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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
September 30, 2020
OR
☐
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
September 30,
2020, there
were 441,795,008
shares of the
registrant’s common stock, par value $0.001,
outstanding.
Table of
Contents
|
|
|
|
|
|
|
Page
|
|
|
Part I. Financial Information
|
|
|
Item 1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 2.
|
|
|
|
Item 3.
|
|
|
|
Item 4.
|
|
|
|
|
Part II. Other Information
|
|
|
Item 1.
|
|
|
|
Item 1A.
|
|
|
|
Item 6.
|
|
|
|
|
|
|
|
|
|
|
NETFLIX,
INC.
Consolidated
Statements of Operations
(unaudited)
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Revenues
|
$
|
6,435,637
|
|
|
$
|
5,244,905
|
|
|
$
|
18,351,614
|
|
|
$
|
14,689,013
|
|
|
Cost of
revenues
|
3,867,751
|
|
|
3,097,919
|
|
|
11,111,159
|
|
|
8,974,190
|
|
|
Marketing
|
527,597
|
|
|
553,797
|
|
|
1,465,797
|
|
|
1,773,525
|
|
|
Technology and
development
|
453,802
|
|
|
379,776
|
|
|
1,342,664
|
|
|
1,135,773
|
|
|
General and
administrative
|
271,624
|
|
|
233,174
|
|
|
800,947
|
|
|
659,783
|
|
|
Operating
income
|
1,314,863
|
|
|
980,239
|
|
|
3,631,047
|
|
|
2,145,742
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest
expense
|
(197,079
|
)
|
|
(160,660
|
)
|
|
(570,313
|
)
|
|
(448,222
|
)
|
|
Interest and
other income (expense)
|
(256,324
|
)
|
|
192,744
|
|
|
(367,802
|
)
|
|
215,378
|
|
|
Income before
income taxes
|
861,460
|
|
|
1,012,323
|
|
|
2,692,932
|
|
|
1,912,898
|
|
|
Provision for
income taxes
|
71,484
|
|
|
347,079
|
|
|
473,693
|
|
|
632,952
|
|
|
Net
income
|
$
|
789,976
|
|
|
$
|
665,244
|
|
|
$
|
2,219,239
|
|
|
$
|
1,279,946
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.79
|
|
|
$
|
1.52
|
|
|
$
|
5.04
|
|
|
$
|
2.93
|
|
|
Diluted
|
$
|
1.74
|
|
|
$
|
1.47
|
|
|
$
|
4.89
|
|
|
$
|
2.83
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
441,526
|
|
|
438,090
|
|
|
440,486
|
|
|
437,547
|
|
|
Diluted
|
455,088
|
|
|
451,552
|
|
|
453,846
|
|
|
451,896
|
|
See accompanying
notes to the consolidated financial statements.
NETFLIX,
INC.
Consolidated
Statements of Comprehensive Income
(unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Net income
|
$
|
789,976
|
|
|
$
|
665,244
|
|
|
$
|
2,219,239
|
|
|
$
|
1,279,946
|
|
|
Other comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
32,925
|
|
|
(20,894
|
)
|
|
22,374
|
|
|
(21,664
|
)
|
|
Comprehensive
income
|
$
|
822,901
|
|
|
$
|
644,350
|
|
|
$
|
2,241,613
|
|
|
$
|
1,258,282
|
|
See accompanying
notes to the consolidated financial statements.
NETFLIX,
INC.
Consolidated
Statements of Cash Flows
(unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Cash flows
from operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
789,976
|
|
|
$
|
665,244
|
|
|
$
|
2,219,239
|
|
|
$
|
1,279,946
|
|
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Additions to
content assets
|
(2,653,886
|
)
|
|
(3,648,292
|
)
|
|
(8,458,943
|
)
|
|
(9,971,141
|
)
|
|
Change in content
liabilities
|
(379,458
|
)
|
|
(95,548
|
)
|
|
(228,945
|
)
|
|
(122,660
|
)
|
|
Amortization of
content assets
|
2,733,743
|
|
|
2,279,977
|
|
|
7,824,287
|
|
|
6,636,578
|
|
|
Depreciation and
amortization of property, equipment and intangibles
|
28,589
|
|
|
26,704
|
|
|
83,767
|
|
|
75,761
|
|
|
Stock-based
compensation expense
|
106,357
|
|
|
100,262
|
|
|
307,586
|
|
|
305,310
|
|
|
Other non-cash
items
|
83,851
|
|
|
57,934
|
|
|
219,600
|
|
|
164,337
|
|
|
Foreign currency
remeasurement loss (gain) on debt
|
249,194
|
|
|
(171,360
|
)
|
|
275,295
|
|
|
(167,676
|
)
|
|
Deferred
taxes
|
(40,277
|
)
|
|
52,105
|
|
|
229,650
|
|
|
94,251
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Other current
assets
|
(22,974
|
)
|
|
145
|
|
|
(147,261
|
)
|
|
(56,162
|
)
|
|
Accounts
payable
|
111,677
|
|
|
(7,643
|
)
|
|
(149,503
|
)
|
|
(134,784
|
)
|
|
Accrued expenses
and other liabilities
|
266,027
|
|
|
260,872
|
|
|
374,768
|
|
|
391,814
|
|
|
Deferred
revenue
|
10,941
|
|
|
22,729
|
|
|
115,457
|
|
|
154,607
|
|
|
Other non-current
assets and liabilities
|
(19,999
|
)
|
|
(44,923
|
)
|
|
(100,248
|
)
|
|
(75,528
|
)
|
|
Net cash provided
by (used in) operating activities
|
1,263,761
|
|
|
(501,794
|
)
|
|
2,564,749
|
|
|
(1,425,347
|
)
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of
property and equipment
|
(109,811
|
)
|
|
(45,333
|
)
|
|
(349,567
|
)
|
|
(145,298
|
)
|
|
Change in other
assets
|
(8,840
|
)
|
|
(4,021
|
)
|
|
(9,388
|
)
|
|
(34,195
|
)
|
|
Net cash used in
investing activities
|
(118,651
|
)
|
|
(49,354
|
)
|
|
(358,955
|
)
|
|
(179,493
|
)
|
|
Cash flows
from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from
issuance of debt
|
—
|
|
|
—
|
|
|
1,009,464
|
|
|
2,243,196
|
|
|
Debt issuance
costs
|
—
|
|
|
—
|
|
|
(7,559
|
)
|
|
(18,192
|
)
|
|
Proceeds from
issuance of common stock
|
68,665
|
|
|
11,989
|
|
|
201,419
|
|
|
56,857
|
|
|
Net cash provided
by financing activities
|
68,665
|
|
|
11,989
|
|
|
1,203,324
|
|
|
2,281,861
|
|
|
Effect of
exchange rate changes on cash, cash equivalents and restricted
cash
|
28,459
|
|
|
(29,325
|
)
|
|
(30,624
|
)
|
|
(29,341
|
)
|
|
Net increase
(decrease) in cash, cash equivalents and restricted
cash
|
1,242,234
|
|
|
(568,484
|
)
|
|
3,378,494
|
|
|
647,680
|
|
|
Cash, cash
equivalents and restricted cash at beginning of period
|
7,180,046
|
|
|
5,028,205
|
|
|
5,043,786
|
|
|
3,812,041
|
|
|
Cash, cash
equivalents and restricted cash at end of period
|
$
|
8,422,280
|
|
|
$
|
4,459,721
|
|
|
$
|
8,422,280
|
|
|
$
|
4,459,721
|
|
See accompanying
notes to the consolidated financial statements.
