ACQUISITIONS

12 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Zynga Acquisition

On May 23, 2022, we completed our acquisition of 100% of the issued and outstanding shares of Zynga, a leading developer of mobile games (the "Zynga Acquisition"). Under the terms and conditions of the merger agreement, each Zynga stockholder received $3.50 in cash and 0.0406 shares of our common stock and cash in lieu of fractional shares for each share of Zynga common stock outstanding at closing. Our consideration consisted of an aggregate of $3,992.4 in cash, 46.3 shares of our common stock, and $151.7 of replacement equity awards attributable to the pre-acquisition service period (see below). In connection with the transaction, on April 14, 2022, we completed our offering and sale of $2,700.0 aggregate principal amount of our Senior Notes (refer to Note 11 - Debt). The cash portion of the merger consideration was funded from our cash on hand, including the proceeds from our senior notes offering. Transaction costs of $139.5, $14.2, and $8.1 for the fiscal year ended March 31, 2023 have been recorded within General and administrative expense, Research and development, and Selling and marketing, respectively, in our Consolidated Statements of Operations.

We acquired Zynga as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property and to diversify and strengthen further our mobile offerings.

The acquisition-date fair value of the consideration totaled $9,521.8, which consisted of the following:


	Fair value of purchase consideration
Cash	$	3,992.4
Common stock (46.3 shares)	5,377.7
Replacement equity awards	151.7
Total	$	9,521.8

We used the acquisition method of accounting and recognized assets acquired and liabilities assumed at their fair value as of the date of acquisition, with the excess recorded to goodwill. As we finalize our estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date). The following table summarizes the preliminary acquisition date fair value of net tangible and intangible assets acquired, net of liabilities assumed from Zynga:


	Fair Value		Weighted average useful life
Cash acquired	$	864.9	N/A
Accounts receivable	271.2		N/A
Prepaid expenses and other	194.4		N/A
Fixed assets	54.3		N/A
Right-of-use assets	92.7		N/A
Other tangible assets	67.1		N/A
Accounts payable	(78.5)		N/A
Accrued expenses and other current liabilities	(352.8)		N/A
Deferred revenue	(333.1)		N/A
Long-term debt	(1,653.1)		N/A
Deferred tax liabilities, net	(922.9)		N/A
Lease liabilities	(15.7)		N/A
Non-current lease liabilities	(131.6)		N/A
Other liabilities assumed	(61.5)		N/A
Intangible assets
Developed game technology	4,440.0		7
Branding and trade names	384.0		12
Game engine technology	261.0		4
User base	316.0		1
Developer relationships	57.0		4
Advertising technology	43.0		3
Customer relationships	31.0		5
Goodwill	5,994.4		N/A
Total	$	9,521.8

Convertible Notes and Related Capped Calls

Refer to Note 11 - Debt for a discussion of the Convertible Notes and related Capped Calls that were previously issued by Zynga.

Identifiable Intangible Assets Acquired and Goodwill

The preliminary fair value estimates of Developed game technology, certain Game engine technology, and Advertising technology were estimated using the multi-period excess earnings method. The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the Developed game technology, Advertising technology, and Game engine technology intangible assets, respectively, net of charges for the use of other identifiable assets of the business including working capital, fixed assets and other intangible assets. Key assumptions and estimates used in deriving the projected cash flows are forecasted revenue, EBITDA margin growth, long-term decay rate, and discount rate. The amortization for these intangible assets has been recorded to Cost of revenue in our Consolidated Statements of Operations.

The preliminary fair value estimate of Branding and trade names was estimated using the relief-from-royalty method, which presumes the owner of the asset avoids hypothetical royalty payments that would need to be made for the use of the asset if the asset was not owned. Key assumptions and estimates used are forecasted revenue, royalty rates, and discount rate. The amortization for the Branding and trade names intangible asset has been recorded to Depreciation and amortization in our Consolidated Statements of Operations.

The preliminary fair value estimate of User base and certain Game engine technology was estimated using the replacement cost method. The replacement cost methodology is a cost approach methodology based on replacement or

reproduction cost of the User Base as an indicator of fair value. The key assumption and estimate used is the hypothetical replacement or reproduction cost. The amortization for the User base intangible asset has been recorded to Selling and marketing in our Consolidated Statements of Operations.

