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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Netflix Inc | NASDAQ:NFLX | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
9.72 | 1.76% | 561.425 | 561.25 | 561.67 | 563.22 | 555.59 | 556.02 | 838,675 | 16:35:30 |
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
77-0467272
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
Large accelerated filer
|
x
|
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
|
Smaller reporting company
|
o
|
|
|
|
Emerging growth company
|
o
|
|
|
Page
|
|
Part I. Financial Information
|
|
Item 1.
|
|
|
|
|
|
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
Part II. Other Information
|
|
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
||
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
Revenues
|
$
|
4,520,992
|
|
|
$
|
3,700,856
|
|
Cost of revenues
|
2,870,614
|
|
|
2,300,579
|
|
||
Marketing
|
616,578
|
|
|
536,777
|
|
||
Technology and development
|
372,764
|
|
|
282,310
|
|
||
General and administrative
|
201,952
|
|
|
134,612
|
|
||
Operating income
|
459,084
|
|
|
446,578
|
|
||
Other income (expense):
|
|
|
|
||||
Interest expense
|
(135,529
|
)
|
|
(81,219
|
)
|
||
Interest and other income (expense)
|
76,104
|
|
|
(65,743
|
)
|
||
Income before income taxes
|
399,659
|
|
|
299,616
|
|
||
Provision for income taxes
|
55,607
|
|
|
9,492
|
|
||
Net income
|
$
|
344,052
|
|
|
$
|
290,124
|
|
|
|
|
|
||||
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.79
|
|
|
$
|
0.67
|
|
Diluted
|
$
|
0.76
|
|
|
$
|
0.64
|
|
Weighted-average common shares outstanding:
|
|
|
|
||||
Basic
|
436,947
|
|
|
434,174
|
|
||
Diluted
|
451,922
|
|
|
450,359
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
Net income
|
$
|
344,052
|
|
|
$
|
290,124
|
|
Other comprehensive income (loss):
|
|
|
|
||||
Foreign currency translation adjustments
|
(6,018
|
)
|
|
24,821
|
|
||
Comprehensive income
|
$
|
338,034
|
|
|
$
|
314,945
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
344,052
|
|
|
$
|
290,124
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
||||
Additions to streaming content assets
|
(2,997,746
|
)
|
|
(2,986,747
|
)
|
||
Change in streaming content liabilities
|
(14,698
|
)
|
|
378,885
|
|
||
Amortization of streaming content assets
|
2,124,686
|
|
|
1,748,844
|
|
||
Amortization of DVD content assets
|
8,509
|
|
|
11,134
|
|
||
Depreciation and amortization of property, equipment and intangibles
|
23,561
|
|
|
19,041
|
|
||
Stock-based compensation expense
|
101,200
|
|
|
68,395
|
|
||
Other non-cash items
|
37,199
|
|
|
8,209
|
|
||
Foreign currency remeasurement loss (gain) on long-term debt
|
(57,600
|
)
|
|
41,080
|
|
||
Deferred taxes
|
6,627
|
|
|
(22,049
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Other current assets
|
(32,076
|
)
|
|
(55,905
|
)
|
||
Accounts payable
|
(124,467
|
)
|
|
74,083
|
|
||
Accrued expenses and other liabilities
|
157,647
|
|
|
119,049
|
|
||
Deferred revenue
|
47,793
|
|
|
55,270
|
|
||
Other non-current assets and liabilities
|
(4,486
|
)
|
|
13,830
|
|
||
Net cash used in operating activities
|
(379,799
|
)
|
|
(236,757
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of DVD content assets
|
(9,170
|
)
|
|
(10,796
|
)
|
||
Purchases of property and equipment
|
(60,381
|
)
|
|
(37,170
|
)
|
||
Change in other assets
|
(10,552
|
)
|
|
(1,786
|
)
|
||
Net cash used in investing activities
|
(80,103
|
)
|
|
(49,752
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from issuance of common stock
|
22,972
|
|
|
56,335
|
|
||
Other financing activities
|
—
|
|
|
(321
