Microsoft Excel LibreOffice Calc

Netflix Inc. (NFLX)


Analysis of Operating Leases

High level of difficulty


Present Value of Future Operating Lease Payments (before Adoption of FASB Topic 842)

Netflix Inc., future operating lease payments (before adoption of FASB Topic 842)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total undiscounted future operating lease payments 1,708,368  737,378  640,840  529,744  211,133 
Discount rate1 5.11% 4.80% 5.30% 5.64% 5.54%
 
Total present value of future operating lease payments 1,277,439  599,664  489,272  393,865  167,294 

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

1 Weighted-average interest rate for Netflix Inc.’s debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.11%
2019 172,470  2019 172,470  164,085 
2020 139,366  2020 139,366  126,145 
2021 145,175  2021 145,175  125,014 
2022 156,527  2022 156,527  128,237 
2023 151,200  2023 151,200  117,851 
2024 and thereafter 943,630  2024 151,200  112,121 
2025 151,200  106,670 
2026 151,200  101,484 
2027 151,200  96,551 
2028 151,200  91,857 
2029 151,200  87,391 
2030 36,430  20,032 
Total: 1,708,368  1,708,368  1,277,439 

Based on: 10-K (filing date: 2019-01-29).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 4.80%
2018 101,987  2018 101,987  97,316 
2019 97,560  2019 97,560  88,828 
2020 96,255  2020 96,255  83,626 
2021 85,188  2021 85,188  70,621 
2022 77,418  2022 77,418  61,240 
2023 and thereafter 278,970  2023 77,418  58,435 
2024 77,418  55,759 
2025 77,418  53,205 
2026 46,716  30,635 
Total: 737,378  737,378  599,664 

Based on: 10-K (filing date: 2018-01-29).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.30%
2017 64,502  2017 64,502  61,255 
2018 76,310  2018 76,310  68,822 
2019 68,456  2019 68,456  58,631 
2020 66,603  2020 66,603  54,173 
2021 57,434  2021 57,434  44,364 
2022 and thereafter 307,535  2022 57,434  42,131 
2023 57,434  40,010 
2024 57,434  37,996 
2025 57,434  36,084 
2026 57,434  34,268 
2027 20,365  11,539 
Total: 640,840  640,840  489,272 

Based on: 10-K (filing date: 2017-01-27).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.64%
2016 42,545  2016 42,545  40,274 
2017 54,811  2017 54,811  49,115 
2018 58,015  2018 58,015  49,210 
2019 53,152  2019 53,152  42,678 
2020 51,844  2020 51,844  39,405 
2021 and thereafter 269,377  2021 51,844  37,302 
2022 51,844  35,310 
2023 51,844  33,425 
2024 51,844  31,640 
2025 51,844  29,951 
2026 10,157  5,555 
Total: 529,744  529,744  393,865 

Based on: 10-K (filing date: 2016-01-28).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 5.54%
2015 35,501  2015 35,501  33,637 
2016 37,078  2016 37,078  33,288 
2017 27,697  2017 27,697  23,560 
2018 19,804  2018 19,804  15,962 
2019 14,923  2019 14,923  11,396 
2020 and thereafter 76,130  2020 14,923  10,798 
2021 14,923  10,231 
2022 14,923  9,694 
2023 14,923  9,185 
2024 14,923  8,703 
2025 1,515  837 
Total: 211,133  211,133  167,294 

Based on: 10-K (filing date: 2015-01-29).


Adjustments to Financial Statements for Operating Leases

Netflix Inc., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported) 25,974,400  19,012,742  13,586,610  10,202,871  7,056,651 
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1 1,277,439  599,664  489,272  393,865  167,294 
Total assets (adjusted) 27,251,839  19,612,406  14,075,882  10,596,736  7,223,945 
Adjustment to Total Debt
Total debt (as reported) 10,360,058  6,499,432  3,364,311  2,371,362  900,000 
Add: Operating lease liability (before adoption of FASB Topic 842)2 1,277,439  599,664  489,272  393,865  167,294 
Total debt (adjusted) 11,637,497  7,099,096  3,853,583  2,765,227  1,067,294 

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

1, 2 Equal to total present value of future operating lease payments.


Netflix Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios for Operating Leases (Summary)

Netflix Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover1
Reported total asset turnover 0.61 0.61 0.65 0.66 0.78
Adjusted total asset turnover 0.58 0.60 0.63 0.64 0.76
Debt to Equity2
Reported debt to equity 1.98 1.81 1.26 1.07 0.48
Adjusted debt to equity 2.22 1.98 1.44 1.24 0.57
Return on Assets3 (ROA)
Reported ROA 4.66% 2.94% 1.37% 1.20% 3.78%
Adjusted ROA 4.44% 2.85% 1.33% 1.16% 3.69%

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Netflix Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Netflix Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Netflix Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Revenues 15,794,341  11,692,713  8,830,669  6,779,511  5,504,656 
Total assets 25,974,400  19,012,742  13,586,610  10,202,871  7,056,651 
Activity Ratio
Total asset turnover1 0.61 0.61 0.65 0.66 0.78
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Revenues 15,794,341  11,692,713  8,830,669  6,779,511  5,504,656 
Adjusted total assets 27,251,839  19,612,406  14,075,882  10,596,736  7,223,945 
Activity Ratio
Adjusted total asset turnover2 0.58 0.60 0.63 0.64 0.76

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

2018 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 15,794,341 ÷ 25,974,400 = 0.61

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 15,794,341 ÷ 27,251,839 = 0.58

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Netflix Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Total debt 10,360,058  6,499,432  3,364,311  2,371,362  900,000 
Stockholders’ equity 5,238,765  3,581,956  2,679,800  2,223,426  1,857,708 
Solvency Ratio
Debt to equity1 1.98 1.81 1.26 1.07 0.48
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Adjusted total debt 11,637,497  7,099,096  3,853,583  2,765,227  1,067,294 
Stockholders’ equity 5,238,765  3,581,956  2,679,800  2,223,426  1,857,708 
Solvency Ratio
Adjusted debt to equity2 2.22 1.98 1.44 1.24 0.57

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

2018 Calculations

1 Debt to equity = Total debt ÷ Stockholders’ equity
= 10,360,058 ÷ 5,238,765 = 1.98

2 Adjusted debt to equity = Adjusted total debt ÷ Stockholders’ equity
= 11,637,497 ÷ 5,238,765 = 2.22

Solvency ratio Description The company
Adjusted debt-to-equity A solvency ratio calculated as adjusted total debt divided by total shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in thousands)
Net income 1,211,242  558,929  186,678  122,641  266,799 
Total assets 25,974,400  19,012,742  13,586,610  10,202,871  7,056,651 
Profitability Ratio
ROA1 4.66% 2.94% 1.37% 1.20% 3.78%
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Net income 1,211,242  558,929  186,678  122,641  266,799 
Adjusted total assets 27,251,839  19,612,406  14,075,882  10,596,736  7,223,945 
Profitability Ratio
Adjusted ROA2 4.44% 2.85% 1.33% 1.16% 3.69%

Based on: 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

2018 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 1,211,242 ÷ 25,974,400 = 4.66%

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 1,211,242 ÷ 27,251,839 = 4.44%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Netflix Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.