Lesson Plan: Statement of Cash Flows

Statement of Cash Flows

LEVEL: INTRODUCTORY | GRADES: 9-12 | LENGTH: 45 MINUTES
Lesson Overview

This lesson focuses on reading and interpreting the statement of cash flows. Students will learn the
definition of a statement of cash flows (and its component parts). Students will learn to read and
decode an actual statement of cash flows from a 10-K filing. Finally, students will use statements of
cash flows to assess the health of individual companies.

Background Knowledge for Teachers

The statement of cash flows shows a firm’s cash position over a stretch of time, basically how much
cash went into and out of a company during that time period. It is necessary to have a statement of
cash flows because of the “accrual accounting” rule when generating these financial statements.
Transactions are recorded when the economic substance of a transaction occurs, not when cash
changes hands. For instance, revenues are recorded when earned, not when the company is paid.
Knowing current period cash flows is helpful in assessing a company’s liquidity and financing needs.

INSIDE THE COMPETITION

1. Use the Statement of Cash Flows to tell a company’s cash position.
2. Combine all three financial statements to choose an investment.

MATERIALS
Provided: Apple Inc. Q2 2020 Statement of Cash Flows (page 7), Netflix Q1 2020 Financial Statements
(page 8-11)
Not Provided: Projector, screen, whiteboard, sharpies

STUDENT VOICES
Wharton hosts the Girls Who Invest program each summer, exposing young women to portfolio
management and the asset management industry. Student Rachel S., for one, was excited to learn about
income statements and the statement of cash flows. Read about her and other GWI scholars’ finance
takeaways in this article.

Learning Objectives

At the end of this lesson, students will be able to:

Define an income statement and its component parts

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 Calculate and differentiate net income and gross income
Use statement of cash flows to assess the well-being of individual companies

Glossary Terms

Watch how Wharton faculty define and use the glossary terms presented to this lesson:

Accounts Receivable
Creditors
Depreciation
Dividend
Income Statement
Inventory
Supplier

ADDITIONAL GLOSSARY TERMS DEFINED IN THE LESSON PLAN

• Accrual-basis Accounting: Transactions are recorded when the economic substance of a

transaction occurs, not when cash changes hands.
• Cash Flow from Operations (CFO): This shows cash flows for activities that are related to the
production and sale of goods and services that enter into the determination of the firm’s
income.
• Cash Flow Statement: A financial statement that shows sources and uses of cash over a period
of time.
• Cash Inflow: This is the money going into a business, for example, cash collected from
customers.
• Cash Outflow: The money leaving a business, for example, cash paid out to suppliers.

Lesson Plan

Engage | 5 min

REVIEW THE OTHER TWO FINANCIAL STATEMENTS

Start the lesson by asking two students to define the income statement and the balance sheet.

An income statement (or statement of operations) shows a company’s revenues and expenses over a
specific period of time. The income statement tells an investor how much money a company has
earned in sales and how much money the company has spent in order to make those sales (i.e. cost of
goods sold, cost of operation). The balance sheet gives investors an idea of what a company owns (i.e.
assets) and what a company owes (i.e. liabilities). The value of a company, its equity, is equal to total
assets minus total liabilities. By looking at a firm’s balance sheets over time, investors can see growth
(or loss) in equity.

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 Definition | 5 min

STATEMENT OF CASH FLOWS

The statement of cash flows shows how much cash a company had on hand at the beginning of the
year (or quarter), how much it has on hand at the end of the year, and what happened in between. In
other words, the statement of cash flows will reflect the difference in cash assets on two consecutive
balance sheets.

Ask students: Why do companies keep a separate statement of cash flows since they already have the
income statement?

Watch this short video together featuring Wharton's Dr. Burcu Esmer (1:14)

Students may be confused about why some companies do not pay cash when buying goods, thus
businesses use accrual accounting. The video provides a story on the income side that we can also
explain from the expense side. Explain to students that in the business world, it is not as easy as “buy
things with cash that is on-hand.” Sometimes companies might not have enough cash in their accounts
but need the money to purchase more supplies to operate. They can pay back their suppliers when
money is paid by their customers. Therefore, on an income statement, companies record money about
to be paid to suppliers as expense, but on the statement of cash flows, the cash amount does not
change as the company has not paid their suppliers yet.