|
)
|
||
Net cash provided by financing activities
|
22,972
|
|
|
56,014
|
|
||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(5,014
|
)
|
|
7,177
|
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
(441,944
|
)
|
|
(223,318
|
)
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
3,812,041
|
|
|
2,822,795
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
3,370,097
|
|
|
$
|
2,599,477
|
|
|
As of
|
||||||
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,348,557
|
|
|
$
|
3,794,483
|
|
Current content assets, net
|
—
|
|
|
5,151,186
|
|
||
Other current assets
|
820,350
|
|
|
748,466
|
|
||
Total current assets
|
4,168,907
|
|
|
9,694,135
|
|
||
Non-current content assets, net
|
20,888,785
|
|
|
14,960,954
|
|
||
Property and equipment, net
|
434,372
|
|
|
418,281
|
|
||
Other non-current assets
|
1,726,568
|
|
|
901,030
|
|
||
Total assets
|
$
|
27,218,632
|
|
|
$
|
25,974,400
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current content liabilities
|
$
|
4,863,351
|
|
|
$
|
4,686,019
|
|
Accounts payable
|
439,496
|
|
|
562,985
|
|
||
Accrued expenses and other liabilities
|
746,268
|
|
|
477,417
|
|
||
Deferred revenue
|
808,692
|
|
|
760,899
|
|
||
Total current liabilities
|
6,857,807
|
|
|
6,487,320
|
|
||
Non-current content liabilities
|
3,560,364
|
|
|
3,759,026
|
|
||
Long-term debt
|
10,305,023
|
|
|
10,360,058
|
|
||
Other non-current liabilities
|
792,380
|
|
|
129,231
|
|
||
Total liabilities
|
21,515,574
|
|
|
20,735,635
|
|
||
Commitments and contingencies (Note 6)
|
|
|
|
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Common stock, $0.001 par value; 4,990,000,000 shares authorized at March 31, 2019 and December 31, 2018; 437,191,891 and 436,598,597 issued and outstanding at March 31, 2019 and December 31, 2018, respectively
|
2,439,773
|
|
|
2,315,988
|
|
||
Accumulated other comprehensive loss
|
(25,600
|
)
|
|
(19,582
|
)
|
||
Retained earnings
|
3,288,885
|
|
|
2,942,359
|
|
||
Total stockholders’ equity
|
5,703,058
|
|
|
5,238,765
|
|
||
Total liabilities and stockholders’ equity
|
$
|
27,218,632
|
|
|
$
|
25,974,400
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
|
|
|
|
||||
Total stockholders' equity, beginning balances
|
|
$
|
5,238,765
|
|
|
$
|
3,581,956
|
|
|
|
|
|
|
||||
Common stock and additional paid-in capital:
|
|
|
|
|
||||
Beginning balances
|
|
$
|
2,315,988
|
|
|
$
|
1,871,396
|
|
Issuance of common stock upon exercise of options
|
|
22,585
|
|
|
55,434
|
|
||
Stock-based compensation expense
|
|
101,200
|
|
|
68,395
|
|
||
Ending balance
|
|
$
|
2,439,773
|
|
|
$
|
1,995,225
|
|
|
|
|
|
|
|
|
||
Accumulated other comprehensive income (loss):
|
|
|
|
|
||||
Beginning balances
|
|
$
|
(19,582
|
)
|
|
$
|
(20,557
|
)
|
Other comprehensive income
|
|
(6,018
|
)
|
|
24,821
|
|
||
Ending balance
|
|
$
|
(25,600
|
)
|
|
$
|
4,264
|
|
|
|
|
|
|
||||
Retained earnings:
|
|
|
|
|
||||
Beginning balances
|
|
$
|
2,942,359
|
|
|
$
|
1,731,117
|
|
Net income
|
|
344,052
|
|
|
290,124
|
|
||
Adoption of ASU 2016-02, Leases (Topic 842)
|
|
2,474
|
|
|
—
|
|
||
Ending balances
|
|
$
|
3,288,885
|
|
|
$
|
2,021,241
|
|
|
|
|
|
|
||||
Total stockholders' equity, ending balances
|
|
$
|
5,703,058
|
|
|
$
|
4,020,730
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
(in thousands, except per share data)
|
||||||
Basic earnings per share:
|
|
|
|
||||
Net income
|
$
|
344,052
|
|
|
$
|
290,124
|
|
Shares used in computation:
|
|
|
|
||||
Weighted-average common shares outstanding
|
436,947
|
|
|
434,174
|
|
||
Basic earnings per share
|
$
|
0.79
|
|
|
$
|
0.67
|
|
|
|
|
|
||||
