Exhibit 99.1
July 17, 2019

Fellow shareholders,

As expected, revenue growth accelerated 400 basis points to 26%, and operating income increased 53% year over year in Q2. Paid membership grew by 2.7m, less than the 5.5m in Q2 a year ago and our 5.0m forecast. In Q3, we expect to grow by 7m paid memberships, more than the 6.1m in Q3 a year ago. Consumers around the world continue to move from linear television to internet entertainment at a remarkable rate.
 (in millions except per share data and Streaming Content Obligations)
Q2'18
Q3'18
Q4'18
Q1'19
Q2'19
Q3'19 Forecast
Revenue
$
3,907

$
3,999

$
4,187

$
4,521

$
4,923

$
5,250

Y/Y % Growth
40.3
%
34.0
%
27.4
%
22.2
%
26.0
%
31.3
%
Operating Income
$
462

$
481

$
216

$
459

$
706

$
833

Operating Margin
11.8
%
12.0
%
5.2
%
10.2
%
14.3
%
15.9
%
Net Income
$
384

$
403

$
134

$
344

$
271

$
470

Diluted EPS
$
0.85

$
0.89

$
0.30

$
0.76

$
0.60

$
1.04

 
 
 
 
 
 
 
Global Streaming Paid Memberships
124.35

130.42

139.26

148.86

151.56

158.56

Y/Y % Growth
25.6
%
25.4
%
25.9
%
25.2
%
21.9
%
21.6
%
Global Streaming Paid Net Additions
5.45

6.07

8.84

9.60

2.70

7.00

 
 
 
 
 
 
 
Net cash (used in) operating activities
$
(518
)
$
(690
)
$
(1,235
)
$
(380
)
$
(544
)
 
Free Cash Flow*
$
(559
)
$
(859
)
$
(1,315
)
$
(460
)
$
(594
)
 
Adjusted EBITDA**
$
563

$
584

$
328

$
584

$
836

 
Shares (FD)
451.6

451.9

451.1

451.9

452.2

 
Streaming Content Obligations*** ($B)
18.4

18.6

19.3

18.9

18.5

 
Note: Figures are consolidated, including DVD.
 
 
 
 
 
 
* Free cash flow represents Net Cash (used in) operating activities adjusted for acquisition of DVD content assets, purchases of property and equipment and change in other assets
** Adjusted EBITDA represents net income before interest expense and other income/expense, income taxes, depreciation and amortization of property and equipment and further adjusted to exclude other non-cash charges or non-recurring items
*** Corresponds to our total known streaming content obligations as defined in our financial statements and related notes in our most recently filed SEC Form 10-K

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1


Q2 Results and Q3 Forecast
Average streaming paid memberships increased 24% year over year, while ARPU increased 3% year over year on a reported basis. Excluding the year over year foreign exchange (F/X) impact on revenue of -$265 million, global streaming ARPU grew 9%, with 12% and 7% ARPU growth in the US and international segments, respectively. Operating margin of 14.3% (up 250 bps year over year) was higher than our beginning-of-quarter forecast as some marketing spend was shifted into the second half of the year. EPS amounted to $0.60 vs. $0.85 and included a $61 million non-cash unrealized loss from F/X remeasurement on our Euro denominated debt. Streaming content obligations decreased 2% sequentially, reflecting our shift to more owned (vs. licensed) content.

As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report. We strive for accuracy (not conservatism), which means that in some quarters we will be high and other quarters low relative to our guidance. In Q2’19, our membership growth forecast was high.
globalpaidnetadds01.jpg

Our missed forecast was across all regions, but slightly more so in regions with price increases. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region). Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated. Additionally, Q1 was so large for us (9.6m net adds), there may have been more pull-forward effect than we realized. In prior quarters with over-forecasts, we’ve found that the underlying long-term growth was not affected and staying focused on the fundamentals of our business served us well.

Q3 has started with Stranger Things season 3, and the first two weeks of Q3 are strong. In addition to the recently released season 3 of Stranger Things, our second half content slate includes new seasons of La Casa de Papel (Money Heist), The Crown, and the final season of the iconic Orange is the New Black as well as big films like The Irishman from Martin Scorsese and action movie 6 Underground (directed by Michael Bay and starring Ryan Reynolds).
 

