TAKE TWO INTERACTIVE SOFTWARE INC

Previous wording

The statements contained herein, which are not historical facts, including statements relating to Take-Two Interactive Software, Inc.'s ("Take-Two," the "Company," "we," "us," or similar pronouns) outlook, 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 our 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 risks relating to the timely release and significant market acceptance of our games; the risks of conducting business internationally, including as a result of unforeseen geopolitical events; the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio; the impact of inflation; volatility in foreign currency exchange rates; our dependence on key management and product development personnel; our dependence on our NBA 2K and Grand Theft Auto products and our ability to develop other hit titles; our ability to leverage opportunities on PlayStation®5 and Xbox Series X|S; factors affecting our mobile business, such as player acquisition costs; and the ability to maintain acceptable pricing levels on our games; and other risks included herein; as well as, but not limited to, the risks and uncertainties discussed under the heading "Risk Factors" included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025; and our other periodic filings with the Securities and Exchange Commission. All forward-looking statements are qualified by these cautionary statements and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Current wording

The statements contained herein, which are not historical facts, including statements relating to Take-Two Interactive Software, Inc.'s ("Take-Two," the "Company," "we," "us," or similar pronouns) outlook, 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 our 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 risks relating to the timely release and significant market acceptance of our games; the risks of conducting business internationally, including as a result of unforeseen geopolitical events; the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio; the impact of inflation; volatility in foreign currency exchange rates; our dependence on key management and product development personnel; our dependence on our NBA 2K and Grand Theft Auto products and our ability to develop other hit titles; our ability to leverage opportunities on PlayStation®5 and Xbox Series X|S; factors affecting our mobile business, such as player acquisition costs; the ability to maintain acceptable pricing levels on our games; and other risks included herein; as well as, but not limited to, the risks and uncertainties discussed under the heading "Risk Factors" included in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025 and our other periodic filings with the Securities and Exchange Commission. All forward-looking statements are qualified by these cautionary statements and speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Previous wording

We derive substantially all of our revenue from the sale of our interactive entertainment content, which includes the sale of internally developed software titles and software titles developed by third parties, the sale of in-game virtual items and advertising, and live services on console, mobile, and PC. Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs. We have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom ("U.K."), and the United States ("U.S.").

Current wording

We derive substantially all of our revenue from the sale of our interactive entertainment content, which includes internally developed software titles and software titles developed by third parties, in-game virtual items and advertising, and live services on console, mobile, and PC. Operating margins are dependent in part upon our ability to release new, commercially successful software products and to manage effectively their development and marketing costs. We have internal development studios located in Australia, Canada, China, Czech Republic, Finland, Germany, Hungary, India, Serbia, South Korea, Spain, Turkey, the United Kingdom ("U.K."), and the United States ("U.S.").

Previous wording

Rockstar Games. Rockstar Games' strategy is to develop a limited number of titles that are known for their quality and longevity in the market for which they can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases. Software titles published by our Rockstar Games label are primarily internally developed. We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto, L.A. Noire, Max Payne, Midnight Club, Red Dead Redemption, and other popular franchises, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment. We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 450 million units worldwide. Our most recent installment, Grand Theft Auto V, which was released in 2013, has sold-in over 215 million units worldwide and includes access to Grand Theft Auto Online. Rockstar Games offers its GTA+ membership program, which engages its player community with an array of rotating benefits, including access to classic Rockstar Games titles. Rockstar Games continues to invest in the franchise and announced that Grand Theft Auto VI is planned for release on May 26, 2026, during our fiscal year 2027. The label released its first trailer for the title in December 2023 and the second in May 2025, and will share more details in the future. Red Dead Redemption 2, which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 75 million units worldwide to date. Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and providing additional content. Rockstar Games' titles are published across all key platforms, including mobile.