Diluted earnings per share:
|
|
|
|
||||
Net income
|
$
|
344,052
|
|
|
$
|
290,124
|
|
Shares used in computation:
|
|
|
|
||||
Weighted-average common shares outstanding
|
436,947
|
|
|
434,174
|
|
||
Employee stock options
|
14,975
|
|
|
16,185
|
|
||
Weighted-average number of shares
|
451,922
|
|
|
450,359
|
|
||
Diluted earnings per share
|
$
|
0.76
|
|
|
$
|
0.64
|
|
|
As of March 31, 2019
|
||||||||||
|
Cash and cash equivalents
|
|
Non-current Assets
|
|
Total
|
||||||
|
(in thousands)
|
||||||||||
Cash
|
$
|
2,384,999
|
|
|
$
|
20,234
|
|
|
$
|
2,405,233
|
|
Level 1 securities:
|
|
|
|
|
|
||||||
Money market funds
|
963,558
|
|
|
1,306
|
|
|
964,864
|
|
|||
|
|
|
|
|
|
||||||
|
$
|
3,348,557
|
|
|
$
|
21,540
|
|
|
$
|
3,370,097
|
|
|
As of December 31, 2018
|
||||||||||
|
Cash and cash equivalents
|
|
Non-current Assets
|
|
Total
|
||||||
|
(in thousands)
|
||||||||||
Cash
|
$
|
2,572,685
|
|
|
$
|
16,260
|
|
|
$
|
2,588,945
|
|
Level 1 securities:
|
|
|
|
|
|
||||||
Money market funds
|
1,221,798
|
|
|
1,298
|
|
|
1,223,096
|
|
|||
|
|
|
|
|
|
||||||
|
$
|
3,794,483
|
|
|
$
|
17,558
|
|
|
$
|
3,812,041
|
|
|
As of
|
||||||
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(in thousands)
|
||||||
Licensed content, net
|
$
|
14,297,658
|
|
|
$
|
14,081,463
|
|
|
|
|
|
||||
Produced content, net
|
|
|
|
|
|
||
Released, less amortization
|
2,737,677
|
|
|
2,403,896
|
|
||
In production
|
3,494,467
|
|
|
3,305,126
|
|
||
In development and pre-production
|
348,515
|
|
|
311,842
|
|
||
|
6,580,659
|
|
|
6,020,864
|
|
||
DVD, net
|
10,468
|
|
|
9,813
|
|
||
Total
|
$
|
20,888,785
|
|
|
$
|
20,112,140
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
(in thousands)
|
||||||
Licensed content
|
$
|
1,774,289
|
|
|
$
|
1,557,424
|
|
Produced content
|
350,397
|
|
|
191,420
|
|
||
Total streaming content
|
$
|
2,124,686
|
|
|
$
|
1,748,844
|
|
|
|
As of
|
|
|
||||||
|
|
March 31,
2019 |
|
December 31,
2018 |
|
Estimated Useful Lives
|
||||
|
|
(in thousands)
|
|
|
||||||
Leasehold improvements
|
|
294,358
|
|
|
282,028
|
|
|
Over life of lease
|
||
Information technology
|
|
229,168
|
|
|
224,296
|
|
|
3 years
|
||
Furniture and fixtures
|
|
70,125
|
|
|
63,667
|
|
|
3-15 years
|
||
Buildings
|
|
32,787
|
|
|
73,468
|
|
|
30 years
|
||
Corporate aircraft
|
|
99,009
|
|
|
62,560
|
|
|
8 years
|
||
DVD operations equipment
|
|
53,416
|
|
|
53,416
|
|
|
5 years
|
||
Machinery and equipment
|
|
2,117
|
|
|
1,692
|
|
|
3 years
|
||
Land
|
|
6,125
|
|
|
6,125
|
|
|
|
||
Capital work-in-progress
|
|
18,290
|
|
|
19,548
|
|
|
|
||
Property and equipment, gross
|
|
805,395
|
|
|
786,800
|
|
|
|
||
Less: Accumulated depreciation
|
|
(371,023
|
)
|
|
(368,519
|
)
|
|
|
||
Property and equipment, net
|
|
$
|
434,372
|
|
|
$
|
418,281
|
|
|
|
|
Three Months Ended
|
||
|
March 31, 2019
|
||
|
(in thousands)
|
||
Cash paid for operating lease liabilities
|
$
|
37,653
|
|
Right-of-use assets obtained in exchange for new operating lease obligations
(1)
|
842,395
|
|
|
Weighted-average remaining lease term
|
8.5 years
|
|
|
Weighted-average discount rate
|
5.7
|
%
|
Due in 12 month period ended March 31,
|
||
2020
|
167,238
|
|
2021
|
142,248
|
|
2022
|
133,824
|
|
2023
|
113,437
|
|
2024
|
109,572
|
|
Thereafter
|
477,116
|
|
|
1,143,435
|
|
Less imputed interest
|
(255,913
|
)
|
Total lease liabilities
|
887,522
|
|
|
|
|
Current operating lease liabilities
|
122,498
|
|
Non-current operating lease liabilities
|
765,024
|
|
Total lease liabilities
|
887,522
|
|
|
|
As of
|
||||||
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
|
(in thousands)