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2


While our US paid membership was essentially flat in Q2, we expect it to return to more typical growth in Q3, and are seeing that in these early weeks of Q3. We forecast Q3 global paid net adds of 7.0m, up vs. 6.1m in Q3’18, with 0.8m in the US and 6.2m internationally. Our internal forecast still currently calls for annual global paid net adds to be up year over year. There’s no change to our 13% operating margin target for FY19, up 300 basis points year over year.
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Content
Our Q2 content slate featured several highly watched titles. We launched Dead to Me, a dramedy starring 2019 Emmy nominated Best Actress Christina Applegate, which was watched by 30m households in its first four weeks. We’ve renewed this half hour comedy for a second season. We’re also proud of When They See Us1, a moving limited series based on the Central Park Five case, from Ava DuVernay. This powerful story was watched by 25m households in its first four weeks and has stirred a global conversation about race, identity, and criminal justice. When They See Us was also just nominated for 16 Emmy Awards, including Outstanding Limited Series. Our Planet was our most ambitious undertaking in the documentary category to date and it’s also our highest-watched original docu-series through its first four weeks (33m households) and was just nominated for 10 Emmy Awards.

We are making good progress with our original films portfolio with more and more of our films creating larger audiences than our pay 1 licensed movies. At the end of June, we premiered our latest Adam Sandler movie Murder Mystery (also starring Jennifer Aniston), which is the most watched Adam Sandler Netflix original film to date; over 73m households watched this film in its first four weeks. In Q2, the young adult romantic comedy movie The Perfect Date (featuring Noah Centineo from our big film To All The Boys I’ve Loved Before) was a global hit with 48m households in its first four weeks. Similarly, Ali Wong co-starred with Randall Park in Always Be My Maybe (directed by Nahnatchka Khan), which was viewed by 32m households in its first four weeks.

___________________________________
1 https://www.youtube.com/watch?v=u3F9n_smGWY&feature=youtu.be


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3



Season 2 of The Rain was among the largest returning seasons for one of our non-English language originals, while Swedish series Quicksand was a new show that was highly watched both locally and globally. We also debuted several local-language titles that were very popular in their home territories like the first two installments of the Historia de un Crimen franchise (Historia de un Crimen: Colosio and Historia de un Crimen: Colmenares) in Latin America, while Family Business was a breakthrough hit for us in France.

We’ve been moving our content from semi-exclusive catalog and 2nd-window unbranded content to branded exclusive 1st window original content for many years. Much of our domestic, and eventually global, Disney catalog, as well as Friends, The Office, and some other licensed content will wind down over the coming years, freeing up budget for more original content. We don’t have material viewing concentration as even our largest titles (that are watched by millions of members) account for only a low single digit percentage of streaming hours. From what we’ve seen in the past when we drop strong catalog content (Starz and Epix with Sony, Disney, and Paramount films, or 2nd run series from Fox, for example) our members shift over to enjoying our other great content.

Forty of our original series, films and specials were nominated for 117 Emmy Awards, including Outstanding Comedy and Drama Series, Limited Series, Animated Series and Reality Series, as well as Variety, Children’s, short form and interactive programs. We are incredibly proud to offer best in class original programming in so many different forms.
Marketing
As Netflix has shifted to original content, our marketing has evolved to increasingly focus on launching our key titles to build excitement amongst existing and non-members. We’re continuing to invest in owned and earned media, where we can have strong, direct relationships with fans. We’re very excited to welcome Jackie Lee-Joe2 as our new CMO to help us take our marketing to the next level.
We’re also building out our licensing and brand partnerships effort, which is optimizing for fan and viewer engagement over revenue maximization. For example, for the launch of Stranger Things season 3, we partnered with best-in-class brands like Coke3, Nike4, Burger King5, and Baskin Robbins6 to build deep connections with our fans.
At E3, the largest video gaming event of the year, we announced a new Stranger Things mobile game, a game based on our upcoming new show Dark Crystal: Age of Resistance (a prequel to the 1982 film), and a partnership with Epic Games, the developers of Fortnite7. Like our other merchandising initiatives, these games are designed to build fandom for our titles and don’t signal a push into gaming as a new business for Netflix.


