new video games.
A limited number of customers account for a significant portion of our sales. The loss of a principal customer or other
significant business relationship could seriously hurt our business.
A substantial portion of our product sales are made to a limited number of customers. Sales to our five largest
customers during the fiscal year ended March 31, 2021 accounted for 78.4% 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. 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. In addition, if our customers are subject to pricing pressures due to deteriorating demand for
our products, competition, or otherwise, such customers may pass those pricing pressures through to us, which could materially
adversely affect our business, financial condition and operating results.
In addition, because some of our customers are also publishers of games for their own hardware platforms and may
manufacture products for other licensees, such customers may give priority to their own products or those of our competitors.
Accordingly, console manufacturers like Sony or Microsoft could cause unanticipated delays in the release of our products, as
well as increases to projected development, manufacturing, marketing, or distribution costs, any of which could negatively
impact our business.
Furthermore, our customers may also be placed into bankruptcy, become insolvent, or be liquidated due to economic
downturns, global credit contractions, or other factors, for example, as a result of COVID-19. Bankruptcies or consolidations of
certain large retail customers could seriously hurt our business, including as a result of uncollectible accounts receivable from
such customers and the concentration of purchasing power among large retailers. In addition, our results of operations may be
12
adversely affected if certain of our customers who purchase on credit terms are no longer eligible to purchase on such terms due
to their financial distress or lack of credit insurance, which may reduce the quantity of products they demand from us.
Increased competition for limited shelf space and promotional support from retailers could affect the success of our business
and require us to incur greater expenses to market our titles.
While digital sales are increasingly important to our business, for physical sales, retailers have limited shelf space and
promotional resources. Competition is intense among newly introduced interactive entertainment software titles for adequate
levels of shelf space and promotional support, with most and highest quality shelf space devoted to those products expected to
be best sellers. 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. Accordingly, we may not be able, or we may have to pay more than our competitors, to achieve similar
levels of promotional support and shelf space. Similarly, as digital sales increase in importance to our business, there is
increasing competition for premium placements of products on websites. Such placement is subject to many similar risks as
physical shelf space discussed above.
The increasing importance of digital sales exposes us to the risks of that business model, including greater competition.
The proportion of our revenues derived from digital content delivery, as compared to traditional retail sales, may
continue to increase. The increased importance of digital content delivery in our industry, including through subscription-based
access to a portfolio of interactive content, increases our potential competition, as the minimum capital needed to produce and
publish a digitally delivered game is significantly less than that needed to produce and publish one that is delivered through
retail distribution. This shift also requires us to dedicate capital to developing and implementing alternative marketing
strategies, which may not be successful. If either occurs, we may be unable to effectively market and distribute our products,
which could materially adversely affect our business, financial condition, and operating results. In addition, a continuing shift to
digital delivery could result in a deprioritization of our products by traditional retailers. The increasing importance of digital
sales to our business could also result in increasing issues with our digital distribution process, including difficulties our
distributors have with collecting from consumers and any associated rebates we would owe.
Our business is partly dependent on our ability to enter into successful software development arrangements with third
parties.
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,
and those who have developed titles for us in the past may not be available to develop software for us in the future. Due to the
limited availability of third-party software developers and the limited control that we exercise over them, these developers may
not be able to complete titles for us on a timely basis or within acceptable quality standards, if at all. 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. Our development payments may not be sufficient to permit developers to develop new
software successfully, which could result in material delays and significant increases in our costs to bring particular products to
market. Software development costs, promotion and marketing expenses and royalties payable to software developers and third-
party licensors have continued to increase and reduce potential profits derived from sales of our software. Future sales of our
titles may not be sufficient to recover development payments and advances to software developers and licensors, and we may
not have adequate financial and other resources to satisfy our contractual commitments to such developers. If we fail to satisfy
our obligations under agreements with third-party developers and licensors, the agreements may be terminated or modified in
ways that are burdensome to us and have a material adverse effect on our business, financial condition, and operating results.
We cannot publish our titles without the approval of hardware licensors that are also our competitors.
We are required to obtain licenses from certain of our competitors, including Sony and Microsoft, to develop and
publish titles for their respective hardware platforms. Our existing platform licenses require that we obtain approval for the
publication of new titles on a title-by-title basis. As a result, the number of titles we are able to publish for these hardware
platforms, our ability to manage the timing of the release of these titles, and, accordingly, our net revenue from titles for these
hardware platforms, may be limited. If a licensor chooses not to renew or extend our license agreement at the end of its current
term, or if a licensor were to terminate our license for any reason or does not approve one or more of our titles, we may be
unable to publish that title as well as additional titles for that licensor's platform. During or following a console transition, like
the one that occurred in 2020, hardware platform manufacturers may seek to change the terms governing our relationships with
them. Termination of any such agreements or disapproval of titles could seriously hurt our business and prospects. We may be
13
unable to continue to enter into license agreements for certain current generation platforms on satisfactory terms or at all.
Failure to enter into any such agreement could also seriously hurt our business.
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 rely on a limited number of channel partners, some of whom have retained the right to change the fee structures for
online distribution of both paid content and free content (including patches and corrections) that we license to them for
distribution on their platforms. Such channel partners' ability to set or influence royalty rates may increase costs, which could
negatively affect our operating margins. We may be unable to distribute our content in a cost-effective or profitable manner
through such distribution channel, which could adversely affect our business, financial condition and operating results.
Outside of fee arrangements, our agreements with our channel partners sometimes give them significant control over
other aspects of the distribution of our products and services that we develop for their platform. If our channel partners establish
terms that restrict our offerings through their channels, or significantly affect the financial terms on which these products or
services are offered to our customers, we may be unable to distribute our product offerings through them or be forced to do so
on materially worse financial or business terms in negotiating such various aspects of distribution. Increased competition for
digital “shelf space” has put channel partners in more favorable bargaining positions in relation to such terms of distribution.
We use open source software in connection with certain of our games and services, which may pose particular risks to our
proprietary software, products, and services in a manner that could have a negative impact on our business.
We use open source software in connection with certain of our games and the services we offer. Some open source
software licenses require users who distribute open source software as part of their software to publicly disclose all or part of
the source code to such software or make available any derivative works of the open source code on unfavorable terms or at no
cost. The terms of various open source licenses have not been interpreted by courts, and there is a risk that such licenses could
be construed in a manner that imposes unanticipated conditions or restrictions on our use of the open source software. If it were
determined that our use was not in compliance with a particular license, we may be required to release our proprietary source
code, pay damages for breach of contract, re-engineer our games, discontinue distribution in the event re-engineering cannot be
accomplished on a timely basis or take other remedial action that may divert resources away from our game development
efforts, any of which could harm our business.
We depend on servers and Internet bandwidth to operate our games and digital services with online features. If we were to
lose server capacity or lack sufficient Internet bandwidth for any reason, our business could suffer.
We rely on data servers, including those owned or controlled by third parties, to enable our customers to download our
games and other downloadable content, and to operate our online games and other products with online functionality. Events
such as limited hardware failure, any broad-based catastrophic server malfunction, a significant intrusion by hackers that
circumvents security measures, or a failure of disaster recovery services would likely interrupt the functionality of our games
with online services and could result in a loss of sales for games and related services. An extended interruption of service could
materially adversely affect our business, financial condition and operating results.
We expect a significant portion of our games to be online enabled in the future, and therefore we must project our
future server needs and make advance purchases of servers or server capacity to accommodate expected business demands. 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 a s a result of COVID-19-related increased worldwide demand,
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. Conversely, if we
overestimate the amount of server capacity required by our business, we may incur additional operating costs.
Because of the importance of our online business to our revenues and results of operations, our ability to access
adequate Internet bandwidth and online computational resources to support our business is critical. If the price of such
resources increases, we may not be able to increase our prices or subscriber levels to compensate for such costs, which could
materially adversely affect our business, financial condition, and operating results.
We submit our products for rating by the Entertainment Software Rating Board ("ESRB") in the United States and other
voluntary or government ratings organizations in foreign countries. Failure to obtain a target rating for certain of our
products could negatively affect our ability to distribute and sell those games, as could the re-rating of a game for any
reason.
We voluntarily submit our game products to the ESRB, a U.S.-based non-profit and independent ratings organization.
The ESRB system provides consumers with information about game content using a rating symbol that generally suggests the
14
appropriate player age group and specific content descriptors, such as graphic violence, profanity or sexually explicit material.
The ESRB may impose significant penalties on game publishers for violations of its rules related to rating or marketing games,
including revocation of a rating or monetary fines. Other countries require voluntary or government backed ratings as
prerequisites for product sales. 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.
In the U.S., if the ESRB rates a game as "AO" (age 18 and older), platform licensors may not certify the game and
retailers may refuse to sell it. In addition, some consumers have reacted to re-ratings or controversial game content by refusing
to purchase such games, demanding refunds for games that they had already purchased, and refraining from buying other games
published by us. Many of our Rockstar titles and certain of our 2K titles have been rated "M" (age 17 and older) by the ESRB.
If we are unable to obtain "M" ratings and instead receive "AO" ratings on future versions of those or similar titles as a result of
changes in the ESRB's ratings standards or for other reasons, including the adoption of legislation in this area, our business and
prospects could be negatively 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.
We have implemented processes to comply with the requirements of the ESRB and other ratings organizations and
properly display t he designated rating symbols and content descriptions. Nonetheless, these processes are subject to human
error, circumvention, overriding, and reasonable resource constraints. If a video game we publish were found to contain
undisclosed pertinent content, the ESRB could re-rate a game, retailers could refuse to sell it and demand that we accept the
return of any unsold copies or returns from customers, and consumers could refuse to buy it or demand that we refund their
money. This could have a material negative effect on our operating results and financial condition. In addition, we may be
exposed to litigation, administrative fines, and penalties, and our reputation could be harmed, which could affect sales of our
other video games. If any of these were to occur, our business and financial performance could be significantly harmed.
Content policies adopted by retailers, consumer opposition and litigation could negatively affect sales of our products.
Retailers, including digital storefronts and platform partners, may decline to sell interactive entertainment software
containing what they judge to be graphic violence, sexually explicit material, or other content that they deem inappropriate. If
retailers decline to sell our products based on their opinion that they contain objectionable themes, graphic violence, sexually
explicit material, or other generally objectionable content, or if any of our previously "M" rated series products are rated "AO,"
we might be required to significantly change or discontinue particular titles or series, which in the case of our best-selling
Grand Theft Auto titles could seriously affect our business. Consumer advocacy groups have opposed sales of interactive
entertainment software containing objectionable themes, violence, sexual material, or other objectionable content by pressing
for legislation in these areas and by engaging in public demonstrations and media campaigns. Additionally, although lawsuits
seeking damages for injuries allegedly suffered by third parties as a result of video games have generally been unsuccessful in
the courts, claims of this kind have been asserted against us from time to time and may be asserted and be successful in the
future. An increase in the number of lawsuits filed by the families of victims of violence may trigger supplemental
governmental scrutiny, damage our reputation, and negatively affect the sale of our products. Further, in 2019, the World
Health Organization included "gaming disorder" in the 11th revision of the International Classification of Diseases, leading
some to consider legislation and policies aimed at addressing this issue. In addition, public dialogue concerning interactive
entertainment may have an adverse impact on our reputation and our customers' willingness to purchase our products.
Our results of operations or reputation may be harmed as a result of offensive consumer-created content.
We are subject to risks associated with the collaborative online features in our games which allow consumers to post
narrative comments, in real t ime, that are visible to other consumers. From time to time, objectionable and offensive consumer
content may be posted to a gaming or other site with online chat features or game forums which allow consumers to post
comments. We may be subject to l awsuits, governmental regulation or restrictions, and consumer backlash (including decreased
sales and harmed reputation), as a result of consumers posting offensive content. We may also be subject to consumer backlash
from comments made in response to postings we make on social media sites such as Facebook, YouTube and Twitter.
We face risks from our international operations.
We are subject to certain risks because of our international operations, particularly as we continue to grow our business
and presence in Asia, Latin America, and other parts of the world. Changes to and compliance with a variety of foreign laws
and regulations may increase our cost of doing business and our inability or failure to obtain required approvals could harm our
international and domestic sales. In either the U.S. or other countries, trade legislation, such as a change in the current tariff
structures, import/export compliance laws, or other trade laws or policies, could adversely affect our ability to sell or to
distribute in international markets. Additionally, cultural differences may affect consumer preferences and as a result, some of
15
our "hit" products may not sell as well as they do in the U.S. Cultural differences may also require us to modify the content of
our products or the method by which we charge our customers. If we do not correctly assess consumer preferences in the
countries in which we sell our products, or respond to other risks related to our international operations, it could negatively
affect our business.
Further, the enforcement of regulations relating to mobile and other games with an online element in China remains
uncertain, and further changes, either in the regulation or their enforcement could have a negative impact on our business in
China. In order to operate in China, all games must have regulatory approval. 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.
We incur legal compliance costs associated with our international operations and could become subject to legal
penalties in foreign countries if we do not comply with local laws and regulations which may be substantially different from
those in the U.S. In many foreign countries, particularly in those with developing economies, it may be common to engage in
business practices that are prohibited by U.S. laws and regulations, such as the Foreign Corrupt Practices Act, and by local
laws, such as laws prohibiting corrupt payments to government officials. 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. Any such violation, even
if prohibited by our policies, could have a material adverse effect on our business.
In 2020, the U.K. left the European Union ("E.U.") ("Brexit"). Subsequently, the U.K. and the E.U. struck a bilateral
trade and cooperation deal governing the future relationship between the U.K. and the E.U. (the "Trade and Cooperation
Agreement"), which took effect on May 1, 2021. 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. However, the legal and
regulatory landscape remains uncertain, and we have no assurance that such preparations will enable us to avoid a material
adverse impact on our business from Brexit. 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. For example, if there are changes to U.K.
immigration policy as a result of Brexit, our employees and their ability to move freely between the E.U. member states for
work-related matters could be affected.
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. The Trade and Cooperation Agreement sets out
preferential arrangements in areas such as the trade in goods and services but does not reach the level of integration that existed
while the U.K. was an E.U. member state, which could have a detrimental impact on our U.K. growth. Such a decline could
also make our doing business in Europe more difficult, which could negatively affect sales to consumers of our products.
Without access to the single E.U. market, it may be more challenging and costly to distribute our products in Europe.
If we are unable to protect the intellectual property relating to our software, the commercial value of our products will be
adversely affected and our competitive position could be harmed.
We develop proprietary software and have obtained the rights to publish and distribute software developed by third
parties. We attempt to protect our software and production techniques under patent, copyright, trademark and trade secret laws
as well as through contractual restrictions on disclosure, copying and distribution. Nonetheless, our software is susceptible to
piracy and unauthorized copying, and third parties may potentially exploit or misappropriate our intellectual property and
proprietary information, causing significant reputational damage. Unauthorized third parties, for example, may be able to copy
or to reverse engineer our software to obtain and use programming or production techniques that we regard as proprietary. Well
organized piracy operations have also proliferated in recent years, resulting in the ability to download pirated copies of our
software over the Internet. Although we attempt to incorporate protective measures into our software, piracy of our products
could negatively affect our future profitability. In addition, "cheating" programs or other unauthorized software tools and
modifications that enable consumers to cheat in games harm the experience of players who play fairly and could negatively
impact the volume of microtransactions or purchases of downloadable content. Also, vulnerabilities in the design of our
applications and of the platforms upon which they run could be discovered after their release. This may lead to lost revenues
from paying consumers or increased cost of developing technological measures to respond to these, either of which could
negatively affect our business.
Our software is susceptible to errors, which can harm our financial results and reputation.
The technological advancements of new hardware platforms result in the development of more complex software
products. As software products become more complex, the risk of undetected errors in new products increases. We may need to
16
produce and distribute patches in order to repair such errors, which could be costly and may distract our developers from
working on new products. If, despite t esting, errors are found in new products or releases after shipments have been made, we
may have to consider suspending distribution of defective products or offering refunds, and we could experience a loss of or
delay in timely market acceptance, product returns, loss of revenue, increases in costs relating to the repair of such errors and
damage to our reputation.
If we acquire or invest in other businesses, intellectual properties, or other assets, we may be unable to integrate them with
our business, our financial performance may be impaired and/or we may not realize the anticipated financial and strategic
goals for such transactions.
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. 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;
• 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.
Future acquisitions and investments could also involve the issuance of our equity and equity-linked securities
(potentially diluting our existing stockholders), the incurrence of debt, contingent liabilities or amortization expenses, write-offs
of goodwill, intangibles, or acquired in-process technology, or other increased cash and non-cash expenses such as stock-based
compensation. 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.
Our ability to acquire and maintain licenses to intellectual property, especially for sports titles, affects our revenue and
profitability. Competition for these licenses may make them more expensive a nd increase our costs.
Certain of our products are based on or incorporate intellectual property owned by others. 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. If we are unable to maintain and
renew these licenses or obtain additional licenses on reasonable economic terms or with significant commercial value, our
revenue and profitability could decline significantly. Competition for these licenses may also increase the advances, guarantees
17
and royalties that we must pay to the licensor, which could significantly increase our costs and adversely affect our profitability.
In addition, on certain intellectual property licenses, we are subject to guaranteed minimum payments, royalties or standards of
performance and may not be able to terminate these agreements prior to their stated expiration. If such licensed products do not
generate revenues in excess of such minimum guarantees, our profitability will be adversely affected.
We are or may be subject to contractual covenants which place certain limitations on how we manage our business.
Our credit agreement (the "Credit Agreement") may limit our ability to take various actions, including incurring
additional debt, paying dividends, repurchasing shares, and acquiring or disposing of assets or businesses. Accordingly, we may
be restricted from taking actions that management believes would be desirable and in the best interests of us and our
stockholders. Our Credit Agreement also requires us to satisfy specified financial covenants and comply with other affirmative
and negative covenants. A breach of any of the covenants contained in our Credit Agreement could result in an event of default,
which would allow our lenders to pursue various remedies, including accelerating the repayment of any outstanding
indebtedness under our Credit Agreement.
Risks related to legal or regulatory compliance
The laws and regulations concerning data privacy and certain other aspects of our business are continually evolving.
Failure to comply with these laws and regulations could harm our business.
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. Children's Online Privacy Protection Act also regulates the collection, use, and disclosure of personal
information from children under 13 years of age. Failure to comply with privacy and data protection laws or age restrictions
may increase our costs, subject us to expensive and distracting government investigations, and result in substantial fines, or
result in lawsuits and claims against us to the extent these laws include a private right of action.
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. General Data Protection Regulation
("GDPR") and the UK Data Protection Act 2018 ("DPA 2018") both became effective in May 2018. GDPR and DPA 2018
apply to us because we receive and process the personal information of individuals in the E.U. and the U.K., and we maintain
certain local entities in the E.U. and the U.K. responsible for processing personal information. GDPR and DPA 2018 contain
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. In the U.S., the California Consumer Privacy Act ("CCPA") became effective on January 1, 2020
and applies to processing of personal information of California residents. California also enacted the California Privacy Rights
Act ("CPRA"), which updates the CCPA, and Virginia enacted the Consumer Data Protection Act, both effective January 1,
2023. Other states, including Nevada, have enacted or are considering similar privacy or data protection laws that may apply to
us. The U.S. government, including the Federal Trade Commission and the Department of Commerce, also continue to review
the need for greater or different regulation over the collection of personal information and information about consumer behavior
on the Internet and on mobile devices, and the U.S. Congress is considering a number of legislative proposals to regulate in this
area. Various government and consumer agencies worldwide have also called for new regulation and changes in industry
practices. Further, and most notably in the mobile ecosystem, companies that provide the platforms on which our games are
played are changing the terms on how publishers can collect and use personal data obtained from users on those platforms.
Player use of our games is subject to our privacy policy, end user license agreements ("EULA"), and terms of service.
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 regulators, the media, or consumers raise any concerns about our privacy and data protection or consumer
protection practices, even if unfounded, this could also result in fines or judgments against us, damage our reputation,
negatively affect our financial condition, and damage our business.
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. Furthermore, the growth and development of electronic commerce and virtual
goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as
ours conducting business through digital sales. Any such changes would require us to devote legal and other resources to
address such regulation. For example, existing laws or new laws regarding the regulation of currency, banking institutions, and
unclaimed property may be interpreted to cover virtual currency or virtual goods. If that were to occur, we may be required to
18
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, all of which could
significantly increase our operating costs. Changes in current laws or regulations or the imposition of new laws and regulations
in the U.S. or elsewhere regarding these activities may lessen the growth of the interactive entertainment industry and impair
our business, financial condition, and operating results. Further, in 2019, the World Health Organization included "gaming
disorder" in the 11th revision of the International Classification of Diseases, leading some to consider legislation and policies
aimed at mitigating the overuse of, and overspending within, video games.
Although we have structured and operate our skill tournaments and game mechanics, including random digital item
mechanics, with applicable laws in mind, including any applicable laws relating to gambling, and believe that playing these
games does not constitute gambling, our skill tournaments or game mechanics could become subject to gambling-related rules
and regulations, or be deemed violative of current rules and regulations, and expose us to civil and criminal penalties. We also
sometimes offer consumers of our online and casual games various types of contests and promotional opportunities. We are
subject to laws in a number of jurisdictions concerning the operation and offering of such activities and games, many of which
are still evolving and could be interpreted in ways that could harm our business. Further, random digital item mechanics may
become subject to regulations in various jurisdictions. 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. Moreover, the inclusion of random digital item mechanics has attracted the
attention of the interactive gaming community, and if the future implementation of t hese features creates a negative perception
of gameplay fairness or other negative perceptions, our reputation and brand could be harmed and revenue could be negatively
impacted. Changes in current laws or regulations or the imposition of new laws and regulations in the U.S., the E.U., or
elsewhere regarding these activities may lessen the growth of online or casual game services and impair our business. Also,
existing laws or new laws regarding the marketing of in-game or in-app purchases, regulation of currency, banking institutions,
unclaimed property, or money laundering may be interpreted to cover virtual currency or goods.
If we infringe on or are alleged to infringe on the intellectual property rights of third parties, our business could be
adversely affected.
As our industry grows, we may be subject to an increasing amount of litigation that is common in the software
industry based on allegations of infringement or other alleged violations of patent, copyright, or trademarks. In addition, we
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. From time to time, we receive notices from third parties or are named in
lawsuits by third parties alleging infringement of their proprietary rights. Although we believe that our software and
technologies and the software and technologies of third-party developers and publishers with whom we have contractual
relations do not and will not infringe or violate proprietary rights of others, it is possible that infringement of proprietary rights
of others may occur. Any claims of infringement, with or without merit, could be time consuming, costly and difficult to
defend. Moreover, intellectual property litigation or claims could require us to discontinue the distribution of products, obtain a
license or redesign our products, which could result in additional substantial costs and material delays.
Our business and products are subject to potential legislation. The adoption of such proposed legislation could limit the
retail market for our products.
Several proposals have been made for federal legislation to regulate our industry. Such proposals seek to prohibit the
sale of products containing certain content included in some of our games. If any such proposals are enacted into law, it may
limit the potential market for some of our games in the U.S., and adversely affect our business, financial condition and
operating results. Other countries have adopted laws regulating content both in packaged games and those transmitted over the
Internet that are stricter than current U.S. laws. In the U.S., proposals have also been made by numerous state legislators to
regulate and prohibit the sale of interactive entertainment software products containing certain types of violent or sexual content
to audiences under the ages of 17 or 18 , such as the State of California's "ultraviolent video games law" that sought to ban the
sale or rental of violent video games to minors. While such legislation to date has been enjoined by industry and retail groups or
been found unconstitutional, the adoption into law of such legislation in federal and/or in state jurisdictions in which we do
significant business could severely limit the retail market for some of our games.
