NETFLIX INC - Quarter Report: 2024 June (Form 10-Q)

Purchases of short-term investments () ()Proceeds from maturities of short-term investments Net cash provided by (used in) investing activities() ()()Cash flows from financing activities:Repayments of debt () Proceeds from issuance of common stock Repurchases of common stock()()()()Taxes paid related to net share settlement of equity awards() () Other financing activities()()()()Net cash used in financing activities()()()()Effect of exchange rate changes on cash, cash equivalents and restricted cash () () Net increase (decrease) in cash, cash equivalents and restricted cash() () Cash, cash equivalents and restricted cash at beginning of period Cash, cash equivalents and restricted cash at end of period $ $ $ $

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Consolidated Balance Sheets

(in thousands, except share and par value data)

As of

June 30,
2024

December 31,
2023

(unaudited)

Assets

Current assets:

Cash and cash equivalents

Short-term investments

Other current assets

Total current assets

Content assets, net

Property and equipment, net

Other non-current assets

Total assets

Liabilities and Stockholders’ Equity

Current liabilities:

Current content liabilities

Accounts payable

Accrued expenses and other liabilities

Deferred revenue

Short-term debt

Total current liabilities

Non-current content liabilities

Long-term debt

Other non-current liabilities

Total liabilities

Commitments and contingencies (Note 8)

par value; shares authorized at June 30, 2024 and December 31, 2023; and issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Treasury stock at cost ( and shares at June 30, 2024 and December 31, 2023, respectively)

()

Accumulated other comprehensive loss

()

Retained earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

Three Months Ended

Six Months Ended

June 30,
2024

June 30,
2023

June 30,
2024

June 30,
2023

Total stockholders' equity, beginning balances

Common stock and additional paid-in capital:

Beginning balances

Issuance of common stock

Stock-based compensation expense

Ending balances

Treasury stock:

Beginning balances

()

Repurchases of common stock to be held as treasury stock

()

Ending balances

()

Accumulated other comprehensive loss:

Beginning balances

()

Other comprehensive income

Ending balances

()

Retained earnings:

Beginning balances

Net income

Ending balances

Total stockholders' equity, ending balances

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Notes to Consolidated Financial Statements

(unaudited)

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Interim results are not necessarily indicative of the results for a full year.

The following is provided to update the Company’s significant accounting policies previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

months or less. The hedging contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange movements, and the Company may choose not to hedge certain exposures.

The gain or loss on derivative instruments designated as cash flow hedges of forecasted foreign currency revenue is initially reported as a component of accumulated other comprehensive income (“AOCI”) and reclassified into “Revenues” on the Consolidated Statements of Operations in the same period the forecasted transaction affects earnings. The gain or loss on derivative instruments designated as cash flow hedges of firmly committed or forecasted transactions related to the licensing and production of content assets is initially reported as a component of AOCI and reclassified into “Cost of Revenues” on the Consolidated Statements of Operations in the same period the hedged transaction affects earnings, which occurs as the underlying hedged content assets are amortized. Cash flows from hedging activities are classified in the same category as the cash flows for the underlying item being hedged within "Net cash provided by operating activities" on the Consolidated Statements of Cash Flows.

In the event that the likelihood of occurrence of the underlying forecasted transactions is determined to be probable not to occur, the gains or losses on the related cash flow hedges are reclassified from AOCI to “Interest and other income (expense)” in the Consolidated Statements of Operations in the period of dedesignation.

Net investment hedges

The Company designates a portion of its foreign currency-denominated debt as net investment hedges to manage the foreign exchange risk on its investment in certain foreign subsidiaries. These hedges may reduce, but do not entirely eliminate, the effect of foreign currency exchange movements, and the Company may choose not to hedge certain exposures. The gains or losses on these non-derivative instruments are reported as a component of AOCI as part of the cumulative translation adjustment on the Company’s Consolidated Balance Sheets. The accumulated gains and losses remain in AOCI until the hedged net investment is sold or liquidated, at which point the amounts recognized in AOCI are reclassified into earnings.

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See Note 9 Stockholders' Equity to the consolidated financial statements for further information regarding stock-based compensation.

$ $ $ Paid net membership additions Paid memberships at end of period (1)

Europe, Middle East, and Africa (EMEA)

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$ $ $ Paid net membership additions Paid memberships at end of period (1)

Latin America (LATAM)

As of/Three Months Ended

As of/Six Months Ended

June 30,
2024

June 30,
2023

June 30,
2024

June 30,
2023

(in thousands)

Streaming revenues

Paid net membership additions

Paid memberships at end of period (1)

Asia-Pacific (APAC)

As of/Three Months Ended

As of/Six Months Ended

June 30,
2024

June 30,
2023

June 30,
2024

June 30,
2023

(in thousands)

Streaming revenues

Paid net membership additions

Paid memberships at end of period (1)


(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 certain other promotions that may be offered by the Company to new or rejoining members. Certain members have the option to add extra member sub accounts. These extra member sub accounts are not included in paid memberships. 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 cancellations, as a result of a failed method of payment, become 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.