___________________________________
2 https://www.netflixinvestor.com/investor-news-and-events/financial-releases/press-release-details/2019/Jackie-Lee-Joe-named-Netflix-Chief-Marketing-Officer/default.aspx
3 https://www.youtube.com/watch?v=uCCg5AjwmvE&feature=youtu.be
4 https://www.bizjournals.com/atlanta/news/2019/06/13/nike-partners-with-netflix-and-stranger-things-to.html
5 https://www.cnn.com/2019/06/13/business/burger-king-stranger-things/index.html
6 https://www.usatoday.com/story/money/2019/05/30/stranger-things-ice-cream-coming-baskin-robbins/1287027001/
7 https://www.gamesradar.com/stranger-things-fortnite-crossover-e3-2019/



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4


Product and Partnerships
We recently entered into a new partnership with AT&T in the US to integrate Netflix into their new set-top box. In the US, we now partner with a wide range of ISPs and MVPDs, including Comcast, DISH, Verizon, T-Mobile, Charter, and Altice, in addition to AT&T.
After several months of testing, we’ve decided to roll out a lower-priced mobile-screen plan in India to complement our existing plans. We believe this plan, which will launch in Q3, will be an effective way to introduce a larger number of people in India to Netflix and to further expand our business in a market where Pay TV ARPU is low (below $5). We will continue to learn more after launch of this plan.
 
Competition
Over the next 12 months, Disney, Apple, WarnerMedia, NBCU and others are joining Hulu, Amazon, BBC, Hotstar, YouTube, Netflix, and many others in offering streaming entertainment. The competition for winning consumers’ relaxation time is fierce for all companies and great for consumers. The innovation of streaming services is also drawing consumers to shift more and more from linear television to streaming entertainment. If you watch Our Planet on a new TV with Dolby Vision or HDR10, you will see why: the quality of streaming television is spectacular. In the US, our most developed market, we still only earn about 10% of consumers’ television time, and less of their mobile screen time, so we have much room for growth.
We, like HBO, are advertising free. That remains a deep part of our brand proposition; when you read speculation that we are moving into selling advertising, be confident that this is false. We believe we will have a more valuable business in the long term by staying out of competing for ad revenue and instead entirely focusing on competing for viewer satisfaction.

Cash Flow and Capital Structure
Net cash used in operating activities in Q2’19 was -$544 million vs. -$518 million in the prior year period. Free cash flow (FCF)8 totaled -$594 million vs. -$559 million in Q2’18. We’re still forecasting FCF of approximately -$3.5 billion for the full year 2019 and expect improvement in 2020. From there, we’ll continue to reduce our free cash flow deficit as we intend to continue growing our member base, revenues, and operating margin, which provides a clear path towards positive FCF. In the meantime, our plan is still to use high yield debt to fund our content investments as we did in April. In our most recent round, we raised 10.5 year senior notes of €1.2 billion (3.875% coupon) and $900 million (5.375% coupon).




___________________________________
8 For a reconciliation of free cash flow to net cash (used in) operating activities, please refer to the reconciliation in tabular form on the attached unaudited financial statements and the footnotes thereto.


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5


Reference
For quick reference, our eight most recent investor letters are: April 2019,9 January 2019,10 October 2018,11 July 2018,12 April 2018,13 January 2018,14 October 2017,15 July 2017.16
Appendix
 (in millions)
Q2'18
Q3'18
Q4'18
Q1'19
Q2'19
Q3'19 Forecast
US Streaming:
 
 
 
 
 
 
Revenue
$
1,893

$
1,937

$
1,996

$
2,074

$
2,299

$
2,400

Contribution Profit*
$
672

$
688

$
590

$
713

$
852

$
923

Contribution Margin*
35.5
%
35.5
%
29.6
%
34.4
%
37.1
%
38.5
%
Paid Memberships
55.96

