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 June 30, 2021

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 June 30, 2021, there were 442,595,888 shares of the registrant’s common stock, par value $0.001, outstanding.

Table of Contents

		Page
	Part I. Financial Information
Item 1.	Consolidated Financial Statements
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Consolidated Balance Sheets	6
	Consolidated Statements of Stockholders' Equity	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
	Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	35
Exhibit Index		36
Signatures		36

2

NETFLIX, INC.

Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Revenues	$	7,341,777	$	6,148,286	$	14,505,059	$	11,915,977
Cost of revenues	4,018,008		3,643,707		7,886,519		7,243,408
Marketing	603,973		434,370		1,116,485		938,200
Technology and development	537,321		435,045		1,062,528		888,862
General and administrative	334,845		277,236		632,041		529,323
Operating income	1,847,630		1,357,928		3,807,486		2,316,184
Other income (expense):
Interest expense	(191,322)		(189,151)		(385,762)		(373,234)
Interest and other income (expense)	(62,519)		(133,175)		206,567		(111,478)
Income before income taxes	1,593,789		1,035,602		3,628,291		1,831,472
Provision for income taxes	(240,776)		(315,406)		(568,563)		(402,209)
Net income	$	1,353,013	$	720,196	$	3,059,728	$	1,429,263
Earnings per share:
Basic	$	3.05	$	1.63	$	6.90	$	3.25
Diluted	$	2.97	$	1.59	$	6.72	$	3.15
Weighted-average shares of common stock outstanding:
Basic	443,159		440,569		443,192		439,961
Diluted	455,129		453,945		455,385		453,220

See accompanying notes to the consolidated financial statements.

3

NETFLIX, INC.

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income	$	1,353,013	$	720,196	$	3,059,728	$	1,429,263
Other comprehensive income (loss):
Foreign currency translation adjustments	5,638		12,982		(34,623)		(10,551)
Comprehensive income	$	1,358,651	$	733,178	$	3,025,105	$	1,418,712

See accompanying notes to the consolidated financial statements.

4

NETFLIX, INC.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash flows from operating activities:
Net income	$	1,353,013	$	720,196	$	3,059,728	$	1,429,263
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Additions to content assets	(4,096,750)		(2,510,782)		(7,381,326)		(5,805,057)
Change in content liabilities	(312,208)		(108,432)		(578,248)		150,513
Amortization of content assets	2,806,803		2,607,159		5,525,999		5,090,544
Depreciation and amortization of property, equipment and intangibles	38,434		26,661		74,175		55,178
Stock-based compensation expense	101,583		104,210		208,813		201,229
Foreign currency remeasurement loss (gain) on debt	63,074		119,161		(190,256)		26,101
Other non-cash items	108,103		70,301		180,760		135,749
Deferred income taxes	51,127		223,308		210,860		269,927
Changes in operating assets and liabilities:
Other current assets	(52,373)		3,066		(273,928)		(124,287)
Accounts payable	72,313		(112,027)		(65,000)		(261,180)
Accrued expenses and other liabilities	(171,430)		(105,450)		6,467		108,741
Deferred revenue	47,093		42,508		69,372		104,516
Other non-current assets and liabilities	(72,543)		(38,803)		(133,911)		(80,249)
Net cash provided by (used in) operating activities	(63,761)		1,041,076		713,505		1,300,988
Cash flows from investing activities:
Purchases of property and equipment	(110,278)		(141,741)		(191,279)		(239,756)
Change in other assets	(1,000)		(260)		(5,615)		(548)
Net cash used in investing activities	(111,278)		(142,001)		(196,894)		(240,304)
Cash flows from financing activities:
Proceeds from issuance of debt	—		1,009,464		—		1,009,464
Debt issuance costs	—		(7,559)		—		(7,559)
Repayments of debt	—		—		(500,000)		—
Proceeds from issuance of common stock	19,749		89,060		67,820		132,754
Repurchases of common stock	(500,022)		—		(500,022)		—
Net cash provided by (used in) financing activities	(480,273)		1,090,965		(932,202)		1,134,659
Effect of exchange rate changes on cash, cash equivalents and restricted cash	23,477		11,819		(18,661)		(59,083)
Net increase (decrease) in cash, cash equivalents and restricted cash	(631,835)		2,001,859		(434,252)		2,136,260
Cash, cash equivalents and restricted cash at beginning of period	8,436,453		5,178,187		8,238,870		5,043,786
Cash, cash equivalents and restricted cash at end of period	$	7,804,618	$	7,180,046	$	7,804,618	$	7,180,046

See accompanying notes to the consolidated financial statements.