|
||||||
Trade receivables
|
|
$
|
432,955
|
|
|
$
|
362,712
|
|
Prepaid expenses
|
|
177,460
|
|
|
178,833
|
|
||
Other
|
|
209,935
|
|
|
206,921
|
|
||
Total other current assets
|
|
$
|
820,350
|
|
|
$
|
748,466
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 Fair Value as of
|
||||||||
|
|
Principal Amount at Par
|
|
Issuance Date
|
|
Maturity
|
|
Interest Payment Dates
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||
|
|
(in millions)
|
|
|
|
|
|
|
|
(in millions)
|
||||||||
5.375% Senior Notes
|
|
$
|
500
|
|
|
February 2013
|
|
February 2021
|
|
February and August
|
|
$
|
521
|
|
|
$
|
509
|
|
5.500% Senior Notes
|
|
700
|
|
|
February 2015
|
|
February 2022
|
|
April and October
|
|
736
|
|
|
706
|
|
|||
5.750% Senior Notes
|
|
400
|
|
|
February 2014
|
|
March 2024
|
|
March and September
|
|
429
|
|
|
407
|
|
|||
5.875% Senior Notes
|
|
800
|
|
|
February 2015
|
|
February 2025
|
|
April and October
|
|
867
|
|
|
812
|
|
|||
4.375% Senior Notes
|
|
1,000
|
|
|
October 2016
|
|
November 2026
|
|
May and November
|
|
982
|
|
|
915
|
|
|||
3.625% Senior Notes (1)
|
|
1,458
|
|
|
May 2017
|
|
May 2027
|
|
May and November
|
|
1,512
|
|
|
1,446
|
|
|||
4.875% Senior Notes
|
|
1,600
|
|
|
October 2017
|
|
April 2028
|
|
April and October
|
|
1,586
|
|
|
1,464
|
|
|||
5.875% Senior Notes
|
|
1,900
|
|
|
April 2018
|
|
November 2028
|
|
May and November
|
|
2,010
|
|
|
1,851
|
|
|||
4.625% Senior Notes (2)
|
|
1,234
|
|
|
October 2018
|
|
May 2029
|
|
May and November
|
|
1,320
|
|
|
1,241
|
|
|||
6.375% Senior Notes
|
|
800
|
|
|
October 2018
|
|
May 2029
|
|
May and November
|
|
868
|
|
|
797
|
|
|||
|
|
$
|
10,392
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
||||||
|
March 31,
2019 |
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
Less than one year
|
$
|
535,960
|
|
|
$
|
538,384
|
|
Due after one year and through three years
|
2,245,272
|
|
|
1,550,581
|
|
||
Due after three years and through five years
|
1,328,564
|
|
|
1,646,101
|
|
||
Due after five years
|
10,658,355
|
|
|
11,138,129
|
|
||
Total debt obligations
|
$
|
14,768,151
|
|
|
$
|
14,873,195
|
|
|
As of
|
||||||
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(in thousands)
|
||||||
Less than one year
|
$
|
8,888,491
|
|
|
$
|
8,611,398
|
|
Due after one year and through three years
|
8,416,736
|
|
|
8,841,561
|
|
||
Due after three years and through five years
|
1,480,670
|
|
|
1,684,582
|
|
||
Due after five years
|
136,892
|
|
|
148,334
|
|
||
Total streaming content obligations
|
$
|
18,922,789
|
|
|
$
|
19,285,875
|
|
|
|
|
Options Outstanding
|
|
|
|
|
||||||||
|
Shares
Available for Grant |
|
Number of
Shares |
|
Weighted-
Average Exercise Price
(per share)
|
|
Weighted-Average Remaining
Contractual Term (in years) |
|
Aggregate
Intrinsic Value (in thousands) |
||||||
Balances as of December 31, 2018
|
8,699,941
|
|
|
20,479,278
|
|
|
$
|
89.61
|
|
|
|
|
|
||
Granted
|
(619,636
|
)
|
|
619,636
|
|
|
319.43
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
(593,294
|
)
|
|
38.07
|
|
|
|
|
|
|||
Expired
|
—
|
|
|
(21
|
)
|
|
4.27
|
|
|
|
|
|
|||
Balances as of March 31, 2019
|
8,080,305
|
|
|
20,505,599
|
|
|
$
|
98.04
|
|
|
5.68
|
|
$
|
5,312,077
|
|
Vested and exercisable as of March 31, 2019
|
|
|
20,505,599
|
|
|
$
|
98.04
|
|
|
5.68
|
|
$
|
5,312,077
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
(in thousands)
|
||||||
Total intrinsic value of options exercised
|
$
|
180,842
|
|
|
$
|
277,910
|
|
Cash received from options exercised
|
22,972
|
|
|
56,335
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
