NETFLIX INC

Previous wording

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

Current wording

We are one of the world’s leading entertainment services with approximately 283 million paid memberships in over 190 countries enjoying TV series, films and games across a wide variety of genres and languages. Members can play, pause and resume watching as much as they want, anytime, anywhere, and can change their plans at any time.

Previous wording

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

Current wording

In order to exclude the effect of foreign currency rate fluctuations on ARM, we calculate current period revenue assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period and exclude the impact of hedging gains or losses realized as revenues. Constant currency percentage change in ARM is calculated as the percentage change between current period constant currency ARM and the prior comparative period ARM. The impact of hedging gains or losses is excluded from both the current and prior periods. For the three and nine months ended September 30, 2024, our revenues would have been approximately $476 million and $1,177 million higher, respectively, excluding the impact of hedging and had foreign currency exchange rates remained constant with those for the three and nine months ended September 30, 2023. The unfavorable foreign exchange rate impacts in the three and nine months ended September 30, 2024 were primarily driven by the devaluation of the Argentine peso relative to the U.S. dollar.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

We primarily derive revenues from monthly membership fees for services related to streaming content to our members. We offer a variety of streaming membership plans, the price of which varies by country and the features of the plan. As of September 30, 2024, pricing on our paid plans ranged from the U.S. dollar equivalent of $1 to $33 per month, and pricing on our extra member sub accounts ranged from the U.S. dollar equivalent of $2 to $8 per month. We expect that from time to time the prices of our membership plans in each country may change and we may test other plan and price variations.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Streaming revenues for the three and nine months ended September 30, 2024 increased 15% and 16% as compared to the three and nine months ended September 30, 2023, respectively, primarily due to the growth in average paying memberships and price increases, partially offset by unfavorable changes in foreign exchange rates.

Previous wording

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

Current wording

The following tables summarize streaming revenue and other streaming membership information by region for the three and nine months ended September 30, 2024 and 2023. Hedging gains of $48 million and $70 million are included in “Streaming revenues” for the three and nine months ended September 30, 2024, respectively. No hedging gains and losses were recognized as “Streaming revenues” in the comparative prior year period. See Note 7 Derivative Financial Instruments and Hedging Activities to the consolidated financial statements for further information regarding the Company’s derivative and non-derivative financial instruments.

Previous wording

The increase in cost of revenues was primarily due to a $360 million increase in content amortization relating to our existing and new content.

Current wording

The increase in cost of revenues was primarily due to a $126 million increase in content amortization relating to our existing and new content.

Previous wording

The increase in cost of revenues was primarily due to a $570 million increase in content amortization relating to our existing and new content.

Current wording

The increase in cost of revenues was primarily due to a $697 million increase in content amortization relating to our existing and new content.

Previous wording

Marketing expenses consist primarily of advertising expenses and certain payments made to our marketing and advertising sales partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators, and internet service providers (“ISPs”). Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support sales and marketing activities.

Current wording

Marketing expenses consist primarily of advertising expenses and certain payments made to our marketing and advertising sales partners, including consumer electronics (“CE”) manufacturers, multichannel video programming distributors (“MVPDs”), mobile operators, and internet service providers (“ISPs”). Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll, stock-based compensation, facilities, and other related expenses for personnel that support advertising sales and marketing activities.

Previous wording

The increase in marketing expenses was primarily due to a $54 million increase in personnel-related costs, coupled with a $48 million increase in advertising expenses due to the timing of content releases.

Current wording

The increase in marketing expenses was primarily due to a $50 million increase in advertising expenses, largely driven by the timing of content releases. In addition, personnel-related costs increased $25 million, driven by the growth in advertising sales headcount.

Previous wording

The increase in marketing expenses was primarily due to a $27 million increase in personnel-related costs, partially offset by a $17 million decrease in advertising expenses due to the timing of content releases.

Current wording

The increase in marketing expenses was primarily due to a $98 million increase in advertising expenses, largely driven the timing of content releases. In addition, personnel-related costs increased $79 million, driven by the growth in advertising sales headcount.

Previous wording

The increase in technology and development expenses was primarily due to a $43 million increase in personnel-related costs, coupled with an increase in infrastructure and general use computer hardware expenses.

Current wording

The increase in technology and development expenses was primarily due to a $70 million increase in personnel-related costs.

Previous wording

The increase in technology and development expenses was primarily due to a $52 million increase in personnel-related costs, coupled with an increase in infrastructure and general use computer hardware expenses.