NETFLIX,
INC.
Consolidated
Balance Sheets
(in
thousands, except share and par value data)
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(unaudited)
|
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
8,392,391
|
|
|
$
|
5,018,437
|
|
|
Other current
assets
|
1,434,089
|
|
|
1,160,067
|
|
|
Total current
assets
|
9,826,480
|
|
|
6,178,504
|
|
|
Content assets,
net
|
25,067,633
|
|
|
24,504,567
|
|
|
Property and
equipment, net
|
828,118
|
|
|
565,221
|
|
|
Other non-current
assets
|
2,900,312
|
|
|
2,727,420
|
|
|
Total
assets
|
$
|
38,622,543
|
|
|
$
|
33,975,712
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current content
liabilities
|
$
|
4,599,654
|
|
|
$
|
4,413,561
|
|
|
Accounts
payable
|
541,298
|
|
|
674,347
|
|
|
Accrued expenses
and other liabilities
|
1,259,124
|
|
|
843,043
|
|
|
Deferred
revenue
|
1,040,202
|
|
|
924,745
|
|
|
Short-term
debt
|
499,517
|
|
|
—
|
|
|
Total current
liabilities
|
7,939,795
|
|
|
6,855,696
|
|
|
Non-current
content liabilities
|
2,926,574
|
|
|
3,334,323
|
|
|
Long-term
debt
|
15,547,616
|
|
|
14,759,260
|
|
|
Other non-current
liabilities
|
1,875,235
|
|
|
1,444,276
|
|
|
Total
liabilities
|
28,289,220
|
|
|
26,393,555
|
|
|
Commitments and
contingencies (Note 7)
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
Common stock,
$0.001 par value; 4,990,000,000 shares authorized at September 30,
2020 and December 31, 2019; 441,795,008 and 438,806,649 issued and
outstanding at September 30, 2020 and December 31, 2019,
respectively
|
3,303,482
|
|
|
2,793,929
|
|
|
Accumulated other
comprehensive loss
|
(1,147
|
)
|
|
(23,521
|
)
|
|
Retained
earnings
|
7,030,988
|
|
|
4,811,749
|
|
|
Total
stockholders’ equity
|
10,333,323
|
|
|
7,582,157
|
|
|
Total liabilities
and stockholders’ equity
|
$
|
38,622,543
|
|
|
$
|
33,975,712
|
|
See accompanying
notes to the consolidated financial statements.
NETFLIX,
INC.
Consolidated
Statements of Stockholders’ Equity
(unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Total stockholders' equity,
beginning balances
|
|
$
|
9,334,753
|
|
|
$
|
6,105,548
|
|
|
$
|
7,582,157
|
|
|
$
|
5,238,765
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and additional
paid-in capital:
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
$
|
3,127,813
|
|
|
$
|
2,566,365
|
|
|
$
|
2,793,929
|
|
|
$
|
2,315,988
|
|
|
Issuance of
common stock upon exercise of options
|
|
69,312
|
|
|
11,345
|
|
|
201,967
|
|
|
56,674
|
|
|
Stock-based
compensation expense
|
|
106,357
|
|
|
100,262
|
|
|
307,586
|
|
|
305,310
|
|
|
Ending
balance
|
|
$
|
3,303,482
|
|
|
$
|
2,677,972
|
|
|
$
|
3,303,482
|
|
|
$
|
2,677,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive loss:
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
$
|
(34,072
|
)
|
|
$
|
(20,352
|
)
|
|
$
|
(23,521
|
)
|
|
$
|
(19,582
|
)
|
|
Other
comprehensive income (loss)
|
|
32,925
|
|
|
(20,894
|
)
|
|
22,374
|
|
|
(21,664
|
)
|
|
Ending
balance
|
|
$
|
(1,147
|
)
|
|
$
|
(41,246
|
)
|
|
$
|
(1,147
|
)
|
|
$
|
(41,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings:
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
$
|
6,241,012
|
|
|
$
|
3,559,535
|
|
|
$
|
4,811,749
|
|
|
$
|
2,942,359
|
|
|
Net
income
|
|
789,976
|
|
|
665,244
|
|
|
2,219,239
|
|
|
1,279,946
|
|
|
Adoption of ASU 2016-02,
Leases (Topic 842)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,474
|
|
|
Ending balances
|
|
$
|
7,030,988
|
|
|
$
|
4,224,779
|
|
|
$
|
7,030,988
|
|
|
$
|
4,224,779
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity, ending balances
|
|
$
|
10,333,323
|
|
|
$
|
6,861,505
|
|
|
$
|
10,333,323
|
|
|
$
|
6,861,505
|
|
See accompanying
notes to the consolidated financial statements.
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, 2019
filed with the
Securities and Exchange Commission (the “SEC”) on January 29, 2020.
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,
2019.
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,
2019.
Recently adopted accounting pronouncements
In June 2016, the
Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2016-13, Financial
Instruments - Credit Losses (Topic 326), in order to improve
financial reporting of expected credit losses on financial
instruments and other commitments to extend credit. ASU 2016-13
requires that an entity measure and recognize expected credit
losses for financial assets held at amortized cost and replaces the
incurred loss impairment methodology in prior GAAP with a
methodology that requires consideration of a broader range of
information to estimate credit losses. The Company adopted ASU
2016-13 in the first quarter of 2020 and the impact of the adoption
was not material to the Company's consolidated financial statements
as credit losses are not expected to be significant based on
historical collection trends, the financial condition of payment
partners, and external market factors. The Company will continue to
actively monitor the impact of the coronavirus (COVID-19) pandemic
on expected credit losses.
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, but in the case where 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 and nine
months ended September 30, 2020 and September 30,
2019,
respectively:
United
States and Canada (UCAN)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
As of/ Nine
Months Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
$
|
2,933,445
|
|
|
$
|
2,621,250
|
|
|
$
|
8,475,891
|
|
|
$
|
7,379,300
|
|
|
Paid net membership
additions
|
|
177
|
|
|
613
|
|
|
5,419
|
|
|
2,357
|
|
|
Paid memberships at end of
period (1)
|
|
73,081
|
|
|
67,114
|
|
|
73,081
|
|
|
67,114
|
|
Europe,
Middle East, and Africa (EMEA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
As of/ Nine
Months Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
$
|
2,019,083
|
|
|
$
|
1,428,040
|
|
|
$
|
5,635,094
|
|
|
$
|
3,980,506
|
|
|
Paid net membership
additions
|
|
759
|
|
|
3,126
|
|
|
10,464
|
|
|
9,537
|
|
|
Paid memberships at end of
period (1)
|
|
62,242
|
|
|
47,355
|
|
|
62,242
|
|
|
47,355
|
|
Latin
America (LATAM)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
As of/ Nine
Months Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
$
|
789,384
|
|
|
$
|
741,434
|
|
|
$
|
2,368,205
|
|
|
$
|
2,049,042
|
|
|
Paid net membership
additions
|
|
256
|
|
|
1,490
|
|
|
4,907
|
|
|
3,303
|
|
|
Paid memberships at end of
period (1)
|
|
36,324
|
|
|
29,380
|
|
|
36,324
|
|
|
29,380
|
|
Asia-Pacific
(APAC)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
As of/ Nine
Months Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
(in
thousands)
|
|
Revenues
|
|
$
|
634,891
|
|
|
$
|
382,304
|
|
|
$
|
1,687,691
|
|
|
$
|
1,051,400
|
|
|
Paid net membership
additions
|
|
1,012
|
|
|
1,543
|
|
|
7,271
|
|
|
3,878
|
|
|
Paid memberships at end of
period (1)
|
|
23,504
|
|
|
14,485
|
|
|
23,504
|
|
|
14,485
|
|
|
|
|
(1) A paid membership (also
referred to as a paid subscription) is defined as a membership that
has the right to receive Netflix service following sign-up and a
method of payment being provided, and that is not part of a free
trial or other promotional offering by the Company to certain new
and rejoining members. A membership is canceled and ceases to be
reflected in the above metrics as of the effective cancellation
date. Voluntary cancellations generally become effective at the end
of the prepaid membership period. Involuntary cancellations, as a
result of a failed method of payment, becomes effective
immediately. Memberships are assigned to territories based on the
geographic location used at time of sign-up as determined by the
Company’s internal systems, which utilize industry standard
geo-location technology.