Dividend yield
|
—
|
%
|
|
—
|
%
|
||
Expected volatility
|
41
|
%
|
|
40
|
%
|
||
Risk-free interest rate
|
2.74
|
%
|
|
2.61
|
%
|
||
Suboptimal exercise factor
|
3.07
|
|
|
2.80
|
|
||
Weighted-average fair value (per share)
|
$
|
163
|
|
|
$
|
124
|
|
Total stock-based compensation expense (in thousands)
|
$
|
101,200
|
|
|
$
|
68,395
|
|
Total income tax impact on provision (in thousands)
|
$
|
21,628
|
|
|
$
|
14,691
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
|
(in thousands, except percentages)
|
||||||
Provision for income taxes
|
|
$
|
55,607
|
|
|
$
|
9,492
|
|
Effective tax rate
|
|
14
|
%
|
|
3
|
%
|
|
As of
|
||||||
|
March 31,
2019 |
|
December 31, 2018
|
||||
|
(in thousands)
|
||||||
United States
|
$
|
1,102,154
|
|
|
$
|
381,947
|
|
International
|
144,012
|
|
|
36,334
|
|
|
As of/ Three Months Ended March 31, 2019
|
||||||||||||||
|
Domestic
Streaming |
|
International
Streaming |
|
Domestic
DVD |
|
Consolidated
|
||||||||
|
(in thousands)
|
||||||||||||||
Total paid memberships at end of period (1)
|
60,229
|
|
|
88,634
|
|
|
2,565
|
|
|
|
|||||
Total paid net membership additions (1)
|
1,743
|
|
|
7,861
|
|
|
(141
|
)
|
|
|
|||||
Total free trials at end of period
|
1,563
|
|
|
5,003
|
|
|
22
|
|
|
|
|||||
Revenues
|
$
|
2,073,555
|
|
|
$
|
2,366,749
|
|
|
$
|
80,688
|
|
|
$
|
4,520,992
|
|
Cost of revenues
|
1,139,535
|
|
|
1,697,121
|
|
|
33,958
|
|
|
2,870,614
|
|
||||
Marketing
|
221,046
|
|
|
395,532
|
|
|
—
|
|
|
616,578
|
|
||||
Contribution profit
|
$
|
712,974
|
|
|
$
|
274,096
|
|
|
$
|
46,730
|
|
|
$
|
1,033,800
|
|
Other operating expenses
|
|
|
|
|
|
|
574,716
|
|
|||||||
Operating income
|
|
|
|
|
|
|
459,084
|
|
|||||||
Other income (expense)
|
|
|
|
|
|
|
(59,425
|
)
|
|||||||
Provision for income taxes
|
|
|
|
|
|
|
55,607
|
|
|||||||
Net income
|
|
|
|
|
|
|
$
|
344,052
|
|
|
As of/ Three Months Ended March 31, 2018
|
||||||||||||||
|
Domestic
Streaming |
|
International
Streaming |
|
Domestic
DVD |
|
Consolidated
|
||||||||
|
(in thousands)
|
||||||||||||||
Total paid memberships at end of period (1)
|
55,087
|
|
|
63,815
|
|
|
3,138
|
|
|
|
|||||
Total paid net membership additions (1)
|
2,277
|
|
|
5,981
|
|
|
(192
|
)
|
|
|
|||||
Total free trials at end of period
|
1,618
|
|
|
4,475
|
|
|
29
|
|
|
|
|||||
Revenues
|
$
|
1,820,019
|
|
|
$
|
1,782,086
|
|
|
$
|
98,751
|
|
|
$
|
3,700,856
|
|
Cost of revenues
|
936,480
|
|
|
1,321,706
|
|
|
42,393
|
|
|
2,300,579
|
|
||||
Marketing
|
250,719
|
|
|
286,058
|
|
|
—
|
|
|
536,777
|
|
||||
Contribution profit
|
$
|
632,820
|
|
|
$
|
174,322
|
|
|
$
|
56,358
|
|
|
$
|
863,500
|
|
Other operating expenses
|
|
|
|
|
|
|
416,922
|
|
|||||||
Operating income
|
|
|
|
|
|
|
446,578
|
|
|||||||
Other income (expense)
|
|
|
|
|
|
|
(146,962
|
)
|
|||||||
Provision for income taxes
|
|
|
|
|
|
|
9,492
|
|
|||||||
Net income
|
|
|
|
|
|
|
$
|
290,124
|
|
(1)
|
A paid membership (also referred to as a paid subscription) is defined as a membership that has the right to receive Netflix service following sign-up and a method of payment being provided, and that is not part of a free trial or other promotional offering by the Company to certain new and rejoining members. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations generally become effective at the end of the prepaid membership period. Involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. Memberships are assigned to territories based on the geographic location used at time of sign-up as determined by the Company's internal systems, which utilize industry standard geo-location technology.
