Option Grant and Exercise Terms
Table of Contents
adversely impacted. Payment terms for certain content commitments, such as content we directly produce, will typically require more up-front cash payments
than other content licenses or arrangements whereby we do not cashflow the production of such content. To the extent membership and/or revenue growth do
not meet our expectations, our liquidity and results of operations could be adversely affected as a result of content commitments and accelerated payment
requirements of certain agreements. In addition, the long-term and fixed cost nature of our content commitments may limit our flexibility in planning for, or
reacting to changes in our business and the market segments in which we operate. If we license and/or produce content that is not favorably received by
consumers in a territory, or is unable to be shown in a territory, acquisition and retention may be adversely impacted and given the long-term and fixed cost
nature of our content commitments, we may not be able to adjust our content offering quickly and our results of operation may be adversely impacted.
We may seek additional capital that may result in stockholder dilution or that may have rights senior to those of our common stockholders.
From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt securities. For several years prior to 2020, our
cash flows from operations were negative and to the extent that it becomes negative in the future we may need to seek additional capital. The decision to obtain
additional capital will depend on, among other things, our business plans, operating performance and condition of the capital markets. Any disruption in the
capital markets could make it more difficult and expensive for us to raise additional capital or refinance our existing indebtedness. If we raise additional funds
through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common
stock, and our stockholders may experience dilution. Any large equity or equity-linked offering could also negatively impact our stock price.
We have a substantial amount of indebtedness and other obligations, including streaming content obligations, which could adversely affect our financial
position.
We have a substantial amount of indebtedness and other obligations, including streaming content obligations. Moreover, we may incur additional
indebtedness in the future and incur other obligations, including additional streaming content obligations. If the financial markets become difficult or costly to
access, our ability to raise additional capital may be negatively impacted. As of December 31, 2021, we had the equivalent of $15.5 billion aggregate principal
amount of senior notes outstanding ("Notes"), some of which is denominated in currencies other than the U.S. dollar. In addition, we have entered into a
revolving credit agreement that provides for a $1 billion unsecured revolving credit facility. As of December 31, 2021, we have not borrowed any amount
under this revolving credit facility. As of December 31, 2021, we had approximately $7.4 billion of total content liabilities as reflected on our consolidated
balance sheet, some of which is denominated in currencies other than the U.S. dollar. Such amount does not include streaming content commitments that do not
meet the criteria for liability recognition, the amounts of which are significant. For more information on our streaming content obligations, including those not
on our consolidated balance sheet, see Note 7, Commitments and Contingencies in the accompanying notes to our consolidated financial statements included in
Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Our substantial indebtedness and other obligations,
including streaming content obligations, may:
⚫make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our Notes and our other
obligations;
⚫limit our ability to borrow additional funds, if needed, for working capital, capital expenditures, acquisitions or other general business purposes;
⚫increase our cost of borrowing;
⚫limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business
purposes;
•require us to use a substantial portion of our cash flow from operations to make debt service payments and pay our other obligations when due;
⚫limit our flexibility to plan for, or react to, changes in our business and industry;
•place us at a competitive disadvantage compared to our less leveraged competitors; and
⚫increase our vulnerability to the impact of adverse economic and industry conditions, including changes in interest rates and foreign exchange rates.
Our streaming obligations include large multi-year commitments. As a result, we may be unable to react to any downturn in the economy or reduction in
our cash flows from operations by reducing our streaming content obligations in the near-term. This could result in our needing to access the capital markets at
an unfavorable time, which may negatively impact our stock price.
12View entire presentation