Netflix, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

?

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

?

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number: 001-35727

Netflix, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

77-0467272

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

100 Winchester Circle, Los Gatos, California

95032

(Address of principal executive offices)

(Zip Code)

(408) 540-3700

(Registrant��s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

NFLX

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90

days. Yes ? No ?

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T

(��232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ? No ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth

company. See the definitions of ��large accelerated filer,�� ��accelerated filer,�� ��smaller reporting company,�� and ��emerging growth company�� in Rule 12b-2 of the

Exchange Act.

Large Accelerated Filer

?

Accelerated filer

?

Non-accelerated filer

?

Smaller reporting company

?

Emerging growth company

?

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised

financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ?

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes ? No ?

As of June 30, 2020, there were 441,015,443 shares of the registrant��s common stock, par value $0.001, outstanding.

Table of Contents

Page

Part I. Financial Information

Item 1.

Consolidated Financial Statements

Consolidated Statements of Operations

3

Consolidated Statements of Comprehensive Income

4

Consolidated Statements of Cash Flows

5

Consolidated Balance Sheets

6

Consolidated Statements of Stockholders' Equity

7

Notes to Consolidated Financial Statements

8

Item 2.

Management��s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

Part II. Other Information

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

35

Item 6.

Exhibits

35

Exhibit Index

36

Signatures

36

2

Table of Contents

NETFLIX, INC.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

Three Months Ended

June 30,

2020

Revenues

$

June 30,

2019

4,923,116

$ 11,915,977

3,005,657

7,243,408

5,876,271

Marketing

434,370

603,150

938,200

1,219,728

Technology and development

435,045

383,233

888,862

755,997

277,236

224,657

529,323

426,609

1,357,928

706,419

2,316,184

1,165,503

General and administrative

Operating income

$

June 30,

2020

3,643,707

Cost of revenues

6,148,286

Six Months Ended

June 30,

2019

$

9,444,108

Other income (expense):

Interest expense

(189,151)

(152,033)

(373,234)

(287,562)

Interest and other income (expense)

(133,175)

(53,470)

(111,478)

22,634

Income before income taxes

Provision for income taxes

Net income

1,035,602

500,916

1,831,472

900,575

315,406

230,266

402,209

285,873

$

720,196

$

270,650

$

1,429,263

$

614,702

Basic

$

1.63

$

0.62

$

3.25

$

1.41

Diluted

$

1.59

$

0.60

$

3.15

$

1.36

Earnings per share:

Weighted-average common shares outstanding:

Basic

440,569

437,587

439,961

437,271

Diluted

453,945

452,195

453,220

452,063

See accompanying notes to the consolidated financial statements.

3

Table of Contents

NETFLIX, INC.

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

Three Months Ended

June 30,

2020

Net income

$

720,196

$

733,178

Six Months Ended

June 30,

2019

$

270,650

$

275,898

June 30,

2020

$

1,429,263

$

1,418,712

June 30,

2019

$

614,702

$

613,932

Other comprehensive income (loss):

Foreign currency translation adjustments

12,982

Comprehensive income

5,248

See accompanying notes to the consolidated financial statements.

4

(10,551)

(770)

Table of Contents

NETFLIX, INC.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Three Months Ended

June 30,

2020

Six Months Ended

June 30,

2019

June 30,

2020

June 30,

2019

Cash flows from operating activities:

Net income

$

720,196

$

270,650

$

1,429,263

$

614,702

Adjustments to reconcile net income to net cash provided by (used in) operating

activities:

Additions to content assets

Change in content liabilities

Amortization of content assets

(2,510,782)

(3,325,103)

(108,432)

(12,414)

2,607,159

Depreciation and amortization of property, equipment and intangibles

Stock-based compensation expense

Other non-cash items

(5,805,057)

(6,322,849)

150,513

2,231,915

(27,112)

5,090,544

4,356,601

26,661

25,496

55,178

49,057

104,210

103,848

201,229

205,048

106,403

70,301

60,695

135,749

Foreign currency remeasurement loss on debt

119,161

61,284

26,101

3,684

Deferred taxes

223,308

35,519

269,927

42,146

Changes in operating assets and liabilities:

Other current assets

(24,231)

(124,287)

(56,307)

Accounts payable

(112,027)

3,066

(2,674)

(261,180)

(127,141)

Accrued expenses and other liabilities

(105,450)

(26,705)

108,741

130,942

42,508

84,085

104,516

131,878

Deferred revenue

Other non-current assets and liabilities

(38,803)

Net cash provided by (used in) operating activities

(26,119)

1,041,076

(80,249)

(543,754)

(30,605)

1,300,988

(923,553)

Cash flows from investing activities:

Purchases of property and equipment

Change in other assets

Net cash used in investing activities

(141,741)

(39,584)

(239,756)

(99,965)

(260)

(10,452)

(548)

(30,174)

(142,001)

(50,036)

(240,304)

(130,139)

Cash flows from financing activities:

Proceeds from issuance of debt

1,009,464

Debt issuance costs

2,243,196

(7,559)

Proceeds from issuance of common stock

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

1,009,464

(18,192)

2,243,196

(7,559)

(18,192)

89,060

21,896

132,754

44,868

1,090,965

2,246,900

1,134,659

2,269,872

11,819

4,998

Net increase in cash, cash equivalents and restricted cash

2,001,859

1,658,108

2,136,260

1,216,164

Cash, cash equivalents and restricted cash at beginning of period

5,178,187

3,370,097

5,043,786

3,812,041

Cash, cash equivalents and restricted cash at end of period

$

7,180,046

$

See accompanying notes to the consolidated financial statements.

5

5,028,205

(59,083)

$

7,180,046

(16)

$

5,028,205

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