UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________ FORM 8-K __________________________________ CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 19, 2021 __________________________________ NETFLIX, INC. (Exact name of registrant as specified in its charter) __________________________________ Delaware 001-35727 77-0467272 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 100 Winchester Circle, Los Gatos, California 95032 (Address of principal executive offices) (Zip Code) (408) 540-3700 (Registrant’s telephone number, including area code) (Former name or former address, if changed since last report) __________________________________ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: ☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) ☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) ☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) ☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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. ☐ Item 2.02 Results of Operations and Financial Condition. On January 19, 2021, Netflix, Inc. (the “Company”) announced its financial results for the quarter ended December 31, 2020. The Letter to Shareholders, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference, includes reference to the non-GAAP financial measure of free cash flow. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States. Management believes that the non-GAAP measure of free cash flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to repay debt obligations, make investments and for certain other activities or the amount of cash used in operations, including investments in global streaming content. However, this non-GAAP measure should be considered in addition to, not as a substitute for or superior to, net income, operating income, diluted earnings per share and net cash provided by operating activities, or other financial measures prepared in accordance with GAAP. Reconciliation to the GAAP equivalent of this non-GAAP measure is contained in tabular form in Exhibit 99.1. Item 9.01 Financial Statement and Exhibits. (d) Exhibit 99.1 Letter to Shareholders dated: January 19, 2021 EXHIBIT INDEX Exhibit No. Description of Exhibit 99.1* Letter to Shareholders dated: January 19, 2021 * This exhibit is intended to be furnished and shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934. The Letter to Shareholders will be attached as Exhibit 99.1. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. NETFLIX, INC. Date: January 19, 2021 /s/ Spencer Neumann Spencer Neumann Chief Financial Officer Exhibit 99.1 January 19, 2021 Fellow shareholders, 2020 was an incredibly difficult year with extraordinary loss for so many families, new restrictions that none of us have ever had to live with before and great uncertainty. We’re enormously grateful that in these uniquely challenging times we’ve been able to provide our members around the world with a source of escape, connection and joy while continuing to build our business. With 8.5m paid net additions in Q4, we crossed the 200m paid memberships mark. For the full year, we added a record 37m paid memberships, achieved $25 billion in annual revenue (+24% year over year) and grew operating profit 76% to $4.6 billion. Our summary results and forecast are below. (in millions except per share data) Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Forecast Revenue $ 5,467 $ 5,768 $ 6,148 $ 6,436 $ 6,644 $ 7,129 Y/Y % Growth 30.6 % 27.6 % 24.9 % 22.7 % 21.5 % 23.6 % Operating Income $ 459 $ 958 $ 1,358 $ 1,315 $ 954 $ 1,780 Operating Margin 8.4 % 16.6 % 22.1 % 20.4 % 14.4 % 25.0 % Net Income $ 587 $ 709 $ 720 $ 790 $ 542 $ 1,355 Diluted EPS $ 1.30 $ 1.57 $ 1.59 $ 1.74 $ 1.19 $ 2.97 Global Streaming Paid Memberships 167.09 182.86 192.95 195.15 203.66 209.66 Y/Y % Growth 20.0 % 22.8 % 27.3 % 23.3 % 21.9 % 14.7 % Global Streaming Paid Net Additions 8.76 15.77 10.09 2.20 8.51 6.00 Net cash provided by (used in) operating activities $ (1,462) $ 260 $ 1,041 $ 1,264 $ (138) Free Cash Flow* $ (1,670) $ 162 $ 899 $ 1,145 $ (284) Shares (FD) 451.4 452.5 453.9 455.1 455.3 Note: Figures are consolidated, including DVD. * Free cash flow represents Net Cash provided by (used in) operating activities less purchases of property and equipment and change in other assets. 1 Q4 Results and Q1 Forecast Average paid streaming memberships increased 23% year over year in Q4, while average revenue per membership1 was flat year over year both on a reported and foreign exchange (F/X) neutral basis. Revenue was 1% higher than our guidance forecast, as paid net adds exceeded our 6.0m projection by 2.5m. Operating margin of 14.4% (a 600bps increase from Q4’19) also came in above our guidance, due to higher- than-expected revenue. EPS of $1.19 vs. $1.30 a year ago included a $258m non-cash unrealized loss from F/X remeasurement on our Euro denominated debt. For the full year, our 37m paid net additions represented a 31% increase from 2019’s 28m paid net adds. We’re becoming an increasingly global service with 83% of our paid net adds in 2020 coming from outside the UCAN region. Our EMEA region accounted for 41% of our full year paid net adds, while APAC was the second largest contributor to paid net additions with 9.3m (up 65% year over year). As a reminder, the quarterly guidance we provide is our actual internal forecast at the time we report and we strive for accuracy. For Q1’21, we expect paid net adds of 6.0m vs. last Q1’s 15.8m, which included the impact from the initial COVID-19 lockdowns. Since the start of 2018, our paid memberships have risen from 111m to 204m and our average revenue per membership has grown from $9.88 to $11.02, despite significant F/X headwinds. This approach has allowed us to organically increase revenue by $4-$5 billion annually over the past several years. We’ve made good progress growing our profitability with FY20 operating margin of 18% rising five percentage points over prior year. For FY21, we’re now targeting a 20% operating margin, up two percentage points from 2020 and higher than our previous 19% forecast, due to a more favorable revenue outlook. As we said last quarter, we intend to continue to grow our operating margin each year at an average rate of three percentage points per year over any few-year period, but we anticipate some lumpiness. Some years we’ll be a little over (like in 2020), some years a little under (like in 2021), but we ___________________________________ 1 Average revenue per membership (ARM) is defined as streaming revenue divided by the average number of streaming paid memberships divided by the number of months in the period; it was previously referred to as streaming ARPU. These figures do not include sales taxes or VAT. 2 are trying to keep on an average three percentage points per year long-term trajectory. Content The big growth in streaming entertainment has led legacy competitors like Disney, WarnerMedia and Discovery to compete with us in new ways, which we’ve been expecting for many years. This is, in part, why we have been moving so quickly to grow and further strengthen our original content library across a wide range of genres and nations. Our fourth quarter slate highlights the breadth and diversity of our entertainment offering. In scripted English language television, season four of the critically acclaimed The Crown was the biggest season so far and drove new watchers of prior seasons. In its first 28 days, more member households chose to watch season four of The Crown than each of the prior seasons, helping to grow the number of member households that have chosen to watch this series to over 100m since its initial launch.