|
Total U.S.
revenues, inclusive of DVD revenues not reported in the tables
above, were $2.8
billion and $8.0
billion, respectively, for
the three
and nine months ended September 30, 2020, and $2.5
billion and $7.0
billion, respectively, for
the three
and nine months ended September 30, 2019. DVD revenues were
$59
million and $185
million, respectively, for
the three
and nine months ended September 30, 2020, and $72
million and $229
million, respectively, for
the three
and nine months ended September 30, 2019.
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 September 30,
2020,
total deferred revenue was $1,040
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 $115
million increase in deferred revenue
as compared to the balance of $925
million for the year ended
December 31,
2019 is a
result of the increase in membership fees billed due to increased
memberships.
3. Earnings
Per Share
Basic earnings
per share is computed using the weighted-average number of
outstanding shares of common stock during the period. Diluted
earnings per share is computed using the weighted-average number of
outstanding shares of common stock and, when dilutive, potential
common shares outstanding during the period. Potential common
shares consist of incremental shares issuable upon the assumed
exercise of stock options. The computation of earnings per share is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in thousands, except per share data)
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
789,976
|
|
|
$
|
665,244
|
|
|
$
|
2,219,239
|
|
|
$
|
1,279,946
|
|
|
Shares used in
computation:
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
441,526
|
|
|
438,090
|
|
|
440,486
|
|
|
437,547
|
|
|
Basic earnings per
share
|
$
|
1.79
|
|
|
$
|
1.52
|
|
|
$
|
5.04
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
789,976
|
|
|
$
|
665,244
|
|
|
$
|
2,219,239
|
|
|
$
|
1,279,946
|
|
|
Shares used in
computation:
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding
|
441,526
|
|
|
438,090
|
|
|
440,486
|
|
|
437,547
|
|
|
Employee stock
options
|
13,562
|
|
|
13,462
|
|
|
13,360
|
|
|
14,349
|
|
|
Weighted-average
number of shares
|
455,088
|
|
|
451,552
|
|
|
453,846
|
|
|
451,896
|
|
|
Diluted earnings per
share
|
$
|
1.74
|
|
|
$
|
1.47
|
|
|
$
|
4.89
|
|
|
$
|
2.83
|
|
Employee stock
options with exercise prices greater than the average market price
of the common stock were excluded from the diluted calculation as
their inclusion would have been anti-dilutive. The following table
summarizes the potential common shares excluded from the diluted
calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in thousands)
|
|
Employee stock
options
|
124
|
|
|
2,402
|
|
|
560
|
|
|
1,268
|
|
4. Cash,
Cash Equivalents and Restricted Cash
The following
tables summarize the Company's cash, cash equivalents, and
restricted cash as of September 30,
2020 and December 31,
2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2020
|
|
|
Cash and cash
equivalents
|
|
Other Current
Assets
|
|
Non-current
Assets
|
|
Total
|
|
|
(in
thousands)
|
|
Cash
|
$
|
2,968,826
|
|
|
$
|
2,761
|
|
|
$
|
26,875
|
|
|
$
|
2,998,462
|
|
|
Level 1
securities:
|
|
|
|
|
|
|
|
|
Money market
funds
|
5,123,565
|
|
|
—
|
|
|
253
|
|
|
5,123,818
|
|
|
Level 2
securities:
|
|
|
|
|
|
|
|
|
Foreign Time
Deposits
|
300,000
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,392,391
|
|
|
$
|
2,761
|
|
|
$
|
27,128
|
|
|
$
|
8,422,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2019
|
|
|
Cash and cash
equivalents
|
|
Other Current
Assets
|
|
Non-current
Assets
|
|
Total
|
|
|
(in
thousands)
|
|
Cash
|
$
|
3,103,525
|
|
|
$
|
1,863
|
|
|
$
|
22,161
|
|
|
$
|
3,127,549
|
|
|
Level 1
securities:
|
|
|
|
|
|
|
|
|
Money market
funds
|
1,614,912
|
|
|
—
|
|
|
1,325
|
|
|
1,616,237
|
|
|
Level 2
securities:
|
|
|
|
|
|
|
|
|
Foreign Time
Deposits
|
300,000
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,018,437
|
|
|
$
|
1,863
|
|
|
$
|
23,486
|
|
|
$
|
5,043,786
|
|
Other current
assets include restricted cash for self insurance. Non-current
assets include restricted cash related to workers compensation
deposits and letter of credit agreements. The fair value of cash
equivalents 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.
See Note 6 to the
consolidated financial statements for further information regarding
the fair value of the Company’s senior notes.
There
were no material gross realized gains or losses in
the three
and nine months ended
September 30,
2020 and 2019, respectively.
5. Balance
Sheet Components
Content Assets, Net
Content assets
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(in
thousands)
|
|
Licensed
content, net
|
$
|
14,297,143
|
|
|
$
|
14,703,352
|
|
|
|
|
|
|
|
Produced
content, net
|
|
|
|
|
|
|
Released, less
amortization
|
5,186,247
|
|
|
4,382,685
|
|
|
In
production
|
4,696,990
|
|
|
4,750,664
|
|
|
In development
and pre-production
|
887,253
|
|
|
667,866
|
|
|
|
10,770,490
|
|
|
9,801,215
|
|
|
|
|
|
|
|
Total
|
$
|
25,067,633
|
|
|
$
|
24,504,567
|
|
|
|
|
|
|
As of
September 30,
2020,
approximately $5,743
million, $3,675
million, and $2,264
million of the $14,297
million unamortized cost of the
licensed content is expected to be amortized in each of the next
three years. As of September 30,
2020,
approximately $1,894
million, $1,465
million, and $1,025
million of the $5,186
million unamortized cost of the
produced content that has been released is expected to be amortized
in each of the next three years.
As of
September 30,
2020, the
amount of accrued participations and residuals was not
material.
