STOCK-BASED COMPENSATION

12 Months Ended

Mar. 31, 2024

Share-Based Payment Arrangement [Abstract]

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 25.7, subject to adjustment as set forth in the 2017 Plan, and, as of March 31, 2024, there were approximately 10.5 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 ZMC 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,
	2024		2023		2022
Cost of revenue	$	24.4	$	(9.5)	$	48.4
Selling and marketing	95.3		95.2		30.0
General and administrative	111.5		115.5		66.5
Research and development	104.4		116.6		38.1

Stock-based compensation expense before income taxes	335.6		317.8		183.0
Provision for (benefit from) income taxes	(12.2)		(45.8)		(35.4)
Stock-based compensation expense, net of income tax benefit	323.4		272.0		147.6
Capitalized stock-based compensation expense	$	85.4	$	74.4	$	82.1

During the fiscal year ended March 31, 2024, the forfeiture of awards resulted in the reversal of expense of $2.4 and amounts capitalized as software development costs of $7.4. During the fiscal year ended March 31, 2023, the forfeiture of awards resulted in the reversal of expense of $49.5 and amounts capitalized as software development costs of $11.9. During the fiscal year ended March 31, 2022, the forfeiture of awards resulted in the reversal of expense of $0.7 and amounts capitalized as software development costs of $3.2.

As of March 31, 2024, the total future unrecognized compensation cost related to outstanding unvested restricted stock was $684.2 and will be either recognized as compensation expense over a weighted-average period of approximately 2.4 years or capitalized as software development costs.

For the fiscal years ended March 31, 2024, 2023, and 2022, the total fair values of restricted stock units that vested were $309.3, $321.8, and $208.6, respectively.

In connection with the Zynga Acquisition (see Note 20 - Acquisitions), (i) the outstanding and unexercised options to purchase Zynga common stock were assumed by the Company and automatically converted into options exercisable for shares of Take-Two common stock (the “Converted Options”), (ii) the issued and outstanding restricted stock unit awards with respect to Zynga common stock were assumed by the Company and automatically converted into a Take-Two restricted stock unit award with respect to shares of Take-Two common stock (the “Converted RSUs”), and (iii) the issued and outstanding performance stock unit awards with respect to Zynga common stock were assumed by the Company and automatically converted into a Take-Two restricted stock unit award with respect to shares of Take-Two common stock (the “Converted PSUs” and together with the Converted Options and the Converted RSUs, the “Converted Awards”). As a result, we issued replacement equity options and PSU/RSU awards of 1.5 and 4.2, respectively. The portion of the fair value related to pre-combination services of $151.7 was included in the purchase price, and $28.6 was recognized as day-one post-combination expense for acceleration of awards, while the remaining fair value will be recognized over the remaining service periods. As of March 31, 2024, the future expense for the Converted RSUs and Converted PSUs was approximately $114.9, which will be recognized over a weighted average service period of approximately 1.0 years. As of March 31, 2024, the future expense for the Converted Options was approximately $0.1, which will be recognized over a weighted average service period of approximately 0.3 years.

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 or four 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.

ZMC Non-Employee Awards

In connection with the 2022 Management Agreement and the 2017 Management Agreement, we granted restricted stock units (in thousands) to ZMC (see Note 3 - Management Agreement) as follows:


	Fiscal Year Ended March 31,
	2024	2023
Time-based	97	192
Market-based(1)	295	510
Performance-based(1)
IP	—	18
Recurrent Consumer Spending ("RCS")	98	153
Total Performance-based	98	171
Total Restricted Stock Units	490	873

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

Time-based restricted stock units granted in fiscal year 2024 pursuant to the 2022 Management Agreement will vest on May 31, 2024, May 30, 2025, and June 1, 2026, and those granted in fiscal year 2023 pursuant to the 2022 Management Agreement, vested in part on June 1, 2023 and will also vest in part on May 31, 2024, and May 30, 2025. Time-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement vested on April 12, 2024.

Market-based restricted stock units granted in fiscal year 2024 pursuant to the 2022 Management Agreement are eligible to vest on June 1, 2026, and those granted in fiscal year 2023 pursuant to the 2022 Management Agreement are eligible to vest on May 31, 2024 and May 30, 2025. Market-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement vested on April 12, 2024. Market-based restricted stock units are eligible to vest based on the Company's 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 either the NASDAQ Composite Index under the 2017 Management Agreement or the NASDAQ 100 index under the 2022 Management Agreement (as defined in the relevant grant agreement) as of the grant date measured over a two-year period or three-year period, as applicable. 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 the 75th percentile.

Performance-based restricted stock units granted in fiscal year 2024 pursuant to the 2022 Management Agreement are eligible to vest on June 1, 2026, and those granted in fiscal year 2023 pursuant to the 2022 Management Agreement are eligible to vest on May 31, 2024 and May 30, 2025. Performance-based restricted stock units granted in fiscal year 2023 pursuant to the 2017 Management Agreement vested on April 12, 2024. The performance-based restricted stock units, of which certain are tied to "IP" and "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" measured over a two-year period or "RCS" measured over a two-year or three-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.