Current wording

Rockstar Games. Rockstar Games' strategy is to develop a limited number of titles that are known for their quality and longevity in the market for which they can create sequels and incremental revenue opportunities through virtual currency, add-on content, and in-game purchases. Software titles published by our Rockstar Games label are primarily internally developed. We expect Rockstar Games, our wholly-owned publisher of the Grand Theft Auto, L.A. Noire, Max Payne, Midnight Club, Red Dead Redemption, and other popular franchises, to continue to be a leader in the action/adventure product category and to create groundbreaking entertainment. We believe that Rockstar Games has established a uniquely original, popular, cultural phenomenon with its Grand Theft Auto series, which is the interactive entertainment industry's most iconic and critically acclaimed brand and has sold-in over 455 million units worldwide. Our most recent installment, Grand Theft Auto V, which was released in 2013, has sold-in over 220 million units worldwide and includes access to Grand Theft Auto Online. Rockstar Games offers its GTA+ membership program, which engages its player community with an array of rotating benefits, including access to classic Rockstar Games titles. Rockstar Games continues to invest in the franchise and announced that Grand Theft Auto VI is planned for release on November 19, 2026, during our fiscal year 2027. The label released its first trailer for the title in December 2023 and the second in May 2025, and will share more details in the future. Red Dead Redemption 2, which has been a critical and commercial success that set numerous entertainment industry records, has sold-in more than 75 million units worldwide. Rockstar Games continues to expand on its established series by developing sequels, offering downloadable episodes, and providing additional content. Rockstar Games' titles are published across all key platforms, including mobile.

Previous wording

Zynga. Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising. Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft and worldwide launch based on the achievement of various milestones and key performance indicator (KPI) thresholds. Zynga's diverse portfolio of popular game franchises has been downloaded more than six billion times, including CSR Racing, Dragon City, Empires & Puzzles, FarmVille, Game of Thrones: Legends, Golf Rival, Harry Potter: Puzzles & Spells, Match Factory!, Merge Dragons!, Merge Magic!, Monster Legends, Toon Blast, Top Eleven, Toy Blast, Two Dots, Words With Friends, Zynga Poker, and a high volume of hyper-and hybrid-casual mobile titles, including Color Block Jam, Fill the Fridge!, Power Slap, Pull the Pin, Screw Jam, and Twisted Tangle.

Current wording

Zynga. Our Zynga label publishes popular free-to-play mobile games that deliver high quality, deeply engaging entertainment experiences and generates revenue from in-game sales and in-game advertising. Zynga's strategy is to have numerous games in concept development and to determine which titles are best suited for soft and worldwide launch based on the achievement of various milestones and key performance indicator (KPI) thresholds. Zynga's diverse portfolio of popular game franchises has been downloaded more than ten billion times, including CSR Racing, Dragon City, Empires & Puzzles, FarmVille, Game of Thrones: Legends, Golf Rival, Hair Challenge, Harry Potter: Puzzles & Spells, High Heels!, Match Factory!, Merge Dragons!, Merge Magic!, Monster Legends, Screw Jam, Seat Away, Toon Blast, Top Eleven, Toy Blast, Two Dots, Words With Friends, and Zynga Poker.

Previous wording

Product Release Schedule. Our financial results are affected by the timing of our product releases and the commercial success of our titles. Generally, a significant portion of our revenue has been derived from a few popular franchises, particularly around new releases within those franchises, some of which have annual or biennial releases. Additionally, our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 14.7% of our net revenue for the three months ended June 30, 2025. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. Rockstar plans to release Grand Theft Auto VI on May 26, 2026.

Current wording

Product Release Schedule. Our financial results are affected by the timing of our product releases and the commercial success of our titles. Generally, a significant portion of our revenue has been derived from a few popular franchises, particularly around new releases within those franchises, some of which have annual or biennial releases. Additionally, our Grand Theft Auto products in particular have historically accounted for a significant portion of our revenue. Sales of Grand Theft Auto products generated 12.0% of our net revenue for the six months ended September 30, 2025. The timing of our Grand Theft Auto product releases may affect our financial performance on a quarterly and annual basis. Rockstar plans to release Grand Theft Auto VI on November 19, 2026.

Previous wording

To date we have announced that, during the remainder of fiscal year 2026, 2K plans to release Mafia: The Old Country, NBA 2K26, Borderlands 4, and WWE 2K26.

Current wording

We have announced that, during the remainder of fiscal year 2026, 2K plans to release WWE 2K26.

Previous wording

Economic Environment and Retailer Performance. We continue to monitor various macroeconomic and geopolitical factors, such as global tariff policies, that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates. Actions we have taken to date and other potential actions we may take in the future in response to these factors could result in negative impacts in future periods.

Current wording

Economic Environment and Retailer Performance. We continue to monitor various macroeconomic and geopolitical factors, such as global tariff policies, that may affect our business in several areas, including consumer demand, inflation, pricing pressure on our products and third party hardware platforms, credit quality of our receivables, and foreign currency exchange rates. Actions we have taken to date and other potential actions we may take in the future in response to these factors could result in negative impacts in future periods.