Definitions & Discussion | 10 min

ITEMS ON THE STATEMENT OF CASH FLOWS

On the cash flow statement, the sources and uses of cash are classified into three categories:

1. CASH FLOW FROM OPERATING ACTIVITIES (CFO)

Cash flow from operations shows cash flows for activities that are related to the production and
sale of goods and services that enter into the determination of the firm’s income.

Ask students a quick question: Which financial statement do these transactions appear on?
Answer: Income Statement

Cash inflows are cash collected from customers, cash outflows are cash paid to suppliers and
wages paid to employees.

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 2. CASH FLOW FROM INVESTING ACTIVITIES

These are activities including purchases or sales of investments, long-lived tangible or intangible
assets and other investment assets (e.g., buying ownership in other firms).

For example, if you want to expand your cupcake business to open a new store, the money you
spend purchasing that new store is cash outflow from investing activities.

3. CASH FLOW FROM FINANCING ACTIVITIES

These relate to payments received from/made to a firm’s owners (issue/repurchase of equity)

or its creditors (issue/repurchase of debt).

For example, if you borrow additional money for your business, this is cash inflow from
financing activities, and if you pay down your debt, this is cash outflow from financing activities.

Ask students: If a company issues stocks, which category does that money go to? As cash inflow
or outflow? What about dividends? Which category, as cash inflow or outflow?

Practice | 10 min

APPLE INC. Q2 2020 STATEMENT OF CASH FLOWS

Now let’s use Apple Inc.’s Q2 2020 Statement of Cash Flows as an example. Ask students to work with
their neighbor. Give students 5 minutes to look through the document and try to find answers to the
following questions:

1. What are Apple’s beginning cash balances? What are the end cash balances? Did cash increase
or decrease?
2. How do you start calculating cash flow from operating activities? Which number do you put in?
3. Why are there adjustments made to reconcile net income to cash?
4. Compare the beginning and ending cash balances with those from the previous quarter. What
happened? Which item might lead to this result?

After students finish, you can discuss together to answer the questions above.

1. What are Apple’s beginning cash balances? What are the end cash balances? Did cash
increase or decrease?
Answer: The beginning balance is $50,224 million and the ending balance is $43,049 million.
The cash decreased in this quarter.
2. How do you start calculating cash flow from operating activities? Which number do you put
in?

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 Answer: Start with net income
3. Why are there adjustments made to reconcile net income to cash?
Answer: Because companies use “accrual accounting” to generate financial statements. When
Apple makes purchases for inventory or when Apple’s customers purchase its products or
services, cash is not necessarily involved. Therefore, adjustments are needed to reflect Apple’s
actual cash position. Look at the examples of accounts receivable and accounts payable here.
Note: numbers in parentheses reflect negative numbers.
4. Compare the beginning and ending cash balances with those from the previous quarter. What
happened? Which item might lead to this result?
Answer: The beginning balance in this quarter is much bigger than that of the previous quarter,
but the ending balance shows only a small increase. The biggest change happened in the
investing activities- to be specific, purchase of marketable securities and proceeds from
maturities of marketable securities.

Marketable securities are assets that can be liquidated to cash quickly. Stocks are a good example of
marketable securities. Apple spent a lot of cash on investing in these. Proceeds from maturities of
marketable securities simply mean the money Apple gets from selling those marketable securities
when they reach the end of its term and can be sold.

5. Does a positive cash flow mean that a company is profitable?

Answer: No. For example, some companies need to sell off their equipment or factory because
they have low product demand. The company’s cash flow will see an increase from the sale, but
that company is losing money on the operating profit front.

So, when the statement of cash flows does not tell a full story about whether the company is profitable
or not, the best practice is to look at all three financial statements together. Each statement provides a
piece of the puzzle to help investors choose a sound investment. Financial documents give investors
key evidence (or information) about the health and future prospects of an individual company. In
combination, the income statement, balance sheet and cash flows provide a comprehensive picture of
a company’s day-to-day financial health.