Change in government regulations relating to the Internet could have a negative impact on our business.
We rely on our consumers' access to significant levels of Internet bandwidth for the sale and digital delivery of our
content and the functionality of our games with online features. Changes in laws or regulations that adversely affect the growth,
popularity, or use of the Internet, including laws affecting "net neutrality" or measures enacted in certain jurisdictions as a result
of the COVID-19 pandemic, could decrease the demand for our products and services or increase our cost of doing business.
19
Although certain jurisdictions have implemented laws and regulations intended to prevent Internet service providers from
discriminating against particular types of legal traffic on their networks, other jurisdictions may lack such laws and regulations
or repeal existing laws or regulations. For example, on December 14, 2017, the Federal Communications Commission voted to
repeal net neutrality regulations in the U.S., and, following that decision, several states enacted net neutrality regulations. Given
uncertainty around these rules, including changing interpretations, amendments, or repeal, coupled with the potentially
significant political and economic power of local Internet service providers and the relatively significant level of Internet
bandwidth access our products and services require, we could experience discriminatory or anti-competitive practices that could
impede our growth, cause us to incur additional expenses, or otherwise negatively affect our business.
Risks related to financial and economic condition
Declines in consumer spending and other adverse changes in the economy could have a material adverse effect on our
business, financial condition and operating results.
Most of our products involve discretionary spending on the part of consumers. We believe that consumer spending is
influenced by general economic conditions and the availability of discretionary income. This makes our products particularly
sensitive to general economic conditions and economic cycles as consumers are generally more willing to make discretionary
purchases, including purchases of products like ours, during periods in which favorable economic conditions prevail. Adverse
economic conditions, such as a prolonged U.S. or international general economic downturn, such as those caused by
COVID-19, including periods of increased inflation, unemployment levels, tax rates, interest rates, energy prices, or declining
consumer confidence, could also reduce consumer spending. Reduced consumer spending has and may in the future continue to
result in reduced demand for our products and may also require increased selling and promotional expenses, which has had and
may continue to have an adverse effect on our business, financial condition and operating results. In addition, during periods of
relative economic weakness, our consolidated credit risk, reflecting our counterparty dealings with distributors, customers,
capital providers and others may increase, perhaps materially so. As a result of COVID-19, our counterparty credit risk may be
particularly exacerbated, as certain of our counterparties may face financial difficulties in paying owed amounts on a timely
basis or at all. Furthermore, uncertainty a nd 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. If economic conditions worsen, our business, financial
condition and operating results could be adversely affected.
We are particularly susceptible to market conditions and risks associated with the entertainment industry, which, in
addition to general macroeconomic downturns, also include the popularity, price, and timing of our products; changes in
consumer demographics; the availability and popularity of other forms of entertainment and leisure; and critical reviews and
public tastes and preferences, which may change rapidly and cannot necessarily be predicted.
Changes in our tax rates or exposure to additional tax liabilities could adversely affect our earnings and financial condition.
We are a multinational corporation with operations in the U.S. and various other jurisdictions around the world.
Accordingly, we are subject to tax in the U.S. and in various other jurisdictions. Significant judgment is required in determining
our worldwide provision for income taxes, and, in the ordinary course of business, there are many transactions and calculations
where the ultimate tax determination is uncertain. We are required to estimate future taxes. Although we currently believe our
tax estimates are reasonable, the estimation process is inherently uncertain, and such estimates are not binding on tax
authorities. Further, our effective tax rate or tax payable could be adversely affected by a variety of factors, including changes
in the business, the mix and level of earnings between countries with differing statutory tax rates, changes in the realizability of
deferred tax assets, changes in tax elections, and changes in applicable tax laws. 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.
On March 11, 2021, the U.S. enacted the American Rescue Plan Act of 2021 (“ARPA”) which provided numerous tax
and other stimulus measures. One such measure will expand limitation of compensation deductions for certain covered
employees of publicly held corporations, beginning in 2027, to also include our next five highly compensated employees. It is
possible that these changes could have an adverse impact on our effective tax rate, tax payments, and financial condition in
future periods.
In addition, numerous countries are evaluating their existing tax laws due in part to recommendations made by the
Organization for Economic Co-operation and Development’s (“OECD’s”) Base Erosion and Profit Shifting (“BEPS”) project.
Although we cannot predict whether, or in what form, any legislation based on such proposals may be adopted by the countries
in which we do business, future tax reform based on such proposals may have an adverse impact on our effective tax rate, tax
payments, and financial condition in future periods.
20
We are also required to pay taxes other than income taxes, such as payroll, sales, use, value-added, net worth, property,
and goods and services taxes, in both the U.S. and foreign jurisdictions. We are regularly under examination by tax authorities
with respect to these non-income taxes. There can be no assurance that the outcomes from these examinations, changes in our
business or changes in applicable tax law or interpretations will not have an adverse effect on our net income or loss and
financial condition.
We are subject to risks and uncertainties of international trade, including fluctuations in the values of local foreign
currencies against the dollar.
Sales in international markets, primarily in Europe, have accounted for a significant portion of our net revenue. For the
fiscal year ended March 31, 2021, 40.2% of our net revenue was earned outside the U.S. We are continuing to execute on our
growth initiatives in Asia, where our strategy is to broaden the distribution of our existing products and expand our online
gaming presence, especially in China and South Korea. We are subject to risks inherent in foreign trade, including increased
credit risks, tariffs, and duties, fluctuations in foreign currency exchange rates, shipping delays, and international political,
regulatory and economic developments, all of which can have a significant influence on our operating results. Many of our
international sales are made in local currencies, which could fluctuate against the dollar. While we may use forward exchange
contracts to a limited extent to seek to mitigate foreign currency risk, our operating results could be adversely affected by
unfavorable foreign currency fluctuations.
Our reported financial results could be adversely affected by the application of existing or future accounting standards to
our business as it evolves.
Our financial results are reported under the accounting policies promulgated by the SEC and national a ccounting
standards bodies and the methods, estimates, and judgments that we use in applying our accounting policies. For example,
standards regarding revenue recognition have and could further significantly affect the way we account for revenue related to
our products and services. We expect that an increasing number of our games will be supported with material post-release
activities, such as content updates and online-enabled features, and we could therefore be required to recognize more of the
related revenues for those games over a period of time rather than at the time of sale. Further, as we increase our downloadable
content and add new features to our online services, user playing patterns can affect our estimate of the service period, and we
could b e required to recognize revenues, and defer related costs, over a shorter or longer period of time than we initially
allocated. As we enhance, expand and diversify our business and product offerings, the application of existing or future
financial accounting standards, particularly those relating to the way we account for revenue, could have a significant adverse
effect on our reported results although not necessarily on our cash flows.
Delaware law, our charter documents, and provisions of our debt agreements may impede or discourage a takeover, which
could cause the market price of our shares to decline.
We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the
ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. Our
Board of Directors has the power, without stockholder approval, to adopt a stockholder rights plan and/or to designate the terms
of one or more series of preferred stock and issue shares of preferred stock. The ability of our Board of Directors to create and
issue a new series of preferred stock and certain provisions of Delaware law, our certificate of incorporation and bylaws could
impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender
offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock and the
value of any outstanding notes.
General Risk Factors
We are subject to risks related to corporate and social responsibility and reputation.
Many factors influence our reputation including the perception held by our customers, business partners and other key
stakeholders. Our business faces increasing scrutiny related to environmental, social and governance activities. We risk damage
to our reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship,
supply chain management, climate change, workplace conduct, human rights and philanthropy. Any harm to our reputation
could impact e mployee 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.
Climate change could result in an increase in the frequency or severity of natural disasters, such as earthquakes, fires,
floods, or significant power outages and other catastrophic events. Such events may adversely impact critical infrastructure,
21
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.
Additional issuances or sales of equity securities by us wo uld dilute the ownership of our existing stockholders and could
adversely affect the market price of our common stock.
We may issue equity or equity-based securities in the future to facilitate acquisitions or strategic transactions, to adjust
our ratio of debt to equity, to fund expansion of our operations or for other purposes. To the extent we issue additional equity
securities, the percentage ownership of our existing stockholders would be reduced. The sale of substantial amounts of our
common stock could adversely affect its price. The sale o r 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.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal executive offices are located at 110 West 44th Street (also known as 1133 Avenue of the Americas),
New York, New York, in approximately 76,000 square feet of space under a lease expiring in December 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.
Take-Two Interactive Software Europe Ltd, our wholly-owned subsidiary, leases approximately 39,500 square feet of
office space in London, United Kingdom, which expires in December 2034, and approximately 12,500 square feet of office
space in Windsor, United Kingdom, which expires in January 2022. Rockstar North, our wholly-owned subsidiary, leases
72,000 square feet of office space in Edinburgh, Scotland, which expires in June 2024.
2K corporate offices and two development studios occupy approximately 123,000 square feet of leased office space in
Novato, California. The lease expires in June 2023 with respect to approximately 59,000 square feet and July 2025 with respect
to approximately 64,000 square feet.
In addition, our other subsidiaries lease office space in Sydney and Pyrmont, Australia; Halifax, Lunenburg, Oakville,
Montreal and Parksville, Canada; Chengdu and Shanghai, China; Brno and Prague, Czech Republic; Paris, France; Munich,
Germany; Budapest, Hungary; Bangalore, India; Dublin, Ireland; Tokyo, Japan; Mexico City, Mexico, Breda, Netherlands;
Auckland, New Zealand; Singapore; Seoul, South Korea; Madrid and Barcelona, 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.
For information regarding our lease commitments, see Note 14 - Leases to our Consolidated Financial Statements.
Item 3. Legal Proceedings
Refer to Note 15 - Commitments and Contingencies to our Consolidated Financial Statements for disclosures
regarding our legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
22
PART II
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 61 as of May 6, 2021.
Dividend Policy
We have never declared or paid cash dividends. We currently anticipate that all future earnings will be retained to
finance the growth of our business and we do not expect to declare or pay any cash dividends in the foreseeable future. The
payment of dividends in the future is within the discretion of our Board of Directors and will depend upon future earnings,
capital requirements and other relevant factors. Our Credit Agreement requires us to meet certain incurrence tests prior to
paying a dividend. See "Liquidity and Capital Resources" under Item 7 for additional information on our Credit Agreement.
Securities 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.
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.
The following line graph compares, from March 31, 2016 through March 31, 2021, 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. The comparison assumes
$100 was invested on March 31, 2016 in our common stock and in each of the following indices and assumes reinvestment of
all cash dividends, if any, paid on such securities. 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. Historical stock
price is not necessarily indicative of future stock price performance.
23
* The graph and chart assume that $100 was invested on March 31, 2016 in the applicable stock or index and that all dividends
were reinvested.
March 31,
2016 2017 2018 2019 2020 2021
Take-Two Interactive Software, Inc. $ 100.00 $ 157.34 $ 259.57 $ 250.52 $ 314.87 $ 469.07
NASDAQ Composite Index 100.00 122.88 148.39 164.16 165.30 286.62
Peer Group 100.00 142.46 193.38 144.40 167.11 248.86
Issuer Purchases of Equity Securities
Share Repurchase Program—Our Board of Directors has authorized the repurchase of up to 14,217,683 shares of our
common stock. Under this program, we may purchase shares from time to time through a variety of methods, including in the
open market or through privately negotiated transactions, in accordance with applicable securities laws. Repurchases are subject
to the availability of stock, prevailing market conditions, the trading price of the stock, our financial performance and other
conditions. The program does not require us to repurchase shares and may be suspended or discontinued at any time for any
reason.
During the fiscal years ended March 31, 2021, 2020, and 2019, we repurchased 0, 0, and 3,715,642 shares of our
common stock in the open market, respectively, for $0.0 million, $0.0 million, and $362.4 million, respectively, including
commissions, as part of the program. As of March 31, 2021, we had repurchased a total of 10,399,529 shares of our common
stock under the program, and 3,818,154 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.
Summary Table—The table below details the share repurchases that were made by us during the three months ended
March 31, 2021:
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, 2021 — — — 3,818
February 1 - 28, 2021 — $ — — 3,818
March 1 - 31, 2021 — $ — — 3,818
24
7DNH7ZR,QWHUDFWLYH6RIWZDUH,QF 1$6'$4&RPSRVLWH,QGH[ 3HHU*URXS
LQYHVWHGRQ0DUFK LQVWRFNRULQGH[ LQFOXGLQJUHLQYHVWPHQWRIGLYLGHQGV
&RPSDULVRQRI<HDU&XPXODWLYH7RWDO5HWXUQ
$PRQJ7DNH7ZR,QWHUDFWLYH6RIWZDUH ,QFWKH1$6'$4&RPSRVLWH,QGH[DQGD3HHU*URXS
0DUFK
Item 6. Selected Financial Data
Not applicable
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, Social Point, and Playdots. 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.
Trends and Factors Affecting our Business
Product Release Schedule. 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 29.2% of our net revenue for the fiscal year ended
March 31, 2021. 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 economic conditions, including the
impact o f the COVID-19 pandemic, that may unfavorably affect our businesses, such as deteriorating consumer demand,
pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates. The COVID-19
pandemic has affected and may continue to affect our business operations, including our employees, customers, partners, and
communities, and there is substantial uncertainty in the nature and degree of its continued effects over time. During fiscal year
2021, as in the final quarter of fiscal year 2020, we noted a positive impact to our results that we believe was partly due to
increased consumer e ngagement with our products because of the COVID-19 related business closures and movement
restrictions, such as "shelter in place" and "lockdown" orders, implemented a round the world, as well as the online accessibility
and social nature of our products. However, we cannot be certain as to the duration of these effects, the impact of vaccination
efforts or of the lifting of certain restrictions on them, and the potential offsetting impacts of deteriorating economic conditions
and decreased consumer spending generally. We expect that engagement trends will continue to be notably higher than they
were pre-pandemic; however, as the return to normalcy continues, we expect a moderation of the trends that benefited our
industry over the past year. We have developed and continue to develop plans to help mitigate the negative impact of the
pandemic on our business, such as our transition, based on our concern for the health and safety of our teams, to working from
home for the vast majority of our teams over the last year, which to date has resulted in minimal disruption. However, despite
largely positive outcomes to date, these efforts may ultimately not be effective, and a protracted economic downturn may limit
the effectiveness of our mitigation efforts. Any of these considerations described above could cause or contribute to the risks
described, above, in Item 1 A of this Form 10-K and could materially adversely affect our business, financial condition, results
of operations, or stock price. Therefore, the effects of COVID-19 may not be fully reflected in our financial results until future
periods, and, at this time, we are not able to predict its ultimate impact on our business.
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 78.4%, 71.5% and 70.1% of net revenue during the fiscal years ended
March 31, 2021, 2020 and 2019, respectively. As of March 31, 2021 and 2020, five customers comprised 77.6% and 58.1% 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 69.2% and 48.8% of such balance at March 31, 2021 and 2020,
respectively. We had two customers who accounted for 50.4% and 18.8% of our gross accounts receivable as of March 31,
2021 and two customers who accounted for 29.4% and 19.4% of our gross accounts receivable as of March 31, 2020. We did
not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2021 and 2020. 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. 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. 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. Certain of our large customers sell used copies of our games, which may negatively affect our business by reducing
demand for new copies of our games. While the downloadable content that we now offer for certain of our titles may serve to
reduce used game sales, we expect used game sales to continue to adversely affect our business.
Hardware Platforms. We derive most of our revenue from the sale of products made for video game consoles
manufactured by third parties, which comprised 74.6% of our net revenue by product platform for the fiscal year ended
25
March 31, 2021. The success of our business is dependent upon the consumer acceptance of these platforms and the continued
growth in the installed base of these platforms. When new hardware platforms are introduced, such as those released in
November 2020 by Sony and Microsoft, demand for interactive entertainment used on older platforms typically declines, which
may negatively affect our business during the market transition to the new consoles. 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.
Further, COVID-19 or other events, may impact the availability of these new consoles, which may also affect demand. We
manage our product delivery on each current and future platform in a manner we believe to be most effective to maximize our
revenue opportunities and achieve the desired return on our investments in product development. 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. 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. 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 tablets and
smartphones, which are delivered to consumers through digital download. As disclosed in our "Results of Operations," below,
net revenue from digital online channels comprised 86.6% of our net revenue for the fiscal year ended March 31, 2021. We
expect online delivery of games and game offerings to continue to grow and to be the primary part of our business over the long
term.
Content Release Highlights
During fiscal year 2021, we released new content for a number of our biggest franchises, including, but not limited to
Grand Theft Auto Online, Red Dead Online, Borderlands, and Sid Meier’s Civilization. Our 2K label also released NBA 2K21
and PGA TOUR 2K21.
To date we have announced that, during fiscal year 2022, Rockstar Games will release Grand Theft Auto V for the PS5
and Xbox Series X|S, Private Division will release OlliOlli World digitally, and 2K will release NBA 2K22 and WWE 2K22.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.
Fiscal 2021 Financial Summary
Our Net revenue for fiscal year ended March 31, 2021 was led by titles from a variety of our top franchises, primarily
NBA 2K; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Borderlands 3,and
our WWE 2K franchise. Our Net revenue increased to $3,372.8 million, an increase of $283.8 million or 9.2% compared to the
fiscal year ended March 31, 2020.
For the fiscal year ended March 31, 2021, our Net income was $588.9 million, as compared to Net income of $404.5
million in the prior year, and includes the reversal of share-based compensation expense of $69.8 million due to forfeitures and
a gain of $40.6 million due to primarily the sale of one of our investments. Diluted earnings per share for the fiscal year ended
March 31, 2021 was $5.09, as compared to Diluted income per share of $3.54 for the fiscal year ended March 31, 2020. Our
operating income for the fiscal year ended March 31, 2021 increased compared to the operating income for fiscal year ended
March 31, 2020, due primarily to higher Gross profit, which was due primarily to higher revenue from the titles described
above, lower capitalized software amortization as a percentage of net revenue, and lower internal royalties as a percentage of
net revenue, partially offset by higher Operating expenses primarily due to higher headcount.
At March 31, 2021, we had $2,060.2 million of Cash and cash equivalents and Restricted cash and cash equivalents,
compared to $1,993.4 million at March 31, 2020. The increase in Cash and cash equivalents and Restricted cash and cash
equivalents from March 31, 2020 was due primarily to Net cash provided by operating activities from sales primarily from the
previously mentioned titles, partially offset by investments in software development and licenses as well as royalty payments.
This net increase was partially offset by (i) Net cash used in investing activities primarily related to changes in bank time
deposits and net purchases of available for sale securities, our acquisition of Playdots, and purchases of fixed assets and (ii) Net
cash used in financing activities, which was primarily related to tax payments related to net share settlements of our restricted
stock.
26
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. See Note 1 - Basis of Presentation and Significant Accounting Policies in the Notes to our Consolidated
Financial Statements in this Annual Report on Form 10-K.
Recently Adopted and Recently Issued Accounting Pronouncements
See Note 1 - Basis of Presentation and Significant Accounting Policies.
Operating Metric
Net Bookings
We monitor Net Bookings as a key operating metric in evaluating the performance of our business. Net Bookings is
defined as the net amount of products and services sold digitally or sold-in physically during the period and includes licensing
fees, merchandise, in-game advertising, strategy guides, and publisher incentives. Net Bookings were as follows:
Fiscal Year Ended March 31,
2021 2020 Increase/(decrease) Increase/(decrease) %
Net Bookings $ 3,552,598 $ 2,990,358 $ 562,240 18.8 %
For the fiscal year ended March 31, 2021, Net Bookings increased by $562.2 million as compared to the prior year due
primarily to increases in Net Bookings from our NBA 2K franchise, Grand Theft Auto Online and Grand Theft Auto V, our
Mafia franchise, PGA TOUR 2K21, which released in August 2020, Two Dots, which was part of our Playdots acquisition
completed in September 2020, and Dragon City, partially offset by a decrease in Net Bookings from Borderlands 3, which
released in September 2019, and The Outer Worlds, which released in October 2019.
Results of Operations
In this section, we discuss the results of our operations for the fiscal year ended March 31, 2021 compared to the
fiscal year ended March 31, 2020. For the comparison of fiscal year 2020 to fiscal year 2019, 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, 2020.
The 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,
2021 2020 2019
Net revenue $ 3,372,772 100.0 % $3,088,970 100.0 % $2,668,394 100.0 %
Cost of goods sold 1,535,085 45.5 % 1,542,450 49.9 % 1,523,644 57.1 %
Gross profit 1,837,687 54.5 % 1,546,520 50.1 % 1,144,750 42.9 %
Selling and marketing 444,985 13.2 % 458,424 14.8 % 391,400 14.7 %
General and administrative 390,683 11.6 % 318,235 10.3 % 281,234 10.5 %
Research and development 317,311 9.4 % 296,398 9.6 % 230,170 8.6 %
Depreciation and amortization 55,596 1.6 % 48,113 1.6 % 40,232 1.5 %
Business reorganization (272) — % 83 — % (4,958) (0.2)%
Total operating expenses 1,208,303 35.8 % 1,121,253 36.3 % 938,078 35.2 %
Income from operations 629,384 18.7 % 425,267 13.8 % 206,672 7.7 %
Interest and other, net 8,796 0.3 % 38,505 1.2 % 26,113 1.0 %
Gain (loss) on long-term investments, net 39,636 1.2 % (5,333) (0.2)% — — %
Income before income taxes 677,816 20.1 % 458,439 14.8 % 232,785 8.7 %
Provision for (benefit from) income taxes 88,930 2.6 % 53,980 1.7 % (101,052) (3.8)%
Net income $ 588,886 17.5 % $ 404,459 13.1 % $ 333,837 12.5 %
27
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue by geographic region:
United States $ 2,015,885 59.8 % $1,775,682 57.5 % $1,426,906 53.5 %
International 1,356,887 40.2 % 1,313,288 42.5 % 1,241,488 46.5 %
Net revenue by platform:
Console $ 2,516,993 74.6 % $2,308,602 74.7 % 2,233,861 83.7 %
PC and other 855,779 25.4 % 780,368 25.3 % 434,533 16.3 %
Net revenue by distribution channel:
Digital online $ 2,919,292 86.6 % $2,378,563 77.0 % 1,681,609 63.0 %
Physical retail and other 453,480 13.4 % 710,407 23.0 % 986,785 37.0 %
Net revenue by content:
Recurrent consumer spending $ 2,074,687 61.5 % 1,384,999 44.8 % 1,070,916 40.1 %
Full game and other 1,298,085 38.5 % $1,703,971 55.2 % $1,597,478 59.9 %
Fiscal Years ended March 31, 2021 and 2020
(thousands of dollars) 2021
%ofnet
revenue 2020
%ofnet
revenue
Increase/
(decrease)
% Increase/
(decrease)
Net revenue $ 3,372,772 100.0 % $3,088,970 100.0 % $ 283,802 9.2 %
Internal royalties 637,652 18.9 % 483,697 15.7 % 153,955 31.8 %
Software development costs and royalties(1) 396,797 11.8 % 611,198 19.8 % (214,401) (35.1)%
Licenses 260,721 7.7 % 170,408 5.5 % 90,313 53.0 %
Product costs 239,915 7.1 % 277,147 9.0 % (37,232) (13.4)%
Cost of goods sold 1,535,085 45.5 % 1,542,450 49.9 % (7,365) (0.5)%
Gross profit $ 1,837,687 54.5 % $1,546,520 50.1 % $ 291,167 18.8 %
(1)
Includes $8,707 and $154,031 of stock-based compensation expense in 2021 and 2020, respectively.