The preliminary fair value estimate of Developer relationships and Customer relationships were estimated using the with and without method, which is a form of the income approach. The with and without method considers the hypothetical impact to the projected cash flows of the business if the asset were not in place. Key assumptions and estimates used are forecasted revenue and expenses as well as discount rate. The amortization for the Developer relationships and Customer relationships intangible assets have been recorded to Research and development and Selling and marketing, respectively, in our Consolidated Statements of Operations.

The $5,994.4 of goodwill recognized, 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.

Zynga Revenue and Earnings

The amounts of revenue and earnings of Zynga included in our Consolidated Statement of Operations from the acquisition date are as follows:


	Fiscal Year Ended March 31, 2023
Net revenue	$	2,159.2
Net loss	1,139.7

Pro-forma Financial Information

The following table summarizes the pro-forma consolidated results of operations (unaudited) for the fiscal year ended March 31, 2023 and 2022, as though the acquisition had occurred on April 1, 2021, the beginning of fiscal year 2022, and Zynga had been included in our consolidated results for the entire periods subsequent to that date.


	Fiscal Year Ended March 31,
	2023		2022
Pro-forma Net revenue	$	5,728.1	$	6,313.1
Pro-forma Net loss	766.7		621.5

The unaudited pro-forma consolidated results above are based on the historical financial statements of Take-Two and Zynga and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal year 2022 and are not indicative of the future operating results of the combined company. The unaudited pro-forma information for all periods presented includes the following adjustments, where applicable, for business combination accounting effects resulting from the acquisition: (i) alignment of Zynga's accounting policy with Take-Two’s revenue accounting policy regarding the timing of recognition of consumable and durable virtual items, (ii) additional interest expense related to financing for the acquisition, (iii) additional incremental stock-based compensation expense for the replacement of Zynga’s outstanding equity awards with Take-Two replacement equity awards, (iv) alignment of Zynga's accounting policy with Take-Two’s policy to expense certain royalty prepayments until technological feasibility is established, (v) additional amortization expense related to finite-lived intangible assets acquired, and (vi) the related tax effects assuming that the business combination occurred on April 1, 2021.

The significant nonrecurring adjustments reflected in the unaudited pro-forma consolidated information above include the reclassification of the transaction costs and the related tax effects incurred after the acquisition to the earliest period presented.

Popcore Acquisition

On November 16, 2022, we completed the acquisition of 100% of Popcore GmbH ("Popcore"), a privately-held Germany-based free-to-play mobile game developer, for initial consideration of $116.9 in cash, 0.6 shares of our common stock, and a contingent earn-out consideration arrangement that requires us to pay up to an aggregate of $105.0 in cash if Popcore achieves certain performance measures over each of the three calendar years following the closing. The cash portion was funded from our cash on hand.

We acquired Popcore as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property and to diversify and strengthen further our mobile offerings.

The acquisition-date fair value of the consideration totaled $198.0, which consisted of the following:


	Fair value of purchase consideration
Cash	$	116.9
Common stock (0.6 shares)	57.8
Contingent earn-out	23.3
Total	$	198.0

The fair value of the contingent earn-out consideration arrangement at the acquisition date was $23.3. We estimated the fair value of the contingent earn-out consideration using a Monte Carlo simulation model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. (Refer to Note 4 - Fair Value Measurements.)

We used the acquisition method of accounting and recognized assets and liabilities 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, as 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 Popcore:


	Fair Value		Weighted average useful life
Cash acquired	$	32.5	N/A
Other tangible assets	23.6		N/A
Other liabilities assumed	(74.3)		N/A
Intangible assets
Developed game technology	113.0		5
Game engine technology	27.7		4
Branding and trade names	3.4		7
Goodwill	72.1		N/A
Total	$	198.0

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 Popcore included in our Consolidated Statement of Operations from the acquisition date are as follows:


	Fiscal Year Ended March 31, 2023
Net revenue	$	73.3
Net loss	8.3

Supplemental pro-forma financial information has not been provided as the historical results of Popcore were not material to us.

Transaction costs of $2.9 for the fiscal year ended March 31, 2023 have been recorded within General and administrative expense in our Consolidated Statements of Operations.