56.96

58.49

60.23

60.10

60.90

Paid Net Additions
0.87

1.00

1.53

1.74

(0.13
)
0.80

Free Trials
1.42

1.51

2.07

1.56

1.58

 
 
 
 
 
 
 
 
International Streaming:
 
 
 
 
 
 
Revenue
$
1,921

$
1,973

$
2,106

$
2,367

$
2,548

$
2,778

Contribution Profit*
$
188

$
218

$
82

$
274

$
416

$
503

Contribution Margin*
9.8
%
11.0
%
3.9
%
11.6
%
16.3
%
18.1
%
Paid Memberships
68.39

73.46

80.77

88.63

91.46

97.66

Paid Net Additions
4.58

5.07

7.31

7.86

2.83

6.20

Free Trials
4.37

5.17

7.13

5.00

4.48

 
 
 
 
 
 
 
 
*Certain prior period amounts have been reclassified from G&A to Cost of revenues and Marketing and from Tech & Dev to Cost of revenues to conform to current period presentation
Note: As announced in our Q3'18 investor letter, we will cease reporting end-of-quarter free trial count in January of 2020.




___________________________________
9 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2019/q1/FINAL-Q1-19-Shareholder-Letter.pdf
10 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q4/01/FINAL-Q4-18-Shareholder-Letter.pdf
11 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q3/FINAL-Q3-18-Shareholder-Letter.pdf
12 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q2/FINAL-Q2-18-Shareholder-Letter.pdf
13 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2018/q1/FINAL-Q1-18-Shareholder-Letter.pdf
14 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2017/q4/COMBINED-Q4-17-Shareholder-Letter-FINAL.pdf
15 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2017/q3/Q3_17_Shareholder_Letter_COMBINED.pdf
16 https://s22.q4cdn.com/959853165/files/doc_financials/quarterly_reports/2017/q2/Q2_17_Shareholder_Letter.pdf


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6


July 17, 2019 Earnings Interview, 3pm PST
Our video interview with Michael Morris of Guggenheim Securities will be on youtube/netflixir at 3pm PST today. Questions that investors would like to see asked should be sent to michael.morris@guggenheimpartners.com. Reed Hastings, CEO, Spence Neumann, CFO, Ted Sarandos, Chief Content Officer, Greg Peters, Chief Product Officer and Spencer Wang, VP of IR/Corporate Development will all be on the video to answer Michael’s questions.

 
IR Contact: 
PR Contact: 
Spencer Wang
Richard Siklos
VP, Finance/IR & Corporate Development
VP, Corporate Communications
408 809-5360
408 540-2629


























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7



Use of Non-GAAP Measures
This shareholder letter and its attachments include reference to the non-GAAP financial measure of free cash flow and EBITDA. Management believes that free cash flow and EBITDA are important liquidity metrics because they measure, during a given period, the amount of cash generated that is available to repay debt obligations, make investments and for certain other activities or the amount of cash used in operations, including investments in global streaming content. However, these non-GAAP measures should be considered in addition to, not as a substitute for or superior to, net income, operating income, diluted earnings per share and net cash provided by operating activities, or other financial measures prepared in accordance with GAAP. Reconciliation to the GAAP equivalent of these non-GAAP measures are contained in tabular form on the attached unaudited financial statements.

Forward-Looking Statements
This shareholder letter contains certain forward-looking statements within the meaning of the federal
securities laws, including statements regarding future content offerings; variability of content obligations; product tests; impact of competition; future capital raises; ARPU; global streaming membership growth; tax rate; impact of the change in corporate structure; U.S. and international streaming paid memberships, paid net additions, revenue, contribution profit (loss) and contribution margin; consolidated revenue, revenue growth, operating income, operating margin, net income, and earnings per share; and free cash flow. The forward-looking statements in this letter are subject to risks and uncertainties that could cause actual results and events to differ, including, without limitation: our ability to attract new members and retain existing members; our ability to compete effectively; maintenance and expansion of device platforms for streaming; fluctuations in consumer usage of our service; service disruptions; production risks; actions of Internet Service Providers; and, competition, including consumer adoption of different modes of viewing in-home filmed entertainment. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on January 29, 2019, as amended by Form 10-K/A, filed with the SEC on February 8, 2019. The Company provides internal forecast numbers. Investors should anticipate that actual performance will vary from these forecast numbers based on risks and uncertainties discussed above and in our Annual Report on Form 10-K, as amended by Form 10-K/A. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this shareholder letter.