Current wording

The increase in technology and development expenses was primarily due to a $122 million increase in personnel-related costs.

Previous wording

The increase in general and administrative expenses was primarily due to a $9 million increase in personnel-related costs as well as increased spend on other corporate expenses.

Current wording

The decrease in general and administrative expenses was primarily due to a $27 million decrease in personnel-related costs as well as decreased spend on third-party expenses.

Previous wording

Interest expense primarily consists of interest on our Notes of $168 million and $341 million for the three and six months ended June 30, 2024. The decrease in interest expense for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023 was due to the lower average aggregate principal of interest bearing notes outstanding.

Current wording

Interest expense primarily consists of interest on our Notes of $185 million and $526 million for the three and nine months ended September 30, 2024. The increase in interest expense for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was due to the increase in debt. Interest expense for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 remained relatively flat.

Previous wording

Interest and other income (expense) consists primarily of foreign exchange gains and losses on foreign currency denominated balances and interest earned on cash, cash equivalents and short-term investments.

Current wording

Interest and other income (expense) consists primarily of foreign exchange gains and losses on foreign currency denominated balances, gains and losses on certain derivative instruments, and interest earned on cash, cash equivalents and short-term investments.

Previous wording

Interest and other income (expense) increased in the three and six months ended June 30, 2024 primarily due to foreign exchange gains of $21 million and $115 million, respectively, compared to losses of $23 million and $130 million, respectively, for the corresponding periods in 2023. In the three months ended June 30, 2024, the foreign exchange gains were primarily driven by the non-cash gain of $43 million from the remeasurement of our €5,170 million Senior Notes, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the six months ended June 30, 2024, the foreign exchange gains were primarily driven by the non-cash gain of $173 million from the remeasurement of our €5,170 million Senior Notes, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the three months ended June 30, 2023, the foreign exchange losses were primarily driven by the non-cash losses of $29 million from the remeasurement of our €5,170 million Senior Notes, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the six months ended June 30, 2023, the foreign exchange losses were primarily driven by the non-cash losses of $110 million from the remeasurement of our €5,170 million Senior Notes, coupled with the remeasurement of cash and content liability positions in currencies other than the functional currencies.

Current wording

Interest and other income (expense) decreased in the three months ended September 30, 2024 primarily due to foreign exchange losses of $91 million, net of the impacts of derivatives and hedging, compared to gains of $89 million for the corresponding period in 2023. In the three months ended September 30, 2024, the foreign exchange losses were primarily driven by the non-cash loss of $105 million from the remeasurement of our €5,170 million Senior Notes, net of hedging impacts, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies. In the three months ended September 30, 2023, the foreign exchange gains were primarily driven by the non-cash gains from the remeasurement of our €5,170 million Senior Notes of $173 million, partially offset by the remeasurement of cash and content liability positions in currencies other than the functional currencies.

Previous wording

The increase in the effective tax rate for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to an increase in foreign taxes, partially offset by higher excess tax benefits on stock-based compensation.

Current wording

The increase in the effective tax rate for the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to an increase in foreign taxes, partially offset by higher excess tax benefits on stock-based compensation.

Previous wording

Cash, cash equivalents, restricted cash and short-term investments decreased $481 million in the six months ended June 30, 2024 primarily due to the repurchase of stock and repayment of debt, partially offset by cash provided by operations and proceeds from issuance of common stock.

Current wording

Cash, cash equivalents, restricted cash and short-term investments increased $2,086 million in the nine months ended September 30, 2024 primarily due to cash provided by operations, issuance of debt, and proceeds from issuance of common stock, partially offset by the repurchase of stock and repayment of debt.

Previous wording

Debt, net of debt issuance costs, decreased $563 million primarily due to the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the six months ended June 30, 2024, coupled with the remeasurement of our euro-denominated notes. The amount of principal and interest on our outstanding notes due in the next twelve months is $2,430 million. As of June 30, 2024, no amounts had been borrowed under the $3 billion Revolving Credit Agreement. See Note 6 Debt in the accompanying notes to our consolidated financial statements.

Current wording

Debt, net of debt issuance costs and discounts, increased $1,438 million primarily due to the issuance of debt and remeasurement of our euro-denominated notes, partially offset by the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the nine months ended September 30, 2024. The amount of principal and interest on our outstanding notes due in the next twelve months is $2,579 million. As of September 30, 2024, no amounts had been borrowed under the $3 billion Revolving Credit Agreement. See Note 6 Debt in the accompanying notes to our consolidated financial statements.

