STOCK-BASED COMPENSATION

12 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

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 7,596, subject to adjustment as set forth in the 2017 Plan, and, as of March 31, 2020, there were approximately 5,065 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.

Stock-Based Compensation Expense

        The following table summarizes stock-based compensation expense included in our Consolidated Statements of Operations:

	Fiscal Year Ended March 31,
	2020		2019		2018
Cost of goods sold	$	154,031	$	149,075	$	24,610
Selling and marketing	18,680		23,685		13,258
General and administrative	53,607		51,903		58,037
Research and development	31,563		23,037		18,020
Business reorganization	—		—		2,424
Stock-based compensation expense before income taxes	$	257,881	$	247,700	$	116,349
Income tax benefit	$	(48,687)	$	(48,383)	$	(3,561)
Stock-based compensation expense, net of income tax benefit	$	209,194	$	199,317	$	112,788
Capitalized stock-based compensation expense	$	24,451	$	75,725	$	90,914

        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. During the fiscal year ended March 31, 2018, the forfeiture of awards resulted in the reversal of expense of $17,609.

        As of March 31, 2020, the total future unrecognized compensation cost related to outstanding unvested restricted stock was $250,271 and will be either recognized as compensation expense over a weighted-average period of approximately 2.1 years or capitalized as software development costs.

        For the fiscal years ended March 31, 2020, 2019 and 2018, the weighted average fair values of restricted stock units that vested were $219,007, $264,162 and $268,570, 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 3 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 2014 Management Agreement and the 2017 Management Agreement, we granted restricted stock units to ZelnickMedia (see Note 3 - Management Agreement) as follows:

	Fiscal Year Ended March 31,
	2020	2019
Time-based	92	86
Market-based(1)	168	158
Performance-based(1)
IP	28	27
Recurrent Consumer Spending ("RCS")	28	26
Total-Performance-based	56	53
Total Restricted Stock Units	316	297

(1) Represents the maximum number of shares eligible to vest.

        Time-based restricted stock units granted in fiscal year 2020 will vest on April 13, 2021, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2019 vested on April 13, 2020.

        Market-based restricted stock units granted in fiscal year 2020 are eligible to vest on April 13, 2021, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2019 vested on April 13, 2020. 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 2020 are eligible to vest on April 13, 2021, provided that the 2017 Management Agreement has not been terminated prior to such vesting date, and those granted in fiscal 2019 vested on April 13, 2020. 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 metric 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, 2020 for the "IP" and "RCS" performance-based restricted stock units granted in fiscal year 2019 and year fiscal 2020.

        The unvested portion of time-based, market-based and performance-based restricted stock units held by ZelnickMedia as of March 31, 2020 and 2019 were 613 and 526, respectively. During the fiscal year ended March 31, 2020, 209 restricted stock units previously granted to ZelnickMedia vested and 20 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, 2020, 2019 and 2018 was $115.01, $103.79 and $106.28 per share, respectively.

        For the fiscal years ended March 31, 2020, 2019 and 2018, 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 $92.65, $97.19 and $78.53 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, 2019	2,603	$	95.35
Granted	668	$	113.18
Vested	(1,243)	$	94.86
Forfeited	(68)	$	106.08
Non-vested restricted stock units at March 31, 2020	1,960	$	99.54

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,
	2020				2019				2018
	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	1.8	%	2.4	%	2.6	%	2.4	%	1.4	%	2.1	%
Expected stock price volatility	39.4	%	39.9	%	34.9	%	31.4	%	28.4	%	35.5	%
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, 2020, 2019, and 2018 was $201.07, $150.91, and $141.78 per share, respectively. For the fiscal years ended March 31, 2020, 2019, and 2018, the estimated value of the market-based restricted stock awards granted to ZelnickMedia was $132.50, $119.21, and $185.66 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, 2019	466	$	123.72
Granted	403	$	170.18
Vested	(489)	$	125.63
Forfeited	(22)	$	138.10
Non-vested restricted stock units at March 31, 2020	358	$	157.05

Performance-Based Awards

        The estimated value of performance-based restricted stock awards granted to employees during the fiscal year ended March 31, 2020, 2019, and 2018, was $124.50, $100.29, and $102.57 respectively. For the fiscal years ended March 31, 2020, 2019, and 2018, the estimated value of the performance-based restricted stock awards granted to ZelnickMedia was $92.65, $97.19, and $97.78 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, 2019	3,000	$	99.37
Granted	500	$	125.66
Vested	(233)	$	109.64
Forfeited	(28)	$	101.49
Non-vested restricted stock units at March 31, 2020	3,239	$	119.97

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, 2020, there were approximately 8,817 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

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,	Fiscal Year Ended March 31,
	2020	2019
Risk-free interest rate	1.6% - 2.4%	2.1% - 2.5%
Expected stock price volatility	28.1% - 45.6%	39.1% - 40.0%
Expected service period (years)	0.5	0.5
Dividends	None	None

        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. For the fiscal year ended March 31, 2019, our employees purchased 57 shares for $5,069 with a weighted-average fair value of $88.66.