nflx-20220331

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 March 31, 2022

☐ 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 March 31, 2022, there were 444,273,850 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	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
	Part II. Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	29
Exhibit Index		30
Signatures		30

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NETFLIX, INC.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)


	Three Months Ended
	March 31, 2022		March 31, 2021
Revenues	$	7,867,767	$	7,163,282
Cost of revenues	4,284,705		3,868,511
Marketing	555,978		512,512
Technology and development	657,530		525,207
General and administrative	397,928		297,196
Operating income	1,971,626		1,959,856
Other income (expense):
Interest expense	(187,579)		(194,440)
Interest and other income	195,645		269,086
Income before income taxes	1,979,692		2,034,502
Provision for income taxes	(382,245)		(327,787)
Net income	$	1,597,447	$	1,706,715

Earnings per share:
Basic	$	3.60	$	3.85
Diluted	$	3.53	$	3.75
Weighted-average shares of common stock outstanding:
Basic	444,146		443,224
Diluted	452,984		455,641

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)


	Three Months Ended
	March 31, 2022		March 31, 2021
Net income	$	1,597,447	$	1,706,715
Other comprehensive loss:
Foreign currency translation adjustments	(33,675)		(40,261)

Comprehensive income	$	1,563,772	$	1,666,454

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Three Months Ended
	March 31, 2022		March 31, 2021
Cash flows from operating activities:
Net income	$	1,597,447	$	1,706,715
Adjustments to reconcile net income to net cash provided by operating activities:
Additions to content assets	(3,584,164)		(3,284,576)
Change in content liabilities	(347,149)		(266,040)
Amortization of content assets	3,166,365		2,719,196
Depreciation and amortization of property, equipment and intangibles	74,602		35,741
Stock-based compensation expense	119,209		107,230
Foreign currency remeasurement gain on debt	(161,821)		(253,330)
Other non-cash items	101,968		72,657
Deferred income taxes	(68,906)		159,733
Changes in operating assets and liabilities:
Other current assets	41,157		(221,555)
Accounts payable	(215,444)		(137,313)
Accrued expenses and other liabilities	350,763		177,897
Deferred revenue	16,743		22,279
Other non-current assets and liabilities	(167,931)		(61,368)
Net cash provided by operating activities	922,839		777,266
Cash flows from investing activities:
Purchases of property and equipment	(121,158)		(81,001)
Change in other assets	—		(4,615)
Acquisitions	(124,521)		—
Net cash used in investing activities	(245,679)		(85,616)
Cash flows from financing activities:
Repayments of debt	(700,000)		(500,000)
Proceeds from issuance of common stock	13,678		48,071
Net cash used in financing activities	(686,322)		(451,929)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(11,448)		(42,138)
Net increase (decrease) in cash, cash equivalents and restricted cash	(20,610)		197,583
Cash, cash equivalents and restricted cash at beginning of period	6,055,111		8,238,870
Cash, cash equivalents and restricted cash at end of period	$	6,034,501	$	8,436,453

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
	March 31, 2022		December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	6,008,946	$	6,027,804
Other current assets	2,089,069		2,042,021
Total current assets	8,098,015		8,069,825
Content assets, net	31,191,920		30,919,539
Property and equipment, net	1,383,763		1,323,453
Other non-current assets	4,657,206		4,271,846
Total assets	$	45,330,904	$	44,584,663
Liabilities and Stockholders’ Equity
Current liabilities:
Current content liabilities	$	4,066,289	$	4,292,967
Accounts payable	617,202		837,483
Accrued expenses and other liabilities	1,817,117		1,449,351
Deferred revenue	1,239,048		1,209,342
Short-term debt	—		699,823
Total current liabilities	7,739,656		8,488,966
Non-current content liabilities	2,945,221		3,094,213
Long-term debt	14,534,561		14,693,072
Other non-current liabilities	2,567,427		2,459,164
Total liabilities	27,786,865		28,735,415
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.001 par value; 4,990,000,000 shares authorized at March 31, 2022 and December 31, 2021; 444,273,850 and 443,963,107 issued and outstanding at March 31, 2022 and December 31, 2021, respectively	4,155,580		4,024,561
Treasury stock at cost (1,564,478 shares at March 31, 2022)	(824,190)		(824,190)
Accumulated other comprehensive loss	(74,170)		(40,495)
Retained earnings	14,286,819		12,689,372
Total stockholders’ equity	17,544,039		15,849,248
Total liabilities and stockholders’ equity	$	45,330,904	$	44,584,663

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
	March 31, 2022		March 31, 2021
Total stockholders' equity, beginning balances	$	15,849,248	$	11,065,240

Common stock and additional paid-in capital:
Beginning balances	$	4,024,561	$	3,447,698
Issuance of common stock upon exercise of options	11,810		45,156
Stock-based compensation expense	119,209		107,230
Ending balances	$	4,155,580	$	3,600,084

Treasury stock:
Beginning balances	$	(824,190)	$	—
Repurchases of common stock to be held as treasury stock	—		—
Ending balances	$	(824,190)	$	—

Accumulated other comprehensive loss
Beginning balances	$	(40,495)	$	44,398
Other comprehensive loss	(33,675)		(40,261)
Ending balances	$	(74,170)	$	4,137

Retained earnings:
Beginning balances	$	12,689,372	$	7,573,144
Net income	1,597,447		1,706,715
Ending balances	$	14,286,819	$	9,279,859

Total stockholders' equity, ending balances	$	17,544,039	$	12,884,080

See accompanying notes to the consolidated financial statements.

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NETFLIX, INC.

Notes to Consolidated Financial Statements

(unaudited)

1. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim consolidated financial statements of Netflix, Inc. and its wholly owned subsidiaries (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on January 27, 2022. The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions include the content asset amortization policy and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.

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, 2021. Interim results are not necessarily indicative of the results for a full year.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Recently adopted accounting pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The Company adopted ASU 2021-08 in the first quarter of 2022 and the adoption had no material impact to the Company’s consolidated financial statements.

2. Revenue Recognition

The Company's primary source of revenues is from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. The Company is the principal in all its relationships where partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators and internet service providers (“ISPs”), provide access to the service as the Company retains control over service delivery to its members. Typically, payments made to the partners, such as for marketing, are expensed. However, if there is no distinct service provided in exchange for the payments made to the partners or if the price that the member pays is established by the partners and there is no standalone price for the Netflix service (for instance, in a bundle), these payments are recognized as a reduction of revenues.

The following tables summarize streaming revenue, paid net membership additions, and paid memberships at end of period by region for the three months ended March 31, 2022 and 2021, respectively:

United States and Canada (UCAN)


	As of/ Three Months Ended
	March 31, 2022		March 31, 2021
	(in thousands)
Revenues	$	3,350,424	$	3,170,972
Paid net membership additions (losses)	(636)		448
Paid memberships at end of period (1)	74,579		74,384

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Europe, Middle East, and Africa (EMEA)


	As of/ Three Months Ended
	March 31, 2022		March 31, 2021
	(in thousands)
Revenues	$	2,561,831	$	2,343,674
Paid net membership additions (losses)	(303)		1,810
Paid memberships at end of period (1)

SEC Form 10-Q filed by Netflix Inc.