5

NETFLIX, INC.

Consolidated Balance Sheets

(in thousands, except share and par value data)

	As of
	June 30, 2021		December 31, 2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	7,777,530	$	8,205,550
Other current assets	1,826,746		1,556,030
Total current assets	9,604,276		9,761,580
Content assets, net	27,291,640		25,383,950
Property and equipment, net	1,107,437		960,183
Other non-current assets	2,967,616		3,174,646
Total assets	$	40,970,969	$	39,280,359
Liabilities and Stockholders’ Equity
Current liabilities:
Current content liabilities	$	4,197,874	$	4,429,536
Accounts payable	622,931		656,183
Accrued expenses and other liabilities	1,125,591		1,102,196
Deferred revenue	1,187,364		1,117,992
Short-term debt	699,128		499,878
Total current liabilities	7,832,888		7,805,785
Non-current content liabilities	2,265,286		2,618,084
Long-term debt	14,926,889		15,809,095
Other non-current liabilities	2,082,035		1,982,155
Total liabilities	27,107,098		28,215,119
Commitments and contingencies (Note 7)
Stockholders’ equity:
Common stock, $0.001 par value; 4,990,000,000 shares authorized at June 30, 2021 and December 31, 2020; 442,595,888 and 442,895,261 issued and outstanding at June 30, 2021 and December 31, 2020, respectively	3,721,246		3,447,698
Treasury stock at cost (1,001,565 shares at June 30, 2021)	(500,022)		—
Accumulated other comprehensive income	9,775		44,398
Retained earnings	10,632,872		7,573,144
Total stockholders’ equity	13,863,871		11,065,240
Total liabilities and stockholders’ equity	$	40,970,969	$	39,280,359

See accompanying notes to the consolidated financial statements.

6

NETFLIX, INC.

Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Total stockholders' equity, beginning balances	$	12,884,080	$	8,409,294	$	11,065,240	$	7,582,157
Common stock and additional paid-in capital:
Beginning balances	$	3,600,084	$	2,935,532	$	3,447,698	$	2,793,929
Issuance of common stock upon exercise of options	19,579		88,071		64,735		132,655
Stock-based compensation expense	101,583		104,210		208,813		201,229
Ending balances	$	3,721,246	$	3,127,813	$	3,721,246	$	3,127,813
Treasury stock:
Beginning balances	$	—	$	—	$	—	$	—
Repurchases of common stock to be held as treasury stock	(500,022)		—		(500,022)		—
Ending balances	$	(500,022)	$	—	$	(500,022)	$	—
Accumulated other comprehensive income (loss):
Beginning balances	$	4,137	$	(47,054)	$	44,398	$	(23,521)
Other comprehensive income (loss)	5,638		12,982		(34,623)		(10,551)
Ending balances	$	9,775	$	(34,072)	$	9,775	$	(34,072)
Retained earnings:
Beginning balances	$	9,279,859	$	5,520,816	$	7,573,144	$	4,811,749
Net income	1,353,013		720,196		3,059,728		1,429,263
Ending balances	$	10,632,872	$	6,241,012	$	10,632,872	$	6,241,012
Total stockholders' equity, ending balances	$	13,863,871	$	9,334,753	$	13,863,871	$	9,334,753

See accompanying notes to the consolidated financial statements.

7

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, 2020 filed with the Securities and Exchange Commission (the “SEC”) on January 28, 2021. 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, 2020. 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, 2020.

Recently adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Company’s consolidated financial statements.