|
|
Domestic
Streaming
|
|
International
Streaming
|
|
Domestic
DVD
|
|
Consolidated
|
||||||||
|
(in thousands)
|
||||||||||||||
Three months ended March 31,
|
|
|
|
|
|
|
|
||||||||
2019
|
$
|
864,311
|
|
|
$
|
1,260,375
|
|
|
$
|
8,509
|
|
|
$
|
2,133,195
|
|
2018
|
730,272
|
|
|
1,018,572
|
|
|
11,134
|
|
|
1,759,978
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
As of/ Three Months Ended
|
|
Change
|
|||||||||||
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
(in thousands, except revenue per membership and percentages)
|
|||||||||||||
Global Streaming Memberships:
|
|
|
|
|
|
|
|
|||||||
Paid memberships at end of period
|
148,863
|
|
|
118,902
|
|
|
29,961
|
|
|
25
|
%
|
|||
Paid net membership additions
|
9,604
|
|
|
8,258
|
|
|
1,346
|
|
|
16
|
%
|
|||
Average monthly revenue per paying membership
|
$
|
10.27
|
|
|
$
|
10.46
|
|
|
$
|
(0.19
|
)
|
|
(2
|
)%
|
Free trials at end of period
|
6,566
|
|
|
6,093
|
|
|
473
|
|
|
8
|
%
|
|||
|
|
|
|
|
|
|
|
|||||||
Financial Results:
|
|
|
|
|
|
|
|
|||||||
Revenues
|
$
|
4,520,992
|
|
|
$
|
3,700,856
|
|
|
$
|
820,136
|
|
|
22
|
%
|
Operating income
|
459,084
|
|
|
446,578
|
|
|
12,506
|
|
|
3
|
%
|
|||
Operating margin
|
10.2
|
%
|
|
12.1
|
%
|
|
(1.9
|
)%
|
|
(16
|
)%
|
|||
Net income
|
344,052
|
|
|
290,124
|
|
|
53,928
|
|
|
19
|
%
|
•
|
As markets within our International streaming segment become profitable, we increasingly focus on our global operating profit margin target as a measure of profitability. We define contribution profit (loss) as revenues less cost of revenues and marketing expenses incurred by the segment. This represents each segment's performance before global corporate costs.
|
•
|
For the Domestic and International streaming segments, amortization of the streaming content assets makes up the majority of cost of revenues. Increasingly, we obtain multi-territory or global rights for our streaming content and allocate these rights between Domestic and International streaming segments based on estimated fair market value. Expenses associated with the acquisition, licensing and production of streaming content (such as payroll and related personnel expenses, costs associated with obtaining rights to music included in our content, overall deals with talent, miscellaneous production related costs and participations and residuals), streaming delivery costs and other operations costs make up the remainder of cost of revenues. We have built our own global content delivery network (“Open Connect”) to help us efficiently stream a high volume of content to our members over the internet. Streaming delivery expenses, therefore, include equipment costs related to Open Connect, payroll and related personnel expenses and all third-party costs, such as cloud computing costs, associated with delivering streaming content over the internet. Other operations costs include customer service and payment processing fees, including those we pay to our integrated payment partners, as well as other costs incurred in making our content available to members.
|
•
|
For the Domestic and International streaming segments, marketing expenses consist primarily of advertising expenses and certain payments made to our marketing partners, including CE manufacturers, MVPDs, mobile operators and ISPs. Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll and related expenses for personnel that support the Company's marketing activities. Marketing expenses are incurred by our Domestic and International streaming segments in order to build consumer awareness of the streaming offerings, and in particular our original content.