For the fiscal year ended March 31, 2021, net revenue increased by $283.8 million, as compared to the prior year. The
increase was due primarily to an increase in net revenue of (i) $378.6 million from our NBA 2K franchise, (ii) $267.4 million
from Grand Theft Auto Online and Grand Theft Auto V, (iii) $75.5 million from our Mafia franchise, (iv) $65.0 million from
PGA TOUR 2K21, which released in August 2020, (vi) $24.1 million from Dragon City, and (vii) $20.5 million from Two Dots,
which was part of our Playdots. acquisition completed in September 2020. These increases were offset by a decrease in net
revenue of (i) $226.4 million from Borderlands 3, which released in September 2019, (ii) $217.8 million from Red Dead
Redemption 2, which released on PC in November 2019, and (iii) $124.7 million from The Outer Worlds, which released in
October 2019.
Net revenue from console games increased by $208.4 million and accounted for 74.6% of our total net revenue in the
fiscal year ended March 31, 2021, as compared to 74.7% in the prior year. The increase was due to an increase in net revenue
from our NBA 2K franchise, Grand Theft Auto Online, PGA TOUR 2K21, and our Mafia franchise, partially offset by a decrease
in net revenue from Red Dead Redemption 2, Borderlands 3, and The Outer Worlds. Net revenue from PC and other increased
by $75.4 million and accounted for 25.4% of our total net revenue in the fiscal year ended March 31, 2021, as compared to
25.3% in the prior year. The increase was due to an increase in net revenue from Grand Theft Auto V and Grand Theft Auto
Online, our NBA 2K franchise, Dragon City, Two Dots, and our Mafia franchise, partially offset by a decrease in net revenue
from Borderlands 3 and The Outer Worlds.
Net revenue from digital online channels increased by $540.7 million and accounted for 86.6% of our total net revenue
for the fiscal year ended March 31, 2021, as compared to 77.0% in the prior year. The increase was due to an increase in net
revenue from our NBA 2K franchise, Grand Theft Auto Online and Grand Theft Auto V, our Mafia franchise, and PGA TOUR
2K21, partially offset by a decrease in net revenue from Borderlands 3, The Outer Worlds, and Red Dead Redemption 2. Net
revenue from physical retail and other channels decreased by $256.9 million and accounted for 13.4% of our total net revenue
for the fiscal year ended March 31, 2021, as compared to 23.0% for the prior year. The decrease was due to a decrease in net
revenue from Red Dead Redemption 2, Borderlands 3, and The Outer Worlds, partially offset by an increase in net revenue
from our Mafia franchise and PGA TOUR 2K21.
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 $689.7 million
and accounted for 61.5% of net revenue for the fiscal year ended March 31, 2021, as compared to 44.8% for the prior year. The
increase was due to an increase in net revenue from our NBA 2K franchise, Grand Theft Auto Online and Grand Theft Auto V,
28
Civilization VI, Dragon City and Two Dots. Net revenue from full game and other decreased by $405.9 million and accounted
for 38.5% of net revenue for the fiscal year ended March 31, 2021, as compared to 55.2% for the prior year. The decrease was
due to a decrease in net revenue from Borderlands 3, Red Dead Redemption 2, and The Outer Worlds, partially offset by an
increase in net revenue from our Mafia franchise, and PGA TOUR 2K21.
Gross profit as a percentage of net revenue for the fiscal year ended March 31, 2021 was 54.5%, as compared to 50.1%
in the prior year. The percentage increase was due primarily to lower capitalized software amortization as a percentage of net
revenue based on the timing of releases and a reversal of stock-based compensation expense as a result of forfeited awards (see
Note 17 - Stock-Based Compensation), partially offset by higher internal royalties as a percentage of net revenue due to the
timing of when royalties are earned, and product mix.
Net revenue earned outside of the United States increased by $43.6 million and accounted for 40.2% of our total net
revenue in the fiscal year ended March 31, 2021, as compared to 42.5% in the prior year. The increase in net revenue outside of
the United States was due to an increase in net revenue from Grand Theft Auto Online and Grand Theft Auto V, our NBA 2K
franchise, and our Mafia franchise, partially offset by a decrease in net revenue from Red Dead Redemption 2 and Borderlands
3. Changes in foreign currency exchange rates increased net revenue and gross profit by $11.2 million and $7.5 million,
respectively, in the fiscal year ended March 31, 2021 as compared to the prior year.
Operating Expenses
(thousands of dollars) 2021
%ofnet
revenue 2020
%ofnet
revenue
Increase/
(decrease)
% Increase/
(decrease)
Selling and marketing $ 444,985 13.2 % $ 458,424 14.8 % $ (13,439) (2.9)%
General and administrative 390,683 11.6 % 318,235 10.3 % 72,448 22.8 %
Research and development 317,311 9.4 % 296,398 9.6 % 20,913 7.1 %
Depreciation and amortization 55,596 1.6 % 48,113 1.6 % 7,483 15.6 %
Business reorganization (272) — % 83 — % (355) (427.7)%
Total operating expenses $ 1,208,303 35.8 % $1,121,253 36.3 % $ 87,050 7.8 %
Includes stock-based compensation expense, which was allocated as follows (in thousands):
2021 2020
Selling and marketing $ 18,348 $ 18,680
General and administrative $ 56,830 $ 53,607
Research and development $ 26,587 $ 31,563
Foreign currency exchange rates increased total operating expenses by $9.7 million in the fiscal year ended March 31,
2021 as compared to the prior year.
Selling and marketing
Selling and marketing expenses decreased by $13.4 million in the fiscal year ended March 31, 2021 as compared to the
prior year, due primarily to $49.1 million in lower overall marketing expenses due primarily to less spend on Borderlands 3 and
Red Dead Redemption 2, partially offset by marketing expenses for Two Dots with no comparable costs in the prior year period.
The net decrease was partially offset by an increase in personnel expenses, primarily due to increased headcount.
General and administrative
General and administrative expenses increased by $72.4 million for the fiscal year ended March 31, 2021, as compared
to the prior year, due primarily to increases in (i) personnel expenses for additional headcount and higher incentive
compensation, (ii) charitable contributions made in connection with our COVID-19 pandemic response and relief efforts, (iii)
professional fees related to consulting, including for our acquisition of Playdots and our offer to acquire Codemasters Group
Holdings PLC, and (iv) IT expenses, primarily for cloud-based services.
General and administrative expenses for the fiscal years ended March 31, 2021 and 2020 include occupancy expense
(primarily rent, utilities and office expenses) of $27.5 million and $25.9 million, respectively, related to our development
studios.
Research and development
Research and development expenses increased by $20.9 million for the fiscal year ended March 31, 2021, as compared
to the prior year, due primarily to increased personnel expense due to increased headcount.
29
Depreciation and amortization
Depreciation and amortization expenses increased by $7.5 million for the fiscal year ended March 31, 2021, as
compared to the prior year, due primarily to an increase in IT infrastructure and leasehold improvements for new office
locations.
Business Reorganization
During the fiscal year ended March 31, 2021, business reorganization expense decreased b y $0.4 million as compared
to the prior year period and was not material.
Interest and other, net
(thousands of dollars) 2021
%ofnet
revenue 2020
%ofnet
revenue
Increase/
(decrease)
% Increase/
(decrease)
Interest income $ 18,701 0.6 % $ 47,341 1.5 % $ (28,640) (60.5)%
Interest expense (6,207) (0.2)% (2,637) (0.1)% (3,570) 135.4 %
Foreign currency exchange gain (loss) 727 — % (3,589) (0.1)% 4,316 (120.3)%
Other (4,425) (0.1)% (2,610) (0.1)% (1,815) 69.5 %
Interest and other, net $ 8,796 0.3 % $ 38,505 1.2 % $ (29,709) (77.2)%
Interest and other, net was income of $8.8 million for the fiscal year ended March 31, 2021, as compared to income of
$38.5 million for the fiscal year ended March 31, 2020. The decrease was due primarily to a $28.6 million decrease in interest
income due to lower interest rates.
Gain/(loss) on long-term investments, net
Gain/(loss) on long-term investments, net for the fiscal year ended March 31, 2021 was a gain of $39.6 million
compared to a loss of $5.3 million in the prior year period and was due primarily to the sale of one of our investments (see Note
4 - Fair Value Measurements).
Provision for income taxes
Our income tax expense was $88.9 million for the fiscal year ended March 31, 2021 as compared to $54.0 million for
the fiscal year ended March 31, 2020.
When compared to the statutory rate of 21%, the effective tax rate of 13.1% for the fiscal year ended March 31, 2021
was due primarily 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 11.8% for the fiscal year ended March 31, 2020
was primarily due to a $37.9 million tax benefit from tax credits anticipated to be utilized, $12.7 million from our geographic
mix of earnings, $11.9 million due to a net deferred tax asset arising 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 during the fiscal year,
discussed below, $9.2 million in changes in unrecognized tax benefits primarily due to audit settlements, and $8.4 million in
excess tax benefits from employee stock compensation. These benefits were partially offset by tax expense of $19.8 million
from the reversal of net deferred tax benefits relating to the Altera case.
The effective tax rate in the current year was higher compared to the prior year primarily due to decreased tax benefits
related to the one time creation of the net deferred tax asset related to TRAF offset by decreased expense associated with the
reversal of net deferred tax benefits relating to the Altera case.
The accounting for share-based compensation will increase or decrease our effective tax rate based upon the difference
between our share-based compensation expense and the deductions taken on our tax return, which depends on the stock price at
the time of the employee award vesting. Since we recognize excess tax benefits on a discrete basis, we anticipate that our
effective tax rate will vary from quarter to quarter depending on our stock price in each period.
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. Examinations may result in tax assessments in excess of
amounts claimed and the payment of additional taxes. We believe our tax positions comply with applicable tax law, and that we
have adequately provided for reasonably foreseeable tax assessments. It is possible that settlement of audits or the expiration of
the statute of limitations could have an impact on our effective tax rate in future periods.
30
On March 11, 2021, The American Rescue Plan Act of 2021 (“ARPA”) was signed into law. ARPA includes several
revenue-raising and business provisions. One such provision that impacts the Company is the expansion of the limitation of
compensation deductions for certain covered employees of publicly held corporations. Effective April 1, 2027, ARPA expanded
the limitation to cover the next five most highly compensated employees. As of March 31, 2021, ARPA did not have a material
impact on our Consolidated Financial Statements.
On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"),
which provides numerous tax and other stimulus measures that generally support the U.S. economy. The CARES Act did not
have a material impact on our Consolidated Financial Statements.
On May 19, 2019, a public referendum held in Switzerland approved the TRAF, which was effective for us on January
1, 2020. The TRAF abolished preferential tax regimes for holding companies, domicile companies, and mixed companies at the
cantonal level. The TRAF allows the cantons to establish transition rules, the implementation of which may be subject to a
ruling from the canton. For the fiscal year ended 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.
As of March 31, 2021, we had gross unrecognized tax benefits, including interest and penalties, of $167.6 million, of
which $62.6 million would affect our effective tax rate if realized. For the fiscal year ended March 31, 2021, gross
unrecognized tax benefits increased by $33.3 million.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended
March 31, 2018 and state income tax returns for periods prior to the fiscal year ended March 31, 2017. 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.
Net income and earnings per share
For the fiscal year ended March 31, 2021, our net income was $588.9 million, as compared to $404.5 million in the
prior year. Diluted earnings per share for the fiscal year ended March 31, 2021 was $5.09, as compared to $3.54 for the fiscal
year ended March 31, 2020. Diluted weighted average shares outstanding of 115.7 million were 1.6 million higher due
primarily to normal stock compensation activity, including vests as well as grants and forfeitures in the prior year being fully
outstanding in the current year.
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. 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.
Short-term Investments
As of March 31, 2021, we had $1,308.7 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. As of March 31, 2021, based on the composition
of our investment portfolio and actions 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. Such impact is not expected to be material to our liquidity.
Credit Agreement
On February 8, 2019, we entered into an unsecured Credit Agreement (the “Credit Agreement”) that runs through
February 8, 2024. The Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of
$200 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. In addition, the Credit Agreement contains uncommitted incremental capacity permitting the
incurrence of up to an additional $250 million in term loans or revolving credit facilities. Loans under the Credit Agreement
will bear interest at a margin of (a) 0.125% to 0.750% above a certain base rate (3.25% at March 31, 2021), or (b) 1.125% to
1.750% above LIBOR (approximately 1.10% at March 31, 2021), which margins are determined by reference to our
consolidated total net leverage ratio.
31
As of March 31, 2021, there was $197.9 million available to borrow under the Credit Agreement and we had $2.1
million of letters of credit outstanding. At March 31, 2021, we had no outstanding borrowings under the Credit Agreement.
The Credit Agreement also includes, among other terms and conditions, maximum leverage ratio, minimum cash
reserves and, in certain circumstances, minimum interest coverage ratio financial covenants, as well as limitations on the
Company’s and each of its subsidiaries’ ability to create, incur, assume or be liable for indebtedness; dispose of assets outside
the ordinary course; acquire, merge or consolidate with or into another person or entity; create, incur or allow any lien on any of
its property; make investments; or pay dividends or make distributions, in each case subject to certain exceptions. 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).
Financial Condition
We are subject to credit risks, particularly if any of our receivables represent a limited number of customers or are
concentrated in foreign markets. If we are unable to collect our accounts receivable as they become due, it could adversely
affect our liquidity and working capital position.
Generally, we have been able to collect our accounts receivable in the ordinary course of business. We do not hold any
collateral to secure payment from customers. We have trade credit insurance on the majority of our customers to mitigate
accounts receivable risk.
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 78.4%, 71.5%, and 70.1% of net revenue during the fiscal
years ended March 31, 2021, 2020, and 2019, respectively. As of March 31, 2021 and 2020, five customers accounted for
77.6% and 58.1% of our gross accounts r eceivable, respectively. Customers that individually accounted for more than 10% of
our gross accounts receivable balance comprised 69.2% and 48.8% of such balances at March 31, 2021 and 2020, respectively.
We had two customers who accounted for 50.4% and 18.8% of our gross accounts receivable as of March 31, 2021 and two
customers who accounted for 29.4%, and 19.4% of our gross accounts receivable as of March 31, 2020. We did not have any
additional customers that exceeded 10% of our gross accounts receivable as of March 31, 2021 and 2020. Based upon
performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers and our past
collection experience, we believe that the receivable balances from these largest customers do not represent a significant credit
risk, although we actively monitor each customer's creditworthiness and economic conditions that may affect our customers'
business and access to capital. We are monitoring the current global economic conditions, including credit markets and other
factors as it relates to our customers in order to manage the risk of uncollectible accounts receivable, including as a result of the
COVID-19 pandemic.
We believe 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. Our liquidity and capital
resources were not materially affected by the COVID-19 pandemic and related volatility and slowdown in the global financial
markets to date. For further discussion regarding the potential future impacts of the COVID-19 pandemic and related economic
conditions on our business, refer to Item 1A, Risk Factors.
As of March 31, 2021, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries
was $321.1 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. In addition, we expect to have the ability to generate sufficient
cash domestically to support ongoing operations for the foreseeable future.
The Tax Cuts and Jobs Act, as enacted in December 2017, includes a number of provisions, which generally establish
a territorial-style system for taxing foreign income of domestic multinational corporations. Our current intention is to reinvest
indefinitely the earnings of our foreign subsidiaries, and, therefore, we have not recorded any material tax liabilities associated
with the repatriation of foreign earnings.
Our Board of Directors has authorized the repurchase of up to 14.2 million shares of our common stock. Under this
program, we may purchase shares from time to time through a variety o f methods, including in the open market or through
privately negotiated transactions, in accordance with applicable securities laws. Repurchases are subject to the availability of
stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. The program
does not require us to repurchase shares and may be suspended or discontinued at any time for any reason.
During the fiscal years ended March 31, 2021, 2020, and 2019, we repurchased zero, zero, and 3.7 million shares of
our common stock, respectively, in the open market for $0.0 million, $0.0 million, and $362.4 million, respectively, including
32
commissions as part of the program. As of March 31, 2021, we had repurchased a total of 10.4 million shares of our common
stock under the program, and 3.8 million shares of our common stock remained available for repurchase under the share
repurchase program.
Our changes in cash flows were as follows:
Fiscal Year Ended March 31,
(thousands of dollars) 2021 2020 2019
Net cash provided by operating activities $ 912,318 $ 685,678 $ 843,515
Net cash (used in) provided by investing activities (806,724) 4,049 (223,576)
Net cash used in financing activities (57,338) (77,453) (463,685)
Effects of foreign currency exchange rates on cash, cash equivalents,
and restricted cash and cash equivalents 18,599 (10,868) (10,639)
Net change in cash, cash equivalents, and restricted cash and cash
equivalents $ 66,855 $ 601,406 $ 145,615
At March 31, 2021, we had $2,060.2 million of Cash, cash equivalents, and Restricted cash and cash equivalents,
compared to $1,993.4 million at March 31, 2020. The increase in Cash, cash equivalents, and Restricted cash and cash
equivalents from March 31, 2020 was due primarily to Net cash provided by operating activities from sales primarily from the
previously mentioned titles, partially offset by investments in software development and licenses as well as royalty payments.
This net increase was partially offset by (i) Net cash used in investing activities primarily related to changes in bank time
deposits and net purchases of available for sale securities, our acquisition of Playdots, and purchases of fixed assets and (ii) Net
cash used in financing activities, which was primarily related to tax payments related to net share settlements of our restricted
stock.
Commitments
Refer to Note 15 - Commitments and Contingencies to our Consolidated Financial Statements for disclosures
regarding our commitments.
Capital Expenditures
In fiscal year 2022, we anticipate capital expenditures to be $100 million.
Off-Balance Sheet Arrangements
As of March 31, 2021 and 2020, 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. As such, we are
not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
International Operations
Net revenue earned outside of the United States is principally generated by our operations in Europe, Asia, Australia,
Canada and Latin America. For the fiscal years ended March 31, 2021, 2020 and 2019, 40.2%, 42.5% and 46.5%, respectively,
of our net revenue was earned outside the United States. We are subject to risks inherent in foreign trade, including increased
credit risks, tariffs and duties, fluctuations in foreign currency exchange rates, shipping delays and international political,
regulatory and economic developments, all of which can have a significant effect on our operating results.
Fluctuations in Quarterly Operating Results and Seasonality
We have experienced fluctuations in quarterly and annual operating results as a result of the timing of the introduction
of new titles, variations in sales of titles developed for particular platforms, market acceptance of our titles, development and
promotional expenses relating to the introduction of new titles, sequels or enhancements of existing titles, projected and actual
changes in platforms, the timing and success of title introductions by our competitors, product returns, changes in pricing
policies by us and our competitors, the accuracy of retailers' forecasts of consumer demand, the size and timing of acquisitions,
the timing of orders from major customers, and order cancellations and delays in product shipment. Sales of our products are
also seasonal, with peak demand typically occurring in the fourth calendar quarter during the holiday season. For certain of our
software products with multiple performance obligations, we defer the recognition of our net revenue over an estimated service
period which generally ranges from six to fifteen months. As a result, the quarter in which we generate the highest net bookings
may be different from the quarter in which we recognize the highest amount of net revenue. Quarterly comparisons of operating
results are not necessarily indicative of future operating results.
33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from fluctuations in market rates and prices. Our market risk exposures
primarily include fluctuations in interest rates and 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. Since short-term investments mature relatively quickly and
can be reinvested at the then current market rates, interest income on a portfolio consisting of short-term securities is more
subject to market fluctuations than a portfolio of longer-term maturities. However, the fair value of a short-term portfolio is less
sensitive to market fluctuations than a portfolio of longer-term 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, 2021, we had $1,308.7 million of short-term investments, which included $729.9 million of available-
for-sale securities. 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 $1,422.9 million of cash and cash equivalents that are comprised primarily of money market
funds and bank-time deposits. 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, 2021.
Historically, fluctuations in interest rates have not had a significant effect on our operating results. Under our Credit
Agreement, loans will bear interest at a rate of (a) 0.250% to 0.750% above a certain base rate (3.25% at March 31, 2021) or
(b) 1.125% to 1.750% above LIBOR (approximately 1.10% at March 31, 2021), which rates are determined by reference to our
consolidated total net leverage ratio. Changes in market rates may affect our future interest expense if there is an outstanding
balance on our line of credit. At March 31, 2021, 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. Accounts relating to foreign operations are translated into United States dollars using prevailing exchange rates
at the relevant period end. Translation adjustments are included as a separate component of stockholders' equity on our
Consolidated Balance Sheets. For the fiscal years ended March 31, 2021 and 2020, our foreign currency translation adjustment
was a gain of $51.3 million and a loss of $27.4 million, respectively. We recognized a foreign currency exchange transaction
gain of $0.7 million, a loss of $3.6 million, and a loss of $0.5 million for the fiscal years ended March 31, 2021, 2020, and
2019, respectively, in Interest and other, net in our Consolidated Statements of Operations.
Balance Sheet Hedging Activities
We use foreign currency forward contracts to mitigate foreign currency exchange rate risk associated with non-
functional currency denominated cash balances and inter-company funding loans, non-functional currency denominated
accounts receivable and non-functional currency denominated accounts payable. These transactions are not designated as
hedging instruments and are accounted for as derivatives whereby the fair value of the contracts is reported as either assets or
liabilities on our Consolidated Balance Sheets, and gains and losses resulting from changes in the fair value are reported 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, 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, 2020, we had $52.6 million of
forward contracts outstanding to buy foreign currencies in exchange for U.S. dollars and $122.0 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. For the
fiscal years ended March 31, 2021, 2020 and 2019, we recorded a loss of $3.6 million, a loss of $1.0 million, and a gain of
$16.8 million, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated
Statements of Operations. As of March 31, 2021 and 2020, the fair value of these outstanding forward contracts was a loss of
$0.1 million and a loss $0.0 million, respectively, and is included in accrued and other current liabilities. The fair value of these
outstanding forward contracts is estimated based on the prevailing exchange rates of the various hedged currencies as of the end
of the period.
Our hedging programs are designed to reduce, but do not entirely eliminate, the effect of currency exchange rate
movements. We believe the counterparties to these foreign currency forward contracts are creditworthy multinational
34
commercial banks and that the risk of counterparty nonperformance is not material. Notwithstanding our efforts to mitigate
some foreign currency exchange rate risks, there can be no assurance that our hedging activities will adequately protect us
against the risks associated with foreign currency fluctuations, which may be more volatile as a result of COVID-19. For the
fiscal year ended March 31, 2021, 40.2% 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 4.0%, while a
hypothetical 10% decrease in the value of the U.S. dollar against all currencies would increase revenue by 4.0%. In the opinion
of management, a substantial portion of this fluctuation would be offset by cost of goods sold and operating expenses incurred
in local currency.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data appear in a separate section of this Form 10-K following Part IV. We
provide details of our valuation and qualifying accounts in Note 21 - Supplementary Financial Information to our Consolidated
Financial Statements. All schedules have been omitted since the information required to be submitted has been included on our
Consolidated Financial Statements or notes thereto or has been omitted as not applicable or not required.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Definition and Limitations of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) are designed to reasonably ensure that information required to be disclosed in
our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to management,
including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding
required disclosures.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. These
limitations include the possibility of human error, the circumvention or overriding of the controls and procedures and
reasonable resource constraints. In addition, because we have designed our system of controls based on certain assumptions,
which we believe are reasonable, about the likelihood of future events, our system of controls may not achieve its desired
purpose under all possible future conditions. Accordingly, our disclosure controls and procedures provide reasonable assurance,
but not absolute assurance, o f achieving their objectives.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated
the effectiveness of our disclosure controls and procedures at March 31, 2021, the end of the period covered by this report.