The following
table represents the amortization of content assets:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in
thousands)
|
|
Licensed content
|
$
|
1,885,259
|
|
|
$
|
1,810,757
|
|
|
Produced content
|
848,484
|
|
|
469,220
|
|
|
Total
|
$
|
2,733,743
|
|
|
$
|
2,279,977
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in
thousands)
|
|
Licensed content
|
$
|
5,628,499
|
|
|
$
|
5,382,225
|
|
|
Produced content
|
2,195,788
|
|
|
1,254,353
|
|
|
Total
|
$
|
7,824,287
|
|
|
$
|
6,636,578
|
|
Property and Equipment, Net
Property and
equipment and accumulated depreciation consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
Estimated
Useful Lives
|
|
|
|
(in
thousands)
|
|
|
|
Land
|
|
$
|
13,560
|
|
|
$
|
6,125
|
|
|
|
|
Buildings
|
|
41,894
|
|
|
33,141
|
|
|
30
years
|
|
Leasehold
improvements
|
|
387,172
|
|
|
354,999
|
|
|
Over life of
lease
|
|
Furniture and
fixtures
|
|
95,240
|
|
|
87,465
|
|
|
3-15 years
|
|
Information
technology
|
|
264,358
|
|
|
243,565
|
|
|
3
years
|
|
Corporate
aircraft
|
|
110,621
|
|
|
108,995
|
|
|
8
years
|
|
Machinery and
equipment
|
|
44,111
|
|
|
46,415
|
|
|
3-5 years
|
|
Capital
work-in-progress
|
|
345,347
|
|
|
100,521
|
|
|
|
|
Property and
equipment, gross
|
|
1,302,303
|
|
|
981,226
|
|
|
|
|
Less: Accumulated
depreciation
|
|
(474,185
|
)
|
|
(416,005
|
)
|
|
|
|
Property and
equipment, net
|
|
$
|
828,118
|
|
|
$
|
565,221
|
|
|
|
Leases
The Company has
entered into operating leases primarily for real estate. These
operating leases are included in "Other non-current assets" on the
Company's Consolidated Balance Sheets, and represent the Company’s
right to use the underlying asset for the lease term. The Company’s
obligations to make lease payments are included in "Accrued
expenses and other liabilities" and "Other non-current liabilities"
on the Company's Consolidated Balance Sheets. As of
September 30,
2020,
total right-of-use assets were approximately $1,939
million and total operating lease
liabilities were approximately $2,090
million, of which
$237
million and $1,853
million were classified in "Accrued
expenses and other liabilities" and "Other non-current
liabilities", respectively. As of December 31,
2019,
total right-of-use assets were approximately $1,532
million and total operating lease
liabilities were approximately $1,613
million, of which
$190
million and $1,423
million were classified in "Accrued
expenses and other liabilities" and "Other non-current
liabilities", respectively. The Company has entered into various
short-term operating leases, primarily for marketing billboards,
with an initial term of twelve months or less. These leases are not
recorded on the Company's Consolidated Balance Sheets. All
operating lease expense is recognized on a straight-line basis over
the lease term. Because the rate implicit in each lease is not
readily determinable, the Company uses its incremental borrowing
rate to determine the present value of the lease
payments.
Information
related to the Company's right-of-use assets and related lease
liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in
thousands)
|
|
Cash paid for operating lease
liabilities
|
$
|
70,917
|
|
|
$
|
51,767
|
|
|
Right-of-use assets obtained
in exchange for new operating lease obligations
|
175,901
|
|
|
77,549
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in
thousands)
|
|
Cash paid for operating lease
liabilities
|
$
|
187,880
|
|
|
$
|
130,740
|
|
|
Right-of-use assets obtained
in exchange for new operating lease obligations (1)
|
592,331
|
|
|
1,150,443
|
|
(1) In the
nine months
ended September 30,
2019, the
balance includes $743
million for operating leases existing
on January 1, 2019. The $592
million in additions in the nine
months ended September 30,
2020 primarily relate to the
additions of corporate office space.
Other Current Assets
Other current
assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
(in
thousands)
|
|
Trade
receivables
|
|
$
|
604,789
|
|
|
$
|
454,399
|
|
|
Prepaid
expenses
|
|
209,218
|
|
|
180,999
|
|
|
Other
|
|
620,082
|
|
|
524,669
|
|
|
Total other
current assets
|
|
$
|
1,434,089
|
|
|
$
|
1,160,067
|
|
6.
Debt
As of
September 30,
2020, the
Company had aggregate outstanding notes of $16,047
million, net of $111
million of issuance costs, with
varying maturities (the "Notes"). Of the outstanding
balance, $500
million, net of issuance costs, is
classified as short-term debt on the Consolidated Balance Sheets.
As of December 31,
2019, the
Company had aggregate outstanding long-term notes of
$14,759
million, net of $114
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 €5,170
million) and is remeasured into U.S.
dollars at each balance sheet date (with remeasurement loss
totaling $249
million and $275
million, respectively, for
the three
and nine months ended September 30, 2020).
The following
table provides a summary of the Company's outstanding debt and the
fair values based on quoted market prices in less active markets as
of September 30,
2020 and
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount at Par
|
|
|
|
|
Level 2 Fair
Value as of
|
|
|
|
September 30,
2020
|
|
December 31,
2019
|
Issuance
Date
|
|
Maturity
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
|
(in
millions)
|
|
|
|
|
(in
millions)
|
|
5.375% Senior
Notes
|
|
$
|
500
|
|
|
$
|
500
|
|
February 2013
|
|
February 2021
|
|
$
|
507
|
|
|
$
|
518
|
|
|
5.500% Senior
Notes
|
|
700
|
|
|
700
|
|
February 2015
|
|
February 2022
|
|
736
|
|
|
744
|
|
|
5.750% Senior
Notes
|
|
400
|
|
|
400
|
|
February 2014
|
|
March 2024
|
|
445
|
|
|
444
|
|
|
5.875% Senior
Notes
|
|
800
|
|
|
800
|
|
February 2015
|
|
February 2025
|
|
906
|
|
|
896
|
|
|
3.000% Senior Notes
(1)
|
|
551
|
|
|
—
|
|
April 2020
|
|
June 2025
|
|
575
|
|
|
—
|
|
|
3.625% Senior
Notes
|
|
500
|
|
|
—
|
|
April 2020
|
|
June 2025
|
|
523
|
|
|
—
|
|
|
4.375% Senior
Notes
|
|
1,000
|
|
|
1,000
|
|
October 2016
|
|
November 2026
|
|
1,092
|
|
|
1,026
|
|
|
3.625% Senior Notes
(1)
|
|
1,523
|
|
|
1,459
|
|
May 2017
|
|
May 2027
|
|
1,651
|
|
|
1,565
|
|
|
4.875% Senior
Notes
|
|
1,600
|
|
|
1,600
|
|
October 2017
|
|
April 2028
|
|
1,800
|
|
|
1,670
|
|
|
5.875% Senior
Notes
|
|
1,900
|
|
|
1,900
|
|
April 2018
|
|
November 2028
|
|
2,269
|
|
|
2,111
|
|
|
4.625% Senior Notes
(1)
|
|
1,289
|
|
|
1,234
|
|
October 2018
|
|
May 2029
|
|
1,495
|
|
|
1,378
|
|
|
6.375% Senior
Notes
|
|
800
|
|
|
800
|
|
October 2018
|
|
May 2029
|
|
989
|
|
|
916
|
|
|
3.875% Senior Notes
(1)
|
|
1,406
|
|
|
1,346
|
|
April 2019
|
|
November 2029
|
|
1,556
|
|
|
1,429
|
|
|
5.375% Senior
Notes
|
|
900
|
|
|
900
|
|
April 2019
|
|
November 2029
|
|
1,062
|
|
|
960
|
|
|
3.625% Senior Notes
(1)
|
|
1,289
|
|
|
1,234
|
|
October 2019
|
|
June 2030
|
|
1,402
|
|
|
1,273
|
|
|
4.875% Senior
Notes
|
|
1,000
|
|
|
1,000
|
|
October 2019
|
|
June 2030
|
|
1,142
|
|
|
1,019
|
|
|
|
|
$
|
16,158
|
|
|
$
|
14,873
|
|
|
|
|
|
$
|
18,150
|
|
|
$
|
15,949
|
|
(1) The following
Senior Notes have a principal amount denominated in euro:
3.000%
Senior Notes
for €470
million, 3.625%
Senior Notes
for €1,300
million, 4.625%
Senior Notes
for €1,100
million, 3.875%
Senior Notes
for €1,200
million, and 3.625%
Senior Notes
for €1,100
million.
