Netflix, Inc.

Consolidated Balance Sheets

(unaudited)
(in thousands)

March 31, June 30, September 30, December 31, March 31, June 30, September 30,December 31, March 31,
2015 2015 2015 2015 2016 2016 2016 2016 2017
Assets
Current assets:
Cash and cash equivalents $ 2,454,777 $ 2,293,872 $ 2,115,437 $ 1,809,330 $1,605,244 $1,390,925 $969,158 $ 1,467,576 $1,077,824
Short-term investments 502,931 502,886 494,205 501,385 467,227 443,303 374,098 266,206 263,405
Current content assets, net 2,439,171 2,582,636 2,762,397 2,905,998 3,258,641 3,349,262 3,632,399 3,726,307 4,026,615
Other current assets 128,178 205,327 177,450 215,127 212,724 203,428 218,238 260,202 292,486
Total current assets 5,525,057 5,584,721 5,549,489 5,431,840 5,543,836 5,386,918 5,193,893 5,720,291 5,660,330
Non-current content assets, net 3,312,353 3,640,767 3,891,790 4,312,817 5,260,160 5,742,938 6,677,674 7,274,501 8,029,112
Property and equipment, net 145,816 171,396 181,268 173,412 166,254 162,864 191,876 250,395 275,083
Other non-current assets 226,268 227,665 264,239 284,802 292,024 300,787 283,895 341,423 394,571
Total assets $ 9,209,494 $ 9,624,549 $ 9,886,786 $ 10,202,871 $ 11,262,274 $ 11,593,507 $ 12,347,338 $ 13,586,610 $ 14,359,096
Liabilities and Stockholders' Equity
Current liabilities:
Current content liabilities $ 2,425,619 $ 2,556,180 $ 2,622,964 $ 2,789,023 $ 3,145,861 $ 3,242,330 $ 3,497,214 $ 3,632,711 $ 3,861,447
Accounts payable 190,567 211,729 209,365 253,491 231,914 240,458 285,753 312,842 294,831
Accrued expenses 107,323 150,406 179,350 140,389 181,634 172,073 201,232 197,632 296,258
Deferred revenue 285,340 301,754 329,739 346,721 374,223 396,976 427,206 443,472 458,693
Total current liabilities 3,008,849 3,220,069 3,341,418 3,529,624 3,933,632 4,051,837 4,411,405 4,586,657 4,911,229
Non-current content liabilities 1,861,791 1,942,624 1,966,854 2,026,360 2,586,098 2,698,520 2,975,189 2,894,654 3,035,430
Long-term debt 2,368,868 2,369,688 2,370,519 2,371,362 2,372,218 2,373,085 2,373,966 3,364,311 3,365,431
Other non-current liabilities 60,772 60,093 40,677 52,099 53,093 54,231 57,812 61,188 73,323
Total liabilities 7,300,280 7,592,474 7,719,468 7,979,445 8,945,041 9,177,673 9,818,372 10,906,810 11,385,413
Stockholders' equity:
Common stock 1,109,388 1,200,880 1,306,461 1,324,809 1,382,051 1,443,707 1,503,641 1,599,762 1,669,132
Accumulated other comprehensive loss (43,154) (38,120) (37,890) (43,308) (34,401) (38,211) (36,530) (48,565) (45,859)
Retained earnings 842,980 869,315 898,747 941,925 969,583 1,010,338 1,061,855 1,128,603 1,350,410
Total stockholders' equity 1,909,214 2,032,075 2,167,318 2,223,426 2,317,233 2,415,834 2,528,966 2,679,800 2,973,683
Total liabilities and stockholders' equity $ 9,209,494 $ 9,624,549 $ 9,886,786 $ 10,202,871 $ 11,262,274 $ 11,593,507 $ 12,347,338 $ 13,586,610 $ 14,359,096
Netflix, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017
Cash flows from operating activities:
Net income $ 23,696 $ 26,335 29,432 43,178 $ 122,641 $27,658 $40,755 $51,517 66,748 $ 186,678 $178,222
Adjustments to reconcile net income to net cash
used in operating activities:
Additions to streaming content assets (1,640,217) (1,276,643) (1,304,466) (1,550,326) (5,771,652) (2,316,599) (1,791,766) (2,442,080) (2,102,841) (8,653,286) (2,348,666)