Based on this evaluation, the principal executive officer and principal financial officer concluded that, at March 31, 2021, our
disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported on a timely
basis, and (ii) accumulated and communicated to management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosures.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal c ontrol over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission 2013 framework ("COSO"). Based on this evaluation,
management has concluded that our internal control over financial reporting was effective as of March 31, 2021.
In accordance with SEC guidance, our management’s assessment of and conclusion on the effectiveness of internal
control over financial reporting did not include the internal controls of Playdots, which we acquired in September 2020 and is
included in the March 31, 2021 Consolidated Financial Statements and constituted 3.2% of consolidated total assets as of
March 31, 2021.
Our independent registered public a ccounting firm, Ernst & Young LLP, has issued an audit report on our internal
control over financial reporting, which is included in this Form 10-K.
35
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2021,
which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under
the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that
most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the
effect of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
On September 4, 2020, we acquired Playdots. We are currently in the process of incorporating the internal controls and
procedures of Playdots into our internal control over financial reporting for purposes of our assessment of and report on internal
control over financial reporting for the fiscal year ending March 31, 2022.
Item 9B. Other Information
None.
36
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference to the sections entitled "Proposal 1—
Election of Directors" and "Executive Compensation—Section 16(a) Beneficial Ownership Reporting Compliance" in our
definitive Proxy Statement (the "Proxy Statement") for the Annual Meeting of Stockholders to be held in 2021. We intend to
file the Proxy Statement within 120 days after the end of the fiscal year (i.e. on or before July 29, 2021). Our Code of Business
Conduct and Ethics applicable to our directors and all employees, including senior financial officers, is available on our website
at www.take2games.com. If we make any amendment to our Code of Business Conduct and Ethics that is required to be
disclosed pursuant to the Exchange Act, we will make such disclosures on our website.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the section entitled "Executive
Compensation" in our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the sections entitled "Voting Security
Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in our Proxy
Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item i s incorporated herein by reference to the section entitled "Certain Relationships
and Related Transactions" in our Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the section entitled "Independent Auditor
Fee Information" in our Proxy Statement.
37
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Report:
(i) Financial Statements. See Index to Financial Statements on page 44 of this Report.
(ii) Financial Statement Schedule. See Note 21 - Supplementary Financial Information to our Consolidated Financial
Statements.
(iii) Index to Exhibits:
2.1 Agreement and Plan of Merger, dated as of August 17,
2020, by and among Take-Two Interactive Software, Inc.,
Dash MS, LLC, Dash MS II, LLC, Playdots, Inc. and
Shareholder Representative Services LLC, as Stockholder
Representative
8-K 8/18/2020 2.1
3.1 Restated Certificate of Incorporation 10-K 2/12/2004 3.1
3.1.1 Certificate of Amendment of Restated Certificate of
Incorporation, dated April 30, 1998
10-K 2/12/2004 3.1.2
3.1.2 Certificate of Amendment of Restated Certificate of
Incorporation, dated November 17, 2003
10-K 2/12/2004 3.1.3
3.1.3 Certificate of Amendment of Restated Certificate of
Incorporation, dated April 23, 2009
8-K 4/23/2009 3.1
3.1.4 Certificate of Amendment of Restated Certificate of
Incorporation, dated September 21, 2012
8-K 9/24/2012 3.1
3.2 Certificate of Designation of Series A Preferred Stock, dated
March 11, 1998
10-K 2/12/2004 3.1.1
3.3 Certificate of Designation of Series B Preferred Stock, dated
March 26, 2008
8-A12B 3/26/2008 4.2
3.4 Second Amended and Restated Bylaws of Take-Two
Interactive Software, Inc., effective as of June 20, 2019
8-K 6/25/2019 3.1
4.1 Description of Registrant's Securities Registered Pursuant to
Section 12 of the Securities Exchange Act of 1934
10-K 5/22/2020 4.1
10.1 Take-Two Interactive Software, Inc. Change in Control
Employee Severance Plan
+
8-K 3/7/2008 10.1
10.2 Amended and Restated Take-Two Interactive Software, Inc.
2009 Stock Incentive Plan, effective as of July 21, 2016
+
14A 7/28/2016 Annex A
10.3 Form of Employee Restricted Stock Agreement
+
10-Q 6/5/2009 10.2
10.4 Form of Non-Employee Director Restricted Stock
Agreement
+
10-Q 6/5/2009 10.3
10.5 Form of Employee Restricted Unit Agreement
+
10-Q 8/1/2012 10.1
10.6 Form of Employee Restricted Unit Agreement
+
10-Q 10/30/2013 10.1
10.7 Form of Employee Global Restricted Unit Agreement
+
10-Q 10/30/2013 10.2
10.8 Form of Employee Restricted Unit Agreement
+
10-Q 10/30/2013 10.3
10.9 Form of Employee Global Restricted Unit Agreement
+
10-Q 10/30/2013 10.4
10.10 Form of Employee Global Restricted Unit Agreement
Pursuant to the Take-Two Interactive Software, Inc. 2009
Stock Incentive Plan
+
10-Q 10/30/2013 10.5
10.11 Amended and Restated Take-Two Interactive Software, Inc.
2017 Stock Incentive Plan
14A 7/24/2020 Annex B
10.12 Amendment No. 1 to the Amended and Restated Take-Two
Interactive Software, Inc. 2017 Stock Incentive Plan+
S-8 9/4/2020 99.2
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date Exhibit
Filed
Herewith
38
10.13 Take-Two Interactive Software, Inc. 2017 Stock Incentive
Plan Qualified RSU Sub-Plan for France, effective as of
September 15, 2017
+
14A 7/27/2017 Annex C
10.14 Take-Two Interactive Software, Inc. 2017 Second Amended
and Restated Global Employee Stock Purchase Plan,
effective as of March 28, 2019
+
10-K 5/14/2019 10.13
10.15 Form of Global Restricted Stock Unit Agreement Pursuant
to the Take-Two Interactive Software, Inc. 2017 Stock
Incentive Plan
+
10-Q 11/8/2017 10.4
10.16 Form of Global Restricted Stock Performance Unit
Agreement Pursuant to the Take-Two Interactive Software,
Inc. 2017 Stock Incentive Plan
+
10-Q 11/8/2017 10.5
10.17 Form of Non-Employee Director Restricted Stock
Agreement Pursuant to the Take-Two Interactive Software
Inc. 2017 Stock Incentive Plan
+
10-Q 11/8/2017 10.6
10.18 Form of Non-Employee Director Stock Grant Agreement
Pursuant to the Take-Two Interactive Software Inc. 2017
Stock Incentive Plan
+
10-Q 11/8/2017 10.7
10.19 Employment Agreement, dated May 12, 2010, between the
Company and Lainie Goldstein
+
8-K 5/14/2010 10.1
10.20 First Amendment to Employment Agreement, dated
October 25, 2010, between the Company and Lainie
Goldstein
+
8-K 10/25/2010 10.1
10.21 Second Amendment to Employment Agreement, dated
August 27, 2012, between the Company and Lainie
Goldstein
+
10-Q 10/31/2012 10.6
10.22 Third Amendment to Employment Agreement dated May 7,
2018, between the Company and Lainie Goldstein
+
10-Q 8/3/2018 10.2
10.23 Employment Agreement, dated February 14, 2008, by and
between the Company and Karl Slatoff
+
8-K 2/15/2008 10.3
10.24 Employment Agreement dated January 28, 2015 between
the Company and Daniel Emerson
+
10-Q 2/6/2015 10.1
10.25 Management Agreement, dated as of March 10, 2014, by
and between the Company and ZelnickMedia Corporation
+
8-K 3/10/2014 10.1
10.26 Restricted Unit Agreement, dated as of May 20, 2015, by
and between the Company and ZelnickMedia Corporation
+
S-3
ASR
5/20/2015 10.2
10.27 Amended and Restated Restricted Unit Agreement Pursuant
to the Take-Two Interactive Software, Inc. 2009 Incentive
Stock Plan, dated as of June 30, 2015
+
10-Q 8/10/2015 10.1
10.28 Amendment to the Restricted Stock Unit Agreement, dated
as of March 31, 2016, by and between Take-Two Interactive
Software, Inc. and ZelnickMedia Corporation
+
10-K 5/19/2016 10.50
10.29 Restricted Unit Agreement, dated as of May 20, 2016, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation
+
S-3
ASR
5/20/2016 10.2
10.30 Amendment to Amended and Restated Restricted Unit
Agreement Pursuant to the Take Two Interactive Software,
Inc. 2009 Incentive Stock Plan, dated as of February 7,
2017
+
10-Q 2/8/2017 10.3
10.31 Restricted Unit Agreement, dated as of May 25, 2017, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation
+
S-3
ASR
5/25/2017 10.2
10.32 Amendment to Amended and Restated Restricted Unit
Agreement Pursuant to the Take-Two Interactive Software,
Inc. 2009 Incentive Stock Plan, dated as of December 15,
2017
+
10-Q 2/8/2018 10.4
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date Exhibit
Filed
Herewith
39
10.33 Management Agreement, dated as of November 17, 2017,
by and between the Company and ZelnickMedia
Corporation
+
8-K 11/22/2017 10.1
10.34 Restricted Unit Agreement, dated as of April 13, 2018, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation
+
S-3
ASR
4/13/2018 10.2
10.35 Restricted Unit Agreement, dated as of April 15, 2019, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation
+
S-3
ASR
4/15/2019 10.2
10.36 Restricted Unit Agreement dated as of April 13, 2020, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation
+
S-3
ASR
4/13/2020 10.2
10.37 Restricted Unit Agreement dated as of April 13, 2021, by
and between Take-Two Interactive Software, Inc. and
ZelnickMedia Corporation +
S-3
ASR
4/13/2021 10.2
10.38 Credit Agreement, dated as of February 8, 2019, by and
among Take-Two Interactive Software, Inc., the lender
parties thereto, Wells Fargo Bank, National Association, as
administrative agent for the Lenders, Wells Fargo
Securities, LLC and JP Morgan Chase Bank, N.A., as joint
lead arrangers and joint bookrunners, and JPMorgan Chase
Bank, N.A. as syndication agent
10-K 5/14/2019 10.35
10.39 Xbox 360 Publisher License Agreement dated
November 17, 2005, between Microsoft Licensing, GP and
the Company*
10-Q 11/8/2011 10.3
10.40 Amendment to Xbox 360 Publisher License Agreement,
dated December 4, 2008, between Microsoft Licensing, GP
and the Company*
10-Q 6/5/2009 10.1
10.41 Amendment to the Xbox 360 Publisher License Agreement,
dated November 22, 2011, between the Company and
Microsoft Licensing, GP*
10-Q 2/3/2012 10.1
10.42 Amendment to the Xbox 360 Publisher License Agreement,
dated December 11, 2012, between the Company and
Microsoft Licensing, GP*
10-Q 2/6/2013 10.2
10.43 Amendment to the Xbox 360 Publisher License Agreement,
dated November 13, 2013, between the Company and
Microsoft Licensing, GP*
10-Q 2/4/2014 10.2
10.44 Amendment to the Xbox 360 Publisher License Agreement,
dated September 30, 2014, between Microsoft Corporation
and the Company*
10-Q 10/30/2014 10.1
10.45 Amendment to the Xbox 360 Publisher License Agreement,
signed on December 21, 2017, between Microsoft
Corporation and the Company*
10-Q 2/8/2018 10.2
10.46 Xbox Console Publisher License Agreement, dated as of
July 1, 2020, by and between Take-Two Interactive
Software, Inc. and Microsoft Corporation**
10-Q 11/6/2020 10.1
10.47 PlayStation Global Developer and Publisher Agreement,
dated as of March 23, 2017, between the Company and
certain of its affiliates and Sony Interactive Entertainment,
Inc., Sony Interactive Entertainment America LLC, and
Sony Interactive Entertainment Europe Ltd.*
10-K 5/24/2017 10.48
10.48 PlayStation 5 Amendment to PlayStation Global Developer
and Publisher Agreement, effective as of May 1, 2020 and
signed on September 30, 2020, between Take-Two
Interactive Software, Inc. and certain of its affiliates and
Sony Interactive Entertainment, Inc., Sony Interactive
Entertainment America LLC, and Sony Interactive
Entertainment Europe Ltd.**
10-Q 11/6/2020 10.4
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date Exhibit
Filed
Herewith
40
10.49 Lease Agreement between the Company and Moklam
Enterprises, Inc. dated July 1, 2002
10-Q 9/16/2002 10.2
10.50 Sixth Lease Modification Agreement, dated January 18,
2012, between the Company and Moklam Enterprises, Inc.
10-K 5/23/2012 10.45
10.51 Seventh Lease Modification Agreement, dated April 8,
2014, between the Company and Moklam Enterprises, Inc.
10-K 5/14/2014 10.39
10.52 Eighth Lease Modification Agreement, dated as of
January 6, 2015, by and between Take-Two Interactive
Software, Inc. and Moklam Enterprises, Inc.
10-K 5/19/2016 10.47
10.53 Ninth Lease Modification Agreement, dated as of December
15, 2015, by and between Take-Two Interactive
Software, Inc. and Moklam Enterprises, Inc.
10-Q 2/4/2016 10.1
10.54 Lease Agreement, dated as of December 12, 2016, by and
between Take-Two Interactive Software, Inc. and DOLP
1133 Properties II LLC for a premises with entrances at
1133 Avenue of the Americas and 110 West 44th Street,
New York, New York 10036
10-Q 2/8/2017 10.1
10.55 First Amendment to Lease, dated as of July 25, 2018 by and
between Take-Two Interactive Software, Inc. and DOLP
1133 Properties II LLC
10-Q 11/8/2018 10.1
21.1 Subsidiaries of the Company X
23.1 Consent of Ernst & Young LLP X
31.1 Chief Executive Officer Certification Pursuant to
Rules 13a-15(e) and 15d-15(e) under the Securities and
Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
X
31.2 Chief Financial Officer Certification Pursuant to
Rules 13a-15(e) and 15d-15(e) under the Securities and
Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
X
32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
X
32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
X
101.INS The Instance Document does not appear in the Interactive
Data File because its XBRL tags are embedded
within the Inline XBRL document.
X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Calculation Linkbase Document X
101.LAB XBRL Taxonomy Label Linkbase Document X
101.PRE XBRL Taxonomy Presentation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Document X
104 Cover Page Interactive Data File (formatted as Inline XBRL
and contained in Exhibit 101)
X
Incorporated by Reference
Exhibit Number Exhibit Description Form Filing Date Exhibit
Filed
Herewith
_______________________________________________________________________________
† Schedules omitted pursuant to item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the
SEC upon its request.
+ Represents a management contract or compensatory plan or arrangement.
* Portions thereof were omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment that
was granted in accordance with Exchange Act Rule 24b-2.
** Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
41
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting
Language): (i) Consolidated Balance Sheets at March 31, 2021 and 2020, (ii) Consolidated Statements of Operations for the
fiscal years ended March 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Comprehensive Income for the fiscal years
ended March 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2021,
2020 and 2019, (v) Consolidated Statements of Stockholders' Equity for the fiscal years ended March 31, 2021, 2020 and 2019,
and (vi) Notes to the Consolidated Financial Statements.
Item 16. Form 10-K Summary
Not applicable.
42
TAKE-TWO INTERACTIVE SOFTWARE, INC.
FISCAL YEAR ENDED MARCH 31, 2021
INDEX TO FINANCIAL STATEMENTS
Page
Reports of Independent Registered Public Accounting Firm 44
Consolidated Balance Sheets—At March 31, 2021 and 2020 48
Consolidated Statements of Operations—For the fiscal years ended March 31, 2021, 2020 and 2019 49
Consolidated Statements of Comprehensive Income—For the fiscal years ended March 31, 2021, 2020 and 2019 50
Consolidated Statements of Cash Flows—For the fiscal years ended March 31, 2021, 2020 and 2019 51
Consolidated Statements of Stockholders' Equity—For the fiscal years ended March 31, 2021, 2020 and 2019 52
Notes to the Consolidated Financial Statements 53
(All other items in this report are inapplicable)
43
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Take-Two Interactive Software, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Take-Two Interactive Software, Inc. (the Company) as of
March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, cash flows, and
stockholders’ equity for each of the three years in the period ended March 31, 2021, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at March 31, 2021 and 2020, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2021, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated May 18, 2021 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases
effective April 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) and the
related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
44
Revenue recognition
Description of
the Matter
As described in Note 1 to the consolidated financial statements, a significant portion of the Company’s
revenue recognized is for full game software products that management must evaluate to determine whether
such products sold have distinct and separable performance obligations. Such performance obligations can be
licenses for intellectual property that provide a functional offline gaming experience or game related
services. If multiple performance obligations are identified, management must estimate a standalone selling
price for each identified performance obligation which is used to allocate the full game software product
transaction price. Revenue for amounts allocated to offline functionality is recognized upon delivery of the
product. Separately, revenue for amounts allocated to the game related services is recognized ratably over an
estimated service period.
Significant judgment is exercised by the Company in identifying performance obligations within its full
game software products that should be accounted for separately in each revenue arrangement, estimating the
standalone selling price for each performance obligation and determining the service period that should be
utilized to recognize revenue over time. Auditing the identification of performance obligations for full game
software products requires complex auditor judgment as each full game software product has unique features
that management must evaluate to determine whether each feature should be accounted for separately.
Auditing the judgments and estimates made by management in determining the standalone selling prices for
each identified performance obligation is especially challenging as the Company typically does not have
observable standalone selling prices for each performance obligation and must rely on an expected cost-plus
margin methodology, taking into account relevant cost assumptions including estimates of post-release
support. Similarly, auditing the estimated service period for the game related services is especially
challenging as the Company must consider a variety of data points. Such data points include the weighted
average number of days between players’ first and last days played online, known online trends, the service
periods of the Company’s previously released products, and, to the extent publicly available, the service
periods of the Company’s competitors’ products that are similar in nature.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of Company’s
controls over the revenue recognition process. We selected a sample of transactions and tested the
Company’s controls over evaluating and identifying performance obligations, determining the estimated
standalone selling price and estimating the service period over which game related services revenue is
recognized.
Our audit procedures to test the Company’s identification of performance obligations included, among
others, inspecting product-specific marketing materials for promised full game software product features,
inspecting summaries of product features from Company personnel in product development roles, and
independently evaluating the full game software product to corroborate identified product features on a
sample basis. Our audit procedures to test the Company’s estimates of standalone selling price for
performance obligations included, among others, testing the underlying data used in management’s
calculations for completeness and accuracy as well as evaluating the reasonableness of significant
assumptions and other factors utilized in making estimates of standalone selling price. For example, for a
selection of full game software products which included multiple performance obligations, we tested the
Company’s expected cost-plus margin analysis by testing the appropriateness of the assumptions used in the
analysis, including product development costs and forecasted post-release support costs, marketing costs and
licensing costs. Our audit procedures to test and evaluate the reasonableness of the Company’s estimated
service period included, among others, testing the completeness and accuracy of management’s player data
analysis, testing qualitative factors utilized such as reviewing online trends, comparing to similar or historical
products and analyzing competitor information.
45
Capitalized internally developed software costs
Description of
the Matter
As described in Note 1 to the consolidated financial statements, the Company capitalizes internally
developed software costs, subsequent to establishing technological feasibility of a product. As noted in Note
8, the Company had approximately $435.1 million of capitalized internally developed software as of March
31, 2021.
Auditing the Company’s determination of the establishment of technological feasibility was especially
challenging because management’s determination of which products qualify and the related timing of
capitalization requires significant judgment.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the internally developed software costs process. For example, we tested controls over management’s
evaluation of products that established technological feasibility.
To test the Company’s capitalization of internally developed software costs, we performed audit procedures
that included, among others, inspecting underlying documentation to support management’s conclusion on
the establishment of technological feasibility in accordance with the applicable accounting standards. This
included inspecting the product’s technical and game design documentation. We also held corroborative
inquiries of Company personnel in product development roles to assess the Company’s conclusions as to the
technological feasibility of its products.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2006.
New York, New York
May 18, 2021
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Take-Two Interactive Software, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Take-Two Interactive Software, Inc.'s (the Company) internal control over financial reporting as of March 31,
2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of March 31, 2021, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of Playdots, Inc., which is included in the March 31, 2021 consolidated financial statements of the Company and
constituted 3% of total assets as of March 31, 2021 and 1% of revenues for the year then ended. Our audit of internal control
over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of
Playdots, Inc.
We also have audited, in accordance with the standards of the Public C ompany Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements
of operations, comprehensive income, cash flows and stockholders’ equity for each of the three years in the period ended March
31, 2021, and the related notes and our report dated May 18, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the p olicies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
May 18, 2021
47
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
March 31,
2021 2020
ASSETS
Current assets:
Cash and cash equivalents $ 1,422,884 $ 1,357,664
Short-term investments 1,308,692 644,003
Restricted cash and cash equivalents 538,822 546,604
Accounts receivable, net of allowances of $350 and $443 at March 31, 2021 and 2020,
respectively 552,762 592,555
Inventory 17,742 19,108
Software development costs and licenses 43,443 40,316
Deferred cost of goods sold 15,524 19,598
Prepaid expenses and other 320,646 273,503
Total current assets 4,220,515 3,493,351
Fixed assets, net 149,364 131,888
Right-of-use assets 164,763 154,284
Software development costs and licenses, net of current portion 490,892 401,778
Goodwill 535,306 386,494
Other intangibles, net 121,591 51,260
Deferred tax assets 90,206 116,676
Long-term restricted cash and cash equivalents 98,541 89,124
Other assets 157,040 123,977
Total assets $ 6,028,218 $ 4,948,832
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 71,001 $ 65,684
Accrued expenses and other current liabilities 1,204,090 1,169,884
Deferred revenue 928,029 777,784
Lease liabilities 31,595 25,187
Total current liabilities 2,234,715 2,038,539
Non-current deferred revenue 37,302 28,339
Non-current lease liabilities 159,671 152,059
Non-current software development royalties 110,127 104,417
Other long-term liabilities 154,511 86,234
Total liabilities 2,696,326 2,409,588
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000 shares authorized: no shares issued and
outstanding at March 31, 2021 and 2020 — —
Common stock, $0.01 par value, 200,000 shares authorized; 137,584 and 135,927 shares
issued and 115,163 and 113,506 outstanding at March 31, 2021 and 2020, respectively 1,376 1,359
Additional paid-in capital 2,288,781 2,134,748
Treasury stock, at cost; 22,421 common shares at March 31, 2021 and 2020, respectively (820,572) (820,572)
Retained earnings 1,870,971 1,282,085
Accumulated other comprehensive loss (8,664) (58,376)
Total stockholders' equity 3,331,892 2,539,244
Total liabilities and stockholders' equity $ 6,028,218 $ 4,948,832
See accompanying Notes.