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8



Netflix, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Revenues
$
4,923,116

 
$
4,520,992

 
$
3,907,270

 
$
9,444,108

 
$
7,608,126

Cost of revenues
3,005,657

 
2,870,614

 
2,402,431

 
5,876,271

 
4,703,010

Marketing
603,150

 
616,578

 
592,007

 
1,219,728

 
1,128,784

Technology and development
383,233

 
372,764

 
299,095

 
755,997

 
581,405

General and administrative
224,657

 
201,952

 
151,524

 
426,609

 
286,136

Operating income
706,419

 
459,084

 
462,213

 
1,165,503

 
908,791

Other income (expense):
 
 
 
 
 
 
 
 
 
Interest expense
(152,033
)
 
(135,529
)
 
(101,605
)
 
(287,562
)
 
(182,824
)
Interest and other income (expense)
(53,470
)
 
76,104

 
68,028

 
22,634

 
2,285

Income before income taxes
500,916

 
399,659

 
428,636

 
900,575

 
728,252

Provision for income taxes
230,266

 
55,607

 
44,287

 
285,873

 
53,779

Net income
$
270,650

 
$
344,052

 
$
384,349

 
$
614,702

 
$
674,473

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.62

 
$
0.79

 
$
0.88

 
$
1.41

 
$
1.55

Diluted
$
0.60

 
$
0.76

 
$
0.85

 
$
1.36

 
$
1.50

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
437,587

 
436,947

 
435,097

 
437,271

 
434,638

Diluted
452,195

 
451,922

 
451,552

 
452,063

 
450,958




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9



Netflix, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands)
 
 
As of
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
5,004,247

 
$
3,794,483

Current content assets, net

 
5,151,186

Other current assets
872,910

 
748,466

Total current assets
5,877,157

 
9,694,135

Non-current content assets, net
21,945,740

 
14,960,954

Property and equipment, net
452,399

 
418,281

Other non-current assets
1,896,043

 
901,030

Total assets
$
30,171,339

 
$
25,974,400

Liabilities and Stockholders' Equity
 
 
 
Current liabilities:
 
 
 
Current content liabilities
$
4,848,201

 
$
4,686,019

Accounts payable
442,194

 
562,985

Accrued expenses and other liabilities
750,812

 
477,417

Deferred revenue
892,777

 
760,899

Total current liabilities
6,933,984

 
6,487,320

Non-current content liabilities
3,564,440

 
3,759,026

Long-term debt
12,594,135

 
10,360,058

Other non-current liabilities
973,232

 
129,231

Total liabilities
24,065,791

 
20,735,635

Stockholders' equity:
 
 
 
Common stock
2,566,365

 
2,315,988

Accumulated other comprehensive loss
(20,352
)
 
(19,582
)
Retained earnings
3,559,535

 
2,942,359

Total stockholders' equity
6,105,548

 
5,238,765

Total liabilities and stockholders' equity
$
30,171,339

 
$
25,974,400

 


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10



Netflix, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
June 30,
2019

March 31,
2019

June 30,
2018

June 30,
2019
 
June 30,
2018
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net income
$
270,650

 
$
344,052

 
$
384,349

 
$
614,702

 
$
674,473

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
 
 
 
 
 
Additions to streaming content assets
(3,325,103
)
 
(2,997,746
)
 
(3,033,721
)
 
(6,322,849
)
 
(6,020,468
)
Change in streaming content liabilities
(12,414
)
 
(14,698
)
 
288,474

 
(27,112
)
 
667,359

Amortization of streaming content assets
2,231,915

 
2,124,686

 
1,817,817

 
4,356,601

 
3,566,661

Amortization of DVD content assets
7,656

 
8,509

 
11,154

 
16,165

 
22,288

Depreciation and amortization of property, equipment and intangibles
25,496

 
23,561

 
19,736

 
49,057

 
38,777

Stock-based compensation expense
103,848

 
101,200

 
81,232

 
205,048

 
149,627

Other non-cash items
53,039

 
37,199

 
13,921

 
90,238

 
22,130

Foreign currency remeasurement loss (gain) on long-term debt
61,284

 
(57,600
)
 