Change in streaming content liabilities 626,325 191,154 104,684 240,250 1,162,413 905,723 238,517 529,885 98,525 1,772,650 366,257
Amortization of streaming content assets 749,518 822,600 871,403 961,861 3,405,382 1,058,521 1,175,361 1,224,108 1,330,508 4,788,498 1,305,683
Amortization of DVD content assets 21,185 20,813 18,589 18,793 79,380 20,441 20,021 19,284 19,206 78,952 18,598
Depreciation and amortization of property, equipment and intangibles 15,167 15,581 16,047 15,488 62,283 14,798 14,131 14,410 14,189 57,528 15,049
Stock-based compensation expense 27,441 28,590 32,834 35,860 124,725 42,422 44,112 43,495 43,646 173,675 44,888
Excess tax benefits from stock-based compensation (29,001) (39,427) (37,726) 25,683 (80,471) (11,316) (13,323) (12,762) (27,720) (65,121) -
Other non-cash items 6,306 6,682 10,866 7,774 31,628 12,757 9,040 9,682 9,430 40,909 21,666
Foreign currency remeasurement loss on long-term debt - - - - - - - - - - -
Deferred taxes (37,042) (4,232) (29,417) 12,036 (58,655) (16,603) (17,876) 14,338 (26,706) (46,847) (26,764)
Changes in operating assets and liabilities:
Other current assets 51,401 (36,648) 66,695 (62,755) 18,693 14,308 24,091 10,250 (1,679) 46,970 (25,402)
Accounts payable (10,625) 6,447 6,762 49,031 51,615 (19,898) 8,795 27,810 15,540 32,247 (11,000)
Accrued expenses 35,922 41,624 10,883 (39,619) 48,810 41,232 2,099 28,957 (3,582) 68,706 93,542
Deferred revenue 10,754 16,414 27,985 16,982 72,135 27,502 22,753 30,230 16,266 96,751 15,221
Other non-current assets and liabilities 21,788 (633) (20,540) (18,981) (18,366) (29,536) (3,003) (11,065) (8,690) (52,294) 8,850
Net cash used in operating activities (127,382) (181,343) (195,969) (244,745) (749,439) (228,590) (226,293) (461,941) (557,160) (1,473,984) (343,856)
Cash flows from investing activities:
Acquisition of DVD content assets (22,906) (19,786) (14,467) (20,799) (77,958) (23,207) (17,924) (17,249) (18,797) (77,177) (25,372)
Purchases of property and equipment (13,036) (27,538) (37,820) (12,854) (91,248) (8,425) (10,814) (27,366) (61,048) (107,653) (52,523)
Change in other assets 225 (639) (3,760) 2,262 (1,912) (356) 907 125 (1,617) (941) (769)
Purchases of short-term investments (90,940) (67,949) (66,444) (146,582) (371,915) (34,962) (18,492) (128,136) (5,603) (187,193) (57,774)
Proceeds from sale of short-term investments 51,948 48,412 43,887 114,832 259,079 8,188 18,752 171,747 83,797 282,484 55,748
Proceeds from maturities of short-term investments 31,887 19,170 31,125 22,580 104,762 63,025 24,675 24,855 27,690 140,245 5,100
Net cash provided by (used in) investing activities (42,822) (48,330) (47,479) (40,561) (179,192) 4,263 (2,896) 23,976 24,422 49,765 (75,590)
Cash flows from financing activities:
Proceeds from issuance of debt 1,500,000 - - - 1,500,000 - - - 1,000,000 1,000,000 -
Issuance costs (17,232) (397) - - (17,629) - - - (10,700) (10,700) -
Proceeds from issuance of common stock 10,916 23,804 35,089 8,171 77,980 3,536 4,232 3,819 25,392 36,979 24,178
Excess tax benefits from stock-based compensation 29,001 39,427 37,726 (25,683) 80,471 11,316 13,323 12,762 27,720 65,121 -
Other financing activities (251) (287) (61) 54 (545) 55 57 58 60 230 61
Net cash provided by (used in) financing activities 1,522,434 62,547 72,754 (17,458) 1,640,277 14,907 17,612 16,639 1,042,472 1,091,630 24,239