48
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
Cost of goods sold 1,535,085 1,542,450 1,523,644
Gross profit 1,837,687 1,546,520 1,144,750
Selling and marketing 444,985 458,424 391,400
General and administrative 390,683 318,235 281,234
Research and development 317,311 296,398 230,170
Depreciation and amortization 55,596 48,113 40,232
Business reorganization (272) 83 (4,958)
Total operating expenses 1,208,303 1,121,253 938,078
Income from operations 629,384 425,267 206,672
Interest and other, net 8,796 38,505 26,113
Gain (loss) on long-term investments, net 39,636 (5,333) —
Income before income taxes 677,816 458,439 232,785
Provision for (benefit from) income taxes 88,930 53,980 (101,052)
Net income $ 588,886 $ 404,459 $ 333,837
Earnings per share:
Basic earnings per share $ 5.14 $ 3.58 $ 2.95
Diluted earnings per share $ 5.09 $ 3.54 $ 2.90
See accompanying Notes.
49
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
March 31,
2021 2020 2019
Net income $ 588,886 $ 404,459 $ 333,837
Other comprehensive income (loss)
Foreign currency translation adjustment 51,253 (27,445) (28,803)
Cash flow hedges:
Change in unrealized gains (3,817) 10,504 763
Reclassification to earnings (1,933) (1,689) 3,726
Tax effect on effective cash flow hedges 845 775 417
Change in fair value of cash flow hedges (4,905) 9,590 4,906
Change in fair value of available-for-sale securities 3,364 (3,332) 2,440
Other comprehensive income (loss) 49,712 (21,187) (21,457)
Comprehensive income $ 638,598 $ 383,272 $ 312,380
See accompanying Notes.
50
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended March 31,
2021 2020 2019
Operating activities:
Net income $ 588,886 $ 404,459 $ 333,837
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment of software development costs and licenses 144,263 167,925 201,221
Stock-based compensation 110,472 257,881 247,700
Amortization of intellectual property 32,241 20,990 23,879
Depreciation 56,309 47,628 39,726
Deferred income taxes 10,631 (3,486) 110,603
Gain on long-term investments, net (41,588) ——
Other, net 5,515 9,074 675
Changes in assets and liabilities:
Accounts receivable 47,195 (195,484) (98,075)
Inventory 2,503 8,489 (14,403)
Software development costs and licenses (221,279) (48,434) (206,831)
Prepaid expenses, other current and other non-current assets (58,737) (259,817) (275,800)
Deferred revenue 152,466 (55,460) 304,713
Deferred cost of goods sold 4,768 32,180 (24,882)
Accounts payable, accrued expenses and other liabilities 78,673 299,733 201,152
Net cash provided by operating activities 912,318 685,678 843,515
Investing activities:
Change in bank time deposits (387,762) 196,720 (171,057)
Proceeds from available-for-sale securities 546,287 400,635 325,133
Purchases of available-for-sale securities (824,477) (499,991) (282,534)
Purchases of fixed assets (68,923) (53,384) (66,969)
Proceeds from sale of long-term investment 47,472 ——
Purchase of long-term investments (16,852) (27,891) —
Business acquisitions, net of cash acquired (102,469) (12,040) (28,149)
Net cash (used in) provided by investing activities (806,724) 4,049 (223,576)
Financing activities:
Tax payment related to net share settlements on restricted stock awards (71,552) (87,968) (101,293)
Repurchase of common stock — — (362,392)
Issuance of common stock 14,214 10,515 —
Net cash used in financing activities (57,338) (77,453) (463,685)
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash
and cash equivalents
18,599
(10,868) (10,639)
Net change in cash, cash equivalents, and restricted cash and cash equivalents 66,855 601,406 145,615
Cash, cash equivalents, and restricted cash and cash equivalents, beginning of year (1) 1,993,392 1,391,986 1,246,371
Cash, cash equivalents, and restricted cash equivalents, end of year (1) $ 2,060,247 $ 1,993,392 $ 1,391,986
Supplemental data:
Interest paid $ 1,862 $ 4,750 $ 5,265
Income taxes paid $ 70,749 $ 27,998 $ 19,280
(1)
Cash, cash equivalents and restricted cash and cash equivalents shown on our Consolidated Statements of Cash Flow includes amounts in the Cash and cash
equivalents, Restricted cash and cash equivalents, and Long-term restricted cash and cash equivalents on our Consolidated Balance Sheet.
See accompanying Notes.
51
TAKE-TWO INTERACTIVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock
Additional
Paid-in
Capital
Treasury Stock
Retained
Earnings/
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
EquityShares Amount Shares Amount
Balance, March 31, 2018
132,743 $ 1,327 $ 1,888,039 (18,705) $ (458,180) $ 73,516 $ (15,732) $ 1,488,970
Net income
— — — — — 333,837 — 333,837
Change in cumulative foreign currency
translation adjustment
— — — — — — (33,456) (33,456)
Net unrealized gain on available-for-sale
securities, net of taxes
— — — — — — 2,440 2,440
Change in unrealized gains on cash flow
hedge, net
— — — — — — 4,906 4,906
Stock-based compensation
— — 219,460 — — — — 219,460
Repurchased common stock
— — — (3,716) (362,392) — — (362,392)
Issuance of restricted stock, net of forfeitures
and cancellations
2,345 23 (23) — — — — —
Conversion of 1.00% Convertible Notes Due
2018
377 4 8,108 — — — — 8,112
Net share settlement of restricted stock
awards
(920) (9) (101,284) — — — — (101,293)
Impact from adoption of New Revenue
Accounting Standard
—— — — — 470,273 4,653 474,926
Employee share purchase plan settlement
57 1 5,069 — — — — 5,070
Balance, March 31, 2019
134,602 $ 1,346 $ 2,019,369 (22,421) $ (820,572) $ 877,626 $ (37,189) $ 2,040,580
Net income
— — — — — 404,459 — 404,459
Change in cumulative foreign currency
translation adjustment
— — — — — — (27,445) (27,445)
Net unrealized gain on available-for-sale
securities, net of taxes
— — — — — — (3,332) (3,332)
Change in unrealized gains on cash flow
hedge, net
—— —— — — 9,590 9,590
Stock-based compensation
— — 192,845 — — — — 192,845
Issuance of restricted stock, net of forfeitures
and cancellations
1,970 19 (19) — — — — —
Net share settlement of restricted stock
awards
(771) (8) (87,960) — — — — (87,968)
Employee share purchase plan settlement
126 2 10,513 — — — — 10,515
Balance, March 31, 2020
135,927 $ 1,359 $ 2,134,748 (22,421) $ (820,572) $ 1,282,085 $ (58,376) $ 2,539,244
Net income
— — — — — 588,886 — 588,886
Change in cumulative foreign currency
translation adjustment
— — — — — — 51,253 51,253
Change in unrealized gains on cash flow
hedge, net
— — — — — — (4,905) (4,905)
Net unrealized gain on available-for-sale
securities, net of taxes
—— —— — — 3,364 3,364
Stock-based compensation
— — 113,741 — — — — 113,741
Issuance of restricted stock, net of forfeitures
and cancellations
1,376 13 (13) — — — — —
Net share settlement of restricted stock
awards
(462) (4) (71,548) — — — — (71,552)
Employee share purchase plan settlement
139 2 14,212 — — — — 14,214
Issuance of shares related to Playdots, Inc.
acquisition
604 6 97,641 — — — — 97,647
Balance, March 31, 2021
137,584 $ 1,376 $ 2,288,781 (22,421) $ (820,572) $ 1,870,971 $ (8,664) $ 3,331,892
See accompanying Notes.
52
TAKE-TWO INTERACTIVE SOFTWARE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Take-Two Interactive Software, Inc. (the "Company," "we," "us," or similar pronouns) was incorporated in the state of
Delaware in 1993. 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, Social Point and Playdots.
Our products are designed for console gaming systems and personal computers, including smart phones and tablets, and are
delivered through physical retail, digital download, online platforms and cloud streaming services.
Principles of Consolidation
The Consolidated Financial Statements include the financial statements of the Company and its wholly-owned
subsidiaries. All inter-company balances and transactions have been eliminated in consolidation.
Reclassifications
Certain immaterial amounts in the financial statements of the prior years have been reclassified to conform to the
current year presentation for comparative purposes.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
net revenue, and expense, as well as the disclosure of contingent assets and liabilities at the dates of the financial statements
during the reporting periods. Our most significant estimates relate to revenue recognition (see Note 2 - Revenue from Contracts
with Customers); the recoverability and amortization of software development costs, licenses, and intangible assets; assets
acquired and liabilities assumed in business combinations; the realization of deferred income taxes; the valuation of stock-based
compensation; and assumptions used in our goodwill impairment tests. These estimates generally involve complex issues and
require us to make judgments, involve analysis of historical and the prediction of future trends, and are subject to change from
period to period. Actual amounts could differ significantly from these estimates, including as a result of the COVID-19
pandemic, which may affect economic conditions in a number of different ways and result in uncertainty and risk. We consider
transactions or events that occur after the balance sheet date, but before the financial statements are issued, to provide additional
evidence relative to certain estimates or to identify matters that require additional disclosures.
Segments
We have one operating and reportable segment. Our operations involve similar products and customers worldwide.
Revenue earned is primarily derived from the sale of software titles, which are internally developed and developed by third
parties. Our Chief Executive Officer, who is our Chief Operating Decision Maker ("CODM"), manages our operations on a
consolidated basis--supplemented by sales information by product category, major product title, and platform--for the purpose
of evaluating performance and allocating resources. Financial information about our one segment and geographic areas is
included in Note 2 - Revenue from Contracts with Customers and Note 9 - Fixed Assets, Net.
Concentration of Credit Risk and Accounts Receivable
We maintain cash balances at several major financial institutions. While we attempt to limit credit exposure with any
single institution, balances often exceed insurable amounts.
Accounts receivable are recorded at the original invoiced amount less an allowance for credit losses. In evaluating our
ability to collect outstanding receivable balances and related allowance for credit losses, we consider many factors, including
the age of the balance, the customer’s payment history and current creditworthiness, as well as current and forecasted economic
conditions that may affect our customers’ ability to pay. Bad debts are written off after all collection efforts have been
exhausted. We do not require collateral from our customers.
If the financial condition and operations of our customers deteriorate, our risk of collection could increase
substantially. 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 78.4%, 71.5% and 70.1% of net revenue during the
fiscal years ended March 31, 2021, 2020 and 2019, respectively. One customer accounted for 38.9%, 31.9% and 31.3% of net
revenue during the fiscal years ended March 31, 2021, 2020, and 2019, respectively. A second customer accounted for 22.2%,
53
20.0%, and 18.1% of net revenue during the fiscal years ended March 31, 2021, 2020, and 2019 respectively. A third customer
accounted for 10.5% of net revenue during the fiscal year ended March 31, 2019. As of March 31, 2021 and 2020, five
customers accounted for 77.6% and 58.1% of our gross accounts receivable, respectively. Customers that individually
accounted for more than 10% of our gross accounts receivable balance comprised 69.2% and 48.8% of such balances at
March 31, 2021 and 2020, respectively. We had two customers who accounted for 50.4% and 18.8% of our gross accounts
receivable as of March 31, 2021 and two customers who accounted for 29.4% and 19.4% of our gross accounts receivable as of
March 31, 2020. We did not have any additional customers that exceeded 10% of our gross accounts receivable as of March 31,
2021 and 2020. Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our
customers and our past collection experience, we believe that the receivable balances from these largest customers do not
represent a significant credit risk.
Cash and Cash Equivalents
We consider all highly liquid instruments purchased with original maturities of three months or less to be cash
equivalents. Our restricted cash and cash equivalents balances are primarily related to a dedicated account limited to the
payment of certain internal royalty obligations. Balances that are restricted from use for more than one year are classified as
non-current.
Short-term Investments
Short-term investments designated a s available-for-sale securities are carried at fair value, which is based on quoted
market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with
similar characteristics. Investments with original maturities greater than 90 days and remaining maturities of less than one year
are normally classified within Short-term investments on our Consolidated Balance Sheets. In addition, investments with
maturities beyond one year a t the time of purchase that are highly liquid in nature and represent the investment of cash that is
available for current operations are classified as short-term investments.
Unrealized gains and losses of available-for-sale securities are excluded from earnings and are reported as a
component of Other comprehensive income (loss), net of tax, until the security is sold, the security has matured, or we
determine that the fair value of the security has declined below its adjusted cost basis and the decline is not due to a credit loss.
Realized gains and losses on short-term investments are calculated based on the specific identification method and would be
reclassified from accumulated other comprehensive loss to Interest and other, net.
Short-term investments are evaluated for impairment quarterly. We consider various factors in determining whether we
should recognize an impairment charge, including the credit quality of the issuer, the duration that the fair value has been less
than the adjusted cost basis, the severity of the impairment, the reason for the decline in value, and our intent to sell and ability
to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. If we conclude that
an investment is impaired or a portion of the unrealized loss is a result of a credit loss, we recognize the charge at that time in
our Consolidated Statements of Operations. Determining whether the decline in fair value is due to a credit loss requires
management judgment based on the specific facts and circumstances of each security. The ultimate value realized on these
securities is subject to m arket price volatility until they are sold.
Inventory
Inventory consists of materials, including manufacturing royalties paid to console manufacturers, and is stated at the
lower of weighted average cost or net realizable value. Estimated product returns are included in the inventory balance at their
cost. We regularly review inventory quantities on-hand and in the retail channels and record an inventory provision for excess
or obsolete inventory based on the future expected demand for our products. Significant changes in demand for our products
would affect management's estimates in establishing our inventory provision. We write down inventory based on excess or
obsolete inventories determined primarily by anticipated future demand for our products. Inventory write-downs are measured
as the difference between the cost of the inventory and market value, based upon assumptions about future demand that are
inherently difficult to assess.
Software Development Costs and Licenses
Capitalized software development costs include direct costs incurred for internally developed titles and payments made
to third-party software developers under development agreements.
We capitalize internal software development costs (including specifically identifiable payroll expense, employee
stock-based compensation, and incentive compensation costs related to the completion and release of titles, as well as third-
party production and other content costs), subsequent to establishing technological feasibility of a software title. Technological
feasibility of a product includes the completion of both technical design documentation and game design documentation.
54
Significant management judgments are made in the assessment of when technological feasibility is established. For products
where proven technology exists, this may occur early in the development cycle. Technological feasibility is evaluated on a
product-by-product basis. Prior to establishing technological feasibility of a product, we record any costs incurred by third-party
developers as research and development expenses.
We enter into agreements with third-party developers that require us to make payments for game development and
production services. In exchange for our payments, we receive the exclusive publishing and distribution rights to the finished
game title as well as, in some cases, the underlying intellectual property rights. Such agreements typically allow us to fully
recover these payments to the developers at an agreed upon royalty rate earned on the subsequent sales of such software, net of
any agreed upon costs. Subsequent to establishing technological feasibility of a product, we capitalize all development and
production service payments to third-party developers as software development costs and licenses. We typically enter into
agreements with third-party developers after completing the technical design documentation for our products and therefore
record the design costs leading up to a signed development contract as research and development expense. When we contract
with third-party developers, we generally select those that have proven technology and experience in the genre of the software
being developed, which often allows for the establishment of technological feasibility early in the development cycle. In
instances where the documentation of the design and technology are not in place prior to an executed contract, we monitor the
software development process and require our third-party developers to adhere to the same technological feasibility standards
that apply to our internally developed products.
Licenses consist of payments and guarantees made to holders of intellectual property rights for use of their trademarks,
copyrights or other intellectual property rights in the development of our products. Agreements with license holders generally
provide for guaranteed minimum payments for use of their intellectual property. Certain licenses, especially those related to our
sports products, extend over multi-year periods and encompass multiple game titles. In addition to guaranteed m inimum
payments, these licenses frequently contain provisions that could require us to pay royalties to the license holder based on pre-
agreed unit sales thresholds.
Amortization of capitalized software development costs and licenses commences when a product is available for
general release and is recorded on a title-by-title basis in cost of goods sold. For capitalized software development costs, annual
amortization is calculated using (1) the proportion of current year revenue to the total revenue expected to be recorded over the
life of the title or (2) the straight-line method over the remaining estimated life of the title, whichever is greater. For capitalized
licenses, amortization is calculated as a ratio of (1) current year revenue to the total revenue expected to be recorded over the
remaining estimated life of the title or (2) the contractual royalty rate based on actual net product sales as defined in the
licensing agreement, whichever is greater. Amortization periods for our software products generally range from twelve to 30
months.
We evaluate the future recoverability of capitalized software development costs and licenses on a quarterly basis.
Recoverability is primarily assessed based on the title's actual performance. For products that are scheduled to be released in the
future, recoverability is evaluated based on the expected performance of the specific products to which the cost or license
relates. We use a number of criteria in evaluating expected product performance, including historical performance of
comparable products developed with comparable technology, market performance of comparable titles, orders for the product
prior to its release, general market conditions, and past performance of the franchise. When we determine that capitalized cost
of the title is unlikely to be recovered by product sales, an impairment of software development and license costs capitalized is
charged to cost of goods sold in the period in which such determination is made.
We have profit and unit sales based internal royalty programs that allow selected employees to participate in the
success of software titles that they assist in developing. Royalties earned under these programs are recorded as a component of
Cost of goods sold in the period earned. Amounts earned and not yet paid are reflected within the software development
royalties component of Accrued expenses and other current liabilities on our Consolidated Balance Sheets.
Fixed Assets, net
Office equipment, furniture and fixtures are depreciated using the straight-line method over their estimated useful life
of five years. Computer equipment and software are generally depreciated using the straight-line method over three to five
years. Leasehold improvements are amortized over the lesser of the term of the related lease or the useful life of the underlying
asset, typically seven years. The cost of additions and improvements are capitalized, and repairs and maintenance costs are
charged to operations, in the periods incurred. When depreciable assets are retired or sold, the cost and related allowances for
depreciation are removed from the accounts and the gain or loss, if any, is recognized. The carrying amounts of these assets are
recorded at historical cost.
55
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance related to the accounting
for leases codified under Topic 842, Leases, which we adopted on April 1, 2019.
We determine if an arrangement is a lease at contract inception. If there is an identified asset in the contract (either
explicitly or implicitly) and we have control over its use, the contract is (or contains) a lease. In certain of our lease
arrangements, primarily those related to our data center arrangements, judgment is required in determining if a contract contains
a lease. For these arrangements, there is judgment in evaluating if the arrangement provides us with an asset that is physically
distinct, or that represents substantially all of the capacity of the asset, and if we have the right to direct the use of the asset.
Lease assets and liabilities are recognized based on the present value of future lease payments over the lease term at the
commencement date. Included in the lease liability are future lease payments that are fixed, in-substance fixed, or payments
based on an index or rate known at the commencement date of the lease. Variable lease payments are recognized as lease
expenses as incurred. The operating lease right-of-use (“ROU”) asset also includes any lease payments made prior to
commencement, initial direct costs incurred, and lease incentives received.
As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate in determining
the present value of future lease payments. The incremental borrowing rate represents the rate required to borrow funds over a
similar term to purchase the leased asset and is based on an unsecured borrowing rate and risk-adjusted to approximate a
collateralized rate at the commencement date of the lease.
In determining our lease liability, the lease term includes options to extend or terminate the lease when it is reasonably
certain that we will exercise such option. For operating leases, the lease expense for minimum lease payments is recognized on
a straight-line basis over the lease term. Lease modifications result in remeasurement of the lease liability. Leases with an initial
term of twelve months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a
straight-line basis over the lease term. We do not separate non-lease components from the related lease components.
Goodwill and Intangible Assets
Goodwill is the excess of purchase price paid over identified intangible and tangible net assets of acquired companies.
Intangible assets consist of intellectual property, developed game technology, analytics technology, user base, trade names, and
in-process research and development. Certain intangible assets acquired in a business combination are recognized as assets
apart from goodwill.
We use either the income, cost or market approach to aid in our conclusions of such fair values and asset lives. The
income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of
the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than i ts
replacement or reproduction cost. The market approach estimates value based on what other participants in the market have
paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach,
or combination of approaches, ultimately selected is based on the characteristics of the asset and the availability of information.
We test our goodwill for impairment annually, or more frequently if events and circumstances indicate the fair value of
a reporting unit may be below its carrying amount. A reporting unit is defined as an operating segment or one level below an
operating segment. We have determined that we operate in two reporting units, which are components of our operating
segment. In the evaluation of goodwill for impairment, we have the option to first perform a qualitative assessment to determine
if the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50%) less than the carrying value
before performing a quantitative impairment test.
When a qualitative assessment is not used, or if the qualitative assessment is not conclusive, a quantitative impairment
analysis for goodwill is performed at the reporting unit level. The quantitative goodwill impairment test is used to identify
potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the
carrying value exceeds the fair value, an impairment charge is recognized equal to the difference between the carrying value of
the reporting unit and its fair value, considering the related income tax effect of any goodwill deductible for tax purposes.
In performing the quantitative assessment, we measure the fair value of the reporting unit using a combination of the
income and market approaches. The assessment requires us to make judgments and involves the use of significant estimates and
assumptions. These estimates and assumptions include long-term growth rates and operating margins used to calculate
projected future cash flows, risk-adjusted discount rates based on our weighted average cost of capital, future economic and
market conditions and the determination of appropriate, comparable market data. Our estimates for market growth are based on
historical data, various internal estimates and observable external sources when available, and are based on assumptions that are
consistent with the plans and estimates we use to manage the underlying business.
56
Based on our annual impairment assessment process for goodwill, no impairments were recorded during the fiscal
years ended March 31, 2021, 2020, or 2019. As of March 31, 2021, the goodwill balance of one of our reporting units is
$345,725, and a m oderate reduction in its fair value may result in an impairment charge, which would be equal to the excess of
the carrying value over the fair value of such assets.
Long-lived Assets
We review all long-lived assets for impairment whenever events or changes in circumstances indicate that the related
carrying amount of an asset or asset group may not be recoverable. We compare the carrying amount of the asset to the
estimated undiscounted future cash flows expected to result from the use of the asset. If the carrying amount of the asset
exceeds estimated expected undiscounted future cash flows, we record an impairment charge for the difference between the
carrying amount of the asset and its fair value. The estimated fair value is generally measured by discounting expected future
cash flows using our incremental borrowing rate or discount rate, if available. As of March 31, 2021, no indicators of
impairment existed.
Derivatives and Hedging
We transact business in various foreign currencies and have significant sales and purchase transactions denominated in
foreign currencies, subjecting us to foreign currency exchange rate risk. From time to time, we carry out transactions involving
foreign currency exchange derivative financial instruments. The transactions are designed to hedge our exposure in currency
exchange rate movements. We recognize derivative instruments as either assets or liabilities on our Consolidated Balance
Sheets and we measure those instruments at fair value. The changes in fair value of derivatives that are not designated as hedges
are recognized currently in earnings as Interest and other, net in our Consolidated Statements of Operations. If a derivative
meets the definition of a cash flow hedge and is so designated, the effective portion of changes in the fair v alue of the derivative
are recognized, as a component of Other comprehensive income (loss) while the ineffective portion of the changes in fair value
is recorded currently in earnings as Interest and other, net in our Consolidated Statements of Operations. Amounts included in
Accumulated other comprehensive income (loss) for cash flow hedges are reclassified into earnings in the same period that the
hedged item is recognized in Cost of goods sold, Research and development expenses, or Interest and other, net, as appropriate.
Income Taxes
We record a tax provision for the anticipated tax consequences of the reported results of operations. Our provision for
income taxes is computed using the asset and liability method, under which deferred income taxes are recognized for
differences between the financial statement and tax bases of assets and liabilities at currently enacted statutory tax rates for the
years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment.