The expected
timing of principal and interest payments for these Notes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(in
thousands)
|
|
Less than one
year
|
$
|
1,258,639
|
|
|
$
|
736,969
|
|
|
Due after one
year and through three years
|
2,136,439
|
|
|
2,581,471
|
|
|
Due after three
years and through five years
|
3,612,818
|
|
|
1,705,201
|
|
|
Due after five
years
|
14,875,099
|
|
|
15,699,800
|
|
|
Total debt
obligations
|
$
|
21,882,995
|
|
|
$
|
20,723,441
|
|
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 101%
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
September 30,
2020 and December 31,
2019, the
Company was in compliance with all related covenants.
Revolving Credit Facility
As of
September 30,
2020, the
Company has a $750
million unsecured revolving credit
facility ("Revolving Credit Agreement") which matures on March 29,
2024. Revolving loans may be borrowed, repaid and reborrowed until
March 29, 2024, at which time all amounts borrowed must be repaid.
The Company may use the proceeds of future borrowings under the
Revolving Credit Agreement for working capital and general
corporate purposes. As of September 30,
2020, no
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 equal to a base
rate (the “Alternate Base Rate”) or (ii) a rate equal to an
adjusted London interbank offered rate (the “Adjusted LIBO Rate”),
plus a margin of 0.75%.
The Alternate Base Rate is defined as the greatest of (A) the rate
of interest published by the Wall Street Journal, from time to
time, as the prime rate, (B) the federal funds rate, plus
0.500%
and (C) the
Adjusted LIBO Rate for a one-month interest period, plus
1.00%.
The Adjusted LIBO Rate is defined as the London interbank offered
rate for deposits in U.S. dollars, for the relevant interest
period, adjusted for statutory reserve requirements, but in no
event shall the Adjusted LIBO Rate be less than 0.00%
per annum.
Regulatory authorities that oversee financial markets have
announced that after the end of 2021, they would no longer compel
banks currently reporting information used to set the LIBO Rate to
continue to make rate submissions. As a result, it is possible that
beginning in 2022, the LIBO Rate will no longer be available as a
reference rate. Under the terms of the Company's Revolving Credit
Agreement, in the event of the discontinuance of the LIBO Rate, a
mutually agreed-upon alternate benchmark rate will be established
to replace the LIBO Rate. The Company and Lenders shall in good
faith establish an alternate benchmark rate which places the
Lenders and the Company in the same economic position that existed
immediately prior to the discontinuation of the LIBO Rate. The
Company does not anticipate that the discontinuance of the LIBO
Rate will materially impact its liquidity or financial
position.
The Company is
also obligated to pay a commitment fee on the undrawn amounts of
the Revolving Credit Agreement at an annual rate
of 0.10%.
The Revolving Credit Agreement requires the Company to comply with
certain covenants, including covenants that limit or restrict the
ability of the Company’s subsidiaries to incur debt and limit or
restrict the ability of the Company and its subsidiaries to grant
liens and enter into sale and leaseback transactions; and, in the
case of the Company or a guarantor, merge, consolidate, liquidate,
dissolve or sell, transfer, lease or otherwise dispose of all or
substantially all of the assets of the Company and its
subsidiaries, taken as a whole. As of September 30,
2020 and December 31,
2019, the
Company was in compliance with all related covenants.
7.
Commitments and Contingencies
Content
As of
September 30,
2020, the
Company had $19.1
billion of obligations comprised
of $4.6
billion included in "Current content
liabilities" and $2.9
billion of "Non-current content
liabilities" on the Consolidated Balance Sheets and
$11.6
billion of obligations that are not
reflected on the Consolidated Balance Sheets as they did not yet
meet the criteria for asset recognition.
As of
December 31,
2019, the
Company had $19.5
billion of obligations comprised
of $4.4
billion included in "Current content
liabilities" and $3.3
billion of "Non-current content
liabilities" on the Consolidated Balance Sheets and
$11.8
billion of obligations that are not
reflected on the Consolidated Balance Sheets as they did not yet
meet the criteria for asset recognition.
The expected
timing of payments for these content obligations is as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(in
thousands)
|
|
Less than one
year
|
$
|
8,668,296
|
|
|
$
|
8,477,367
|
|
|
Due after one
year and through three years
|
8,004,624
|
|
|
8,352,731
|
|
|
Due after three
years and through five years
|
1,956,565
|
|
|
2,041,340
|
|
|
Due after five
years
|
442,769
|
|
|
618,644
|
|
|
Total content
obligations
|
$
|
19,072,254
|
|
|
$
|
19,490,082
|
|
Content
obligations include amounts related to the acquisition, licensing
and production of content. Obligations that are in non-U.S. dollar
currencies are translated to the U.S. dollar at period end rates.
An obligation for the production of content includes non-cancelable
commitments under creative talent and employment agreements as well
as other production related commitments. An obligation for the
acquisition and licensing of content is incurred at the time the
Company enters into an agreement to obtain future titles. Once a
title becomes available, a content liability is recorded on the
Consolidated Balance Sheets. Certain agreements include the
obligation to license rights for unknown future titles, the
ultimate quantity and/or fees for which are not yet determinable as
of the reporting date. Traditional film output deals, or certain TV
series license agreements where the number of seasons to be aired
is unknown, are examples of such license agreements. The Company
does not include any estimated obligation for these future titles
beyond the known minimum amount. However, the unknown obligations
are expected to be significant.
Legal Proceedings
From time to
time, in the normal course of its operations, the Company is
subject to litigation matters and claims, including claims relating
to employee relations, business practices and patent infringement.
Litigation can be expensive and disruptive to normal business
operations. Moreover, the results of complex legal proceedings are
difficult to predict and the Company's view of these matters may
change in the future as the litigation and events related thereto
unfold. The Company expenses legal fees as incurred. The Company
records a provision for contingent losses when it is both probable
that a liability has been incurred and the amount of the loss can
be reasonably estimated. An unfavorable outcome to any legal
matter, if material, could have an adverse effect on the Company's
operations or its financial position, liquidity or results of
operations.
The Company is
involved in litigation matters not listed herein but does not
consider the matters to be material either individually or in the
aggregate at this time. The Company's view of the matters not
listed may change in the future as the litigation and events
related thereto unfold.
Indemnification
In the ordinary
course of business, the Company has entered into contractual
arrangements under which it has agreed to provide indemnification
of varying scope and terms to business partners and other parties
with respect to certain matters, including, but not limited to,
losses arising out of the Company’s breach of such agreements and
out of intellectual property infringement claims made by third
parties. In these circumstances, payment may be conditional on the
other party making a claim pursuant to the procedures specified in
the particular contract.
The Company's
obligations under these agreements may be limited in terms of time
or amount, and in some instances, the Company may have recourse
against third parties for certain payments. In addition, the
Company has entered into indemnification agreements with its
directors and certain of its officers that will require it, among
other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors or
officers. The terms of such obligations vary.
It is not
possible to make a reasonable estimate of the maximum potential
amount of future payments under these or similar agreements due to
the conditional nature of the Company’s obligations and the unique
facts and circumstances involved in each particular
agreement. No
amount has been
accrued in the accompanying consolidated financial statements with
respect to these indemnification obligations.
8.