|
|
|
As of/ Three Months Ended
|
|
Change
|
|||||||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
|
(in thousands, except revenue per membership and percentages)
|
|||||||||||||
Memberships:
|
|
|
|
|
|
|
|
|
|||||||
Paid memberships at end of period
|
|
60,229
|
|
|
55,087
|
|
|
5,142
|
|
|
9
|
%
|
|||
Paid net membership additions
|
|
1,743
|
|
|
2,277
|
|
|
(534
|
)
|
|
(23
|
)%
|
|||
Average monthly revenue per paying membership
|
|
$
|
11.64
|
|
|
$
|
11.25
|
|
|
$
|
0.39
|
|
|
3
|
%
|
Free trials at end of period
|
|
1,563
|
|
|
1,618
|
|
|
(55
|
)
|
|
(3
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Contribution profit:
|
|
|
|
|
|
|
|
|
|||||||
Revenues
|
|
$
|
2,073,555
|
|
|
$
|
1,820,019
|
|
|
$
|
253,536
|
|
|
14
|
%
|
Cost of revenues
|
|
1,139,535
|
|
|
936,480
|
|
|
203,055
|
|
|
22
|
%
|
|||
Marketing
|
|
221,046
|
|
|
250,719
|
|
|
(29,673
|
)
|
|
(12
|
)%
|
|||
Contribution profit
|
|
712,974
|
|
|
632,820
|
|
|
80,154
|
|
|
13
|
%
|
|||
Contribution margin
|
|
34
|
%
|
|
35
|
%
|
|
|
|
|
|
|
As of/ Three Months Ended
|
|
Change
|
|||||||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
|
(in thousands, except revenue per membership and percentages)
|
|||||||||||||
Memberships:
|
|
|
|
|
|
|
|
|
|||||||
Paid memberships at end of period
|
|
88,634
|
|
|
63,815
|
|
|
24,819
|
|
|
39
|
%
|
|||
Paid net membership additions
|
|
7,861
|
|
|
5,981
|
|
|
1,880
|
|
|
31
|
%
|
|||
Average monthly revenue per paying membership
|
|
$
|
9.31
|
|
|
$
|
9.77
|
|
|
$
|
(0.46
|
)
|
|
(5
|
)%
|
Free trials at end of period
|
|
5,003
|
|
|
4,475
|
|
|
528
|
|
|
12
|
%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Contribution profit:
|
|
|
|
|
|
|
|
|
|||||||
Revenues
|
|
$
|
2,366,749
|
|
|
$
|
1,782,086
|
|
|
$
|
584,663
|
|
|
33
|
%
|
Cost of revenues
|
|
1,697,121
|
|
|
1,321,706
|
|
|
375,415
|
|
|
28
|
%
|
|||
Marketing
|
|
395,532
|
|
|
286,058
|
|
|
109,474
|
|
|
38
|
%
|
|||
Contribution profit
|
|
274,096
|
|
|
174,322
|
|
|
99,774
|
|
|
57
|
%
|
|||
Contribution margin
|
|
12
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
As of/ Three Months Ended
|
|
Change
|
|||||||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
|
(in thousands, except revenue per membership and percentages)
|
|||||||||||||
Memberships:
|
|
|
|
|
|
|
|
|
|||||||
Paid memberships at end of period
|
|
2,565
|
|
|
3,138
|
|
|
(573
|
)
|
|
(18
|
)%
|
|||
Average monthly revenue per paying membership
|
|
$
|
10.21
|
|
|
$
|
10.18
|
|
|
$
|
0.03
|
|
|
—
|
%
|
Free trials at end of period
|
|
22
|
|
|
29
|
|
|
(7
|
)
|
|
(24
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Contribution profit:
|
|
|
|
|
|
|
|
|
|||||||
Revenues
|
|
$
|
80,688
|
|
|
$
|
98,751
|
|
|
$
|
(18,063
|
)
|
|
(18
|
)%
|
Cost of revenues
|
|
33,958
|
|
|
42,393
|
|
|
(8,435
|
)
|
|
(20
|
)%
|
|||
Contribution profit
|
|
46,730
|
|
|
56,358
|
|
|
(9,628
|
)
|
|
(17
|
)%
|
|||
Contribution margin
|
|
58
|
%
|
|
57
|
%
|
|
|
|
|
|
Three Months Ended
|
|
Change
|
|||||||||||
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
General and administrative
|
$
|
201,952
|
|
|
$
|
134,612
|
|
|
$
|
67,340
|
|
|
50
|
%
|
As a percentage of revenues
|
4
|
%
|
|
4
|
%
|
|
|
|
|
|
|
Three Months Ended
|
|
Change
|
|||||||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Interest expense
|
|
$
|
(135,529
|
)
|
|
$
|
(81,219
|
)
|
|
$
|
(54,310
|
)
|
|
(67
|
)%
|
As a percentage of revenues
|
|
(3
|
)%
|
|
(2
|
)%
|
|
|
|
|
|
|
Three Months Ended
|
|
Change
|
|||||||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
|
Q1'19 vs. Q1'18
|
|||||||||
|
|
(in thousands, except percentages)
|
|||||||||||||
Interest and other income (expense)
|
|
$
|
76,104
|
|
|
$
|
(65,743
|
)
|
|
$
|
141,847
|
|
|
216
|
%
|
As a percentage of revenues
|
|
2
|
%
|
|
(2
|
)%
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
|
(in thousands, except percentages)
|
||||||
Provision for income taxes
|
|
$
|
55,607
|
|
|
$
|
9,492
|
|
Effective tax rate
|
|
14
|
%
|
|
3
|
%
|
|
As of
|
|||||
|
March 31,
2019 |
|
December 31,
2018 |
|||
|
(in thousands)