Effect of exchange rate changes on cash and cash equivalents (11,061) 6,221 (7,741) (3,343) (15,924) 5,334 (2,742) (441) (11,316) (9,165) 5,455
Net increase (decrease) in cash and cash equivalents 1,341,169 (160,905) (178,435) (306,107) 695,722 (204,086) (214,319) (421,767) 498,418 (341,754) (389,752)
Cash and cash equivalents, beginning of period 1,113,608 2,454,777 2,293,872 2,115,437 1,113,608 1,809,330 1,605,244 1,390,925 969,158 1,809,330 1,467,576
Cash and cash equivalents, end of period $ 2,454,777 $ 2,293,872 $ 2,115,437 $ 1,809,330 $ 1,809,330 $ 1,605,244 $ 1,390,925 $ 969,158 $ 1,467,576 $ 1,467,576 $ 1,077,824

Non-GAAP free cash flow reconciliation:

Net cash used in operating activities $ (127,382) $ (181,343) $ (195,969) $ (244,745) (749,439) $ (228,590) $ (226,293) $ (461,941) $ (557,160) (1,473,984) $ (343,856)
Acquisition of DVD content assets (22,906) (19,786) (14,467) (20,799) (77,958) (23,207) (17,924) (17,249) (18,797) (77,177) (25,372)
Purchases of property and equipment (13,036) (27,538) (37,820) (12,854) (91,248) (8,425) (10,814) (27,366) (61,048) (107,653) (52,523)
Change in other assets 225 (639) (3,760) 2,262 (1,912) (356) 907 125 (1,617) (941) (769)
Non-GAAP free cash flow $ (163,099) $ (229,306) $ (252,016) $ (276,136) $ (920,557) $ (260,578) $ (254,124) $ (506,431) $ (638,622) $ (1,659,755) $ (422,520)
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017

Revenues $ 1,573,129 $ 1,644,694 $ 1,738,355 $ 1,823,333 $ 6,779,511 $1,957,736 $2,105,204 $2,290,188 $2,477,541 $8,830,669 $2,636,635
Cost of revenues 1,046,401 1,121,752 1,173,958 1,249,365 4,591,476 1,369,540 1,473,098 1,532,844 1,654,419 6,029,901 1,657,024
Marketing 194,677 197,140 208,102 224,173 824,092 208,010 216,029 282,043 284,996 991,078 271,270
Technology and development 143,106 155,061 171,762 180,859 650,788 203,508 207,300 216,099 225,191 852,098 257,108
General and administrative 91,489 95,906 110,892 109,042 407,329 127,225 138,407 153,166 159,001 577,799 194,291
Operating income 97,456 74,835 73,641 59,894 305,826 49,453 70,370 106,036 153,934 379,793 256,942
Other income (expense):
Interest expense (26,737) (35,217) (35,333) (35,429) (132,716) (35,537) (35,455) (35,536) (43,586) (150,114) (46,742)
Interest and other income (expense) (32,293) 872 3,930 (3,734) (31,225) 25,963 16,317 8,627 (20,079) 30,828 13,592
Income before income taxes 38,426 40,490 42,238 20,731 141,885 39,879 51,232 79,127 90,269 260,507 223,792
Provision for (benefit from) income taxes 14,730 14,155 12,806 (22,447) 19,244 12,221 10,477 27,610 23,521 73,829 45,570
Net income $ 23,696 $ 26,335 $ 29,432 $ 43,178 $ 122,641 $ 27,658 $ 40,755 $ 51,517 $ 66,748 $ 186,678 $ 178,222
Earnings per share:
Basic $ .06 $ .06 $ .07 $ .10 $ .29 $ .06 $ .10 $ .12 $ .16 $ .44 $ .41
Diluted $ .05 $ .06 $ .07 $ .10 $ .28 $ .06 $ .09 $ .12 $ .15 $ .43 $ .40
Weighted-average common shares outstanding:
Basic 423,624 425,340 426,869 427,668 425,889 428,117 428,483 428,937 429,738 428,822 430,600
Diluted 433,809 436,097 437,606 438,257 436,456 437,993 438,154 438,389 440,063 438,652 445,458
Netflix, Inc.
Segment Information
(unaudited)
(in thousands)

Twelve Months Twelve Months

As of / Three Months Ended Ended As of / Three Months Ended Ended As o
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2015 2015 2015 2015 2015 2016 2016 2016 2016 2016 2017

Domestic Streaming
Total memberships at end of period 41,397 42,300 43,181 44,738 46,967 47,129 47,497 49,431 50,854
Paid memberships at end of period 40,315 41,057 42,068 43,401 45,714 46,004 46,479 47,905 49,375
Revenues $ 984,532 $ 1,025,913 $ 1,063,961 $ 1,105,933 $ 4,180,339 $ 1,161,241 $ 1,208,271 $ 1,304,333 $ 1,403,462 $ 5,077,307 $ 1,470,042
Cost of revenues 582,529 612,691 644,914 647,059 2,487,193 666,546 707,106 720,658 761,479 2,855,789 749,488
Marketing 89,551 73,427 74,835 79,833 317,646 81,942 86,806 108,495 105,589 382,832 115,038
Contribution profit 312,452 339,795 344,212 379,041 1,375,500 412,753 414,359 475,180 536,394 1,838,686 605,516
Contribution margin 31.7% 33.1% 32.4% 34.3% 32.9% 35.5% 34.3% 36.4% 38.2% 36.2% 41.2%