Valuation allowances are established when we determine that it is more likely than not that such deferred tax assets
will not be realized. We do not record income tax expense related to foreign withholding taxes or United States income taxes
that may become payable upon the repatriation of undistributed earnings of foreign subsidiaries, as such earnings are expected
to be reinvested indefinitely outside of the United States.
We use estimates and assumptions to compute the provision for income taxes including allocations of certain
transactions to different tax jurisdictions, amounts of permanent and temporary differences, the likelihood of deferred tax assets
being recovered and the outcome of contingent tax risks. These estimates and assumptions are revised as new events occur,
more experience is acquired and additional information is obtained. The effect of these revisions is recorded in income tax
expense or benefit in the period in which they become known.
Revenue Recognition
We derive revenue primarily from the sale of our interactive entertainment content, principally for console gaming
systems and personal computers, including smartphones and tablets. Our interactive entertainment content consists of full game
software products that m ay contain offline gameplay, online gameplay, or a combination of offline and online gameplay. We
may also sell separate downloadable add-on content to supplement our full game software products. Certain of our software
products provide customers with the option to acquire virtual currency or make in-game purchases.
We determine revenue recognition by:
• identifying the contract, or contracts, with the customer;
• identifying the performance obligations in the contract;
• determining the transaction price;
57
• allocating the transaction price to performance obligations in the contract; and
• recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.
We recognize revenue in the amount that reflects the consideration we expect to receive in exchange for the sales of
software products and game related services when control of the promised products and services is transferred to our customers
and our performance obligations under the contract have been satisfied. Revenue is recorded net of transaction taxes assessed
by governmental authorities such as sales, value-added and other similar taxes.
Our software products are sold as full games, which typically provide access to the main game content, primarily for
console and PC. Generally, our full game software products deliver a license of our intellectual property that provides a
functional offline gaming experience (i.e., one that does not require an Internet connection to access the main game content or
other significant game related services). We recognize revenue related to the license of our intellectual property that provides
offline functionality at the time control of the products has been transferred to our customers (i.e. upon delivery of the software
product).
In addition, some of our full game software products that provide a functional offline gaming experience may also
include significant game related services delivered over time, such as online functionality that is dependent upon online support
services and/or additional free content updates. For full game sales that offer offline functionality and significant game related
services we evaluate whether the license of our intellectual property and the game related services are distinct and separable.
This evaluation is performed for each software product sold. If we determine that our software products contain a license of
intellectual property separate from the game related services (i.e. multiple performance obligations), we estimate a standalone
selling price for each identified performance obligation. We allocate the transaction price t o each performance obligation using
a relative standalone selling price m ethod (the transaction price is allocated to a performance obligation based on the proportion
of the standalone selling price of each performance obligation to the sum of the standalone selling prices for all performance
obligations in the contract). For the portion of the transaction price allocable to the license, revenue is recognized when the
customer takes control of the product. For the portion of the transaction price a llocated to game r elated services, revenue is
recognized ratably over an estimated service period for the related software product. We also defer related product costs and
recognize the costs as the revenues are recognized.
Certain of our full game software products are delivered primarily as an online gaming experience with substantially
all gameplay requiring online access to our game related services. We recognize revenue for full game software products that
are dependent on our game related services over an estimated service period. For our full game online software products, we
also defer related product costs and recognize the costs as the revenue is recognized.
In addition to sales of our full game software products, certain of our software products provide customers with the
option to acquire virtual currency or make in-game purchases. Revenue from the sale of virtual currency and in-game purchases
is deferred and recognized ratably over an estimated service period.
We also sell separate downloadable add-on content to supplement our full game software products. Revenue from the
sale of separate downloadable add-on content is evaluated for revenue recognition on the same basis as our full game software
products.
Certain software products are sold to customers with a “street date” (the earliest date these products may be sold by
these retailers). For the transaction price related to the license for these products that also provide a functional offline gaming
experience, we recognize revenue on the later of the street date or the sale date as this is generally when we have transferred
control of this performance obligation. For the sale of physical software products, recognition of revenue allocated to game
related services does not begin until the product is sold-through by our customer to the end user. We currently estimate sell-
through to the end user for all our titles to be approximately two months after we have sold-in the software products to retailers.
Determining the estimated sell-through period requires management judgment and estimates.
In addition, some of our software products are sold as digital downloads. Revenue from digital downloads generally
commences when the download is made available to the end user by a third-party digital storefront.
Our payment terms and conditions vary by customer and typically provide net 30- to 60-day terms. In instances where
the timing of revenue recognition differs from the timing of invoicing, we do not adjust the promised amount of consideration
for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer
of a promised product or service to our customer and payment for that product or service will be one year or less.
In certain countries, we use third-party licensees to distribute and host our games in accordance with license
agreements, for which the licensees typically pay us a fixed minimum guarantee and sales-based royalties. These arrangements
typically include multiple performance obligations, such as an upfront license of intellectual property and rights to future
58
updates. Based on the allocated transaction price, we recognize revenue associated with the minimum guarantee when we
transfer control of the upfront license of intellectual property (generally upon commercial launch) and the remaining portion
ratably over the contractual term in which we provide the licensee with future update rights. Royalty payments in excess of the
minimum guarantee are generally recognized when the licensed product is sold by the licensee.
Contract Balances
We generally record a receivable related to revenue when we have an unconditional right to invoice and receive
payment, and we record deferred revenue when cash payments are received or due in advance of satisfying our performance
obligations, even if amounts are refundable. Contract assets generally consist of arrangements for which we have recognized
revenue to the extent it is probable that significant reversal will not occur but do not have a right to invoice as of the reporting
date. Contract assets are recorded within Prepaid expenses and other on our Consolidated Balance Sheet.
Our allowances for doubtful accounts are typically immaterial and, if required, are based on our best estimate of
expected credit losses inherent in our accounts receivable balance.
Deferred revenue is comprised primarily of unsatisfied revenue related to the portion of the transaction price allocable
to game related services of our full game software products and sales of virtual currency. These sales are typically invoiced at
the beginning of the contract period, and revenue is recognized ratably over the estimated service period. Deferred revenue may
also include amounts related to software products with future street dates.
Refer to Note 2 - Revenue from Contracts with Customers for further information, including changes in deferred
revenue during the period.
Principal Agent Considerations
We offer certain software products via third-party digital storefronts, such as Microsoft’s Xbox Live, Sony’s
PlayStation Network, Valve's Steam, Epic Games Store, Apple's App Store, and the Google Play Store. For sales of our
software products via third-party digital storefronts, we determine whether or not we are acting as the principal in the sale to the
end user, which we consider in determining if revenue should be reported based on the gross transaction price to the end user or
based on the transaction price net of fees retained by the third-party digital storefront. An entity is the principal if it controls a
good or service before it is transferred to the customer. Key indicators that we use in evaluating these sales transactions include,
but are not limited to, the following:
• the underlying contract terms and conditions between the various parties to the transaction;
• which party is primarily responsible for fulfilling the promise to provide the specified good or service; and
• which party has discretion in establishing the price for the specified good or service.
Based on our evaluation of the above indicators, for sales arrangements via Microsoft’s Xbox Live, Sony’s PlayStation
Network, Valve's Steam, and Epic Games Store we have determined we are not the principal in the sales transaction to the end
user and therefore we report revenue based on the consideration received from the digital storefront. For sales arrangements via
Apple's App Store and the Google Play Store, we have determined that we are the principal to the end user and thus report
revenue on a gross basis and mobile platform fees charged by these digital storefronts are expensed as incurred and reported
within Cost of goods sold.
Shipping and Handling
Shipping and handling costs are incurred to move physical software products to customers. We recognize all shipping
and handling costs as an expense in Cost of goods sold because we are responsible for delivery of the product to our customers
prior to transfer of control to the customer.
Estimated Service Period
For certain performance obligations satisfied over time, we have determined that the estimated service period is the
time period in which an average user plays our software products (“user life”) which most faithfully depicts the timing of
satisfying our performance obligation. We consider a variety of data points when determining and subsequently reassessing the
estimated service period for players of our software products. Primarily, we review the weighted average number of days
between players’ first and last days played online. When a new game is launched and therefore no history of online player data
is available, we consider other factors to determine the user life, such as the estimated service period of other games actively
being sold with similar characteristics. We also consider known online trends, the service periods of our previously released
software products, and, to the extent publicly available, the service periods of our competitors’ software products that are
59
similar in nature to ours. We believe this provides a reasonable depiction of the transfer of our game related services to our
customers, as it is the best representation of the period during which our customers play our software products. Determining the
estimated service period is subjective and requires significant management judgment and estimates. Future usage patterns may
differ from historical usage patterns, and therefore the estimated service period may change in the future. The estimated service
periods for players of our current software products are generally between six and fifteen months depending on the software
product.
Revenue Arrangements with Multiple Performance Obligations
Our contracts with customers often include promises to transfer multiple products and services. Determining whether
products and services are considered distinct performance obligations that should be accounted for separately versus together
requires significant judgment. For software products in which the software license has offline functionality and benefits from
meaningful game related services, which may include online functionality that is dependent on our online support services and/
or additional free content updates, we believe we have separate performance obligations for the license of the intellectual
property and the game related services. Additionally, because each of our product offerings has unique features and because we
do not sell our game related services separately, we typically do not have observable standalone selling prices for each
performance obligation. Significant judgment and estimates are also required to determine the standalone selling price for each
distinct performance obligation and whether a discount needs to be allocated based on the relative standalone selling price of
our products and services.
To estimate the standalone selling price for each performance obligation, we consider, to the extent available, a variety
of data points such as past selling prices of the product or other similar products, competitor pricing, and market data. If
observable pricing is not available, we use an expected cost-plus margin approach taking into account relevant costs including
product development, post-release support, marketing and licensing costs. This evaluation is performed on a product by product
basis.
Price Protection, Allowances for Returns, and Sales Incentives
We grant price protection and accept returns in connection with our distribution arrangements. Following reductions in
the price of our physical software products, we grant price protection to permit customers to take credits against amounts they
owe us with respect to merchandise unsold by them. Our customers must satisfy certain conditions to entitle them to receive
price protection or return products, including compliance with applicable payment terms and confirmation of field inventory
levels.
At contract inception and at each subsequent reporting period, we make estimates of price protection and product
returns related to current period software product revenue. We estimate the amount of price protection and returns for software
products based upon, among other factors, historical experience and performance of the titles in similar genres, historical
performance of the hardware platform, customer inventory levels, analysis of sell-through rates, sales force and retail c ustomer
feedback, industry pricing, market conditions, and changes in demand and acceptance of our products by consumers.
We enter into various sales incentive arrangements with our customers, such as rebates, discounts, and cooperative
marketing. These incentives are considered adjustments to the transaction price of our software products and are reflected as
reductions to revenue. Sales incentives incurred by us for distinct goods or services received, such as the appearance of our
products in a customer’s national circular ad, are included in Selling and marketing expense if there is a separate identifiable
benefit and the benefit’s fair value can be established. Otherwise, such sales incentives are reflected as a reduction to revenue.
Revenue is recognized after deducting the estimated price protection, allowances for returns, and sales incentives,
which are accounted for as variable consideration. Price protection, allowances for returns, and sales incentives are considered
refund liabilities and are reported within Accrued expenses and other current liabilities on our Consolidated Balance Sheet.
Significant Estimates
Significant management judgment and estimates must be used in connection with many of the determinations
described above, such as estimating the fair value allocation to distinct and separable performance obligations, the service
period over which to defer recognition of revenue, the time it takes our physical products to sell-through to end users, and the
amounts of price protection. We believe we can make reliable estimates. However, actual results may differ from initial
estimates due to changes in circumstances, market conditions, and assumptions. Adjustments to estimates are recorded in the
period in which they become known.
Advertising
We expense marketing costs as incurred, except for production costs associated with media advertising, which are
deferred and charged to expense when the related advertisement is run for the first time. Advertising, marketing, and other
60
promotional expenses for the fiscal years ended March 31, 2021, 2020 and 2019 amounted to $241,068, $285,607 and
$249,315, respectively, and are included in Selling and marketing expense in our Consolidated Statements of Operations.
Stock-based Compensation
We have stock-based compensation plans that are broad-based long-term retention programs intended to attract and
retain talented employees and align stockholder and employee interests, which allows for awards of restricted stock, restricted
stock units and other stock-based awards of our common stock to employees and non-employees. Our plans include time-based,
market-based, and performance-based awards of our common stock to employees and non-employees.
We account for stock-based awards under the fair value method of accounting. The fair value of all stock-based
compensation is either capitalized and amortized in accordance with our software development cost accounting policy or
recognized as expense on a straight-line basis over the full vesting period of the awards for time-based stock awards and on an
accelerated attribution method for market-based and performance-based stock awards.
We estimate the fair value of time-based awards using our closing stock price on the date of grant. We estimate the fair
value of market-based awards using a Monte Carlo Simulation method, which takes into account assumptions such as the
expected volatility of our common stock, the risk-free interest rate based on the contractual term of the award, expected
dividend yield, vesting schedule and the probability that the market conditions of the awards will be achieved. For performance-
based shares, we do not record expense until the performance criteria are considered probable.
Stock-based compensation expense is recorded net of forfeitures as they occur.
Earnings (loss) per Share ("EPS")
Basic EPS is computed by dividing the net income (loss) applicable to common stockholders for the period by the
weighted average number of shares of common stock outstanding during the same period. Diluted EPS is computed by dividing
the net income (loss) applicable to common stockholders for the period by the weighted average number of shares of common
stock and common stock equivalents outstanding. Common stock equivalents are measured using the treasury stock method and
represent unvested stock-based awards.
Foreign Currency
The functional currency for our foreign operations is primarily the applicable local currency. Accounts of foreign
operations are translated into U.S. dollars using exchange rates for assets and liabilities at the balance sheet date and average
prevailing exchange rates for the period for revenue and expense accounts. Adjustments resulting from translation are included
in accumulated other comprehensive income (loss). Realized and unrealized transaction gains and losses are included in our
Consolidated Statements of Operations in the period in which they occur.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by
owners and distributions to owners. Accumulated other comprehensive income (loss) includes foreign currency translation
adjustments, which relate to investments that are permanent in nature and therefore do not require tax adjustments, and the
amounts for unrealized gains (losses), net on derivative instruments designated as cash flow hedges, as well as any associated
tax impact, and available for sale securities.
Recently Adopted Accounting Pronouncements
Accounting for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework -
Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value
measurements by removing, modifying, or adding certain disclosures. We adopted this update effective April 1, 2020. The
adoption of this standard did not have a material impact on our Consolidated Financial Statements.
Accounting for Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which replaces the incurred loss
impairment methodology in current U.S. GAAP with a methodology that requires the reflection of expected credit losses and
also requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. It
also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt
securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the
securities. For most financial instruments, the standard requires the use of a forward-looking expected loss model rather than
61
the incurred loss model for recognizing credit losses, which generally results in the earlier recognition of credit losses on
financial instruments. We adopted this update effective April 1, 2020 under a modified retrospective basis. No adjustment to
retained earnings was recorded as a result of the adoption of this standard, which did not have an impact on our Consolidated
Financial Statements.
Recently Issued Accounting Pronouncements
Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as
tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments,
and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for fiscal years, and interim periods
within those fiscal years, beginning December 15, 2020 (April 1, 2021 for the Company), with early adoption permitted. We do
not expect that the impact of the adoption will be material to our Consolidated Financial Statements.
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
Service and other revenue
Service and other revenue is primarily comprised of revenue from our software products that include game related
services, or separate virtual currency transactions, and in-game purchases, which are recognized over an estimated service
period.
Product revenue
Product revenue is primarily comprised of the portion of revenue from software products that is recognized when the
customer takes control of the product (i.e. upon delivery of the software product).
Net revenue by service and other revenue and product was as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue recognized:
Service and other $ 2,281,555 $ 1,839,696 $ 1,319,033
Product 1,091,217 1,249,274 1,349,361
Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
Recurrent consumer spending revenue
Recurrent consumer spending revenue is generated from ongoing consumer engagement and includes revenue from
virtual currency, add-on content, and in-game purchases.
Full game and other revenue
Full game and other revenue primarily includes the initial sale of full game software products, which may include
offline and/or significant game related services.
Net revenue by recurrent consumer spending revenue and full game and other was as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue recognized:
Recurrent consumer spending $ 2,074,687 $ 1,384,999 $ 1,070,916
Full game and other 1,298,085 1,703,971 1,597,478
Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
62
Geography
We attribute net revenue to geographic regions based on software product destination. Net revenue by geographic
region was as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue recognized:
United States $ 2,015,885 $ 1,775,682 $ 1,426,906
International 1,356,887 1,313,288 1,241,488
Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
Platform
Net revenue by platform was as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue recognized:
Console $ 2,516,993 $ 2,308,602 $ 2,233,861
PC and other 855,779 780,368 434,533
Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
Distribution Channel
Our products are delivered through digital online services (digital download, online platforms, and cloud streaming)
and physical retail and other. Net revenue by distribution channel was as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Net revenue recognized:
Digital online $ 2,919,292 $ 2,378,563 $ 1,681,609
Physical retail and other 453,480 710,407 986,785
Total net revenue $ 3,372,772 $ 3,088,970 $ 2,668,394
Deferred Revenue
We record deferred revenue when payments are due or received in advance of the fulfillment of our associated
performance obligations. The balance of deferred revenue, including current and non-current balances, as of March 31, 2021
and March 31, 2020 were $965,331 and $806,123, respectively. For the fiscal year ended March 31, 2021, the additions to our
deferred revenue balance were primarily due to cash payments received or due in advance of satisfying our performance
obligations, while the reductions to our deferred revenue balance were due primarily to the recognition of revenue upon
fulfillment of our performance obligations, both of which were in the ordinary course of business.
During the fiscal year ended March 31, 2021, $774,279 of revenue was recognized that was included in the deferred
revenue balance at the beginning of the period. As of March 31, 2021, the aggregate amount of contract revenue allocated to
unsatisfied performance obligations is $1,100,441, which includes our deferred revenue balances and amounts to be invoiced
and recognized as revenue in future periods. We expect to recognize approximately $969,739 of this balance as revenue over
the next 12 months, and the remainder thereafter. This balance does not include an estimate for variable consideration arising
from sales-based royalty license revenue in excess of the contractual minimum guarantee.
As of March 31, 2021 and March 31, 2020, our contract asset balances were $105,554 and $81,625, respectively,
which are included within Prepaid and other in our Consolidated Balance Sheet.
63
3. MANAGEMENT AGREEMENT
In November 2017, we entered into a new management agreement (the "2017 Management Agreement") with
ZelnickMedia Corporation ("ZelnickMedia") that replaced our previous agreement with ZelnickMedia and pursuant to which
ZelnickMedia provides financial and management consulting services to the Company through March 31, 2024. The 2017
Management Agreement became effective January 1, 2018. As part of the 2017 Management Agreement, Strauss Zelnick, the
President of ZelnickMedia, continues to serve as Executive Chairman and Chief Executive Officer of the Company, and Karl
Slatoff, a partner of ZelnickMedia, continues to serve as President of the Company. The 2017 Management Agreement provides
for an annual management fee of $3,100 over the term of the agreement and a maximum annual bonus opportunity of $7,440
over the term of the agreement, based on the Company achieving certain performance thresholds.
In consideration for ZelnickMedia's services, we recorded consulting expense (a component of General and
administrative expenses) of $10,540, $10,540, and $9,265 for the fiscal years ended March 31, 2021, 2020, and 2019,
respectively.
Pursuant to the 2017 Management Agreement, we also issued stock-based awards to ZelnickMedia. During the fiscal
years ended March 31, 2021, 2020, and 2019, we recorded $27,281, $23,413, and $21,257, respectively, of stock-based
compensation expense for non-employee awards, which is included in General and administrative expenses. See Note 17 -
Stock-Based Compensation for a discussion of such awards.
4. FAIR VALUE MEASUREMENTS
The carrying amounts of our financial instruments, including cash and cash equivalents, restricted cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short
maturities.
We follow a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy
requires entities to maximize the use of "observable inputs" and minimize the use of "unobservable inputs." The three levels of
inputs used to measure fair value are as follows:
• Level 1—Quoted prices in active markets for identical assets or liabilities.
• Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for markets that are
not active or other inputs that are observable or can be corroborated by observable market data.
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar
techniques that use significant unobservable inputs.
The table below segregates all assets that are measured at fair value on a recurring basis (which is measured at least
annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at
the measurement date.
64
March 31,
2021
Quoted prices
in active
markets
for identical
assets (level 1)
Significant
other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3) Balance Sheet Classification
Money market funds
$ 837,614 $ 837,614 $ — $ — Cash and cash equivalents
Bank-time deposits
95,000 95,000 — — Cash and cash equivalents
Commercial paper
100,105 — 100,105 — Cash and cash equivalents
Money market funds
528,659 528,659 — — Restricted cash and cash equivalents
Bank-time deposits
563 563 — — Restricted cash and cash equivalents
Corporate bonds
521,224 — 521,224 — Short-term investments
Bank-time deposits 578,762 578,762 — — Short-term investments
US Treasuries 60,086 60,086 — — Short-term investments
Commercial paper
148,150 — 148,150 — Short-term investments
Asset-backed securities 470 — 470 — Short-term investments
Money market funds 98,541 98,541 — —
Long-term restricted cash and cash
equivalents
Private equity 7,578 — — 7,578 Other assets
Foreign currency forward contracts (125) $ — (125) $ —
Accrued expenses and other current
liabilities
Total recurring fair value measurements, net
$2,976,627 $ 2,199,225 $ 769,824 $ 7,578
March 31,
2020
Quoted prices
in active
markets
for identical
assets (level 1)
Significant
other
observable
inputs
(level 2)
Significant
unobservable
inputs
(level 3) Balance Sheet Classification
Money market funds
$ 497,861 $ 497,861 $ — $ — Cash and cash equivalents
Bank-time deposits
313,757 313,757 — — Cash and cash equivalents
Commercial paper
97,544 — 97,544 — Cash and cash equivalents
Corporate bonds
9,888 — 9,888 — Cash and cash equivalents
Money market funds
546,604 546,604 — — Restricted cash and cash equivalents
Corporate bonds
334,631 — 334,631 — Short-term investments
Bank-time deposits
191,000 191,000 — — Short-term investments
US Treasuries
30,819 30,819 — — Short-term investments
Commercial paper
87,553 — 87,553 — Short-term investments
Cross-currency swap
11,275 — 11,275 — Prepaid expenses and other
Money market funds 89,124 89,124 — —
Long-term restricted cash and cash
equivalents
Private equity
2,759 — — 2,759 Other assets
Foreign currency forward contracts (11) — (11) —
Accrued expenses and other current
liabilities
Total recurring fair value measurements, net
$ 2,212,804 $ 1,669,165 $ 540,880 $ 2,759
We did not have any transfers between Level 1 and Level 2 fair value measurements, nor did we have any transfers
into or out of Level 3 during the fiscal year ended March 31, 2021.
Nonrecurring Fair Value Measurements
We hold equity investments in certain unconsolidated entities without a readily determinable fair value. Our strategic
investments represent less than a 20% ownership interest in each of the privately held entities, and we do not maintain power
over or control of the entities. We have elected the practical expedient in Topic 321, Investments-Equity Securities,tomeasure
these investments at cost less any impairment, adjusted for observable price changes, if any. Based on these considerations, we
estimate that the carrying value of the acquired shares represents the fair value of the investment. At March 31, 2021, we held
approximately $20,000 of such investments in Other assets within our Consolidated Balance Sheet.