2. Revenue Recognition

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

The following tables summarize streaming revenue, paid net membership additions (losses), and paid memberships at end of period by region for the three and six months ended June 30, 2021 and June 30, 2020, respectively:

United States and Canada (UCAN)

	As of/ Three Months Ended				As of/ Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(in thousands)
Revenues	$	3,234,643	$	2,839,670	$	6,405,615	$	5,542,446
Paid net membership additions (losses)	(433)		2,935		15		5,242
Paid memberships at end of period (1)	73,951		72,904		73,951		72,904

8

Europe, Middle East, and Africa (EMEA)

	As of/ Three Months Ended				As of/ Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(in thousands)
Revenues	$	2,400,480	$	1,892,537	$	4,744,154	$	3,616,011
Paid net membership additions	188		2,749		1,998		9,705
Paid memberships at end of period (1)	68,696		61,483		68,696		61,483

Latin America (LATAM)

	As of/ Three Months Ended				As of/ Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(in thousands)
Revenues	$	860,882	$	785,368	$	1,697,529	$	1,578,821
Paid net membership additions	764		1,750		1,121		4,651
Paid memberships at end of period (1)	38,658		36,068		38,658		36,068

Asia-Pacific (APAC)

	As of/ Three Months Ended				As of/ Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(in thousands)
Revenues	$	799,480	$	569,140	$	1,561,894	$	1,052,800
Paid net membership additions	1,022		2,657		2,383		6,259
Paid memberships at end of period (1)	27,875		22,492		27,875		22,492

(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 certain other promotions that may be offered by the Company to new or 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, become 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 $3.0 billion and $6.0 billion, respectively, for the three and six months ended June 30, 2021, and $2.7 billion and $5.2 billion, respectively, for the three and six months ended June 30, 2020. DVD revenues were $46 million and $96 million, respectively, for the three and six months ended June 30, 2021 and $62 million and $126 million, respectively, for the three and six months ended June 30, 2020.

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 June 30, 2021, total deferred revenue was $1,187 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 $69 million increase in deferred revenue as compared to the balance of $1,118 million for the year ended December 31, 2020 is a result of the increase in membership fees billed due to increased members and average monthly revenue per paying member.

9

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 outstanding shares of common stock during the period. Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options. The computation of earnings per share is as follows:

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
	(in thousands, except per share data)
Basic earnings per share:
Net income	$	1,353,013	$	720,196	$	3,059,728	$	1,429,263
Shares used in computation:
Weighted-average shares of common stock outstanding	443,159		440,569		443,192		439,961
Basic earnings per share	$	3.05	$	1.63	$	6.90	$	3.25
Diluted earnings per share:
Net income	$	1,353,013	$	720,196	$	3,059,728	$	1,429,263
Shares used in computation:
Weighted-average shares of common stock outstanding	443,159		440,569		443,192		439,961
Employee stock options	11,970		13,376		12,193		13,259
Weighted-average number of shares	455,129		453,945		455,385		453,220
Diluted earnings per share	$	2.97	$	1.59	$	6.72	$	3.15

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 shares of common stock excluded from the diluted calculation:

	Three Months Ended		Six Months Ended
	June 30, 2021	June 30, 2020	June 30, 2021	June 30, 2020
	(in thousands)
Employee stock options	788	39	523	777

10

4. Cash, Cash Equivalents and Restricted Cash

The following tables summarize the Company's cash, cash equivalents, and restricted cash as of June 30, 2021 and December 31, 2020:

	As of June 30, 2021
	Cash and cash equivalents		Other Current Assets		Non-current Assets		Total
	(in thousands)
Cash	$	4,062,961	$	2,689	$	24,253	$	4,089,903
Level 1 securities:
Money market funds	3,414,146		—		146		3,414,292
Level 2 securities:
Foreign Time Deposits	300,423		—		—		300,423
	$	7,777,530	$	2,689	$	24,399	$	7,804,618

	As of December 31, 2020
	Cash and cash equivalents		Other Current Assets		Non-current Assets		Total
	(in thousands)
Cash	$	3,331,860	$	1,783	$	31,284	$	3,364,927
Level 1 securities:
Money market funds	4,573,690		—		253		4,573,943
Level 2 securities:
Foreign Time Deposits	300,000		—		—		300,000
	$	8,205,550	$	1,783	$	31,537	$	8,238,870

Other current assets include restricted cash for deposits related to self insurance. Non-current assets include restricted cash related to 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 Debt 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 six months ended June 30, 2021 and 2020, respectively.