International Streaming
Total memberships at end of period 20,877 23,251 25,987 30,024 34,533 36,048 39,246 44,365 47,894
Paid memberships at end of period 19,304 21,649 23,951 27,438 31,993 33,892 36,799 41,185 44,988

Revenues $ 415,397 $ 454,763 $ 516,870 $ 566,405 $ 1,953,435 $ 651,748 $ 758,201 $ 853,480 $ 947,666 $ 3,211,095 $ 1,046,199
Cost of revenues 375,278 422,966 451,251 530,880 1,780,375 629,899 698,162 748,515 834,794 2,911,370 847,317
Marketing 105,126 123,713 133,267 144,340 506,446 126,068 129,223 173,548 179,407 608,246 156,232
Contribution profit (loss) (65,007) (91,916) (67,648) (108,815) (333,386) (104,219) (69,184) (68,583) (66,535) (308,521) 42,650
Contribution margin -15.6% -20.2% -13.1% -19.2% -17.1% -16.0% -9.1% -8.0% -7.0% -9.6% 4.1%

Total Streaming
Total memberships at end of period 62,274 65,551 69,168 74,762 81,500 83,177 86,743 93,796 98,748
Paid memberships at end of period 59,619 62,706 66,019 70,839 77,707 79,896 83,278 89,090 94,363
Revenue $ 1,399,929 $ 1,480,676 $ 1,580,831 $ 1,672,338 $ 6,133,774 $ 1,812,989 $ 1,966,472 $ 2,157,813 $ 2,351,128 $ 8,288,402 $ 2,516,241
Cost of revenues 957,807 1,035,657 1,096,165 1,177,939 4,267,568 1,296,445 1,405,268 1,469,173 1,596,273 5,767,159 1,596,805
Marketing 194,677 197,140 208,102 224,173 824,092 208,010 216,029 282,043 284,996 991,078 271,270
Contribution profit 247,445 247,879 276,564 270,226 1,042,114 308,534 345,175 406,597 469,859 1,530,165 648,166
Contribution margin 17.7% 16.7% 17.5% 16.2% 17.0% 17.0% 17.6% 18.8% 20.0% 18.5% 25.8%

Domestic DVD
Total memberships at end of period 5,564 5,314 5,060 4,904 4,741 4,530 4,273 4,114 3,944
Paid memberships at end of period 5,470 5,219 4,971 4,787 4,647 4,435 4,194 4,029 3,867
Revenues $ 173,200 $ 164,018 $ 157,524 $ 150,995 $ 645,737 $ 144,747 $ 138,732 $ 132,375 $ 126,413 $ 542,267 $ 120,394
Cost of revenues 88,594 86,095 77,793 71,426 323,908 73,095 67,830 63,671 58,146 262,742 60,219
Contribution profit 84,606 77,923 79,731 79,569 321,829 71,652 70,902 68,704 68,267 279,525 60,175
Contribution margin 48.8% 47.5% 50.6% 52.7% 49.8% 49.5% 51.1% 51.9% 54.0% 51.5% 50.0%

Consolidated
Revenues $ 1,573,129 $ 1,644,694 $ 1,738,355 $ 1,823,333 $ 6,779,511 $ 1,957,736 $ 2,105,204 $ 2,290,188 $ 2,477,541 $ 8,830,669 $ 2,636,635
Cost of revenues 1,046,401 1,121,752 1,173,958 1,249,365 4,591,476 1,369,540 1,473,098 1,532,844 1,654,419 6,029,901 1,657,024
Marketing 194,677 197,140 208,102 224,173 824,092 208,010 216,029 282,043 284,996 991,078 271,270
Contribution profit $ 332,051 $ 325,802 $ 356,295 $ 349,795 $ 1,363,943 $ 380,186 $ 416,077 $ 475,301 $ 538,126 $ 1,809,690 $ 708,341
Other operating expenses 234,595 250,967 282,654 289,901 1,058,117 330,733 345,707 369,265 384,192 1,429,897 451,399
Operating income 97,456 74,835 73,641 59,894 305,826 49,453 70,370 106,036 153,934 379,793 256,942
Other income (expense) (59,030) (34,345) (31,403) (39,163) (163,941) (9,574) (19,138) (26,909) (63,665) (119,286) (33,150)
Provision for (benefit from) income taxes 14,730 14,155 12,806 (22,447) 19,244 12,221 10,477 27,610 23,521 73,829 45,570
Net Income $ 23,696 $ 26,335 $ 29,432 $ 43,178 $ 122,641 $ 27,658 $ 40,755 $ 51,517 $ 66,748 $ 186,678 $ 178,222