|
|||||
Cash, cash equivalents, and restricted cash
|
$
|
3,370,097
|
|
|
3,812,041
|
|
Long-term debt
|
10,305,023
|
|
|
10,360,058
|
|
|
Three Months Ended
|
||||||
|
March 31,
2019 |
|
March 31,
2018 |
||||
|
(in thousands)
|
||||||
Net cash used in operating activities
|
$
|
(379,799
|
)
|
|
$
|
(236,757
|
)
|
Net cash used in investing activities
|
(80,103
|
)
|
|
(49,752
|
)
|
||
Net cash provided by financing activities
|
22,972
|
|
|
56,014
|
|
||
|
|
|
|
||||
Non-GAAP reconciliation of free cash flow:
|
|
|
|
||||
Net cash used in operating activities
|
(379,799
|
)
|
|
(236,757
|
)
|
||
Acquisition of DVD content assets
|
(9,170
|
)
|
|
(10,796
|
)
|
||
Purchases of property and equipment
|
(60,381
|
)
|
|
(37,170
|
)
|
||
Change in other assets
|
(10,552
|
)
|
|
(1,786
|
)
|
||
Free cash flow
|
$
|
(459,902
|
)
|
|
$
|
(286,509
|
)
|
|
Payments due by Period
|
||||||||||||||||||
Contractual obligations (in thousands):
|
Total
|
|
Less than
1 year |
|
1-3 years
|
|
3-5 years
|
|
More than
5 years |
||||||||||
Streaming content obligations (1)
|
$
|
18,922,789
|
|
|
$
|
8,888,491
|
|
|
$
|
8,416,736
|
|
|
$
|
1,480,670
|
|
|
$
|
136,892
|
|
Debt (2)
|
14,768,151
|
|
|
535,960
|
|
|
2,245,272
|
|
|
1,328,564
|
|
|
10,658,355
|
|
|||||
Operating lease obligations (3)
|
1,724,867
|
|
|
152,540
|
|
|
258,447
|
|
|
303,881
|
|
|
1,009,999
|
|
|||||
Other purchase obligations (4)
|
710,437
|
|
|
432,297
|
|
|
243,833
|
|
|
34,307
|
|
|
—
|
|
|||||
Total
|
$
|
36,126,244
|
|
|
$
|
10,009,288
|
|
|
$
|
11,164,288
|
|
|
$
|
3,147,422
|
|
|
$
|
11,805,246
|
|
(1)
|
As of
March 31, 2019
, streaming content obligations were comprised of
$4.9 billion
included in "Current content liabilities" and
$3.6 billion
of "Non-current content liabilities" on the Consolidated Balance Sheets and
$10.4 billion
of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.
|
(2)
|
Long-term debt obligations include our Notes consisting of principal and interest payments. See Note 5 to the consolidated financial statements for further details.
|
(3)
|
See Note 4 to the consolidated financial statements for further details regarding leases. As of March 31, 2019, the Company has additional operating leases for real estate that have not yet commenced of $815 million which has been included above.
|
(4)
|
Other purchase obligations include all other non-cancelable contractual obligations. These contracts are primarily related to streaming delivery and cloud computing costs, as well as other miscellaneous open purchase orders for which we have not received the related services or goods.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 6.
|
Exhibits
|
Exhibit Number
|
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed
Herewith |
||||||
|
|
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
001-35727
|
|
10.1
|
|
April 1, 2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8-K
|
|
001-35727
|
|
3.1
|
|
April 3, 2019
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
X
|
||
|
|
|
|
|
|
|
|
|||||
101
|
|
The following financial information from Netflix, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed with the SEC on April 18, 2019, formatted in XBRL includes: (i) Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018, (ii) Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018 (iii) Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018, (iv) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 and (v) the Notes to the Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
X
|
*
|
These certifications are not deemed filed by the SEC and are not to be incorporated by reference in any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.
|
|
|
NETFLIX, INC.
|
|
Dated:
|
April 18, 2019
|
By:
|
/s/ Reed Hastings
|
|
|
|
Reed Hastings
Chief Executive Officer
(Principal executive officer)
|
|
|
|
|
Dated:
|
April 18, 2019
|
By:
|
/s/ Spencer Neumann
|
|
|
|
Spencer Neumann
Chief Financial Officer
(Principal financial and accounting officer)
|
1 Year Netflix Chart |
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