11

5. Balance Sheet Components

Content Assets, Net

Content assets consisted of the following:

	As of
	June 30, 2021		December 31, 2020
	(in thousands)
Licensed content, net	$	13,111,259	$	13,747,607
Produced content, net
Released, less amortization	5,847,391		5,809,681
In production	7,348,810		4,827,455
In development and pre-production	984,180		999,207
	14,180,381		11,636,343
Content assets, net	$	27,291,640	$	25,383,950

As of June 30, 2021, approximately $5,692 million, $3,209 million, and $1,904 million of the $13,111 million unamortized cost of the licensed content is expected to be amortized in each of the next three years.  As of June 30, 2021, approximately $2,233 million, $1,684 million, and $1,026 million of the $5,847 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 June 30, 2021, the amount of accrued participations and residuals was not material.

The following tables represent the amortization of content assets:

	Three Months Ended
	June 30, 2021		June 30, 2020
	(in thousands)
Licensed content	$	1,884,638	$	1,883,070
Produced content	922,165		724,089
Total	$	2,806,803	$	2,607,159

	Six Months Ended
	June 30, 2021		June 30, 2020
	(in thousands)
Licensed content	$	3,713,884	$	3,743,240
Produced content	1,812,115		1,347,304
Total	$	5,525,999	$	5,090,544

12

Property and Equipment, Net

Property and equipment and accumulated depreciation consisted of the following:

	As of
	June 30, 2021		December 31, 2020		Estimated Useful Lives
	(in thousands)
Land	$	56,066	$	50,700
Buildings	48,007		42,717		30 years
Leasehold improvements	599,574		524,537		Over life of lease
Furniture and fixtures	115,829		110,185		3 years
Information technology	323,771		283,014		3 years
Corporate aircraft	110,864		110,629		8 years
Machinery and equipment	32,732		34,633		3-5 years
Capital work-in-progress	373,559		298,558
Property and equipment, gross	1,660,402		1,454,973
Less: Accumulated depreciation	(552,965)		(494,790)
Property and equipment, net	$	1,107,437	$	960,183

Leases

The Company has entered into operating leases primarily for real estate. 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. 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 operating right-of-use assets and related operating lease liabilities were as follows:

	Three Months Ended
	June 30, 2021		June 30, 2020
	(in thousands)
Cash paid for operating lease liabilities	$	79,472	$	59,473
Right-of-use assets obtained in exchange for new operating lease obligations	183,351		364,606

	Six Months Ended
	June 30, 2021		June 30, 2020
	(in thousands)
Cash paid for operating lease liabilities	$	161,911	$	116,963
Right-of-use assets obtained in exchange for new operating lease obligations	232,796		416,430

	As of
	June 30, 2021		December 31, 2020
	(in thousands)
Operating lease right-of-use assets, net	$	2,102,676	$	2,037,726
Current operating lease liabilities	275,040		256,222
Non-current operating lease liabilities	2,042,067		1,945,631
Total operating lease liabilities	$	2,317,107	$	2,201,853

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Other Current Assets

Other current assets consisted of the following:

	As of
	June 30, 2021		December 31, 2020
	(in thousands)
Trade receivables	$	775,222	$	610,819
Prepaid expenses	294,837		203,042
Other	756,687		742,169
Total other current assets	$	1,826,746	$	1,556,030

6. Debt

As of June 30, 2021, the Company had aggregate outstanding notes of $15,626 million, net of $99 million of issuance costs, with varying maturities (the "Notes"). Of the outstanding balance, $699 million, net of issuance costs, is classified as short-term debt on the Consolidated Balance Sheets. As of December 31, 2020, the Company had aggregate outstanding notes of $16,309 million, net of $107 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 $63 million for the three months ended June 30, 2021 and remeasurement gain totaling $190 million for the six months ended June 30, 2021).