Deferred revenue consists of membership fees billed that have not been recognized, as well as gift cards and other prepaid memberships that have not been fully redeemed. As of June 30, 2024, total deferred revenue was $ million, the vast majority of which was related to membership fees billed that are expected to be recognized as revenue within the next month. The remaining deferred revenue balance, which is related to gift cards and other prepaid memberships, will be recognized as revenue over the period of service after redemption, which is expected to occur over the next 12 months. The $ million increase in deferred revenue as compared to the balance of $ million as of December 31, 2023 is a result of the increase in membership fees billed due to increased memberships and price increases.

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$ $ $

Shares used in computation:

Weighted-average shares of common stock outstanding Basic earnings per share$ $ $ $ Diluted earnings per share:

Net income

$ $ $ $

Shares used in computation:

Weighted-average shares of common stock outstanding Effect of dilutive stock-based awards Weighted-average number of shares Diluted earnings per share$ $ $ $

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$ $ $ $ Level 1 securities:Money market funds Level 2 securities:Time Deposits (1) $ $ $ $ $

As of December 31, 2023

Cash and cash equivalents

Short-term investments

Other Current Assets

Non-current Assets

Total

(in thousands)

Cash

Level 1 securities:

Money market funds

Level 2 securities:

Time Deposits (1)

(1) The majority of the Company's time deposits are international deposits, which mature within one year.

Other current assets include restricted cash for deposits related to self-insurance. Non-current assets include restricted cash related to letter of credit agreements. The fair value of cash equivalents and short-term investments included in the Level 2 category is based on observable inputs, such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly.

Produced content, net

Released, less amortization

In production

In development and pre-production

Content assets, net

$ $

As of June 30, 2024, the amount of accrued participations and residuals was not material.

$ $ $ Produced content Total$ $ $ $

Property and Equipment, Net

Buildings and improvements

years

Leasehold improvements

Over life of lease

Furniture and fixtures

years

Information technology

years

Corporate aircraft

- years

Machinery and equipment

- years

Capital work-in-progress

Property and equipment, gross

Less: Accumulated depreciation

()()

Property and equipment, net

$ $

$ $ $ Right-of-use assets obtained in exchange for new operating lease obligations


	As of
	June 30, 2024	December 31, 2023
	(in thousands)
Operating lease right-of-use assets, net	$	$

Current operating lease liabilities
Non-current operating lease liabilities
Total operating lease liabilities	$	$

Other Current Assets

Prepaid expenses

Other

Total other current assets

$ $

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million, net of $ million of issuance costs, with varying maturities (the "Notes"). Of the outstanding balance, $ million, net of issuance costs, is classified as short-term debt on the Consolidated Balance Sheets. As of December 31, 2023, the Company had aggregate outstanding notes of $ million, net of $ million of issuance costs. Each of the Notes were issued at par and are senior unsecured obligations of the Company. Interest is payable semi-annually at fixed rates.

A portion of the outstanding Notes is denominated in foreign currency (comprised of € million) and is remeasured into U.S. dollars at each balance sheet date (with remeasurement gain totaling $ million and $ million, respectively, for the three and six months ended June 30, 2024). As of June 30, 2024, approximately $ billion of the Company’s euro–denominated Senior Notes was designated as a hedge of the foreign exchange risk of the Company’s net investment in certain foreign subsidiaries. In the three and six months ended June 30, 2024, a pre-tax loss of $ million on the Company’s euro-denominated Senior Notes designated as net investment hedges was recorded in AOCI. amount of the Company’s euro-denominated Senior Notes was designated as a net investment hedge as of December 31, 2023 or in the comparative prior year periods. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

% Senior Notes$ $ February 2014March 2024$ $

% Senior Notes

February 2015February 2025

% Senior Notes (1)

April 2020June 2025

% Senior Notes

April 2020June 2025

% Senior Notes

October 2016November 2026

% Senior Notes (1)

May 2017May 2027

% Senior Notes

October 2017April 2028

% Senior Notes

April 2018November 2028

% Senior Notes (1)

October 2018May 2029

% Senior Notes

October 2018May 2029

% Senior Notes (1)

April 2019November 2029

% Senior Notes

April 2019November 2029

% Senior Notes (1)

October 2019June 2030

% Senior Notes

October 2019June 2030 $ $ $ $

(1) The following Senior Notes have a principal amount denominated in euros: % Senior Notes for € million, % Senior Notes for € million, % Senior Notes for € million, % Senior Notes for € million, and % Senior Notes for € million.

In the six months ended June 30, 2024, the Company repaid upon maturity the $ million aggregate principal amount of its % Senior Notes.