Previous wording

Hardware Platforms. We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties. Such console revenue comprised 36.6% of our net revenue for the three months ended June 30, 2025. The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms, which could be impacted by global economic factors, including global tariff policies. When new hardware platforms are introduced, demand for interactive entertainment developed for older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles). The inclusion of such features on new consoles could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products. Further, events beyond our control may impact the availability of these new consoles, which may also affect demand for our products. 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 for these platforms is to focus our development efforts on a select number of the highest quality titles.

Current wording

Hardware Platforms. We derive a substantial portion of our revenue from the sale of products made for video game consoles manufactured by third parties. Such console revenue comprised 38.8% of our net revenue for the six months ended September 30, 2025. The success of our business is dependent upon consumer acceptance of these platforms and the continued growth in the installed base of these platforms, which could be impacted by global economic factors, including global tariff policies. When new hardware platforms are introduced, demand for interactive entertainment developed for older platforms typically declines, which may negatively affect our business during the market transition to the new consoles. The latest Sony and Microsoft consoles provide "backwards compatibility" (i.e., the ability to play games for the previous generation of consoles). The inclusion of such features on new consoles could mitigate the risk of such a decline. However, we cannot be certain how backwards compatibility will affect demand for our products. Further, events beyond our control may impact the availability of these new consoles, which may also affect demand for our products. 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 for these platforms is to focus our development efforts on a select number of the highest quality titles.

Previous wording

Online Content and Digital Distribution. We provide a variety of online delivered products, including direct digital downloads of our titles, and access to additional offerings through virtual currency, add-on content, in-game purchases, and in-game advertising, which drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles. Net revenue from digital online channels comprised 98.2% of our net revenue for the three months ended June 30, 2025. We expect online delivery of games and game offerings to continue to be the primary part of our business over the long term.

Current wording

Online Content and Digital Distribution. We provide a variety of online delivered products, including direct digital downloads of our titles, and access to additional offerings through virtual currency, add-on content, in-game purchases, and in-game advertising, which drive ongoing engagement and incremental revenue from recurrent consumer spending on our titles. Net revenue from digital online channels comprised 96.7% of our net revenue for the six months ended September 30, 2025. We expect online delivery of games and game offerings to continue to be the primary part of our business over the long term.

Previous wording

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:

Current wording

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, and publisher incentives. Net Bookings were as follows:

Previous wording

For the three months ended June 30, 2025, Net Bookings increased as compared to the prior year period. The increase was primarily due to an increase in Net Bookings from our NBA 2Kfranchise and Color Block Jam, which released in November 2024.

Current wording

For the six months ended September 30, 2025, Net Bookings increased as compared to the prior year period. The increase was primarily driven by higher Net Bookings from our NBA 2Kand Borderlands franchises, Color Block Jam, and our Mafia franchise.

Previous wording

(1) Includes $(41.0) and $2.9 of stock-based compensation expense in 2025 and 2024, respectively, in software development costs and royalties.

Current wording

(1) Includes $4.8 and $3.1 of stock-based compensation expense in 2025 and 2024, respectively, in software development costs and royalties.

Previous wording

For the three months ended June 30, 2025, net revenue increased by $165.6 as compared to the prior year period. The increase was primarily due to increases in net revenue of $76.0 from Color Block Jam, which released in November 2024 and $72.8 from our NBA 2Kfranchise.

Current wording

For the three months ended September 30, 2025, net revenue increased by $420.7 as compared to the prior year period. The increase was primarily driven by higher net revenue of (i) $148.7 from our Borderlands franchise, the latest installment of which, Borderlands 4, released in September 2025, (ii) $127.9 from our NBA 2Kfranchise, (iii) $72.8 from Color Block Jam, which released in November 2024, and (iv) $55.9 from our Mafia franchise, the latest installment of which, Mafia: The Old Country released in August 2025.