Stockholders’ Equity
Stock Option Plan
On June 4, 2020,
the Company's stockholders approved the 2020 Stock Plan, which was
adopted by the Company’s Board of Directors on March 4, 2020
subject to stockholder approval. The 2020 Stock Plan is the
successor to the 2011 Stock Plan. The 2020 Stock Plan provides for
the grant of incentive stock options to employees and for the grant
of non-statutory stock options, stock appreciation rights,
restricted stock and restricted stock units to employees, directors
and consultants. The 2020 Stock plan authorized 17,500,000
new shares to be
available for award grants. As of the date the 2020 Stock Plan was
adopted by the Company's Board of Directors, 5,530,106
shares were
available to be granted under the 2011 Stock Plan. These shares are
available for award grants under the 2020 Stock Plan.
A summary of the
activities related to the Company’s stock option plans is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Shares
Available
for Grant
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise Price
(per
share)
|
|
Balances as of
December 31, 2019
|
6,111,561
|
|
|
20,859,326
|
|
|
$
|
124.28
|
|
|
New Shares
Authorized
|
17,500,000
|
|
|
—
|
|
|
—
|
|
|
Granted
|
(1,498,232
|
)
|
|
1,498,232
|
|
|
412.45
|
|
|
Exercised
|
—
|
|
|
(2,988,359
|
)
|
|
67.58
|
|
|
Expired
|
—
|
|
|
(188
|
)
|
|
13.38
|
|
|
Balances as of
September 30, 2020
|
22,113,329
|
|
|
19,369,011
|
|
|
$
|
155.32
|
|
|
Vested and
exercisable as of September 30, 2020
|
|
|
19,369,011
|
|
|
$
|
155.32
|
|
The aggregate
intrinsic value of the Company's outstanding stock options as
of September 30,
2020 was $6,684
million and represents the total
pretax intrinsic value (the difference between the Company’s
closing stock price on the last trading day of the
third
quarter of
2020
and the exercise
price, multiplied by the number of in-the-money options) that would
have been received by the option holders had all option holders
exercised their options on the last trading day of the
third
quarter of
2020. This amount changes based
on the fair market value of the Company’s common stock. The
weighted-average remaining contractual term of the Company's
outstanding stock options as of September 30,
2020 included in the table above
was 5.47
years.
A summary of the
amounts related to option exercises, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
(in
thousands)
|
|
Total intrinsic value of
options exercised
|
$
|
321,859
|
|
|
$
|
119,439
|
|
|
$
|
1,067,241
|
|
|
$
|
513,213
|
|
|
Cash received from options
exercised
|
68,665
|
|
|
11,989
|
|
|
201,419
|
|
|
56,857
|
|
Stock-based Compensation
Stock options
granted are exercisable for the full ten year contractual term
regardless of employment status. The following table summarizes the
assumptions used to value option grants using the lattice-binomial
model and the valuation data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
Expected
volatility
|
45
|
%
|
|
38
|
%
|
|
37% - 45%
|
|
|
38% - 41%
|
|
|
Risk-free interest
rate
|
0.67
|
%
|
|
1.92
|
%
|
|
0.67% - 1.71%
|
|
|
1.92% - 2.74%
|
|
|
Suboptimal exercise
factor
|
3.62
|
|
|
3.19
|
|
|
3.34 - 3.62
|
|
|
3.07 - 3.19
|
|
|
Weighted-average fair value
(per share)
|
$
|
264
|
|
|
$
|
154
|
|
|
$
|
205
|
|
|
$
|
165
|
|
|
Total stock-based
compensation expense (in thousands)
|
$
|
106,357
|
|
|
$
|
100,262
|
|
|
$
|
307,586
|
|
|
$
|
305,310
|
|
|
Total income tax impact on
provision (in thousands)
|
$
|
24,292
|
|
|
$
|
22,679
|
|
|
$
|
68,435
|
|
|
$
|
69,152
|
|
The Company
considers several factors in determining the suboptimal exercise
factor, including the historical and estimated option exercise
behavior.
The Company
calculates expected volatility based solely on implied volatility.
The Company believes that implied volatility of publicly traded
options in its common stock is more reflective of market
conditions, and given consistently high trade volumes of the
options, can reasonably be expected to be a better indicator of
expected volatility than historical volatility of its common
stock.
In valuing shares
issued under the Company’s employee stock option plans, the Company
bases the risk-free interest rate on U.S. Treasury zero-coupon
issues with terms similar to the contractual term of the options.
The Company does not anticipate paying any cash dividends in the
foreseeable future and therefore uses an expected dividend yield
of zero in
the option valuation model. The Company does not use a post-vesting
termination rate as options are fully vested upon grant
date.
9. Income
Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
(in
thousands, except percentages)
|
|
Provision for income
taxes
|
|
$
|
71,484
|
|
|
$
|
347,079
|
|
|
$
|
473,693
|
|
|
$
|
632,952
|
|
|
Effective tax
rate
|
|
8
|
%
|
|
34
|
%
|
|
18
|
%
|
|
33
|
%
|
On June 29, 2020,
California enacted legislative changes that impose an annual cap
of $5
million on
the amount of business incentive tax credits the Company can
utilize in California effective for tax years 2020 through
2022.
As of September
30, 2020, the Company had a California research and development
("R&D") credit carryforward of $239
million which can be carried forward
indefinitely. In the second quarter of 2020 we evaluated the
Company’s ability to realize the California R&D credit, the
Company considered all available positive and negative evidence,
including operating results, ongoing tax planning, and forecasts of
future taxable income and determined it is more likely than not
that the pre-2020 credits and a portion of the current year R&D
credit would not be realized. In the nine months ended September
30, 2020, the Company has recorded a valuation allowance of
$239
million. The Company will monitor
its business strategies, weighing positive and negative evidence in
assessing its realization of this asset in the future and in the
event there is a need to release the valuation allowance, a tax
benefit will be recorded.
The effective tax
rates for the three and nine months ended September 30, 2020
differed from the Federal statutory rate primarily due to the
recognition of excess tax benefits of stock-based compensation,
partially offset by the establishment of a valuation allowance on
the California R&D credit in the second quarter
of 2020. The effective tax rates for the three and nine months
ended September 30, 2019 differed from the Federal statutory rate
primarily due to changes from the global corporate structure
simplification, state taxes, foreign taxes, non-deductible
expenses, and the international provisions of U.S. tax reform that
became effective in 2018, partially offset by the recognition of
excess tax benefits of stock-based compensation, and Federal and
California R&D credits.
The decrease in
effective tax rates for the three and nine months ended
September 30, 2020, as compared to the same
period in 2019 was primarily due to the
United States Treasury issuance of final regulations that made
certain aspects related to the Tax Cuts and Jobs Act of 2017 no
longer applicable to the Company and the recognition of excess tax
benefits of stock-based compensation, partially offset by the
establishment of a valuation allowance on the California R&D
credit in the second quarter of 2020. For the three and nine months ended
September 30, 2020, the Company recognized a
discrete tax benefit related to the excess tax benefits from
stock-based compensation of $66
million and $223
million, respectively, compared to
the three
and nine months ended September 30, 2019 of $27
million and $114
million, respectively.
Gross
unrecognized tax benefits were $85
million and $67
million as of September 30,
2020 and December 31,
2019,
respectively. The gross unrecognized tax benefits, if recognized by
the Company, will result in a reduction of approximately
$49
million to the provision for income
taxes thereby favorably impacting the Company’s effective tax rate.
As of September 30,
2020,
gross unrecognized tax benefits of $24
million were classified as “Other
non-current liabilities” and $30
million as a reduction to deferred
tax assets which was classified as "Other non-current assets" in
the Consolidated Balance Sheets. The Company includes interest and
penalties related to unrecognized tax benefits within the
"Provision for income taxes" on the Consolidated Statements of
Operations and “Other non-current liabilities” in the Consolidated
Balance Sheets. Interest and penalties included in the Company’s
“Provision for income taxes” were not material in any of the
periods presented.