Each of the Notes are repayable in whole or in part upon the occurrence of a change of control, at the option of the holders, at a purchase price in cash equal to % of the principal plus accrued interest. The Company may redeem the Notes prior to maturity in whole or in part at an amount equal to the principal amount thereof plus accrued and unpaid interest and an applicable premium. The Notes include, among other terms and conditions, limitations on the Company's ability to create, incur or allow certain liens; enter into sale and lease-back transactions; create, assume, incur or guarantee additional indebtedness of certain of the Company's subsidiaries; and consolidate or merge with, or convey, transfer or lease all or substantially all of the Company's and its subsidiaries assets, to another person. As of June 30, 2024 and December 31, 2023, the Company was in compliance with all related covenants.

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, $ billion unsecured revolving credit facility that matures on April 12, 2029 (the “Revolving Credit Agreement”), to replace its previous $ billion unsecured revolving credit facility. As of June 30, 2024, amounts have been borrowed under the Revolving Credit Agreement.

The borrowings under the Revolving Credit Agreement bear interest, at the Company’s option, of either (i) a floating rate per annum equal to a base rate (the “Alternate Base Rate”) plus an applicable margin or (ii) a per annum rate equal to an adjusted term SOFR rate (the “Adjusted Term SOFR Rate”) plus an applicable margin. The applicable margin for Alternate Base Rate loans will range from % to %, and the applicable margin for Adjusted Term SOFR Rate loans will range from % to %, each based on the Company’s credit ratings.

The Revolving Credit Agreement contains customary affirmative covenants and negative covenants (and customary baskets and exceptions with respect thereto) for a credit facility of this size and type and requires the Company to maintain a minimum ratio of consolidated EBITDA to consolidated interest expense of to 1.0 as of the last day of each fiscal quarter. As of June 30, 2024 and December 31, 2023, the Company was in compliance with all related covenants and ratios.

$ Derivatives not designated as hedging instruments:

Foreign exchange contracts

Total

$ $

Fair Value of Derivative Contracts

$ $ $ Derivatives not designated as hedging instruments:Foreign exchange contracts Total$ $ $ $

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$ $ $ Derivatives not designated as hedging instruments:Foreign exchange contracts Total$ $ $ $

The Company classifies derivative instruments in the Level 2 category within the fair value hierarchy. These instruments are valued using industry standard valuation models that use observable inputs such as interest rate yield curves, and forward and spot prices for currencies.

As of June 30, 2024, the pre-tax net accumulated gain on our foreign currency cash flow hedges included in AOCI on the Consolidated Balance Sheets expected to be recognized in earnings within the next 12 months is $ million.

Master Netting Agreements

In order to mitigate counterparty credit risk, the Company enters into master netting agreements with its counterparties for its foreign currency exchange contracts which permit the parties to settle amounts on a net basis under certain conditions. The Company has elected to present its derivative assets and liabilities on a gross basis on its Consolidated Balance Sheets.

The Company also enters into collateral security arrangements with its counterparties that require the parties to post cash collateral when certain contractual thresholds are met. No cash collateral was received or posted by the Company as of June 30, 2024 and December 31, 2023.

$ $ $()$ $ Derivative liabilities ()

As of December 31, 2023

Gross Amount Not Offset in the Consolidated Balance Sheets

Gross Amount Recognized in the Consolidated Balance Sheets

Gross Amount Offset in the Consolidated Balance Sheets

Net Amount Presented in the Consolidated Balance Sheets

Financial Instruments

Collateral Received and Posted

Net Amount

(in thousands)

Derivative assets

()

Derivative liabilities

()

Restricted Stock Unit Activity

The Company grants time-based restricted stock unit (“RSU”) awards and performance-based restricted stock unit (“PSU”) awards to certain executive officers. RSU awards vest quarterly over a period subject to the executive’s continued employment or service with the Company through the vesting date. PSU awards have performance periods ranging from one to and vest depending on the Company’s achievement of predetermined market-based performance targets.

Granted

Vested

()

Forfeited

Balances as of June 30, 2024 $

Stock-based Compensation

Total stock-based compensation expense was $ million and $ million for the three and six months ended June 30, 2024, respectively, and $ million and $ million for the three and six months ended June 30, 2023, respectively.

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billion of its common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $ billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. The Company is not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including the Company’s stock price, general economic, business and market conditions, and alternative investment opportunities. The Company may discontinue any repurchases of its common stock at any time without prior notice. During the three and six months ended June 30, 2024, the Company repurchased and shares, respectively, for an aggregate amount of $ billion and $ billion, respectively. As of June 30, 2024, $ billion remains available for repurchases. Shares repurchased by the Company are accounted for when the transaction is settled. As of June 30, 2024, there were no unsettled share repurchases. Direct costs incurred to acquire the shares are included in the total cost of the shares.