(85,410
)
 
3,684

 
(44,330
)
Deferred taxes
35,519

 
6,627

 
(9,539
)
 
42,146

 
(31,588
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
Other current assets
(24,231
)
 
(32,076
)
 
(25,564
)
 
(56,307
)
 
(81,469
)
Accounts payable
(2,674
)
 
(124,467
)
 
7,733

 
(127,141
)
 
81,816

Accrued expenses and other liabilities
(26,705
)
 
157,647

 
(52,851
)
 
130,942

 
66,198

Deferred revenue
84,085

 
47,793

 
23,848

 
131,878

 
79,118

Other non-current assets and liabilities
(26,119
)
 
(4,486
)
 
40,582

 
(30,605
)
 
54,412

Net cash used in operating activities
(543,754
)
 
(379,799
)
 
(518,239
)
 
(923,553
)
 
(754,996
)
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Acquisition of DVD content assets
(7,798
)
 
(9,170
)
 
(12,552
)
 
(16,968
)
 
(23,348
)
Purchases of property and equipment
(39,584
)
 
(60,381
)
 
(27,323
)
 
(99,965
)
 
(64,493
)
Change in other assets
(2,654
)
 
(10,552
)
 
(441
)
 
(13,206
)
 
(2,227
)
Net cash used in investing activities
(50,036
)
 
(80,103
)
 
(40,316
)
 
(130,139
)
 
(90,068
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from issuance of debt
2,243,196

 

 
1,900,000

 
2,243,196

 
1,900,000

Debt issuance costs
(18,192
)
 

 
(16,992
)
 
(18,192
)
 
(16,992
)
Proceeds from issuance of common stock
21,896

 
22,972

 
26,936

 
44,868

 
83,271

Other financing activities

 

 
(532
)
 

 
(853
)
Net cash provided by financing activities
2,246,900

 
22,972

 
1,909,412

 
2,269,872

 
1,965,426

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
4,998

 
(5,014
)
 
(36,340
)
 
(16
)
 
(29,163
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
1,658,108

 
(441,944
)
 
1,314,517

 
1,216,164

 
1,091,199

Cash, cash equivalents and restricted cash at beginning of period
3,370,097

 
3,812,041

 
2,599,477

 
3,812,041

 
2,822,795

Cash, cash equivalents and restricted cash at end of period
$
5,028,205

 
$
3,370,097

 
$
3,913,994

 
$
5,028,205

 
$
3,913,994

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Non-GAAP free cash flow reconciliation:
 
 
 
 
 
 
 
 
 
Net cash used in operating activities
$
(543,754
)
 
$
(379,799
)
 
$
(518,239
)
 
$
(923,553
)
 
$
(754,996
)
Acquisition of DVD content assets
(7,798
)
 
(9,170
)
 
(12,552
)
 
(16,968
)
 
(23,348
)
Purchases of property and equipment
(39,584
)
 
(60,381
)
 
(27,323
)
 
(99,965
)
 
(64,493
)
Change in other assets
(2,654
)
 
(10,552
)
 
(441
)
 
(13,206
)
 
(2,227
)
Non-GAAP free cash flow
$
(593,790
)
 
$
(459,902
)
 
$
(558,555
)
 
$
(1,053,692
)
 
$
(845,064
)

nflxlogo2015a20.jpg
11



Netflix, Inc.
Segment Information
(unaudited)
(in thousands)
 
As of / Three Months Ended
 
As of/ Six Months Ended
 
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
June 30,
2019
 
June 30,
2018
Domestic Streaming
 
 
 
 
 
 
 
 
 
Paid memberships at end of period
60,103

 
60,229

 
55,959

 
60,103

 
55,959

Paid net membership additions (losses)
(126
)
 
1,743

 
872

 
1,617

 
3,149

Free trials
1,575

 
1,563

 
1,420

 
1,575

 
1,420

 
 