Deferred tax
assets of $429
million and $658
million were classified as “Other
non-current assets” on the Consolidated Balance Sheets as of
September 30,
2020 and December 31,
2019,
respectively. In evaluating its ability to realize the net deferred
tax assets, the Company considered all available positive and
negative evidence, including its past operating results and the
forecast of future market growth, forecasted earnings, future
taxable income, and prudent and feasible tax planning strategies.
The Company has a valuation allowance of $371
million and
$135
million as of September 30,
2020 and December 31,
2019,
respectively. The valuation allowance is related to the California
R&D credits and certain foreign tax credits that the Company
does not expect to realize.
The Company files
U.S. Federal, state and foreign tax returns. The Company is
currently under examination by the IRS for 2016 through 2018 and is
subject to examination for 2019. The 2011 through 2019 state tax
returns are subject to examination by various state tax
authorities. The Company is also currently under examination in the
U.K. for 2018 and 2019. The Company has no other significant
foreign jurisdiction audits underway. The years 2014 through 2019 remain subject to examination
by foreign tax authorities.
Given the
potential outcome of the current examinations as well as the impact
of the current examinations on the potential expiration of the
statute of limitations, it is reasonably possible that the balance
of unrecognized tax benefits could significantly change within the
next twelve months. At this time, an estimate of the range of
reasonably possible adjustments to the balance of unrecognized tax
benefits cannot be made.
10. Segment
and Geographic Information
The Company
operates as one
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.
On July 13, 2020, Ted Sarandos
was appointed as co-Chief Executive Officer of the Company
and serves as Chief Content Officer and co-Chief Executive
Officer with Reed Hastings, the Company’s co-Chief Executive Officer, President, and Chairman of the Board.
The Company determined that both Mr. Sarandos and Mr. Hastings are
its CODM and that there have been no changes to the Company's one
operating segment as the Company's financial results continue to be
evaluated on a consolidated basis by its CODM.
Total U.S.
revenues were $2.8
billion and $8.0
billion, respectively, for
the three
and nine months ended
September 30,
2020,
and $2.5
billion and $7.0
billion, respectively, for
the three
and nine months ended September 30, 2019. See Note 2
Revenue
Recognition for additional information
about streaming revenue by region.
The Company's
long-lived tangible assets, as well as the Company's operating
lease right-of-use assets recognized on the Consolidated Balance
Sheets as of September 30,
2020 and December 31,
2019, were
located as follows:
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
September 30,
2020
|
|
December 31,
2019
|
|
|
(in
thousands)
|
|
United States
|
$
|
2,111,158
|
|
|
$
|
1,503,459
|
|
|
International
|
655,795
|
|
|
594,047
|
|
|
|
|
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; content amortization; impact of recently adopted
accounting pronouncements; price changes and testing; dividends;
impact of foreign currency and exchange rate fluctuations,
including on net income, revenues and average revenues per paying
member; deferred revenue; investments in global content, including
original content; impact of content and pricing changes on
membership growth; the impact of the discontinuance of the LIBO
Rate; liquidity, including cash flows from operations, available
funds and access to financing sources; net cash provided by (used
in) operating activities and free cash flow; unrecognized tax
benefits; deferred tax assets; accessing and obtaining additional
capital, including use of the debt market; accounting treatment for
changes related to content assets; net income; future contractual
obligations, including unknown content obligations and timing of
payments; membership growth for the remainder of the fiscal year;
and the impact of the coronavirus (COVID-19) pandemic and our
response to it. 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, 2019
filed with the
Securities and Exchange Commission (“SEC”) on January 29, 2020, in
particular the risk factors discussed under the heading “Risk
Factors” in Part I, Item IA, as updated in the Company’s Quarterly
Report on Form 10-Q for the quarter ended March 31,
2020.
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 information
to our investors using our investor relations website
(netflixinvestor.com), SEC filings, press releases, public
conference calls and webcasts. We use these channels, as well as
social media, to communicate with our members and the public about
our company, our services and other issues. It is possible that the
information we post on social media 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 United States ("U.S.") social media channels listed on our
investor relations website.
Overview
We are the
world’s leading subscription streaming entertainment service with
over 195
million paid streaming memberships in
over 190 countries enjoying TV series,
documentaries and feature films across a wide variety of genres and
languages. Members can watch as much as they want, anytime,
anywhere, on any internet-connected screen. Members can play, pause
and resume watching, all without commercials. Additionally, we
continue to offer our legacy DVD-by-mail service in the United
States.
We are a pioneer
in the delivery of streaming entertainment, launching our streaming
service in 2007. Since this launch, we have developed an ecosystem
for internet-connected screens and have added increasing amounts of
content that enable consumers to enjoy entertainment directly on
their internet-connected screens. As a result of these efforts, we
have experienced growing consumer acceptance of, and interest in,
the delivery of streaming entertainment.
Our core strategy
is to grow our streaming membership business globally within the
parameters of our operating margin target. We are continuously
improving our members' experience by expanding our content with a
focus on a programming mix of content that delights our members and
attracts new members. In addition, we are continuously enhancing
our user interface and extending our streaming service to more
internet-connected screens. Our members can download a selection of
titles for offline viewing.
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 first and fourth quarters
(October through March) represent our greatest streaming membership
growth. In addition, our membership growth can be impacted by our
content release schedule and changes to pricing.
Results of Operations
The following
represents our consolidated performance highlights:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
Change
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Q3'20 vs.
Q3'19
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Global
Streaming Memberships:
|
|
|
|
|
|
|
|
|
Paid net membership
additions
|
2,204
|
|
|
6,772
|
|
|
(4,568
|
)
|
|
(67
|
)%
|
|
Paid memberships at end of
period
|
195,151
|
|
|
158,334
|
|
|
36,817
|
|
|
23
|
%
|
|
Average paying
memberships
|
194,049
|
|
|
154,948
|
|
|
39,101
|
|
|
25
|
%
|
|
Average monthly
revenue per paying membership
|
$
|
10.95
|
|
|
$
|
11.13
|
|
|
$
|
(0.18
|
)
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
Financial
Results:
|
|
|
|
|
|
|
|
|
Streaming
revenues
|
$
|
6,376,803
|
|
|
$
|
5,173,028
|
|
|
$
|
1,203,775
|
|
|
23
|
%
|
|
DVD revenues
|
58,834
|
|
|
71,877
|
|
|
(13,043
|
)
|
|
(18
|
)%
|
|
Total
revenues
|
$
|
6,435,637
|
|
|
$
|
5,244,905
|
|
|
$
|
1,190,732
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
1,314,863
|
|
|
$
|
980,239
|
|
|
$
|
334,624
|
|
|
34
|
%
|
|
Operating margin
|
20.4
|
%
|
|
18.7
|
%
|
|
1.7
|
%
|
|
9
|
%
|
Paid net
membership additions for the three months ended
September 30,
2020 decreased 67% as compared to the three
months ended September 30,
2019, in
large extent due to the COVID-19 pandemic which contributed to
significant paid net membership additions in the first half of
2020, and resulted in less growth in the third quarter of 2020 as
compared to the prior year. While we are unable to accurately
predict the impact of the pandemic on paid net membership additions
in subsequent quarters, we expect less growth for the remainder of
2020 as compared to the prior year.