Previous wording

Net revenue from mobile increased by $79.2 and accounted for 53.3% of our total net revenue for the three months ended June 30, 2025, as compared to 54.0% for the prior year period. The increase was primarily due to an increase in net revenue from Color Block Jam. Net revenue from console games increased by $41.7 and accounted for 36.6% of our total net revenue for the three months ended June 30, 2025, as compared to 38.0% for the prior year period. The increase in net revenue from console games was primarily due to an increase in net revenue from our NBA 2Kfranchise. Net revenue from PC and other increased by $44.7 and accounted for 10.1% of our total net revenue for the three months ended June 30, 2025, as compared to 8.0% for the prior year period. The increase in net revenue from PC and other was primarily due to an increase in net revenue from our Grand Theft Autoand NBA 2K franchises.

Current wording

Net revenue from mobile increased by $81.4 and accounted for 46.3% of our total net revenue for the three months ended September 30, 2025, as compared to 54.7% for the prior year period. The increase was primarily driven by higher net revenue from Color Block Jam. Net revenue from console games increased by $228.9 and accounted for 40.6% of our total net revenue for the three months ended September 30, 2025, as compared to 36.3% for the prior year period. The increase was primarily driven by higher net revenue from our NBA 2K, Borderlands, and Mafia franchises. Net revenue from PC and other increased by $110.4 and accounted for 13.1% of our total net revenue for the three months ended September 30, 2025, as compared to 9.0% for the prior year period. The increase was primarily driven by higher net revenue from our Borderlands, Mafia, and NBA 2K franchises.

Previous wording

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising. Net revenue from RCS increased by $158.4 and accounted for 83.5% of net revenue for the three months ended June 30, 2025, as compared to 82.0% of net revenue for the prior year period. The increase in net revenue from RCS was primarily due to an increase in net revenue from Color Block Jamand our NBA 2Kfranchise. Net revenue from full game and other increased by $7.2 and accounted for 16.5% of net revenue for the three months ended June 30, 2025 as compared to 18.0% of net revenue for the prior year period. The increase in net revenue from full game and other was primarily due to an increase in net revenue from our Grand Theft Auto franchise. The increase was partially offset by a decrease in net revenue from TopSpin 2K25, which released in April 2024,.

Current wording

Recurrent consumer spending ("RCS") is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, in-game purchases, and in-game advertising. Net revenue from RCS increased by $196.9 and accounted for 71.9% of net revenue for the three months ended September 30, 2025, as compared to 79.7% of net revenue for the prior year period. The increase was primarily driven by higher net revenue from our NBA 2Kfranchise and Color Block Jam. Net revenue from full game and other increased by $223.8 and accounted for 28.1% of net revenue for the three months ended September 30, 2025 as compared to 20.3% of net revenue for the prior year period. The increase was primarily driven by higher net revenue from our Borderlandsand Mafia franchises.

Previous wording

Net revenue from digital online channels increased by $181.1 and accounted for 98.2% of our total net revenue for the three months ended June 30, 2025, as compared to 96.8% for the prior year period. The increase was primarily due to an increase in net revenue from our NBA 2Kfranchise and Color Block Jam. Net revenue from physical retail and other channels decreased by $15.5 and accounted for 1.8% of our total net revenue for the three months ended June 30, 2025, as compared to 3.2% for the same period in the prior year period. The decrease in net revenue from physical retail and other channels was primarily due to a decrease in net revenue from TopSpin 2K25; and our NBA 2K and WWE 2Kfranchises.

Current wording

Net revenue from digital online channels increased by $393.1 and accounted for 95.5% of our total net revenue for the three months ended September 30, 2025, as compared to 96.1% for the prior year period. The increase was primarily driven by higher net revenue from our NBA 2Kand Borderlands franchises, Color Block Jam, and our Mafia franchise. Net revenue from physical retail and other channels increased by $27.6 and accounted for 4.5% of our total net revenue for the three months ended September 30, 2025, as compared to 3.9% for the same period in the prior year period. The increase was primarily driven by higher net revenue from our Borderlandsand Mafia franchises, partially offset by lower net revenue from our NBA 2K franchise.

Previous wording

Gross profit as a percentage of net revenue for the three months ended June 30, 2025 was 62.9% as compared to 57.6% for the prior year period. The increase in gross profit as a percentage of net revenue was primarily due to (i) the reversal of expense related to the forfeiture of awards (refer to Note 10 - Loss Per Share) and (ii) lower amortization of intangibles assets primarily due to divestitures and impairments in the prior year, partially offset by the acquisition of Gearbox (refer to Note 13 - Acquisitions).