 
 
 
 
 
 
 
 
Revenues
$
2,299,189

 
$
2,073,555

 
$
1,893,222

 
$
4,372,744

 
$
3,713,241

Cost of revenues
1,196,420

 
1,139,535

 
969,995

 
2,335,955

 
1,906,475

Marketing
250,606

 
221,046

 
251,298

 
471,652

 
502,017

Contribution profit
852,163

 
712,974

 
671,929

 
1,565,137

 
1,304,749

 
 
 
 
 
 
 
 
 
 
International Streaming
 
 
 
 
 
 
 
 
 
Paid memberships at end of period
91,459

 
88,634

 
68,395

 
91,459

 
68,395

Paid net membership additions
2,825

 
7,861

 
4,580

 
10,686

 
10,561

Free trials
4,481

 
5,003

 
4,367

 
4,481

 
4,367

 
 
 
 
 
 
 
 
 
 
Revenues
$
2,547,727

 
$
2,366,749

 
$
1,921,144

 
$
4,914,476

 
$
3,703,230

Cost of revenues
1,778,890

 
1,697,121

 
1,392,512

 
3,476,011

 
2,714,218

Marketing
352,544

 
395,532

 
340,709

 
748,076

 
626,767

Contribution profit
416,293

 
274,096

 
187,923

 
690,389

 
362,245

 
 
 
 
 
 
 
 
 
 
Domestic DVD
 
 
 
 
 
 
 
 
 
Paid memberships at end of period
2,411

 
2,565

 
2,971

 
2,411

 
2,971

Free trials
17

 
22

 
28

 
17

 
28

 
 
 
 
 
 
 
 
 
 
Revenues
$
76,200

 
$
80,688

 
$
92,904

 
$
156,888

 
$
191,655

Cost of revenues
30,347

 
33,958

 
39,924

 
64,305

 
82,317

Contribution profit
45,853

 
46,730

 
52,980

 
92,583

 
109,338

 
 
 
 
 
 
 
 
 
 
Consolidated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
4,923,116

 
$
4,520,992

 
$
3,907,270

 
$
9,444,108

 
$
7,608,126

Cost of revenues
3,005,657

 
2,870,614

 
2,402,431

 
5,876,271

 
4,703,010

Marketing
603,150

 
616,578

 
592,007

 
1,219,728

 
1,128,784

Contribution profit
1,314,309

 
1,033,800

 
912,832

 
2,348,109

 
1,776,332

Other operating expenses
607,890

 
574,716

 
450,619

 
1,182,606

 
867,541

Operating income
706,419

 
459,084

 
462,213

 
1,165,503

 
908,791

Other expense
(205,503
)
 
(59,425
)
 
(33,577
)
 
(264,928
)
 
(180,539
)
Provision for income taxes
230,266

 
55,607

 
44,287

 
285,873

 
53,779

Net income
$
270,650

 
$
344,052

 
$
384,349

 
$
614,702

 
$
674,473






nflxlogo2015a20.jpg
12


Netflix, Inc.
Non-GAAP Information
(unaudited)
(in thousands)

 
 
 
June 30,
2018
 
September 30,
2018
 
December 31,
2018
 
March 31,
2019
 
June 30,
2019
Non-GAAP Adjusted EBITDA reconciliation:
 
 
 
 
 
 
 
 
 
GAAP net income
$
384,349

 
$
402,835

 
$
133,934

 
$
344,052

 
$
270,650

Add:
 
 
 
 
 
 
 
 
 
Other expense
33,577

 
101,858

 
96,371

 
59,425

 
205,503

Provision for (benefit from) income taxes
44,287

 
(24,025
)
 
(14,538
)
 
55,607

 
230,266

Depreciation and amortization of property, equipment and intangibles
19,736

 
21,161

 
23,219

 
23,561

 
25,496

Stock-based compensation expense
81,232

 
82,316

 
88,714

 
101,200

 
103,848

Adjusted EBITDA
$
563,181

 
$
584,145

 
$
327,700

 
$
583,845

 
$
835,763


nflxlogo2015a20.jpg
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