Consolidated
revenues for the three months ended September 30,
2020 increased 23% as compared to the three
months ended September 30,
2019. The
increase in our consolidated revenues was due to the
25%
growth in average
paying memberships. The growth in paid memberships was partially
offset by a 2% decrease in the average
monthly revenue per paying membership due to the strengthening of
the U.S. dollar relative to certain foreign
currencies.
The increase in
operating margin is primarily due to increased revenues and
decreased marketing costs, coupled with technology and development,
and general and administrative costs growing at a slower rate as
compared to the 23% increase in revenues. The
increase in operating margin was partially offset by increased
content expenses as we continue to acquire, license and produce
content, including expenses related to the COVID-19 pandemic and
expenses related to overall deals.
The full extent
of the impact of the COVID-19 pandemic on our business, operations
and financial results will depend on numerous evolving factors that
we may not be able to accurately predict. See Item 1A: "Risk
Factors" in our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 for additional details. In an effort to protect the
health and safety of our employees, our workforce has had and
continues in most instances to spend a significant amount of time
working from home, international travel has been severely curtailed
and many of our productions remain paused or continue to experience
disruption, as are the productions of our third-party content
suppliers. Our other partners have similarly had their operations
disrupted, including those partners that we use for our operations
as well as development, production, and post-production of content.
While we and our partners have resumed productions and related
operations in many parts of the world, our ability to produce
content remains affected by the pandemic. In an effort to contain
COVID-19 or slow its spread, governments around the world have also
enacted various measures, some of which have been subsequently
rescinded, modified or reinstated, including orders to close all
businesses not deemed “essential,” isolate residents to their homes
or places of residence, and practice social distancing. We
anticipate that these actions and the global health crisis caused
by COVID-19, including any resurgences, will continue to negatively
impact business activity across the globe. While we have observed
demand increases for our streaming entertainment service in the
first half of 2020, we experienced less growth in the third quarter
of 2020 and we cannot estimate the impact COVID-19 will have in the
future as business and consumer activity decelerates across the
globe. We will continue to actively monitor the situation and may
take further actions that alter our business operations as may be
required by federal, state, local or foreign authorities, or that
we determine are in the best interests of our employees, customers,
partners and stockholders. It is not clear what the potential
effects any such alterations or modifications may have on our
business, including the effects on our customers, suppliers or
vendors, or on our financial results.
Streaming Revenues
We 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 September 30,
2020,
pricing on our plans ranged from the U.S. dollar equivalent
of $3 to $24 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.
The following
tables summarize streaming revenue and other streaming membership
information by region for the three and nine
months
ended September 30,
2020 and September 30,
2019.
United
States and Canada (UCAN)
Three
months ended September 30, 2020 as compared
to the three
months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Q3'20 vs.
Q3'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
2,933,445
|
|
|
$
|
2,621,250
|
|
|
$
|
312,195
|
|
|
12
|
%
|
|
Paid net membership
additions
|
|
177
|
|
|
613
|
|
|
(436
|
)
|
|
(71
|
)%
|
|
Paid memberships at end of
period
|
|
73,081
|
|
|
67,114
|
|
|
5,967
|
|
|
9
|
%
|
|
Average paying
memberships
|
|
72,993
|
|
|
66,808
|
|
|
6,185
|
|
|
9
|
%
|
|
Average monthly revenue per
paying membership
|
|
$
|
13.40
|
|
|
$
|
13.08
|
|
|
$
|
0.32
|
|
|
2
|
%
|
|
Constant currency change
(1)
|
|
|
|
|
|
|
|
3
|
%
|
Nine months
ended September 30, 2020 as compared
to the nine months
ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Nine
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
YTD'20 vs.
YTD'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
8,475,891
|
|
|
$
|
7,379,300
|
|
|
$
|
1,096,591
|
|
|
15
|
%
|
|
Paid net membership
additions
|
|
5,419
|
|
|
2,357
|
|
|
3,062
|
|
|
130
|
%
|
|
Paid memberships at end of
period
|
|
73,081
|
|
|
67,114
|
|
|
5,967
|
|
|
9
|
%
|
|
Average paying
memberships
|
|
71,082
|
|
|
66,357
|
|
|
4,725
|
|
|
7
|
%
|
|
Average monthly revenue per
paying membership
|
|
$
|
13.25
|
|
|
$
|
12.36
|
|
|
$
|
0.89
|
|
|
7
|
%
|
|
Constant currency change
(1)
|
|
|
|
|
|
|
|
7
|
%
|
Europe,
Middle East, and Africa (EMEA)
Three
months ended September 30, 2020 as compared
to the three
months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Q3'20 vs.
Q3'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
2,019,083
|
|
|
$
|
1,428,040
|
|
|
$
|
591,043
|
|
|
41
|
%
|
|
Paid net membership
additions
|
|
759
|
|
|
3,126
|
|
|
(2,367
|
)
|
|
(76
|
)%
|
|
Paid memberships at end of
period
|
|
62,242
|
|
|
47,355
|
|
|
14,887
|
|
|
31
|
%
|
|
Average paying
memberships
|
|
61,863
|
|
|
45,792
|
|
|
16,071
|
|
|
35
|
%
|
|
Average monthly revenue per
paying membership
|
|
$
|
10.88
|
|
|
$
|
10.40
|
|
|
$
|
0.48
|
|
|
5
|
%
|
|
Constant currency change
(1)
|
|
|
|
|
|
|
|
3
|
%
|
Nine months
ended September 30, 2020 as compared
to the nine months
ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Nine
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
YTD'20 vs.
YTD'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
5,635,094
|
|
|
$
|
3,980,506
|
|
|
$
|
1,654,588
|
|
|
42
|
%
|
|
Paid net membership
additions
|
|
10,464
|
|
|
9,537
|
|
|
927
|
|
|
10
|
%
|
|
Paid memberships at end of
period
|
|
62,242
|
|
|
47,355
|
|
|
14,887
|
|
|
31
|
%
|
|
Average paying
memberships
|
|
59,076
|
|
|
43,119
|
|
|
15,957
|
|
|
37
|
%
|
|
Average monthly revenue per
paying membership
|
|
$
|
10.60
|
|
|
$
|
10.26
|
|
|
$
|
0.34
|
|
|
3
|
%
|
|
Constant currency change
(1)
|
|
|
|
|
|
|
|
5
|
%
|
Latin
America (LATAM)
Three
months ended September 30, 2020 as compared
to the three
months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Three
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
Q3'20 vs.
Q3'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
789,384
|
|
|
$
|
741,434
|
|
|
$
|
47,950
|
|
|
6
|
%
|
|
Paid net membership
additions
|
|
256
|
|
|
1,490
|
|
|
(1,234
|
)
|
|
(83
|
)%
|
|
Paid memberships at end of
period
|
|
36,324
|
|
|
29,380
|
|
|
6,944
|
|
|
24
|
%
|
|
Average paying
memberships
|
|
36,196
|
|
|
28,635
|
|
|
7,561
|
|
|
26
|
%
|
|
Average monthly revenue per
paying membership
|
|
$
|
7.27
|
|
|
$
|
8.63
|
|
|
$
|
(1.36
|
)
|
|
(16
|
)%
|
|
Constant currency change
(1)
|
|
|
|
|
|
|
|
5
|
%
|
Nine months
ended September 30, 2020 as compared
to the nine months
ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of/ Nine
Months Ended
|
|
Change
|
|
|
|
September 30,
2020
|
|
September 30,
2019
|
|
YTD'20 vs.
YTD'19
|
|
|
|
(in
thousands, except revenue per membership and
percentages)
|
|
Revenues
|
|
$
|
2,368,205
|
|
|
$
|
2,049,042
|
|
|
$
|
|