Current wording

Gross profit as a percentage of net revenue for the three months ended September 30, 2025 was 55.3% as compared to 53.8% for the prior year period. The increase in gross profit as a percentage of net revenue was primarily driven by (i) lower amortization of intangible assets primarily due to impairments in the prior year and (ii) lower product costs as a percentage of net revenues, partially offset by higher amortization of capitalized software and development costs primarily due to the timing of releases.

Previous wording

Changes in foreign currency exchange rates increased net revenue by $1.8 and increased gross profit by $10.9 for the three months ended June 30, 2025 as compared to the prior year period.

Current wording

Changes in foreign currency exchange rates increased net revenue by $2.5 and increased gross profit by $5.6 for the three months ended September 30, 2025 as compared to the prior year period.

Previous wording

Changes in foreign currency exchange rates increased total operating expenses by $12.0 for the three months ended June 30, 2025, as compared to the prior year period.

Current wording

Changes in foreign currency exchange rates increased total operating expenses by $6.0 for the three months ended September 30, 2025, as compared to the prior year period.

Previous wording

General and administrative expenses decreased by $3.5 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to decreases in transaction costs related to our Gearbox acquisition (refer to Note 13 - Acquisitions) and legal and settlement fees related to the IBM case against Zynga in the prior year, partially offset by higher personnel expense.

Current wording

General and administrative expenses decreased by $28.0 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by lower legal and settlement fees related to the IBM case against Zynga in the prior year, partially offset by higher personnel expense due to higher performance-based compensation.

Previous wording

Depreciation and amortization expenses increased by $5.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to increases in IT infrastructure expense and leasehold improvements for office buildouts.

Current wording

Depreciation and amortization expenses increased by $1.5 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher IT infrastructure expense and (ii) higher leasehold improvement expense for office buildouts, partially offset by lower amortization related to acquired intangible assets due to prior year impairments.

Previous wording

Business reorganization decreased by $53.7 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to the completion of the 2024 Plan. Business reorganization was $(4.2) for the three months ended June 30, 2025, primarily due to the recovery of previously incurred costs related to the termination of development of one of our titles in connection with the 2024 Plan.

Current wording

Business reorganization decreased by $16.7 for the three months ended September 30, 2025, as compared to the prior year period, primarily driven by the completion of the 2024 Plan.

Previous wording

Interest and other, net was expense of $35.4 for the three months ended June 30, 2025, as compared to expense of $27.3 for the prior year period. The net increase in expense was primarily due to an increase in foreign currency losses.

Current wording

Interest and other, net was an expense of $17.5 for the three months ended September 30, 2025, as compared to an expense of $27.1 for the prior year period. The net decrease in expense was primarily driven by lower interest expense related to our debt transactions (refer to Note 9 - Debt) and foreign currency gains in the current period compared to foreign currency losses in the prior year period.

Previous wording

The benefit from income taxes for the three months ended June 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred. The benefit from income taxes was $1.9 for the three months ended June 30, 2025, as compared to the provision for income taxes of $49.8 for the prior year period.

Current wording

The provision for income taxes for the three months ended September 30, 2025 is based on our projected annual effective tax rate for fiscal year 2026, adjusted for specific items that are required to be recognized in the period in which they are incurred. The provision for income taxes was $18.4 for the three months ended September 30, 2025, as compared to the provision for income taxes of $41.2 for the prior year period.

Previous wording

When compared to the statutory rate of 21%, the effective tax rate of 13.8% for the three months ended June 30, 2025 was primarily due to tax expense of $5.6 related to an increase in the U.S. and international valuation allowances and $2.9 by geographic mix of earnings and changes in reserves, offset by tax benefits of $4.9 from employee stock-based compensation, tax benefits of $2.6 from tax credits.

Current wording

When compared to the statutory rate of 21%, the effective tax rate of (15.9)% for the three months ended September 30, 2025 was primarily driven by tax expense of $33.7 related to an increase in the U.S. and international valuation allowances and $16.0 related to geographic mix of earnings and changes in reserves, offset by tax benefits of $10.3 from tax credits.

Previous wording

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (23.5)% for the three months ended June 30, 2024 was primarily due to a tax expense of $96.8 related to an increase in valuation allowance and tax expense of $8.2 related to geographic mix of earnings offset by benefits of $17.7 from tax credits.