During the fiscal year ended March 31, 2021, we recognized a gain on the sale of one of these investments of $40,588.
The gain is reflected in Gain (loss) on long-term investments, net within our Consolidated Statements of Operations.
65
5. SHORT-TERM INVESTMENTS
Our short-term investments consisted of the following as of March 31, 2021:
March 31, 2021
Cost or
Amortized Cost
Gross Unrealized
Gains Losses Fair Value
Short-term investments
Bank time deposits $ 578,762 $ — $ — $ 578,762
Available-for-sale securities:
Corporate bonds 520,486 994 (256) 521,224
US Treasuries 60,029 57 — 60,086
Commercial paper 148,149 1 — 148,150
Asset-backed securities 469 1 — 470
Total short-term investments $ 1,307,895 $ 1,053 $ (256) $ 1,308,692
March 31, 2020
Cost or
Amortized Cost
Gross Unrealized
Gains Losses Fair Value
Short-term investments
Bank time deposits $ 191,000 $ — $ — $ 191,000
Available-for-sale securities:
Corporate bonds 337,752 307 (3,428) 334,631
US Treasuries 30,481 338 — 30,819
Commercial paper 87,553 — — 87,553
Total short-term investments $ 646,786 $ 645 $ (3,428) $ 644,003
The following table summarizes the contracted maturities of our short-term investments at March 31, 2021:
March 31, 2021
Amortized Cost Fair Value
Short-term investments
Due in 1 year or less $ 1,111,554 $ 1,112,328
Due in 1-2 years 196,341 196,364
Total short-term investments $ 1,307,895 $ 1,308,692
6. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Our risk management strategy includes the use of derivative financial instruments to reduce the volatility of earnings
and cash flows associated with changes in foreign currency exchange rates. We do not enter into derivative financial contracts
for speculative or trading purposes. We classify cash flows from derivative transactions as cash flows from operating activities
in our Consolidated Statements of Cash Flows.
Foreign Currency Forward Contracts
The following table shows the gross notional amounts of foreign currency forward contracts:
March 31,
2021 2020
Forward contracts to sell foreign currencies $ 140,510 $ 122,024
Forward contracts to purchase foreign currencies $ 92,123 $ 52,596
For the fiscal years ended March 31, 2021, 2020 and 2019, we recorded a loss of $3,584, a loss of $959, and a gain of
$16,831, respectively, related to foreign currency forward contracts in Interest and other, net on our Consolidated Statements of
Operations. Our derivative contracts are foreign currency exchange forward contracts that are not designated as hedging
instruments under hedge accounting and are used to reduce the impact of foreign currency on certain balance sheet exposures
66
and certain revenue and expense. These instruments are generally short term in nature, with typical maturities of less than one
year, and are subject to fluctuations in foreign exchange rates.
Cross-currency Swaps
In August 2017, we entered into a cross-currency swap agreement related to an intercompany loan that was designated
and accounted for as a cash flow hedge of foreign currency exchange risk. During the three months ended June 30, 2020, we
settled the intercompany loan and cross-currency swap, thereby discontinuing the cash flow hedge. As a result, we reclassified
$3,109 from Accumulated other comprehensive income (loss) to earnings as an increase to Interest and other, net on our
Consolidated Statement of Operations. We also received $7,420 in cash to settle our corresponding derivative asset.
7. INVENTORY
Inventory balances by category are as follows:
March 31,
2021 2020
Finished products $ 16,941 $ 17,984
Parts and supplies 801 1,124
Inventory $ 17,742 $ 19,108
Estimated product returns included in inventory at March 31, 2021 and 2020 were $186 and $506, respectively.
8. SOFTWARE DEVELOPMENT COSTS AND LICENSES
Details of our capitalized software development costs and licenses are as follows:
March 31,
2021 2020
Current Non-current Current Non-current
Software development costs, internally developed $ 22,225 $ 412,919 $ 17,367 $ 305,970
Software development costs, externally developed 7,349 75,086 10,971 92,908
Licenses 13,869 2,887 11,978 2,900
Software development costs and licenses $ 43,443 $ 490,892 $ 40,316 $ 401,778
Software development costs and licenses, net of current portion as of March 31, 2021 and 2020 included $483,110 and
$333,063, respectively, related to titles that have not been released.
Amortization and impairment of software development costs and licenses are as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Amortization of software development costs and licenses $ 113,897 $ 321,956 $ 342,870
Impairment of software development costs and licenses 39,073 — 7,426
Less: Portion representing stock-based compensation (8,707) (154,031) (149,075)
Amortization and impairment, net of stock-based compensation $ 144,263 $ 167,925 $ 201,221
The impairment charges related (i) to unamortized capitalized costs for the development of certain interactive
entertainment software products, which are anticipated to exceed the net realizable value of the asset, and (ii) to decisions not to
proceed with further development of certain interactive entertainment software products.
67
9. FIXED ASSETS, NET
Fixed asset balances by category are as follows:
March 31,
2021 2020
Computer equipment $ 155,580 $ 127,897
Leasehold improvements 135,150 113,057
Computer software 63,947 60,507
Furniture and fixtures 17,693 16,520
Office equipment 13,282 12,109
Buildings 857 —
386,509 330,090
Less: accumulated depreciation (237,145) (198,202)
Fixed assets, net $ 149,364 $ 131,888
Depreciation expense related to fixed assets for the fiscal years ended March 31, 2021, 2020 and 2019 was $54,835,
$47,628 and $39,726, respectively.
The following represents our fixed assets, net by location:
March 31,
2021 2020
United States $ 101,838 $ 87,153
International 47,526 44,735
Fixed assets, net $ 149,364 $ 131,888
10. GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
The change in our goodwill balance is as follows:
Total
Balance at March 31, 2019 $ 381,717
Additions from immaterial acquisitions 13,205
Currency translation adjustment (8,428)
Balance at March 31, 2020 $ 386,494
Acquisition of Playdots, Inc. (see Note 22) 119,069
Additions from immaterial acquisitions 13,260
Currency translation adjustment 16,483
Balance at March 31, 2021 $ 535,306
Intangibles
The following table sets f orth the intangible assets that are subject to amortization:
March 31,
2021 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Weighted
average
useful life
Developed game technology $ 143,628 $ (62,667) $ 80,961 $ 64,336 $ (42,425) $ 21,911 6 years
Intellectual property 41,077 (14,542) 26,535 26,109 (10,836) 15,273 6 years
Analytics technology 32,768 (27,256) 5,512 30,711 (19,450) 11,261 5 years
Branding and trade names 8,245 (2,245) 6,000 4,343 (1,528) 2,815 6 years
User base 6,200 (3,617) 2,583 — — — 1 year
Total intangible assets $ 231,918 $ (110,327) $ 121,591 $ 125,499 $ (74,239) $ 51,260 5 years
68
Amortization of intangible assets is included in our Consolidated Statements of Operations as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Cost of goods sold $ 21,199 $ 14,325 $ 16,937
Selling and marketing 3,617 ——
Research and development 6,663 6,180 6,436
Depreciation and amortization 762 485 506
Total amortization of intangible assets $ 32,241 $ 20,990 $ 23,879
Estimated future amortization of intangible assets that will be recorded in cost of goods sold and operating expenses
for the years ending March 31, are as follows:
Fiscal Year Ended March 31, Amortization
2022 $ 42,182
2023 22,758
2024 19,307
2025 14,838
2026 13,998
11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of:
March 31,
2021 2020
Software development royalties $ 814,998 $ 822,416
Compensation and benefits 122,404 81,791
Licenses 84,330 57,651
Refund Liability 53,361 77,829
Marketing and promotions 32,591 40,797
Other 96,406 89,400
Accrued expenses and other current liabilities $ 1,204,090 $ 1,169,884
12. DEBT
Credit Agreement
On February 8, 2019, we entered into an unsecured credit agreement (the “Credit Agreement”) that runs through
February 8, 2024. The Credit Agreement provides for an unsecured five-year revolving credit facility with commitments of
$200,000, including sublimits for (i) the issuance of letters of credit in an aggregate face amount of up to $25,000 and (ii)
borrowings and letters of credit denominated in Pounds Sterling, Euros and Canadian Dollars in an aggregate principal amount
of up to $25,000. In addition, the Credit Agreement contains uncommitted incremental capacity permitting the incurrence of up
to an additional $250,000 in term loans or revolving credit facilities.
Loans under the Credit Agreement will bear interest at a rate of (a) 0.250% to 0.750% above a certain base rate (3.25%
at March 31, 2021) or (b) 1.125% to 1.750% above LIBOR (approximately 1.10% at March 31, 2021), which rates are
determined by reference to our consolidated total net leverage ratio. We had no outstanding borrowings at March 31, 2021 and
March 31, 2020.
69
Information related to availability on our Credit Agreement is as follows:
March 31,
2021 2020
Available borrowings $ 197,874 $ 198,336
Outstanding letters of credit $ 2,126 $ 1,664
We recorded interest expense and fees related to the Credit Agreement of $355, $275 and $372, for the fiscal years
ended March 31, 2021, 2020 and 2019, respectively and, under a prior credit agreement that was terminated on the same day
that we entered into the Credit Agreement, $472 for the fiscal year ended March 31, 2019. The Credit Agreement also includes,
among other terms and conditions, maximum leverage ratio, minimum cash reserves and, in certain circumstances, minimum
interest coverage ratio financial covenants, as well as limitations on us and each of our subsidiaries’ ability to create, incur,
assume or be liable for indebtedness; dispose of assets outside the ordinary course; acquire, merge or consolidate with or into
another person or entity; create, incur or allow any lien on any of its property; make investments; or pay dividends or make
distributions, in each case subject to certain exceptions. 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).
13. EARNINGS PER SHARE ("EPS")
The following table sets forth the computation of basic and diluted EPS (in thousands except per share amounts):
Fiscal Year Ended March 31,
2021 2020 2019
Computation of Basic earnings per share:
Net income $ 588,886 $ 404,459 $ 333,837
Weighted average common shares outstanding—basic 114,602 113,096 113,176
Basic earnings per share $ 5.14 $ 3.58 $ 2.95
Computation of Diluted earnings per share:
Net income $ 588,886 $ 404,459 $ 333,837
Weighted average common shares outstanding—basic 114,602 113,096 113,176
Add: dilutive effect of common stock equivalents 1,142 1,040 2,022
Weighted average common shares outstanding—diluted 115,744 114,136 115,198
Diluted earnings per share $ 5.09 $ 3.54 $ 2.90
14. LEASES
Our lease arrangements are primarily for (1) corporate, administrative, and development studio offices and (2) data
centers and server equipment. Our existing leases have remaining lease terms ranging from one to thirteen years. In certain
instances, such leases include one or more options to renew, with renewal terms that generally extend the lease term
by one to five years for each option. The exercise of lease renewal options is generally at our sole discretion. Additionally, the
majority of our leases are classified as operating leases.
Information related to our operating leases are as follows:
70
Fiscal Year Ended March 31,
2021 2020
Lease costs
Operating lease costs $ 37,300 $ 29,383
Short term lease costs $ 1,148 $ 2,771
Rent expense prior to our adoption of Topic 842 amounted to $29,204 for the fiscal year ended March 31, 2019.
Fiscal Year Ended March 31,
2021 2020
Supplemental operating cash flow information
Cash paid for amounts included in the measurement of lease liabilities $ 35,458 $ 28,419
ROU assets obtained in exchange for lease obligations $ 34,638 $ 58,745
March 31,
2021 2020
Weighted average information
Remaining lease term 8.61 years 8.90 years
Discount rate 4.91 % 4.98 %
Future undiscounted lease payments for our operating lease liabilities, and a reconciliation of these payments to our
operating lease liabilities at March 31, 2021, are as follows:
For the years ending March 31,
2022 $ 36,582
2023 35,369
2024 27,352
2025 21,350
2026 16,520
Thereafter 79,217
Total future lease payments $ 216,390
Less imputed interest (25,124)
Total lease liabilities $ 191,266
As of March 31, 2021, we have entered into facility leases that have not yet commenced with future lease payments of
approximately $5,709. These leases are expected to commence within the next twelve months and will have lease terms ranging
from three to nine years.
71
15. COMMITMENTS AND CONTINGENCIES
A summary of annual minimum contractual obligations and commitments as of March 31, 2021 is as follows:
Fiscal Year Ending March 31,
Software
Development
and Licensing Marketing
Purchase
Obligations Total
2022 $ 217,275 $ 40,494 $ 51,115 $ 308,884
2023 160,991 42,376 25,986 229,353
2024 152,458 84,729 8,617 245,804
2025 108,321 26,184 1,503 136,008
2026 56,155 25,063 — 81,218
Thereafter 21,375 — — 21,375
Total $ 716,575 $ 218,846 $ 87,221 $ 1,022,642
Software Development and Licensing Agreements: We make payments to third-party software developers that
include contractual payments to developers under several software development agreements that expire at various times through
July 2031. Our aggregate outstanding software development commitments assume satisfactory performance by third-party
software developers. We also have licensing commitments that primarily consist of obligations to holders of intellectual
property rights for use of their trademarks, copyrights, technology or other intellectual property rights in the development of our
products.
Marketing Agreements: We have certain minimum marketing support commitments where we commit to spend
specified amounts related to marketing our products. Marketing commitments expire at various times through September 2025
and primarily reflect our agreements with major sports leagues and players' associations.
Purchase Obligations: These obligations are primarily related to agreements to purchase services that are
enforceable and legally binding on us that specifies all significant terms, including fixed, minimum or variable pricing
provisions; and the approximate timing of the transactions, expiring at various times through March 2024.
Employee Savings Plans: For our United States employees we maintain a 401(k) retirement savings plan and trust.
Our 401(k) plan is offered to all eligible employees and participants may make voluntary contributions. We also have various
pension plans for our non-U.S. employees, some of which are required by local laws, and allow or require employer
contributions. Employer contributions under all defined contribution and pension plans during the fiscal years ended March 31,
2021, 2020, and 2019 were $17,701, $14,071, and $10,881, respectively.
Legal and Other Proceedings: We are, or may become, subject to demands and claims (including intellectual
property and employment related claims) and are involved in routine litigation in the ordinary course of business which we do
not believe to be material to our business or financial condition or results of operations. We have appropriately accrued amounts
related to certain of these claims and legal and other proceedings. While it is reasonably possible that a loss may be incurred in
excess of the amounts accrued in our financial statements, we believe that such losses, unless otherwise disclosed, would not be
material.
16. INCOME TAXES
Components of income before income taxes are as follows:
Fiscal Year Ended March 31,
2021 2020 2019
Domestic $ 467,962 $ 322,297 $ 134,265
Foreign 209,854 136,142 98,520
Income before income taxes $ 677,816 $ 458,439 $ 232,785
72
Provision for (benefit from) current and deferred income taxes consists of the following:
Fiscal Year Ended March 31,
2021 2020 2019
Current:
U.S. federal $ 18,417 $ 26,561 $ 8,240
U.S. state and local 6,030 3,575 2,857
Foreign 27,333 10,061 22,274
Total current income taxes 51,780 40,197 33,371
Deferred:
U.S. federal 43,642 45,079 (128,317)
U.S. state and local 1,070 1,317 (9,157)
Foreign (7,562) (32,613) 3,051
Total deferred income taxes 37,150 13,783 (134,423)
Provision for (benefit from) income taxes $ 88,930 $ 53,980 $ (101,052)
A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:
Fiscal Year Ended March 31,
2021 2020 2019
U.S. federal statutory rate 21.0 % 21.0 % 21.0 %
State and local taxes, net of U.S. f ederal benefit 1.1 % 2.1 % 2.9 %
Foreign tax rate differential
(1)
(2.9)% 1.0 % (9.0)%
Foreign earnings
(2)
(0.3)% (9.3)% 5.1 %
Tax credits
(3)
(4.3)% (8.3)% (15.0)%
Excess tax benefits from stock-based compensation (2.0)% (1.8)% (5.7)%
One-time transition tax —% — % (2.0)%
Valuation allowance—domestic 0.1 % 0.2 % (46.0)%
Valuation allowance—foreign
(2)
—% 7.3 % — %
Change in reserves (0.4)% (2.0)% 1.3 %
Other 0.8 % 1.6 % 4.0 %
Effective tax rate 13.1 % 11.8 % (43.4)%
(1)
The foreign rate differentials in relation to foreign earnings, for all periods presented, are primarily driven by changes in the mix of our foreign earnings and
the difference between the foreign and U.S. income tax rates. Fiscal year ended March 31, 2020 includes the impact of the reversal of a net deferred tax asset
of $19,826 related to the effects of stock-based compensation from our intercompany cost-sharing arrangements due to an appeals court decision issued in
Altera Corp. v. Commissioner.
(2)
Fiscal year ended March 31, 2020 includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland
related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.
(3)
Tax benefits were recorded for fiscal years ended March 31, 2021, 2020, and 2019 attributable to certain tax credits related to software development
activities.
73
The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:
March 31,
2021 2020
Deferred tax assets:
Accrued compensation expense $ 132,794 $ 124,276
Equity-based compensation 60,012 66,253
Tax credit carryforward 54,576 45,746
Tax basis step up related to TRAF 45,266 45,266
Operating lease liabilities 42,846 39,512
Net operating loss carryforward 5,576 5,555
Deferred revenue 3,323 —
Business reorganization 401 1,874
Other 10,236 7,785
Total deferred tax assets 355,030 336,267
Less: Valuation allowance (95,761) (86,937)
Net deferred tax assets 259,269 249,330
Deferred tax liabilities:
Capitalized software and depreciation (99,673) (74,006)
Right of use assets (40,391) (36,947)
Intangible amortization (29,683) (18,206)
Deferred revenue — (5,038)
Other (2,773) (3,587)
Total deferred tax liabilities (172,520) (137,784)
Net deferred tax asset
(1)
86,749 111,546
(1)
As of March 31, 2021, $90,206 is included in Deferred tax assets and $3,457 is included in Other long-term liabilities. As of March 31, 2020, $116,676 is
included in Deferred tax assets and $5,130 is included in Other long-term liabilities.
The valuation allowance is primarily attributable to deferred tax assets for which no benefit is provided due to
uncertainty with respect to their realization.
At March 31, 2021, we had domestic net operating loss carryforwards totaling $44,481 of which $19,329 will expire in
2022 to 2028, $18,296 will expire from 2029 to 2032, and $6,856 will expire in 2036 to 2041. In addition, we had foreign net
operating loss carryforwards of $10,236, of which $1,170 will expire in 2028 and the remainder may be carried forward
indefinitely.
At March 31, 2021, we had domestic tax credit carryforwards totaling $173,559, of which $46,875 expire in 2038 to
2041, and the remainder may be carried forward indefinitely.
The total amount of undistributed earnings of foreign subsidiaries was approximately $419,887 at March 31, 2021 and
$562,269 at March 31, 2020. As of March 31, 2021, it is our intention to reinvest indefinitely undistributed earnings of our
foreign subsidiaries. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may
become payable if undistributed earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability
that would arise if these earnings were remitted.
We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of
amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law
and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that
any assessments in excess of the amounts provided for will not have a material adverse effect on our Consolidated Financial
Statements. It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our
effective tax rate in future periods.
We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our
Consolidated Statements of Operations. For the fiscal years ended March 31, 2021, 2020 and 2019, we recognized an increase
of interest and penalties of $2,594, $71 and $232, respectively. The gross amount of interest and penalties accrued as of
March 31, 2021 and 2020 was $9,351 and $6,757, respectively.
74
As of March 31, 2021, we had gross unrecognized tax benefits, including interest and penalties, of $167,559, of which
$62,569 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2021, gross unrecognized tax
benefits increased by $33,290.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended
March 31, 2018 and state income tax returns for periods prior to the fiscal year ended March 31, 2017. 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 U.S. state and foreign taxing authorities are currently examining our income tax returns for the fiscal years ended March
31, 2015 through March 31, 2019.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any,
upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.
Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible
that a reduction of $8,950 of unrecognized tax benefits may occur within the next 12 months, some of which, depending on the
nature of the settlement or expiration of statutes of limitations, may affect our income tax provision and therefore benefit the
resulting effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any
settlements.
The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as
follows:
Fiscal Year Ended March 31,
2021 2020 2019
Balance, beginning of period $ 127,512 $ 132,320 $ 122,056
Additions:
Current year tax positions 18,861 8,596 13,281
Prior year tax positions 20,953 1,404 288
Reduction of prior year tax positions (981) (14,270) (1,700)
Lapse of statute of limitations (8,136) (538) (1,605)
Balance, end of period $ 158,209 $ 127,512 $ 132,320
We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any
settlement will not have a material adverse effect on our consolidated financial statements. However, there can be no assurances
as to the possible outcomes.
17. STOCK-BASED COMPENSATION
Stock Incentive Plan
In September 2017, our stockholders approved our 2017 Stock Incentive Plan (the "2017 Plan"). The aggregate
number of shares issuable under the 2017 Plan is 9,654, subject to adjustment as set forth in the 2017 Plan, and, as of March 31,
2021, there were approximately 4,305 shares available for issuance. The 2017 Plan is administered by the Compensation
Committee of the Board of Directors and allows for awards of restricted stock units and other stock-based awards of our
common stock to employees and non-employees, including to ZelnickMedia in connection with their contract to provide
executive management service to us. Subject to the provisions of the plans, the Board of Directors, or any Committee appointed
by the Board of Directors, has the authority to determine the individuals to whom the equity awards are to be granted, the
number of shares to be covered by each equity award, the vesting period, restrictions, if any, on the equity award and the terms
and conditions of the equity award. Upon the vesting of certain stock-based awards, employees have the option to have us
withhold shares to satisfy the employee's federal and state tax withholding requirements.
75
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense included in our Consolidated Statements of
Operations:
Fiscal Year Ended March 31,
2021 2020 2019
Cost of goods sold $ 8,707 $ 154,031 $ 149,075
Selling and marketing 18,348 18,680 23,685
General and administrative 56,830 53,607 51,903
Research and development 26,587 31,563 23,037
Stock-based compensation expense before income taxes $ 110,472 $ 257,881 $ 247,700
Income tax benefit $ (21,746) $ (48,687) $ (48,383)
Stock-based compensation expense, net of income tax benefit $ 88,726 $ 209,194 $ 199,317
Capitalized stock-based compensation expense $ 30,124 $ 24,451 $ 75,725
During the fiscal year ended March 31, 2021, the forfeiture of awards resulted in the reversal of expense of $69,758
and amounts capitalized as software development costs of $10,837. During the fiscal year ended March 31, 2020, the forfeiture
of awards resulted in the reversal of expense of $425 and amounts capitalized as software development costs of $2,607. During
the fiscal year ended March 31, 2019, the forfeiture of awards resulted in the reversal of expense of $5,784 and amounts
capitalized as software development costs of $17,504.
As of March 31, 2021, the total future unrecognized compensation cost related to outstanding unvested restricted stock
was $410,665 and will be either recognized as compensation expense over a weighted-average period of approximately
2.07 years or capitalized as software development costs.
For the fiscal years ended March 31, 2021, 2020 and 2019, the total fair values of restricted stock units that vested
were $205,867, $219,007 and $264,162, respectively.
Restricted Stock Units
Employee Awards
Time-based restricted stock units granted to employees under our stock-based compensation plans generally vest either
annually or quarterly over three years from the date of grant. Certain restricted stock units granted to key officers, senior-level
employees, or key employees vest based on market conditions, primarily related to the performance of the price of our common
stock. Certain restricted stock units granted to key officers, senior-level employees, or key employees vest based on
performance conditions, primarily related to performance metrics around certain of our titles.