Group Research & Presentation | 13 min

NETFLIX Q1 2020 FINANCIAL STATEMENTS

Break students into groups of three. In this activity, students will take on the role of financial analysts.
Each group will analyze Netflix’s Q1 2020 financial statements and prepare a 1-minute investment brief
with evidence: Is Netflix a good investment?

SOME GUIDING QUESTIONS:

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 Netflix’s financial statements show both previous years and previous quarters. Are things
getting better or worse for Netflix?
What are some key numbers your group should consider?
Give groups 10 minutes to analyze and select 3-4 groups to present.

Takeaways | 2 min

1. The statement of cash flows shows the firm’s cash position over a period of time, basically how
much cash went into and out of a company during that time period.
2. The necessity of having a statement of cash flows lies in the “accrual accounting” rule when
generating these financial statements. Transactions are recorded when the economic substance
of the transaction occurs, not when cash changes hands.

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Netflix, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months
Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended Ended
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2020

Revenues $3,700,856 $3,907,270 $3,999,374 $4,186,841 $15,794,341 $4,520,992 $4,923,116 $5,244,905 $5,467,434 $20,156,447 $5,767,691
Cost of revenues 2,300,579 2,402,431 2,531,128 2,733,400 9,967,538 2,870,614 3,005,657 3,097,919 3,466,023 12,440,213 3,599,701
Marketing 536,777 592,007 510,330 730,355 2,369,469 616,578 603,150 553,797 878,937 2,652,462 503,830
Technology and development 282,310 299,095 308,620 331,789 1,221,814 372,764 383,233 379,776 409,376 1,545,149 453,817
General and administrative 134,612 151,524 168,628 175,530 630,294 201,952 224,657 233,174 254,586 914,369 252,087
Operating income 446,578 462,213 480,668 215,767 1,605,226 459,084 706,419 980,239 458,512 2,604,254 958,256
Other income (expense):
Interest expense (81,219) (101,605) (108,862) (128,807) (420,493) (135,529) (152,033) (160,660) (177,801) (626,023) (184,083)
Interest and other income (expense) (65,743) 68,028 7,004 32,436 41,725 76,104 (53,470) 192,744 (131,378) 84,000 21,697
Income before income taxes 299,616 428,636 378,810 119,396 1,226,458 399,659 500,916 1,012,323 149,333 2,062,231 795,870
Provision for (benefit from) income taxes 9,492 44,287 (24,025) (14,538) 15,216 55,607 230,266 347,079 (437,637) 195,315 86,803
Net income $290,124 $ 384,349 $ 402,835 $ 133,934 $1,211,242 $344,052 $ 270,650 $ 665,244 $ 586,970 $1,866,916 $ 709,067
Earnings per share:
Basic $ .67 $ .88 $ .92 $ .31 $ 2.78 $ .79 $ .62 $ 1.52 $ 1.34 $ 4.26 $ 1.61
Diluted $ .64 $ .85 $ .89 $ .30 $ 2.68 $ .76 $ .60 $ 1.47 $ 1.30 $ 4.13 $ 1.57
Weighted-average common shares outstanding:
Basic 434,174 435,097 435,809 436,385 435,374 436,947 437,587 438,090 438,547 437,799 439,352
Diluted 450,359 451,552 451,919 451,116 451,244 451,922 452,195 451,552 451,367 451,765 452,494
Lesson Plan: Statement of Cash Flows

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 Netflix, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands)