Current wording

In the prior year period, when compared to the statutory rate of 21.0%, the effective tax rate of (12.7)% for the three months ended September 30, 2024 was due primarily to tax expense of $104.9 related to an increase in valuation allowance and tax expense of $9.9 related to geographic mix of earnings offset by benefits of $17.2 from tax credits.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act was signed into law and includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, accelerated deductions for domestic research expenditures and modifications to tax credits. The legislation has multiple effective dates, with certain provisions effective in fiscal year ending March 31, 2026 and others implemented in future periods. We are currently assessing its impact on our Consolidated Financial Statements

Current wording

On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law and includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, accelerated deductions for domestic research expenditures, permanently reinstating 100% bonus depreciation, and modifications to tax credits. The legislation has multiple effective dates, with certain provisions effective in fiscal year ending March 31, 2026 and others implemented in future periods. The impact of OBBB has been reflected in our estimated annualized effective tax rate, and reduced our forecasted U.S. cash tax liability. It did not, however, impact our U.S. deferred tax assets or liabilities since we continue to maintain a full valuation allowance against U.S. net deferred tax assets.

Previous wording

For the three months ended June 30, 2025, net loss was $11.9, as compared to a net loss of $262.0 in the prior year period. Basic and diluted loss per share for the three months ended June 30, 2025 was $0.07, as compared to basic and diluted loss per share of $1.52 in the prior year period. Basic weighted average shares of 180.8 were 8.5 shares higher as compared to the prior year period basic weighted average shares, primarily due to our equity issuance, as well as normal stock compensation activity, including vests, grants, and forfeitures in the prior year being fully outstanding in the current year. See Note 10 - Loss Per Share to our Condensed Consolidated Financial Statements for additional information.

Current wording

For the three months ended September 30, 2025, net loss was $133.9, as compared to a net loss of $365.5 in the prior year period. Basic and diluted loss per share for the three months ended September 30, 2025 was $0.73, as compared to basic and diluted loss per share of $2.08 in the prior year period. Basic weighted average shares of 184.6 were 9.2 shares higher as compared to the prior year period basic weighted average shares, primarily due to our equity issuance, as well as normal stock compensation activity, including vests, grants, and forfeitures in the prior year being fully outstanding in the current year. See Note 10 - Loss Per Share to our Condensed Consolidated Financial Statements for additional information.

Previous wording

Selling and marketing expenses decreased by $22.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to lower overall marketing expenses for Match Factory!, Screw Jam, Star Wars: Hunters, and Twisted Tangle, partially offset by (i) higher marketing expenses for Color Block Jam, with no corresponding expense in the prior year, and (ii) higher personnel expense due to increased headcount.

Current wording

Selling and marketing expenses increased by $52.7 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher personnel expense due to higher performance-based compensation and (ii) higher overall marketing expense for Color Block Jam and our Borderlands franchise, partially offset by lower overall marketing expenses for Match Factory!, Screw Jam, Game of Thrones: Legends, Star Wars: Hunters, and Twisted Tangle.

Previous wording

Research and development expenses increased by $41.6 for the three months ended June 30, 2025, as compared to the prior year period, primarily due to increases due to (i) the timing of tax related credits related to certain titles and (ii) higher personnel expense due to the acquisition of Gearbox in June 2024 (refer to Note 13 - Acquisitions).

Current wording

Research and development expenses increased by $62.9 for the six months ended September 30, 2025, as compared to the prior year period, primarily driven by (i) higher personnel expense due to the acquisition of Gearbox in June 2024 and higher performance-based compensation, and (ii) the timing of additional R&D related credits related to certain titles.

Previous wording

The change in the effective tax rate, when compared to the prior year period's effective tax rate, is primarily due to increased tax benefits from employee stock-based compensation, decreased tax benefits from tax credits, decreased tax expense from changes in the U.S. and international valuation allowance, and decreased tax expense from geographic mix of earnings.

Current wording

The change in the effective tax rate, when compared to the prior year period's effective tax rate, is primarily driven by lower tax expense from changes in the U.S. and international valuation allowance, lower tax benefits from tax credits, and lower tax benefits from employee stock-based compensation, offset by lower tax expense related to geographic mix of earnings and changes in reserves.

Previous wording

As of June 30, 2025, we had $10.1 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days. From time to time, we may make additional short-term investments depending on future market conditions and liquidity needs.

Current wording

As of September 30, 2025, we had $246.4 of short-term investments, which primarily consisted of bank time deposits with maturities greater than 90 days. From time to time, we may make additional short-term investments depending on future market conditions and liquidity needs.