Previous wording

In March 2021, our Board of Directors authorized the repurchase of up to $5 billion of our common stock, with no expiration date, and in September 2023, the Board of Directors increased the share repurchase authorization by an additional $10 billion, also with no expiration date. Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the six months ended June 30, 2024, the Company repurchased 6,145,069 shares of common stock for an aggregate amount of $3.6 billion. As of June 30, 2024, $4.8 billion remains available for repurchases.

Current wording

Stock repurchases may be effected through open market repurchases in compliance with Rule 10b-18 under the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, privately-negotiated transactions, accelerated stock repurchase plans, block purchases, or other similar purchase techniques and in such amounts as management deems appropriate. We are not obligated to repurchase any specific number of shares, and the timing and actual number of shares repurchased will depend on a variety of factors, including our stock price, general economic, business and market conditions, and alternative investment opportunities. We may discontinue any repurchases of our common stock at any time without prior notice. During the nine months ended September 30, 2024, the Company repurchased 8,696,108 shares of common stock for an aggregate amount of $5.3 billion. As of September 30, 2024, $3.1 billion remains available for repurchases.

Previous wording

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

Current wording

(1)As of September 30, 2024, content obligations were comprised of $4.5 billion included in “Current content liabilities” and $1.9 billion of “Non-current content liabilities” on the Consolidated Balance Sheets and $16.3 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not then meet the criteria for recognition.

Previous wording

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

Current wording

Net cash provided by operating activities for the three months ended September 30, 2024 increased $329 million as compared to the corresponding period in 2023, primarily driven by a $686 million or 41% increase in net income, an increase in adjustments for non-cash expenses, and favorable changes in working capital, mainly due to the timing of payments for taxes. These cash inflows were partially offset by an increase in payments for content assets. The payments for content assets increased $890 million, from $3,210 million to $4,100 million, or 28%.

Previous wording

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

Current wording

Net cash provided by (used in) investing activities for the three months ended September 30, 2024 decreased $2,165 million as compared to the corresponding period in 2023, primarily due to purchases of investments of $1.7 billion, coupled with there being no proceeds from maturities of investments in the three months ended September 30, 2024, as compared to proceeds from maturities of investments of $400 million in the three months ended September 30, 2023.

Previous wording

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

Current wording

Net cash provided by (used in) financing activities for the three months ended September 30, 2024 increased $2,702 million as compared to the corresponding period in 2023, primarily due to proceeds from the issuance of debt of $1,794 million, coupled with an $800 million decrease in the repurchases of common stock from $2.5 billion in the three months ended September 30, 2023 to $1.7 billion in the three months ended September 30, 2024.

Previous wording

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

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2024 increased $213 million as compared to the corresponding period in 2023, primarily driven by a $2,373 million or 53% increase in net income, an increase in adjustments for non-cash expenses, and favorable changes in working capital, partially offset by an increase in payments for content assets. The payments for content assets increased $2,774 million, from $9,660 million to $12,434 million, or 29%.

Previous wording

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

Current wording

Net cash provided by (used in) investing activities for the nine months ended September 30, 2024 decreased $2,153 million as compared to the corresponding period in 2023, primarily due to purchases of investments for an aggregate amount of $1.7 billion in the nine months ended September 30, 2024 as compared to purchases of investments for an aggregate amount of $505 million in the nine months ended September 30, 2023, coupled with there being no maturities of investments in the nine months ended September 30, 2024, as compared to maturities of investments of $902 million in the nine months ended September 30, 2023.

Previous wording

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

Current wording

Net cash used in financing activities for the nine months ended September 30, 2024 decreased $103 million as compared to the corresponding period in 2023, primarily due to proceeds from the issuance of debt of $1,794 million in the nine months ended September 30, 2024 and a $412 million increase in the proceeds from the issuance of common stock from $119 million in the nine months ended September 30, 2023 to $531 million in the nine months ended September 30, 2024. These cash inflows were partially offset by a $1.8 billion increase in the repurchases of common stock from an aggregate amount of $3.5 billion of repurchases in the nine months ended September 30, 2023 to $5.3 billion in the nine months ended September 30, 2024, coupled with the repayment upon maturity of the $400 million aggregate principal amount of our 5.750% Senior Notes in the nine months ended September 30, 2024 as compared to no repayments of debt in the corresponding period in 2023.