March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31,
2018 2018 2018 2018 2019 2019 2019 2019 2020
Assets
Current assets:
Cash and cash equivalents $2,593,666 $3,906,357 $3,067,534 $ 3,794,483 $3,348,557 $5,004,247 $4,435,018 $ 5,018,437 $5,151,884
Current content assets, net 4,626,522 4,803,663 4,987,916 5,151,186 - - - - -
Other current assets 597,388 636,869 674,531 748,466 820,350 872,910 892,740 1,160,067 1,295,897
Total current assets 7,817,576 9,346,889 8,729,981 9,694,135 4,168,907 5,877,157 5,327,758 6,178,504 6,447,781
Non-current content assets, net 11,300,469 12,279,519 13,397,672 14,951,141 20,878,317 21,937,845 23,227,772 24,504,567 25,266,889
Property and equipment, net 341,932 349,646 371,152 418,281 434,372 452,399 481,992 565,221 650,455
Other non-current assets 692,820 687,483 867,424 910,843 1,737,036 1,903,938 1,904,189 2,727,420 2,694,785
Total assets $20,152,797 $22,663,537 $23,366,229 $25,974,400 $27,218,632 $ 30,171,339 $ 30,941,711 $33,975,712 $ 35,059,910
Liabilities and Stockholders' Equity
Current liabilities:
Current content liabilities $4,459,391 $4,537,578 $4,609,055 $4,681,562 $4,858,899 $ 4,846,525 $ 4,857,520 $4,413,561 $4,761,585
Accounts payable 436,183 448,219 441,427 562,985 439,496 442,194 444,129 674,347 545,488
Accrued expenses and other liabilities 436,121 396,104 531,035 481,874 750,720 752,488 1,040,745 843,043 1,061,090
Deferred revenue 673,892 697,740 716,723 760,899 808,692 892,777 915,506 924,745 986,753
Short-term debt - - - - - - - - 498,809
Total current liabilities 6,005,587 6,079,641 6,298,240 6,487,320 6,857,807 6,933,984 7,257,900 6,855,696 7,853,725
Non-current content liabilities 3,444,476 3,604,158 3,593,823 3,759,026 3,560,364 3,564,440 3,419,552 3,334,323 3,206,051
Long-term debt 6,542,373 8,342,067 8,336,586 10,360,058 10,305,023 12,594,135 12,425,746 14,759,260 14,170,692
Other non-current liabilities 139,631 141,071 127,927 129,231 792,380 973,232 977,008 1,444,276 1,420,148
Total liabilities 16,132,067 18,166,937 18,356,576 20,735,635 21,515,574 24,065,791 24,080,206 26,393,555 26,650,616
Stockholders' equity:
Common stock 1,995,225 2,103,437 2,215,736 2,315,988 2,439,773 2,566,365 2,677,972 2,793,929 2,935,532
Accumulated other comprehensive income (loss) 4,264 (12,427) (14,508) (19,582) (25,600) (20,352) (41,246) (23,521) (47,054)
Retained earnings 2,021,241 2,405,590 2,808,425 2,942,359 3,288,885 3,559,535 4,224,779 4,811,749 5,520,816
Total stockholders' equity 4,020,730 4,496,600 5,009,653 5,238,765 5,703,058 6,105,548 6,861,505 7,582,157 8,409,294
Total liabilities and stockholders' equity $20,152,797 $22,663,537 $23,366,229 $25,974,400 $27,218,632 $ 30,171,339 $ 30,941,711 $33,975,712 $ 35,059,910