Previous wording

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 83.5% and 83.1% of net revenue during the three months ended June 30, 2025 and 2024, respectively. We had four customers who accounted for 25%, 23%, 17%, and 13% of our net revenue as of June 30, 2025, and four customers who accounted for 25%, 24%, 19%, and 11% of our net revenue as of March 31, 2025. As of June 30, 2025 and March 31, 2025, five customers accounted for 75.2% and 72.1% of our gross accounts receivable, respectively. Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 61.0% and 61.0% of such balances at June 30, 2025 and March 31, 2025, respectively. We had three customers who accounted for 25.6%, 22.8%, and 12.6% of our gross accounts receivable as of June 30, 2025, and three customers who accounted for 24.0%, 21.3%, and 15.7% of our gross accounts receivable as of March 31, 2025. We did not have any additional customers that exceeded 10% of our gross accounts receivable as of June 30, 2025, and March 31, 2025. Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products, 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.

Current wording

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 81.5% and 82.2% of net revenue during the six months ended September 30, 2025 and 2024, respectively. We had four customers who accounted for 24.9%, 22.7%, 15.1%, and 12.4% of our net revenue as of September 30, 2025, and four customers who accounted for 25.6%, 22.5%, 18.6%, and 10.3% of our net revenue as of September 30, 2024. As of September 30, 2025 and March 31, 2025, five customers accounted for 78.3% and 72.1% of our gross accounts receivable, respectively. Customers that individually accounted for more than 10% of our gross accounts receivable balance comprised 64.9% and 61.0% of such balances at September 30, 2025 and March 31, 2025, respectively. We had three customers who accounted for 31.5%, 18.9%, and 14.4% of our gross accounts receivable as of September 30, 2025, and three customers who accounted for 24.0%, 21.3%, and 15.7% of our gross accounts receivable as of March 31, 2025. We did not have any additional customers that exceeded 10% of our gross accounts receivable as of September 30, 2025, and March 31, 2025. Based upon performing ongoing credit evaluations, maintaining trade credit insurance on a majority of our customers who sell our physical products, 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.

Previous wording

As of June 30, 2025, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $1,056.1. 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.

Current wording

As of September 30, 2025, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $1,432.2. 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.

Previous wording

At June 30, 2025, we had $2,116.2 of cash and cash equivalents and restricted cash and cash equivalents, compared to $1,559.2 at March 31, 2025. The increase was primarily due to Net cash provided by financing activities, primarily related to proceeds from our equity issuance of our common stock (refer to Note 10 -Loss Per Share), partially offset by the repayment of our 2025 Notes (refer to Note 9 - Debt). This net increase was partially offset by the decrease in (i) Net cash used in operating activities, which was primarily due to investments in software development and licenses, partially offset by sales of our products and (ii) Net cash used in investing activities which was primarily due to the purchase of fixed assets.

Current wording

At September 30, 2025, we had $1,961.0 of cash and cash equivalents and restricted cash and cash equivalents, compared to $1,559.2 at March 31, 2025. The increase was primarily due to Net cash provided by financing activities, primarily related to proceeds from our equity issuance of our common stock (refer to Note 10 - Loss Per Share), partially offset by the repayment of our 2025 Notes (refer to Note 9 - Debt). The increase was also due to Net cash provided by operating activities, which was primarily due to sales of our products, partially offset by investments in software development and licenses. This net increase was partially offset by the decrease in Net cash used in investing activities, which was primarily due to the purchase of short-term investments and fixed assets.

Previous wording

In fiscal year 2026, we anticipate capital expenditures to be approximately $140.0. During the three months ended June 30, 2025, capital expenditures were $25.1.

Current wording

In fiscal year 2026, we anticipate capital expenditures to be approximately $180.0. During the six months ended September 30, 2025, capital expenditures were $57.0.

Previous wording

Net revenue earned outside of the United States is principally generated by our operations in Europe, Asia, Australia, Canada, and Latin America. For the three months ended June 30, 2025 and 2024, 40.1% and 38.7%, respectively, of our net revenue was earned outside the U.S. 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.

Current wording

Net revenue earned outside of the United States is principally generated by our operations in Europe, Asia, Australia, Canada, and Latin America. For the three months ended September 30, 2025 and 2024, 41.6% and 39.8%, respectively, of our net revenue was earned outside the U.S. 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.