Accumulated Other Comprehensive Income (Loss)

)$ $ $()$ $()

Other comprehensive income (loss) before reclassifications

()() ()

Amounts reclassified from accumulated other comprehensive income (loss)

() ()

Net change in accumulated other comprehensive income (loss)

()() () Balances as of June 30, 2024$()$()$ $()$ $()

Foreign Currency Translation
Adjustments

Net Investment Hedge Gains (Losses)

Change in Unrealized Gains (Losses) on Cash Flow Hedges

Tax (Expense) Benefit on Cash Flow Hedges

Tax (Expense) Benefit on Net Investment Hedges

Total

(in thousands)

Balances as of December 31, 2023

()

Other comprehensive income (loss) before reclassifications

()

Amounts reclassified from accumulated other comprehensive income (loss)

()

Net change in accumulated other comprehensive income (loss)

()

Balances as of June 30, 2024

()

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)$ $ $ $ $()

Other comprehensive income (loss) before reclassifications

Net change in accumulated other comprehensive income (loss)

Balances as of June 30, 2023

$()$ $ $ $ $()

Foreign Currency Translation
Adjustments

Net Investment Hedge Gains (Losses)

Change in Unrealized Gains (Losses) on Cash Flow Hedges

Tax (Expense) Benefit on Cash Flow Hedges

Tax (Expense) Benefit on Net Investment Hedges

Total

(in thousands)

Balances as of December 31, 2022

()

Other comprehensive income (loss) before reclassifications

gains or losses on derivative instruments were reclassified from AOCI into the Consolidated Statements of Operations in the three and six months ended June 30, 2023.

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10.

$ $ $ Effective tax rate % % % %

11.

operating segment. The Company's chief operating decision maker ("CODM") is its co-chief executive officers, who review financial information presented on a consolidated basis for the purposes of making operating decisions, assessing financial performance and allocating resources.

Total U.S. revenues were $ billion and $ billion, respectively, for the three and six months ended June 30, 2024, and $ billion and $ billion, respectively, for the three and six months ended June 30, 2023. See Note 2 Revenue Recognition for additional information about streaming revenue by region.

$ International

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding: our core strategy; our ability to improve our content offerings and service; our future financial performance, including expectations regarding revenues, deferred revenue, operating income and margin, net income, expenses, and profitability; liquidity, including the sufficiency of our capital resources, net cash provided by (used in) operating activities, and access to financing sources; capital allocation strategies, including any stock repurchases or repurchase programs; seasonality; impact of foreign exchange rate fluctuations, including on net income, revenues and average revenues per paying member; expectations regarding hedging activity; impact of interest rate fluctuations; adequacy of existing facilities; future regulatory changes and their impact on our business; intellectual property; price changes and testing; accounting treatment for changes related to content assets; acquisitions; membership growth, including impact of content and pricing changes on membership growth; member viewing patterns; future contractual obligations, including unknown content obligations and timing of payments; our global content and marketing investments, including investments in original programming; content amortization; resolution of tax examinations; tax expense; unrecognized tax benefits; deferred tax assets; and our ability to effectively manage change and growth. These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those included in forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on January 26, 2024, in particular the risk factors discussed under the heading “Risk Factors” in Part I, Item 1A.

We assume no obligation to revise or publicly release any revision to any forward-looking statements contained in this Quarterly Report on Form 10-Q, unless required by law.

Investors and others should note that we announce material financial and other information to our investors using our investor relations website (ir.netflix.net), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media and blogs to communicate with our members and the public about our company, our services and other issues. It is possible that the information we

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post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website.

Overview

We are one of the world’s leading entertainment services with over 277 million paid memberships in over 190 countries enjoying TV series, films and games across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.

Our core strategy is to grow our business globally within the parameters of our operating margin target. We strive to continuously improve our members’ experience by offering compelling content that delights them and attracts new members. We seek to drive conversation around our content to further enhance member joy, and we are continuously enhancing our user interface to help our members more easily choose content that they will find enjoyable.

Our membership growth exhibits a seasonal pattern that reflects variations when consumers buy internet-connected screens and when they tend to increase their viewing. Historically, the fourth quarter represents our greatest streaming membership growth. In addition, our membership growth can be impacted by our content release schedule and changes to pricing and plans.

Results of Operations

The following represents our consolidated performance highlights:


	As of/Three Months Ended						Change
	June 30, 2024			June 30, 2023			Q2'24 vs. Q2'23
	(in thousands, except revenue per membership and percentages)
Financial Results:
Streaming revenues	$	9,559,310		$	8,158,326		$	1,400,984		17	%
DVD revenues (1)	—			28,975			(28,975)			(100)	%
Total revenues	$	9,559,310		$	8,187,301		$	1,372,009		17	%

Operating income	$	2,602,837		$	1,827,183		$	775,654		42	%
Operating margin	27		%	22		%	5		%

Global Streaming Memberships:
Paid net membership additions	8,045			5,892			2,153			37	%
Paid memberships at end of period	277,647			238,390			39,257			16	%
Average paying memberships	273,625			235,444			38,181			16	%
Average monthly revenue per paying membership	$	11.65		$	11.55		$	0.10		1	%
Constant currency change (2)										5	%

(1) We discontinued our DVD-by-mail service in September 2023. The discontinuance of our DVD business had an immaterial impact on our operations and financial results.