ZelnickMedia Non-Employee Awards
In connection with the 2017 Management Agreement, we granted restricted stock units to ZelnickMedia (see Note 3 -
Management Agreement) as follows:
Fiscal Year Ended
March 31,
2021 2020
Time-based 79 92
Market-based
(1)
145 168
Performance-based
(1)
IP 24 28
Recurrent Consumer Spending ("RCS") 24 28
Total Performance-based 48 56
Total Restricted Stock Units 272 316
(1)
Represents the maximum number of shares eligible to vest.
Time-based restricted stock units granted in fiscal year 2021 will vest on April 13, 2022, provided that the 2017
Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020 vested on April 13,
2021.
76
Market-based restricted stock units granted in fiscal year 2021 are eligible to vest on April 13, 2022, provided that the
2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020 vested on
April 13, 2021. Market-based restricted stock units are eligible to vest based on our Total Shareholder Return (as defined in the
relevant grant agreement) relative to the Total Shareholder Return (as defined in the relevant grant agreement) of the companies
that constitute the NASDAQ Composite Index as of the grant date measured over a two-year period. To earn the target number
of market-based restricted stock units (which represents 50% of the number of the market-based restricted stock units set forth
in the table above), the Company must perform at the 50th percentile, with the maximum number of market-based restricted
stock units earned if the Company performs at least at the 75th percentile.
Performance-based restricted stock units granted in fiscal year 2021 are eligible to vest on April 13, 2022, provided
that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2020
vested on April 13, 2021. Performance-based restricted stock units, of which 50% are tied to "IP" and 50% to "RCS" (as
defined in the relevant grant agreement), are eligible to vest based on the Company's achievement of certain performance
metrics (as defined in the relevant grant agreement) of either individual product releases of "IP" or "RCS" measured over a two-
year period. The target number of performance-based restricted stock units that may be earned pursuant to these grants is equal
to 50% of the grant amounts set forth in the above table (the numbers in the table represent the maximum number of
performance-based restricted stock units that may be earned). At the end of each reporting period, we assess the probability of
each performance m etric and upon determination that certain thresholds are probable, we record expense for the unvested
portion of the shares of performance-based restricted stock units. Certain performance metrics have been achieved as of
March 31, 2021 for the "IP" and "RCS" performance-based restricted stock units granted in fiscal year 2020 and fiscal year
2021.
The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia
as of March 31, 2021 and 2020 were 588 and 613, respectively. During the fiscal year ended March 31, 2021, 296 restricted
stock units previously granted to ZelnickMedia vested and 0 restricted stock units were forfeited by ZelnickMedia.
Fair Value of Stock-Based Awards
Time-Based Awards
The estimated value, based on the closing price of our stock on the grant date, of time-based restricted stock units
granted to employees during the fiscal years ended March 31, 2021, 2020 and 2019 was $171.58, $115.01 and $103.79 per
share, respectively.
For the fiscal years ended March 31, 2021, 2020 and 2019, the estimated value, based on the closing price of our stock
on the grant date, of time-based restricted stock awards granted to ZelnickMedia was $120.00, $92.65 and $97.19 per share,
respectively.
The following table summarizes the activity in non-vested restricted stock units to employees and ZelnickMedia under
our stock-based compensation plans with time-based restricted stock awards presented at 100% of target number of shares that
may potentially vest:
Shares
(in thousands)
Weighted
Average Fair
Value on
Grant Date
Non-vested restricted stock units at March 31, 2020 1,960 $ 99.54
Granted 1,191 $ 167.52
Vested (925) $ 106.41
Forfeited (162) $ 167.03
Non-vested restricted stock units at March 31, 2021
2,064 $ 139.94
77
Market-Based Awards
The following table summarizes the weighted-average assumptions used in the Monte Carlo Simulation to estimate the
fair value of market-based awards:
Fiscal Year Ended March 31,
2021 2020 2019
Employee
Market-Based
Non-Employee
Market-Based
Employee
Market-Based
Non-Employee
Market-Based
Employee
Market-Based
Non-Employee
Market-Based
Risk-free interest rate 0.2 % 0.2 % 1.8 % 2.4 % 2.6 % 2.4 %
Expected stock price volatility 40.7 % 40.8 % 39.4 % 39.9 % 34.9 % 31.4 %
Expected service period (years) 1.5 1.0 1.5 1.0 1.5 1.0
Dividends None None None None None None
The estimated value of market-based restricted stock awards granted to employees during the fiscal years ended
March 31, 2021, 2020, and 2019 was $279.09, $201.07, and $150.91 per share, respectively. For the fiscal years ended
March 31, 2021, 2020, and 2019, the estimated value of the market-based restricted stock a wards granted to ZelnickMedia was
$200.34, $132.50, and $119.21 per share, respectively.
The following table summarizes the activity in non-vested restricted stock units to employees and ZelnickMedia under
our stock-based compensation plans with market-based restricted stock awards presented at 100% of target number of shares
that may potentially vest:
Shares
(in thousands)
Weighted
Average Fair
Value on
Grant Date
Non-vested restricted stock units at March 31, 2020 358 $ 157.05
Granted 367 $ 185.05
Vested (395) $ 144.65
Forfeited (7) $ 228.34
Non-vested restricted stock units at March 31, 2021
323 $ 187.21
Performance-Based Awards
The estimated value of performance-based restricted stock awards granted to employees during the fiscal year ended
March 31, 2021, 2020, and 2019 was $176.42, $124.50, and $100.29, respectively. For the fiscal years ended March 31, 2021,
2020, and 2019, the estimated value of the performance-based restricted stock awards granted to ZelnickMedia was $120.00,
$92.65, and $97.19 per share, respectively.
The following table summarizes the activity in non-vested restricted stock units to employees and ZelnickMedia under
our stock-based compensation plans with performance restricted stock awards presented at 100% of target number of shares
that may potentially vest:
Shares
(in thousands)
Weighted
Average Fair
Value on
Grant Date
Non-vested restricted stock units at March 31, 2020 3,239 $ 119.97
Granted 1,768 $ 174.47
Vested (80) $ 100.36
Forfeited (1,328) $ 176.61
Non-vested restricted stock units at March 31, 2021
3,599 $ 150.06
Employee Stock Purchase Plans
In September 2017, our stockholders approved our 2017 Global Employee Stock Purchase Plan as amended and
restated ("ESPP"). The maximum aggregate number of shares of common stock that may be issued under the plan is 9,000, and
as of March 31, 2021, there were approximately 8,677 shares available for issuance. The ESPP is administered by the
Compensation Committee of the Board of Directors and allows for eligible employees an option to purchase shares of our
common stock, which the employee may or may not exercise during an offering period. Eligible employees may authorize
payroll deductions of between 1% and 10% of their compensation to purchase shares of common stock at 85% of the lower of
78
the market price of our common stock on the date of commencement of the applicable offering period or on the last day of each
six-month purchase period.
The fair value is determined using the Black-Scholes valuation model. Key assumptions of the Black-Scholes
valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends. The risk-free interest
rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option. Expected volatility is
based on a combination of historical stock price volatility and implied volatility of publicly-traded options on our common
stock. Expected term is determined based on historical exercise behavior, post-vesting termination patterns, options outstanding
and future expected exercise behavior. The following table summarizes the assumptions used in the Black-Scholes valuation
model to value our purchase rights:
Fiscal Year Ended March 31,
2021 2020
Risk-free interest rate 0.1% 1.6% - 2.4%
Expected stock price volatility 33.8% - 46.8% 28.1% - 45.6%
Expected service period (years) 0.5 0.5
Dividends None None
For the fiscal year ended March 31, 2021, our employees purchased 139 shares for $14,214 with a weighted-average
fair value of $101.81. For the fiscal year ended March 31, 2020, our employees purchased 126 shares for $10,515 with a
weighted-average fair value of $83.25.
18. SHARE REPURCHASE PROGRAM
Our Board of Directors has authorized the repurchase of up to 14,218 shares of our common stock. Under this
program, we may purchase shares from time to time through a variety of methods, including in the open market or through
privately negotiated transactions, in accordance with applicable securities laws. Repurchases are subject to the availability of
stock, prevailing market conditions, the trading price of the stock, our financial performance and other conditions. The program
does not require us to repurchase shares and may be suspended or discontinued at any time for any reason.
During the fiscal years ended March 31, 2021, 2020, and 2019 we repurchased 0, 0, and 3,716 shares of our common
stock in the open market, respectively, for $0, $0, and $362,429, respectively, including commissions of $0, $0 and $37,
respectively, as part of the program. As of March 31, 2021, we had repurchased a total of 10,400 shares of our common stock
under the program, and 3,818 shares of our common stock remained available for repurchase under the share repurchase
program.
All of the repurchased shares are classified a s Treasury stock in our Consolidated Balance Sheets.
19. INTEREST AND OTHER, NET
Fiscal Year Ended March 31,
2021 2020 2019
Interest income $ 18,701 $ 47,341 $ 38,019
Interest expense (6,207) (2,637) (8,032)
Foreign currency exchange gain (loss) 727 (3,589) (505)
Other (4,425) (2,610) (3,369)
Interest and other, net $ 8,796 $ 38,505 $ 26,113
79
20. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table provides the components of accumulated other comprehensive (loss) income:
Foreign
currency
translation
adjustments
Unrealized
gain
(loss) on
derivative
instruments
Unrealized
gain (loss)
on cross-
currency
swap
Unrealized
gain
(loss) on
available-
for-sales
securities Total
Balance at March 31, 2019 $ (33,090) $ 600 $ (5,285) $ 586 $ (37,189)
Other comprehensive (loss) income before reclassifications (27,445) — 10,504 (3,332) (20,273)
Amounts reclassified from accumulated other comprehensive
(loss) income — — (1,689) — (1,689)
Tax effect on cross-currency swap — — 775 — 775
Balance at March 31, 2020 $ (60,535) $ 600 $ 4,305 $ (2,746) $ (58,376)
Other comprehensive income (loss) before reclassifications 51,253 — (3,817) 3,364 50,800
Amounts reclassified from accumulated other comprehensive
(loss) income — (600) (1,333) — (1,933)
Tax effect on cross-currency swap — — 845 — 845
Balance at March 31, 2021 $ (9,282) $ — $ — $ 618 $ (8,664)
21. SUPPLEMENTARY FINANCIAL INFORMATION
The following table provides details of our valuation and qualifying accounts:
Beginning
Balance Additions Deductions Other
Ending
Balance
Fiscal Year Ended March 31, 2021
Valuation allowance for deferred income taxes $ 86,937 11,525 (2,701) — $ 95,761
Allowance for doubtful accounts 443 — — (93) 350
Fiscal Year Ended March 31, 2020
Valuation allowance for deferred income taxes $ 49,413 44,703 (7,179) — $ 86,937
Allowance for doubtful accounts 995 — (547) (5) 443
Fiscal Year Ended March 31, 2019
Valuation allowance for deferred income taxes
(1)
$ 195,640 11,850 (107,133) (50,944) $ 49,413
Allowance for doubtful accounts 1,247 651 — (903) 995
(1)
Amount categorized as Other represents a reduction to the valuation allowance included in the cumulative effect of initially applying the New Revenue
Accounting Standard as an adjustment to the opening balance of Retained earnings, due to revenues that were previously deferred being accelerated to
Retained earnings, for which a timing difference exists for accounting and tax purposes.
22. ACQUISITIONS
On September 4, 2020, we completed the acquisition of privately-held Playdots, Inc. ("Playdots"), a New York, New
York based free-to-play mobile game developer, for consideration of $97,846 in cash and 604 shares of our common stock. The
cash portion was funded from our cash on hand. Of the cash consideration, $13,440 was contractually deferred and accrued for
within Accrued expenses and other current liabilities within our Consolidated Balance Sheet at acquisition. During the fiscal
year ended March 31, 2021, we paid out $3,840 of this amount. As of March 31, 2021, $9,600 remained accrued within
Accrued expenses and other current liabilities within our Consolidated Balance Sheet at acquisition.
We acquired Playdots as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property
and to diversify and strengthen further our mobile offerings.
80
The acquisition-date fair value of the consideration totaled $195,493, which consisted of the following:
Fair value of
purchase
consideration
Cash $ 97,846
Common stock (604 shares) 97,647
Total $ 195,493
We used the acquisition method of accounting and recognized assets at their fair value as of the date of acquisition,
with the excess recorded to goodwill. The preliminary fair values of net tangible and intangible assets are management’s
estimates based on the information available at the acquisition date and may change over the measurement period, which will
end no later than one year from the acquisition date, to the extent additional information is received. The following table
summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed
from Playdots:
Fair Value
Weighted average
useful life
Cash acquired $ 12,098 N/A
Other tangible net assets 8,206 N/A
Other liabilities assumed (24,680) N/A
Intangible Assets
Developed game technology 69,000 6
User base 6,200 1
Branding and trade names 3,400 8
Game engine technology 2,200 4
Goodwill 119,069 N/A
Total $ 195,493
Goodwill, which is not deductible for U.S. income tax purposes, is primarily attributable to the assembled workforce
of the acquired business and expected synergies at the time of the acquisition.
The amounts of revenue and earnings of Playdots included in our Consolidated Statement of Operations from the
acquisition date to the period ending March 31, 2021 are as follows:
Fiscal Year Ended
March 31, 2021
Net revenue $ 20,640
Net income (loss) $ (27,407)
The following table summarizes the pro forma consolidated results of operations (unaudited) for the fiscal years ended
March 31, 2021 and 2020, respectively, as though the acquisition had occurred on April 1, 2019, the beginning of Fiscal 2020,
and Playdots had been included in our consolidated results for the entire periods subsequent to that date.
Fiscal Year Ended March 31,
2021 2020
Pro forma Net revenue $ 3,392,117 $ 3,112,757
Pro forma Net income $ 580,393 $ 370,225
81
The unaudited pro forma consolidated results above are based on the historical financial statements of the Company
and Playdots and not necessarily indicative of the results of operations that would have been achieved if the acquisition was
completed at the beginning of Fiscal 2020 and are not indicative of the future operating results of the combined company. The
financial information for Playdots prior to the acquisition has been included in the pro forma results of operations and includes
certain adjustments to the historical consolidated financial statements of Playdots to align with our accounting policies. The pro
forma consolidated results of operations also include the business combination accounting effects resulting from the acquisition,
including amortization expense related to finite-lived intangible assets acquired and the related tax effects assuming that the
business combination occurred on April 1, 2019.
Transaction costs of $2,553 for the fiscal years ended March 31, 2021, which have been recorded within General and
administrative expense in our Consolidated Statements of Operations, have been excluded from the above pro-forma
consolidated results of operations due to their non-recurring nature.
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TAKE-TWO INTERACTIVE SOFTWARE, INC.
By:
/s/ STRAUSS ZELNICK
Strauss Zelnick
Chairman and Chief Executive Officer
May 18, 2021
POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints Strauss Zelnick and Lainie Goldstein and each of
them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his, her or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities and on the date i ndicated.
/s/ STRAUSS ZELNICK
Chairman and Chief Executive Officer
(Principal Executive Officer)Strauss Zelnick May 18, 2021
/s/ LAINIE GOLDSTEIN
Chief Financial Officer (Principal Financial
and Accounting Officer)Lainie Goldstein May 18, 2021
/s/ MICHAEL DORNEMANN
Michael Dornemann Lead Independent Director May 18, 2021
/s/ ROLAND HERNANDEZ
Roland Hernandez
Director
May 18, 2021
/s/ J MOSES
J Moses Director May 18, 2021
/s/ MICHAEL SHERESKY
Michael Sheresky Director May 18, 2021
/s/ LAVERNE SRINIVASAN
LaVerne Srinivasan Director May 18, 2021
/s/ SUSAN TOLSON
Susan Tolson Director May 18, 2021
/s/ PAUL VIERA
Paul Viera Director May 18, 2021
Signature Title Date
83
Exhibit 21.1
Subsidiaries of Take-Two Interactive Software, Inc.
2K Czech, s.r.o. Czech Republic
2K Games (Chengdu) Co., Ltd. China
2K Games Dublin Limited Ireland
2K Games Madrid S.L. Spain
2K Games (Shanghai) Co., Ltd. China
2K Games, Inc. Delaware
2K, Inc. New York
2K Marin, Inc. Delaware
2K Play, Inc. Delaware
2K Games Songs LLC Delaware
2K Games Sounds LLC Delaware
2K Games Tunes LLC Delaware
2K Studios Montreal, Inc. Quebec
2K Vegas, Inc. Delaware
2KSports, Inc. Delaware
A.C.N. 617 406 550 Pty Ltd. Australia
A.C.N. 633 146 291 Pty Ltd. Australia
Blue Shift, Inc. California
Cat Daddy Games, L.L.C. Washington
Dhruva Interactive Private Limited India
DMA Design Holdings Limited United Kingdom
Double Take LLC Delaware
Firaxis Games, Inc. Delaware
Frog City Software, Inc. Delaware
Gathering of Developers, Inc. Texas
Gearhead Entertainment, Inc. Pennsylvania
Ghost Story Games, LLC Delaware
Glennco Games, LLC Delaware
Hangar 13 UK Limited United Kingdom
Indie Built, Inc. Delaware
Inventory Management Systems, Inc. Delaware
Joytech Europe Limited United Kingdom
Joytech Ltd. Hong Kong
Kush Games, Inc. California
LILW12TH, Inc. Delaware
Maxcorp Ltd. Bermuda
Parrot Games, S.L.U. Spain
Playdots, LLC Delaware
Rockstar Dundee Limited United Kingdom
Rockstar Events Inc. New York
Rockstar Games, Inc. Delaware
Rockstar Games India Private Limited India
Name Jurisdiction of Incorporation
Rockstar Games Songs LLC Delaware
Rockstar Games Sounds LLC Delaware
Rockstar Games Toronto ULC British Columbia
Rockstar Games Tunes LLC Delaware
Rockstar Interactive India LLP India
Rockstar International Limited United Kingdom
Rockstar Leeds Limited United Kingdom
Rockstar Lincoln Limited United Kingdom
Rockstar London Limited United Kingdom
Rockstar New England, Inc. Delaware
Rockstar North Limited United Kingdom
Rockstar Records, LLC Delaware
Rockstar San Diego, Inc. Virginia
Segmatic Services (US), Inc. Delaware
Social Point, K.K. Japan
Social Point, S.L. Spain
T2 Developer, Inc. Delaware
Take 2 Interactive Software Pty. Ltd. Australia
Take 2 Productions, Inc. Delaware
Take-Two Asia Pte. Ltd. Singapore
Take-Two Chile SpA Chile
Take-Two Contracting, LLC Delaware
Take-Two Esports Holdings, LLC Delaware
Take-Two Europe (Holdings) Limited United Kingdom
Take-Two Games Songs LLC Delaware
Take-Two Games Sounds LLC Delaware
Take-Two Games Tunes LLC Delaware
Take-Two GB Limited. United Kingdom
Take-Two Holdings III LLC Delaware
Take-Two Holdings II LLC Delaware
Take Two Holdings LLC Delaware
Take-Two Hong Kong Limited Hong Kong
Take-Two Interactive Benelux B.V. Netherlands
Take-Two Interactive Canada Holdings, Inc. Ontario
Take-Two Interactive Canada, Inc. Ontario
Take-Two Interactive Espana S.L. Spain
Take-Two Interactive France SAS France
Take-Two Interactive GmbH Germany
Take-Two Interactive Japan G.K. Japan
Take-Two Interactive Korea Ltd. South Korea
Take-Two Interactive Software Europe Limited United Kingdom
Take-Two Interactive Software Ireland Limited Ireland
Take-Two Interactive Software UK Limited United Kingdom
Take-Two Interactive Software Vancouver ULC
dba Visual Concepts Blue Shift British Columbia
Name Jurisdiction of Incorporation
Take-Two International B.V. Netherlands
Take-Two Talent, LLC Delaware
Take-Two UK Holdings Limited United Kingdom
Take-Two Vegas, LLC Delaware
Take Two International GmbH Switzerland
Talonsoft, Inc. Delaware
Techcorp Ltd. Hong Kong
Venom Games Limited United Kingdom
Venues I, LLC Delaware
Visual Concepts China Co., Ltd. China
Visual Concepts Entertainment California
Visual Concepts Hungary Kft Hungary
VLM Entertainment Group, Inc. Delaware
WC Holdco, Inc. New York
Name Jurisdiction of Incorporation
Exhibit 31.1
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Section 302 Certification
I, Strauss Zelnick, certify that:
1. I have reviewed this Annual Report on Form 10-K of Take-Two Interactive Software, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ STRAUSS ZELNICK
Strauss Zelnick
Chairman and Chief Executive Officer
May 18, 2021
Exhibit 31.2
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Section 302 Certification
I, Lainie Goldstein, certify that:
1. I have reviewed this Annual Report on Form 10-K of Take-Two Interactive Software, Inc. (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were m ade,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) evaluated t he effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ LAINIE GOLDSTEIN
Lainie Goldstein
Chief Financial Officer
May 18, 2021
EXHIBIT 32.1
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Take-Two Interactive Software, Inc. (the “Company”) on Form 10-K for the period
ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Strauss
Zelnick, as Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
May 18, 2021 /s/ STRAUSS ZELNICK
Strauss Zelnick
Chairman and Chief Executive Officer
EXHIBIT 32.2
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Take-Two Interactive Software, Inc. (the “Company”) on Form 10-K for the period
ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lainie
Goldstein, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all m aterial respects, the financial condition and
results of operations of the Company.
May 18, 2021 /s/ LAINIE GOLDSTEIN
Lainie Goldstein
Chief Financial Officer
Design by FGI. www.fgidesign.com
OFFICERS
STRAUSS ZELNICK
Chairman and
Chief Executive Ocer
KARL SLATOFF
President
LAINIE GOLDSTEIN
Chief Financial Ocer
DANIEL P. EMERSON
Executive Vice President and
Chief Legal Ocer
BOARD OF DIRECTORS
STRAUSS ZELNICK
Chairman
MICHAEL DORNEMANN
Lead Independent Director
ROLAND HERNANDEZ
J MOSES
MICHAEL SHERESKY
LaVERNE SRINIVASAN
SUSAN TOLSON
PAUL VIERA
CORPORATE OFFICES
CORPORATE HEADQUARTERS
Take-Two Interactive Software, Inc.
110 West 44th Street
New York, NY 10036
(646) 536-2842
Take-Two Interactive
Software Europe Limited
Take-Two House
30 Cleveland Street
London
W1T 4JD
Take-Two Asia Pte. Ltd.
47 Scotts Road
#11-01 Goldbell Towers
Singapore 228233
PRINCIPAL OPERATING OFFICES
Rockstar Games, Inc.
622 Broadway
New York, NY 10012
CORPORATE INFORMATION
STOCKHOLDER INFORMATION
A copy of the Company’s Annual
Report on Form 10-K, as filed with
the Securities and Exchange
Commission, will be furnished
without charge upon written
request to Investor Relations at
the Corporate Headquarters.
INVESTOR RELATIONS
IR@take2games.com
INDEPENDENT AUDITORS
Ernst & Young LLP
5 Times Square
New York, NY 10036
TRANSFER AGENT
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
COMMON STOCK INFORMATION
The Company’s common
stock is listed on the NASDAQ
Global Select Market under
the symbol TTWO.
www.take2games.com
TAKE-TWO INTERACTIVE SOFTWARE, INC.
110 West 44th Street
New York, NY 10036
(646) 536-2842
www.take2games.com
