#1#2Disclosure This presentation is intended to provide additional information to investors on certain accounting matters. This information should be considered in addition to, not as a substitute for or superior to the disclosure contained in our filings with the Securities and Exchange Commission. You should read this discussion in conjunction with the condensed consolidated financial statements and the notes thereto included in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. 2 NETFLIX#3Contents. ● Overview ASC 920: Entertainment - Broadcasters and ASC 926: Entertainment - Films Financial Statements Impact on Cash Flow Frequently Asked Questions 3#4Overview. NETFLIX 4#5#6#7Amortization methodology. The amortization schedule for content is based on historical and estimated viewing patterns and is reviewed quarterly. All titles in our content library are amortized on an accelerated basis. Content assets are amortized over the shorter of the title's window of availability, estimated useful life, or 10 years. On average, over 90% of a licensed or produced streaming content asset is expected to be amortized within four years after its launch. First run topical programming like talk shows are expensed upon airing. 7 NETFLIX#8ASC 920: Entertainment - Broadcasters & ASC 926: Entertainment - Films NETFLIX#9Criteria for ASC 920. ASC 920 specifies that a broadcaster shall account for a license agreement for program material as a purchase of rights Under ASC 920, the following 3 criteria must be met in order for the content we license to qualify for asset recognition: The cost of each title is known or reasonably determinable The title (source file) has been received The title is available for first showing 9 NETFLIX#10We use ASC 926 for produced assets. For content that we produce, we capitalize the costs associated with production, including development cost, direct costs and production overhead. These amounts and licensed content are now included in "Non-current content assets, net" in our balance sheet, in accordance with ASU 2019-2. Licensed content, net Produced content, net Released, less amortization In production In development and pre-production Content assets, net 10 $ As of December 31, 2022 (in thousands) 12,732,549 $ 13,799,221 9,110,518 10,255,940 637,706 20,004,164 2021 32,736,713 6,877,743 9,235,975 1,006,600 17,120,318 $ 30,919,539 NETFLIX#11Financial statements. NETFLIX 11#12#13#14Revenues Cost of revenues Marketing Technology and development General and administrative Operating income Other income (expense): Interest expense Interest and other income (expense) Income before income taxes Provision for income taxes Net income Earnings per share: Basic Diluted Weighted-average common shares outstanding: Basic Diluted Income Statement. $ $ $ $ 2022 31,615,550 $ 19,168,285 2,530,502 2,711,041 1,572,891 5,632,831 Year ended December 31, 2021 29,697,844 17,332,683 2,545,146 2,273,885 1,351,621 6,194,509 (706,212) 337,310 5,263,929 (772,005) 4,491,924 $ $ 10.10 9.95 $ 444,698 451,290 14 (765,620) 411,214 $ 5,840,103 (723,875) 5,116,228 $ $ 11.55 11.24 $ 443,155 455,372 2020 24,996,056 15,276,319 2,228,362 1,829,600 1,076,486 4,585,289 (767,499) (618,441) 3,199,349 (437,954) 2,761,395 6.26 6.08 440,922 454,208 Content amortization included in cost of revenues. It is broken out in the Consolidated Statements of Cash Flows and further details available in the Notes to Consolidated Financial Statements. NETFLIX#15Amortization expense disclosure. Licensed content Produced content (1) Total $ $ 2022 Year ended December 31, 2021 (in thousands) 7,681,978 $ 6,344,154 14,026,132 $ 8,055,811 $ 4,174,556 12,230,367 $ 2020 7,544,631 3,262,281 10,806,912 (1) Tax incentives earned on qualified production spend generally reduce the cost-basis of content assets and result in lower content amortization over the life of the title. For the year ended December 31, 2022, tax incentives resulted in lower content amortization on produced content of approximately $719 million. 15 NETFLIX#16#17Content Obligations. Content obligations include amounts related to the acquisition, licensing and production of content. 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 we enter into an agreement to obtain future titles. These obligations reflect content costs that will be amortized to the income statement in the future once the 3 criteria for ASC 920 are met. ESPN and Fox have similar obligations related to their sports programming commitments. Those that are not reflected on the balance sheet do not yet meet asset recognition criteria (see slide 9) and: Either will never meet asset recognition criteria because cost per title is unknown or, Cost per title is known but titles are not yet available for showing. 17 NETFLIX#18#19Content Obligations. 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 and are not included in content obligations. Traditional film output deals or certain TV series license agreements where the number of seasons to be aired is unknown, are examples of these types of agreements. These unknown obligations are expected to be significant and we believe could include approximately $1 billion to $4 billion over the next three years, with the payments for the vast majority of such amounts expected to occur after the next twelve months. Once we know the title that we will receive and the license fees, we include the amount in the contractual obligations table. 19 NETFLIX#20#21Cash costs for original content are more front end loaded. For produced original content, we often cash flow the production costs during the content creation process prior to completion and release on the Netflix service. This could be years in advance of a release date. This also creates a content asset with a useful life well into the future. For licensed originals, cash payment terms also generally exceed expense in the early years. Payment for second window and catalog licensed content is generally upon delivery and over the window of availability. 21 NETFLIX#22Frequently Asked Questions (FAQ). NETFLIX 22#23FAQ. You have discussed your ratio of cash spending on content to P&L spending on content. What does this refer to? This ratio is our cash spending on content (as derived from our cash flow statement) divided by our content amortization (which flows through our income statement) This ratio is an indicator of the timing differences between cash payment terms on content vs. the content expense recognition Cash payments are more front-loaded, especially for produced content which we must fund during the production process before the content is completed and available for viewing 23 NETFLIX#24FAQ (continued). How do I calculate your cash spending on content? Cash spending on content can be derived from our cash flow statement. The sum of Additions to Content Assets and the Change in Content Liabilities equates to our cash spending on content Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Additions to content assets Change in content liabilities Amortization of content assets $ 2022 Year Ended December 31, 2021 4,491,924 (16,839,038) 179,310 14,026,132 24 $ 5,116,228 $ (17,702,202) 232,898 12,230,367 2020 2,761,395 (11,779,284) (757,433) 10,806,912 ~$16.7 bil. in cash spent on content in FY22 vs. $14.0 bil. in content amortization, resulting in a 1.2x ratio of cash spend on content to content amort. ratio NETFLIX#25#26#27#28