Take-Two Interactive Software(TTWO) - 2023 Q3 - Quarterly Report

Acquisition and Financing - The acquisition of Zynga was completed on May 23, 2022, for a total consideration of $9,521.8 million, including $3,992.4 million in cash and $5,377.7 million in common stock[171]. - The company issued $2,700.0 million in senior notes to finance part of the Zynga acquisition, with interest rates ranging from 3.300% to 4.000%[173][174]. - The company completed the offering of $2,700.0 million in senior notes on April 14, 2022, to finance part of the Zynga acquisition[259]. - The 2022 Credit Agreement provides a $500.0 million unsecured revolving credit facility, with additional capacity based on 35.0% of the company's Consolidated Adjusted EBITDA[175]. - The 2022 Credit Agreement provides for a $500.0 million unsecured revolving credit facility, with no borrowings as of December 31, 2022, leaving approximately $499.5 million available[263]. - The company incurred $321.6 million for the tendered or converted 2024 Convertible Notes and $845.1 million for the 2026 Convertible Notes[178]. Revenue and Financial Performance - Net revenue for the three months ended December 31, 2022, was $1,407.8 million, a 55.9% increase from $903.3 million in the prior year period[207]. - Total net revenue for the nine months ended December 31, 2022, was $3,903.7 million, a 51.6% increase from $2,574.8 million in the prior year[232]. - Net revenue from digital online channels comprised 94.6% of total net revenue for the nine months ended December 31, 2022, highlighting the shift towards digital distribution[196]. - Net revenue from mobile games increased by $1,519.7 million, accounting for 46.6% of total net revenue for the nine months ended December 31, 2022, compared to 11.7% in the prior year[233]. - Net revenue from recurrent consumer spending rose by $567.6 million, representing 79.2% of total net revenue, up from 60.6% in the prior year[210]. - The acquisition of Zynga contributed $631.2 million to net revenue, with top contributors including Empires & Puzzles and Toon Blast[207]. - Sales of Grand Theft Auto products accounted for 15% of net revenue for the nine months ended December 31, 2022[191]. - Net revenue from the United States was $886.8 million, representing 63.0% of total net revenue, compared to 59.2% in the prior year[212]. - Net revenue earned outside of the United States increased by $459.3 million, accounting for 38.2% of total net revenue for the nine months ended December 31, 2022[237]. Expenses and Losses - The company experienced a net loss of $153.4 million for the three months ended December 31, 2022, compared to a net income of $144.6 million in the prior year[206]. - The net loss for the nine months ended December 31, 2022, was $514.4 million, compared to a net income of $307.1 million in the prior year, with diluted loss per share at $3.27[256]. - Total operating expenses for the three months ended December 31, 2022, were $888.8 million, a 122.9% increase from $398.8 million in the prior year[213]. - Total operating expenses for the nine months ended December 31, 2022, were $2,524.9 million, representing 64.7% of net revenue, a 130.9% increase from $1,093.3 million (42.5% of net revenue) in the prior year[238]. - Selling and marketing expenses increased by $311.4 million for the three months ended December 31, 2022, primarily due to marketing expenses from the Zynga acquisition and higher personnel costs[214]. - Selling and marketing expenses increased by $787.9 million (210.0%) to $1,163.1 million, primarily due to marketing expenses from the Zynga acquisition and higher personnel costs[239]. - Research and development expenses rose by $121.5 million for the three months ended December 31, 2022, mainly due to increased personnel expenses and production costs related to Zynga[215]. - Research and development expenses rose by $344.7 million (111.0%) to $655.2 million, driven by increased personnel expenses and production costs related to Zynga[240]. - General and administrative expenses increased by $38.1 million for the three months ended December 31, 2022, driven by higher personnel expenses, rent, and professional fees associated with the Zynga acquisition[216]. - General and administrative expenses increased by $257.6 million (71.0%) to $620.6 million, mainly due to professional fees and additional headcount related to the Zynga acquisition[241]. - Interest and other net expenses rose to $28.3 million for the three months ended December 31, 2022, compared to $5.6 million in the prior year, primarily due to interest expenses related to the Zynga acquisition[219]. - Interest and other net expenses were $108.1 million for the nine months ended December 31, 2022, compared to $7.2 million in the prior year, largely due to interest expenses from various debt instruments related to the Zynga acquisition[244]. Market and Strategic Initiatives - Zynga's game franchises have been downloaded over 6 billion times, including popular titles like FarmVille and Words With Friends[187]. - The company expects to continue developing successful franchises under its 2K label, including the NBA 2K series, which remains the top-ranked NBA basketball video game[185]. - The company aims to capitalize on the popularity of video games by creating high-quality interactive entertainment franchises across various platforms[181]. - The company continues to expand its distribution strategy in Asia, particularly in China and South Korea, with NBA 2K Online having over 55 million registered users[189]. - The company is expanding its mobile gaming efforts, with a focus on increasing profitability through direct-to-consumer strategies[197]. - The company plans to enhance its cybersecurity measures following a network intrusion incident in September 2022[179]. Economic and Operational Risks - The economic environment, including the impact of COVID-19, continues to pose risks to the company's operations and customer base[192]. - The company monitors player acquisition costs closely, which may impact operating results if they become less effective or more expensive over time[198]. - The company's five largest customers represented 79.7% of net revenue during the nine months ended December 31, 2022, indicating a high customer concentration risk[194]. - Net revenue earned outside the United States was 37.0% for the three months ended December 31, 2022, down from 40.8% in the same period of 2021[276].