(2) We believe the non-GAAP financial measure of constant currency revenue is useful in analyzing the underlying trends in average monthly revenue per paying membership (“ARM”) absent foreign currency fluctuations. However, this non-GAAP financial measure should be considered in addition to, not as a substitute for, or superior to other financial measures prepared in accordance with GAAP.

In order to exclude the effect of foreign currency rate fluctuations on ARM, we calculate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period and exclude the impact of hedging gains or losses realized as revenues. Constant currency percentage change in ARM is calculated as the percentage change between current period constant currency ARM and the prior comparative period ARM. The impact of hedging gains or losses is excluded from both the current and prior periods. For the three and six months ended June 30, 2024, our revenues would have been approximately $430 million and $701 million higher, respectively, excluding the impact of hedging and had foreign currency exchange rates remained constant with those for the three and six months ended June 30, 2023.

Operating margin for the three months ended June 30, 2024 increased five percentage points as compared to the prior comparative period, primarily due to revenues growing at a faster rate as compared to the growth in cost of revenues, marketing expenses, general and administrative expenses, and technology and development expenses.

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Streaming Revenues

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of June 30, 2024, pricing on our paid plans ranged from the U.S. dollar equivalent of $1 to $31 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $8 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

We also earn revenue from advertisements presented on our streaming service, consumer products, live events and various other sources. Revenues earned from sources other than monthly membership fees were not material for the three and six months ended June 30, 2024 and June 30, 2023.

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023


	Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except percentages)
Streaming revenues	$	9,559,310	$	8,158,326	$	1,400,984	17	%

Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except percentages)
Streaming revenues	$	18,929,750	$	16,288,327	$	2,641,423	16	%

Streaming revenues for the three and six months ended June 30, 2024 increased 17% and 16% as compared to the three and six months ended June 30, 2023, respectively, primarily due to the growth in average paying memberships and price increases, partially offset by unfavorable changes in foreign exchange rates.

The following tables summarize streaming revenue and other streaming membership information by region for the three and six months ended June 30, 2024 and 2023. Hedging gains of $33 million and $22 million are included in “Streaming revenues” for the three and six months ended June 30, 2024, respectively. No hedging gains and losses were recognized as “Streaming revenues” in the comparative prior year period. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

United States and Canada (UCAN)

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023


	As of/Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	4,295,560	$	3,599,448	$	696,112	19	%
Paid net membership additions	1,451		1,173		278		24	%
Paid memberships at end of period	84,109		75,571		8,538		11	%
Average paying memberships	83,384		74,985		8,399		11	%
Average monthly revenue per paying membership	$	17.17	$	16.00	$	1.17	7	%
Constant currency change							7	%

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Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	As of/Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	8,519,875	$	7,208,093	$	1,311,782	18	%
Paid net membership additions	3,981		1,275		2,706		212	%
Paid memberships at end of period	84,109		75,571		8,538		11	%
Average paying memberships	82,389		74,666		7,723		10	%
Average monthly revenue per paying membership	$	17.24	$	16.09	$	1.15	7	%
Constant currency change							7	%

Europe, Middle East, and Africa (EMEA)

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023


	As of/Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	3,007,772	$	2,562,170	$	445,602	17	%
Paid net membership additions	2,235		2,434		(199)		(8)	%
Paid memberships at end of period	93,964		79,807		14,157		18	%
Average paying memberships	92,847		78,590		14,257		18	%
Average monthly revenue per paying membership	$	10.80	$	10.87	$	(0.07)	(1)	%
Constant currency change							1	%

Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	As of/Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	5,965,965	$	5,079,811	$	886,154	17	%
Paid net membership additions	5,151		3,078		2,073		67	%
Paid memberships at end of period	93,964		79,807		14,157		18	%
Average paying memberships	91,559		77,821		13,738		18	%
Average monthly revenue per paying membership	$	10.86	$	10.88	$	(0.02)	—	%
Constant currency change							—	%

Latin America (LATAM)

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023

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	As of/Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	1,204,145	$	1,077,435	$	126,710	12	%
Paid net membership additions	1,530		1,217		313		26	%
Paid memberships at end of period	49,250		42,466		6,784		16	%
Average paying memberships	48,485		41,858		6,627		16	%
Average monthly revenue per paying membership	$	8.28	$	8.58	$	(0.30)	(3)	%
Constant currency change							24	%

Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	As of/Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	2,369,153	$	2,147,627	$	221,526	10	%
Paid net membership additions	3,253		767		2,486		324	%
Paid memberships at end of period	49,250		42,466		6,784		16	%
Average paying memberships	47,672		41,666		6,006		14	%
Average monthly revenue per paying membership	$	8.28	$	8.59	$	(0.31)	(4)	%
Constant currency change							20	%

Asia-Pacific (APAC)

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023


	As of/Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	1,051,833	$	919,273	$	132,560	14	%
Paid net membership additions	2,829		1,068		1,761		165	%
Paid memberships at end of period	50,324		40,546		9,778		24	%
Average paying memberships	48,910		40,012		8,898		22	%
Average monthly revenue per paying membership	$	7.17	$	7.66	$	(0.49)	(6)	%
Constant currency change							(3)	%

Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	As of/Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except revenue per membership and percentages)
Streaming revenues	$	2,074,757	$	1,852,796	$	221,961	12	%
Paid net membership additions	4,986		2,523		2,463		98	%
Paid memberships at end of period	50,324		40,546		9,778		24	%
Average paying memberships	47,664		39,382		8,282		21	%
Average monthly revenue per paying membership	$	7.25	$	7.84	$	(0.59)	(8)	%
Constant currency change							(4)	%

Total

$43,034,660 $14,386,992 $28,647,668

(1)As of June 30, 2024, content obligations were comprised of $4.4 billion included in “Current content liabilities” and $2.0 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $16.9 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

The material cash requirements above do not include any estimated obligation for the unknown future titles, payment for which could range from less than one year to more than five years. However, these unknown obligations are expected to be significant and we believe could include approximately $1 billion to $4 billion over the next three years, with the payments for the vast majority of such amounts expected to occur after the next twelve months. The foregoing range is based on considerable management judgments and the actual amounts may differ. Once we know the title that we will receive and the license fees, we include the amount in the contractual obligations table above.

(2)Debt obligations include our Notes consisting of principal and interest payments. See Note 6 Debt to the consolidated financial statements for further details.

(3)Operating lease obligations are comprised of operating lease liabilities included in "Accrued expenses and other liabilities" and "Other non-current liabilities" on the Consolidated Balance Sheets, inclusive of imputed interest. Operating lease obligations also include additional obligations that are not reflected on the Consolidated Balance Sheets as they did not meet the criteria for recognition. See Note 5 Balance Sheet Components in the accompanying notes to our consolidated financial statements for further details regarding leases.

Cash Flows

The following tables summarize our cash flows:

Three months ended June 30, 2024 as compared to the three months ended June 30, 2023


	Three Months Ended				Change
	June 30, 2024		June 30, 2023		Q2'24 vs. Q2'23
	(in thousands, except percentages)
Net cash provided by operating activities	$	1,290,847	$	1,440,232	$	(149,385)	(10)	%
Net cash provided by (used in) investing activities	(78,287)		97,737		(176,024)		(180)	%
Net cash used in financing activities	(1,489,381)		(649,349)		840,032		129	%

Net cash provided by operating activities for the three months ended June 30, 2024 decreased $149 million as compared to the corresponding period in 2023, primarily driven by a $779 million or 21% increase in payments for content assets and unfavorable changes in working capital, partially offset by a $660 million or 44% increase in net income and adjustments for non-cash expenses.

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Net cash provided by (used in) investing activities for the three months ended June 30, 2024 decreased $176 million as compared to the corresponding period in 2023, primarily due to there being no proceeds or purchases of short-term investments in the three months ended June 30, 2024, as compared to proceeds from maturities of short-term investments of $502 million and purchases of short-term investments of $303 million in the three months ended June 30, 2023.

Net cash used in financing activities for the three months ended June 30, 2024 increased $840 million as compared to the corresponding period in 2023, primarily due to repurchases of common stock for an aggregate amount of $1.6 billion in the three months ended June 30, 2024 as compared to repurchases of common stock for an aggregate amount of $645 million in the three months ended June 30, 2023, partially offset by an $84 million increase in proceeds from the issuance of common stock due to an increase in employee stock options exercised in the three months ended June 30, 2024 as compared to the corresponding period in 2023.

Six months ended June 30, 2024 as compared to the six months ended June 30, 2023


	Six Months Ended				Change
	June 30, 2024		June 30, 2023		YTD'24 vs. YTD'23
	(in thousands, except percentages)
Net cash provided by operating activities	$	3,503,369	$	3,618,972	$	(115,603)	(3)	%
Net cash used in investing activities	(154,001)		(165,916)		(11,915)		(7)	%
Net cash used in financing activities	(3,622,325)		(1,023,422)		2,598,903		254	%

Net cash provided by operating activities for the six months ended June 30, 2024 decreased $116 million as compared to the corresponding period in 2023, primarily driven by a $1,883 million or 29% increase in payments for content assets and unfavorable changes in working capital, partially offset by a $1,687 million or 60% increase in net income and adjustments for non-cash expenses.