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 June 30, 2021 and December 31, 2020:

	Principal Amount at Par						Level 2 Fair Value as of
	June 30, 2021		December 31, 2020		Issuance Date	Maturity	June 30, 2021		December 31, 2020
	(in millions)						(in millions)
5.375% Senior Notes	$	—	$	500	February 2013	February 2021	$	—	$	502
5.500% Senior Notes	700		700		February 2015	February 2022	721		735
5.750% Senior Notes	400		400		February 2014	March 2024	449		449
5.875% Senior Notes	800		800		February 2015	February 2025	926		921
3.000% Senior Notes (1)	557		574		April 2020	June 2025	607		616
3.625% Senior Notes	500		500		April 2020	June 2025	539		535
4.375% Senior Notes	1,000		1,000		October 2016	November 2026	1,138		1,110
3.625% Senior Notes (1)	1,540		1,588		May 2017	May 2027	1,774		1,776
4.875% Senior Notes	1,600		1,600		October 2017	April 2028	1,861		1,807
5.875% Senior Notes	1,900		1,900		April 2018	November 2028	2,336		2,280
4.625% Senior Notes (1)	1,303		1,344		October 2018	May 2029	1,631		1,630
6.375% Senior Notes	800		800		October 2018	May 2029	1,022		995
3.875% Senior Notes (1)	1,422		1,466		April 2019	November 2029	1,715		1,700
5.375% Senior Notes	900		900		April 2019	November 2029	1,095		1,061
3.625% Senior Notes (1)	1,303		1,344		October 2019	June 2030	1,553		1,533
4.875% Senior Notes	1,000		1,000		October 2019	June 2030	1,190		1,155
	$	15,725	$	16,416			$	18,557	$	18,805

(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.

In February 2021, the Company repaid upon maturity the $500 million aggregate principal amount of its 5.375% Senior Notes due February 2021.

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The expected timing of principal and interest payments for the Company’s outstanding Notes are as follows:

	As of
	June 30, 2021		December 31, 2020
	(in thousands)
Less than one year	$	1,436,861	$	1,264,020
Due after one year and through three years	1,809,556		2,136,997
Due after three years and through five years	3,130,845		3,614,906
Due after five years	14,345,884		14,841,164
Total debt obligations	$	20,723,146	$	21,857,087

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 June 30, 2021 and December 31, 2020, the Company was in compliance with all related covenants.

Revolving Credit Facility

On June 17, 2021, the Company amended its unsecured revolving credit facility ("Revolving Credit Agreement") to, among other things, extend the maturity date from March 29, 2024 to June 17, 2026 and to increase the size of the facility from $750 million to $1 billion. Revolving loans may be borrowed, repaid and reborrowed until June 17, 2026, 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 June 30, 2021, 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 Adjusted LIBO Rate to continue to make rate submissions, and that publication of the Adjusted LIBO Rate based upon U.S. Dollars is expected to cease on June 30, 2023. The Revolving Credit Agreement contains customary provisions for the replacement of the Adjusted LIBO Rate with an alternate benchmark rate, including a rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York, as the Adjusted LIBO Rate is phased out in the lending market. The Company does not anticipate that the replacement of the Adjusted LIBO Rate with such alternative benchmark rate, as provided in the Revolving Credit Agreement, 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 June 30, 2021 and December 31, 2020, the Company was in compliance with all related covenants.

7. Commitments and Contingencies

Content

As of June 30, 2021, the Company had $21.9 billion of obligations comprised of $4.2 billion included in "Current content liabilities" and $2.3 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $15.4 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, 2020, the Company had $19.2 billion of obligations comprised of $4.4 billion included in "Current content liabilities" and $2.6 billion of "Non-current content liabilities" on the Consolidated Balance Sheets and $12.2 billion of obligations that are not reflected on the Consolidated Balance Sheets as they did not yet meet the criteria for asset recognition.

15

The expected timing of payments for these content obligations is as follows:

	As of
	June 30, 2021		December 31, 2020
	(in thousands)
Less than one year	$	9,885,589	$	8,980,868
Due after one year and through three years	8,548,463		7,819,563
Due after three years and through five years	2,688,616		1,973,091
Due after five years	740,476		445,308
Total content obligations	$	21,863,144	$	19,218,830

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

In June 2020, the Company's stockholders approved the 2020 Stock Plan, which was adopted by the Company’s Board of Directors in March 2020 subject to stockholder approval. The 2020 Stock Plan is the successor to the 2011 Stock Plan and 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.

16

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, 2020	21,702,085	18,676,810	$