The unvested portion of time-based, market-based and performance-based restricted stock units held by ZMC as of March 31, 2024 and 2023 were 1.3 and 1.1, respectively. During the fiscal year ended March 31, 2024, 0.2 restricted stock units previously granted to ZMC vested, and 0.0 restricted stock units were forfeited by ZMC.

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, 2024, 2023, and 2022 was $138.25, $118.17, and $180.97 per share, respectively.

For the fiscal years ended March 31, 2024, 2023, and 2022, the estimated value, based on the closing price of our stock on the grant date, of time-based restricted stock awards granted to ZMC was $137.59, $128.90, and $182.66 per share, respectively.

The following table summarizes the activity in non-vested restricted stock units to employees and ZMC 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 millions)	Weighted Average Fair Value on Grant Date
Non-vested restricted stock units at March 31, 2023	5.1	$	126.34
Granted	1.6	138.21
Vested	(1.9)	130.24
Forfeited	(0.4)	123.03
Non-vested restricted stock units at March 31, 2024	4.4	$	129.33

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,
	2024		2023		2022
	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	4.0%	4.0%	2.6-2.8%	2.4-2.8%	0.1	%	0.2	%
Expected stock price volatility	36.6%	36.6%	35.9-37.6%	34.2-37.6%	37.3	%	36.3	%
Expected service period (years)	2.8	2.8	1.8-2.8	1.8-2.8	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, 2024, 2023, and 2022 was $195.85, $179.93, and $292.76 per share, respectively. For the fiscal years ended March 31, 2024, 2023, and 2022, the estimated value of the market-based restricted stock awards granted to ZMC was $193.41, $175.12, and $293.32 per share, respectively.

The following table summarizes the activity in non-vested restricted stock units to employees and ZMC 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 millions)	Weighted Average Fair Value on Grant Date
Non-vested restricted stock units at March 31, 2023	0.7	$	183.72
Granted	0.5	195.03
Vested	(0.2)	276.07
Forfeited	(0.1)	218.49
Non-vested restricted stock units at March 31, 2024	0.9	$	172.66

Performance-Based Awards

The estimated value of performance-based restricted stock awards granted to employees during the fiscal year ended March 31, 2024, 2023, and 2022 was $139.21, $125.03, and $176.05, respectively. For the fiscal years ended March 31, 2024, 2023, and 2022, the estimated value of the performance-based restricted stock awards granted to ZMC was $148.42, $125.90, and $182.66 per share, respectively.

The following table summarizes the activity in non-vested restricted stock units to employees and ZMC 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 millions)	Weighted Average Fair Value on Grant Date
Non-vested restricted stock units at March 31, 2023	3.9	$	113.28
Granted	0.2	141.90
Vested	(0.1)	166.02
Forfeited	(0.1)	151.67
Non-vested restricted stock units at March 31, 2024	3.9	$	113.58

Fair Value of Stock Options

All Converted Options generally vest over four to five years, with 20% to 25% vesting after one year and the remainder vesting monthly thereafter over 26 to 48 months, respectively. The stock options have a contract term of 10 years and the related expense is determined using the Black-Scholes option pricing model on the date of grant.

The following table shows stock option activity for the fiscal year ended March 31, 2024:


	Shares (in millions)	Weighted Average Fair Value on Grant Date		Aggregate Intrinsic Value of Stock Options Outstanding		Weighted Average Contractual Term (In Years)
Balance as of March 31, 2023	0.7	$	49.54	$	46.51	4.53
Granted	—	—
Vested	(0.1)	38.68
Forfeited	—	34.68
Balance as of March 31, 2024	0.6	$	50.50	$	61.85	3.45
As of March 31, 2024
Exercisable options	0.6	$	50.02	$	61.72	3.45
Vested and expected to vest	—	$	44.59	$	0.13	6.51

The following table presents the weighted-average grant date fair value and related assumptions used to estimate the fair value of our stock options converted during the fiscal year ended March 31, 2023. We had no stock options converted or granted in the fiscal year ended March 31, 2024:


						Fiscal Year Ended March 31,
						2023
Risk-free interest rate						0.6-2.8%
Expected stock price volatility						36.0-46.5%
Expected service period (years)						0.1-5.1
Dividends						None

The aggregate intrinsic value of stock options exercised during the fiscal year ended March 31, 2024 was $4.6. For the fiscal year ended March 31, 2024, the amount of cash received from exercise of stock options was $1.5. The total fair value of options that vested during the fiscal year ended March 31, 2024 was $1.5. The total fair value of options that were exercised during the fiscal year ended March 31, 2024 was $6.1.

During the fiscal year ended March 31, 2024, total unrecognized stock-based compensation expense of $0.1 related to unvested stock options is expected to be recognized over a weighted-average recognition period of approximately 0.28 years.

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 9.0, and as of March 31, 2024, there were approximately 7.9 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 15% 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 historical stock price volatility. 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,
	2024	2023
Risk-free interest rate	5.14-5.51%	1.4-4.6%
Expected stock price volatility	26.3-39.1%	27.7%
Expected service period (years)	0.5	0.5
Dividends	None	None

For the fiscal year ended March 31, 2024, our employees purchased 0.4 shares for $37.9 with a weighted-average fair value of $102.19. For the fiscal year ended March 31, 2023, our employees purchased 0.2 shares for $22.1 with a weighted-average fair value of $101.15.