Net cash used in investing activities for the six months ended June 30, 2024 decreased $12 million as compared to the corresponding period in 2023, primarily due to decreased purchases of property and equipment, coupled with there being no purchases or maturities of short-term investments in the six months ended June 30, 2024, as compared to purchases of short-term investments of $505 million and maturities of short-term investments of $502 million in the six months ended June 30, 2023.

Net cash used in financing activities for the six months ended June 30, 2024 increased $2,599 million as compared to the corresponding period in 2023, primarily due to repurchases of common stock for an aggregate amount of $3.6 billion in the six months ended June 30, 2024 as compared to repurchases of common stock for an aggregate amount of $1.0 billion in the six months ended June 30, 2023, coupled with the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the six months ended June 30, 2024 as compared to no repayments of debt in the corresponding period in 2023. The increase in net cash used in financing activities was partially offset by the $327 million increase in proceeds from the issuance of common stock in the six months ended June 30, 2024 as compared to the corresponding period in 2023, due to an increase in employee stock options exercised.

Indemnification

The information set forth under Note 8 Commitments and Contingencies to the consolidated financial statements under the caption “Indemnification” is incorporated herein by reference.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

For financial market risks related to changes in interest rates, reference is made to Item 7A “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposure to market risk has not changed significantly since December 31, 2023.

Interest Rate Risk

At June 30, 2024, our cash equivalents and short-term investments were generally invested in money market funds and time deposits. Interest paid on such funds fluctuates with the prevailing interest rate.

As of June 30, 2024, we had $14.0 billion of debt, consisting of fixed rate unsecured debt in thirteen tranches due between 2025 and 2030. Refer to Note 6 Debt to the consolidated financial statements for details about all issuances. The fair value of our debt will fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. The fair value of our debt will also fluctuate based on changes in foreign currency rates, as discussed below.

Foreign Currency Risk

We operate our business globally and transact in multiple currencies. Currencies denominated in other than the U.S. dollar accounted for 56% of revenue and 30% of operating expenses for the six months ended June 30, 2024. We therefore have foreign currency risk related to these currencies, which are primarily the euro, British pound, Brazilian real, Argentine peso, and the Mexican peso.

Accordingly, volatility in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our revenue and operating income as expressed in U.S. dollars. Excluding the impact of hedging gains or losses realized as revenues, our revenues for the six months ended June 30, 2024 would have been approximately $701 million higher had foreign currency exchange rates remained constant with those for the six months ended June 30, 2023. See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding our non-GAAP financial measure of constant currency.

We enter into foreign exchange forward contracts to mitigate fluctuations in forecasted U.S. dollar-equivalent revenues from changes in foreign currency exchange rates. These contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange fluctuations, and we may choose not to hedge certain exposures. We designate these contracts as cash flow hedges of forecasted foreign currency revenue and initially record the gains or losses on these derivative instruments as a component of accumulated other comprehensive income (“AOCI”) and reclassify the amounts into “Revenues” on the Consolidated Statements of Operations in the same period the forecasted transaction affects earnings. If the U.S. dollar weakened by 10% as of June 30, 2024 and December 31, 2023, the amounts recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $1 billion and $958 million lower, respectively. This adverse change in AOCI would be expected to offset a corresponding favorable foreign currency change in the underlying forecasted revenues when recognized in earnings.

We enter into foreign exchange forward contracts to mitigate fluctuations in forecasted and firmly committed U.S. dollar-equivalent transactions related to the licensing and production of content assets from changes in foreign currency exchange rates. These contracts may reduce, but do not entirely eliminate, the effect of foreign currency exchange fluctuations, and we may choose not to hedge certain exposures. We designate these contracts as cash flow hedges and initially record the gains or losses on these derivative instruments as a component of AOCI and reclassify the amounts into “Cost of Revenues” to offset the hedged exposures as they affect earnings, which occurs as the underlying hedged content assets are amortized. If the U.S. dollar strengthened by 10% as of June 30, 2024 and December 31, 2023, the amounts recorded in AOCI related to our foreign exchange contracts, before taxes, would have been approximately $118 million and $71 million lower, respectively. This adverse change in AOCI would be expected to offset a corresponding favorable foreign currency change in the underlying exposures when recognized in earnings.

We use non-derivative instruments to mitigate foreign exchange risk related to our net investments in certain foreign subsidiaries. These non-derivative instruments may reduce, but do not entirely eliminate, the effect of foreign currency exchange fluctuations, and we may choose not to hedge certain exposures. We designate a portion of our foreign currency-denominated Senior Notes in euros as net investment hedges and the gains or losses on these non-derivative instruments are reported as a component of AOCI and remain in AOCI until the hedged net investment is sold or liquidated, at which point the amounts recognized in AOCI are reclassified into earnings.

We have also experienced and will continue to experience fluctuations in our net income as a result of gains (losses) on the settlement and the remeasurement of monetary assets and liabilities denominated in currencies that are not the functional currency. In the six months ended June 30, 2024, we began entering into foreign exchange forward contracts to mitigate the foreign exchange risk on intercompany transactions and monetary assets and liabilities that are not denominated in the functional currencies of the Company and its subsidiaries. These derivative instruments are not designated as hedging instruments and may reduce, but do not entirely eliminate, the effect of foreign currency exchange movements. The gain or loss on derivative instruments not designated as hedging instruments are recorded in “Interest and other income (expense)” in the Consolidated Statements of Operations. If an adverse change in exchange rates of 10% was applied to our monetary assets and liabilities denominated in currencies other than the functional currencies as of June 30, 2024 and December 31, 2023, income before income taxes would have been approximately $305 million and $516 million lower, respectively, after considering the offsetting impact of the foreign currency exchange contracts. The hypothetical adverse change in income before taxes is primarily driven by foreign exchange losses on our Senior Notes denominated in euros which have not been designated as hedges of our net investment in certain foreign subsidiaries.

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our co-Chief Executive Officers and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, including our co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The information set forth under Note 8 Commitments and Contingencies in the notes to the consolidated financial statements under the caption “Legal Proceedings” is incorporated herein by reference.

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Item 1A.Risk Factors

There have been no material changes from the risk factors previously disclosed under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Company Purchases of Equity Securities

Stock repurchases during the three months ended June 30, 2024 were as follows:


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
					(in thousands)
April 1 - 30, 2024	795,124	$	600.38	795,124	$	5,877,477
May 1 - 31, 2024	1,032,742	$	609.73	1,032,742	$	5,247,780
June 1 - 30, 2024	750,238	$	657.02	750,238	$	4,754,859
Total	2,578,104			2,578,104


(1) In March 2021, the Company’s Board of Directors authorized the repurchase of up to $5 billion of its common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $10 billion, also with no expiration date. For further information regarding stock repurchase activity, see Note 9 Stockholders’ Equity to the consolidated financial statements in this Quarterly Report.
(2) Average price paid per share includes costs associated with the repurchases.

Item 5.Other Information

Rule 10b5-1 Trading Plans

(1)8/6/2025

(2)

8/8/2025

(3)

5/12/2025


(1) David Hyman, Chief Legal Officer, entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 on May 7, 2024. Mr. Hyman's plan provides for the potential exercise of vested stock options and the associated sale of up to shares of Netflix common stock. The plan expires on August 6, 2025, or upon the earlier completion of all authorized transactions under the plan.
(2) Anne Sweeney, a member of the Board of Directors, entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 on May 9, 2024. Ms. Sweeney's plan provides for the potential exercise of vested stock options and the associated sale of up to shares of Netflix common stock. The plan expires on August 8, 2025, or upon the earlier completion of all authorized transactions under the plan.
(3) Jay Hoag, a member of the Board of Directors, trusts for which he serves as a trustee and a partnership for which he serves as the sole general partner and limited partner, entered into a pre-arranged stock trading plan pursuant to Rule 10b5-1 on May 10, 2024. The plan provides for the potential sale of up to shares of Netflix common stock. The plan expires on May 12, 2025, or upon the earlier completion of all authorized transactions under the plan.

Other than those disclosed above, none of our directors or officers or a "non-Rule 10b5-1 trading arrangement" as defined in Item 408 of Regulation S-K.

Item 6.Exhibits

(a) Exhibits:

See Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q.

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EXHIBIT INDEX

Exhibit Number

Exhibit Description

Incorporated by Reference

Filed
Herewith

Form

File No.

Exhibit

Filing Date

3.1

Restated Certificate of Incorporation

8-K

001-35727

3.1

June 8, 2022

3.2

Amended and Restated Bylaws

8-K

001-35727

3.2

February 24, 2023

31.1

Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certifications of Co-Chief Executive Officers and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Balance Sheets, (v) Consolidated Statements of Stockholders' Equity and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags

104

The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, formatted in Inline XBRL

* 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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NETFLIX, INC.
Dated:	July 19, 2024	By:	/s/ Ted Sarandos
			Ted Sarandos Co-Chief Executive Officer (Principal executive officer)

Dated:	July 19, 2024	By:	/s/ Greg Peters
			Greg Peters Co-Chief Executive Officer (Principal executive officer)

Dated:	July 19, 2024	By:	/s/ Jeffrey Karbowski
			Jeffrey Karbowski Chief Accounting Officer (Principal accounting officer)

NETFLIX INC - Quarter Report: 2024 June (Form 10-Q)

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