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 Netflix, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended Three Months Ended
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2020
Cash flows from operating activities:
Net income $ 290,124 $ 384,349 $ 402,835 $ 133,934 $ 1,211,242 $ 344,052 $ 270,650 $ 665,244 $ 586,970 $ 1,866,916 $ 709,067
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Additions to content assets (2,986,747) (3,033,721) (3,238,717) (3,784,252) (13,043,437) (2,997,746) (3,325,103) (3,648,292) (3,945,542) (13,916,683) (3,294,275)
Change in content liabilities 378,885 288,474 65,868 266,653 999,880 (14,698) (12,414) (95,548) (571,351) (694,011) 258,945
Amortization of content assets 1,748,844 1,817,817 1,911,767 2,053,660 7,532,088 2,124,686 2,231,915 2,279,977 2,579,669 9,216,247 2,483,385
Depreciation and amortization of property, equipment and intangibles 19,041 19,736 21,161 23,219 83,157 23,561 25,496 26,704 27,818 103,579 28,517
Stock-based compensation expense 68,395 81,232 82,316 88,714 320,657 101,200 103,848 100,262 100,066 405,376 97,019
Other non-cash items 19,343 25,075 18,921 18,301 81,640 45,708 60,695 57,934 63,893 228,230 65,448
Foreign currency remeasurement loss (gain) on debt 41,080 (85,410) (7,670) (21,953) (73,953) (57,600) 61,284 (171,360) 122,100 (45,576) (93,060)
Deferred taxes (22,049) (9,539) (39,453) (14,479) (85,520) 6,627 35,519 52,105 (188,694) (94,443) 46,619
Changes in operating assets and liabilities:
Other current assets (55,905) (25,564) (30,364) (88,359) (200,192) (32,076) (24,231) 145 (195,951) (252,113) (127,353)
Accounts payable 74,083 7,733 (4,449) 121,831 199,198 (124,467) (2,674) (7,643) 230,847 96,063 (149,153)
Accrued expenses and other liabilities 119,049 (52,851) 134,000 (49,776) 150,422 157,647 (26,705) 260,872 (234,036) 157,778 214,191
Deferred revenue 55,270 23,848 18,983 44,176 142,277 47,793 84,085 22,729 9,239 163,846 62,008
Other non-current assets and liabilities 13,830 40,582 (25,609) (26,741) 2,062 (4,486) (26,119) (44,923) (47,003) (122,531) (41,446)
Net cash provided by (used in) operating activities (236,757) (518,239) (690,411) (1,235,072) (2,680,479) (379,799) (543,754) (501,794) (1,461,975) (2,887,322) 259,912
Cash flows from investing activities:
Purchases of property and equipment (37,170) (27,323) (39,333) (70,120) (173,946) (60,381) (39,584) (45,333) (107,737) (253,035) (98,015)
Change in other assets (12,582) (12,993) (129,361) (10,238) (165,174) (19,722) (10,452) (4,021) (99,834) (134,029) (288)
Net cash used in investing activities (49,752) (40,316) (168,694) (80,358) (339,120) (80,103) (50,036) (49,354) (207,571) (387,064) (98,303)
Cash flows from financing activities:
Proceeds from issuance of debt - 1,900,000 - 2,061,852 3,961,852 - 2,243,196 - 2,226,110 4,469,306 -
Issuance costs - (16,992) - (18,879) (35,871) - (18,192) - (17,942) (36,134) -
Proceeds from issuance of common stock 56,335 26,936 29,781 11,450 124,502 22,972 21,896 11,989 15,633 72,490 43,694
Other financing activities (321) (532) (544) (559) (1,956) - - - - - -
Net cash provided by financing activities 56,014 1,909,412 29,237 2,053,864 4,048,527 22,972 2,246,900 11,989 2,223,801 4,505,662 43,694

Effect of exchange rate changes on cash, cash equivalents, and restricted cash 7,177 (36,340) (5,562) (4,957) (39,682) (5,014) 4,998 (29,325) 29,810 469 (70,902)
Net increase (decrease) in cash, cash equivalents, and restricted cash (223,318) 1,314,517 (835,430) 733,477 989,246 (441,944) 1,658,108 (568,484) 584,065 1,231,745 134,401
Cash, cash equivalents, and restricted cash beginning of period 2,822,795 2,599,477 3,913,994 3,078,564 2,822,795 3,812,041 3,370,097 5,028,205 4,459,721 3,812,041 5,043,786
Cash, cash equivalents, and restricted cash end of period $ 2,599,477 $ 3,913,994 $ 3,078,564 $ 3,812,041 $ 3,812,041 $ 3,370,097 $ 5,028,205 $ 4,459,721 $ 5,043,786 $ 5,043,786 $ 5,178,187

Non-GAAP free cash flow reconciliation:

Net cash provided by (used in) operating activities $ (236,757) $ (518,239) $ (690,411) $ (1,235,072) $ (2,680,479) $ (379,799) $ (543,754) $ (501,794) $ (1,461,975) $ (2,887,322) $ 259,912
Net cash used in investing activities (49,752) (40,316) (168,694) (80,358) (339,120) (80,103) (50,036) (49,354) (207,571) (387,064) (98,303)
Non-GAAP free cash flow $ (286,509) $ (558,555) $ (859,105) $ (1,315,430) $ (3,019,599) $ (459,902) $ (593,790) $ (551,148) $ (1,669,546) $ (3,274,386) $ 161,609

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 Netflix, Inc.
Streaming Revenue and Membership Information by Region
(unaudited)
(in thousands, except for average monthly revenue per paying membership and percentages)
As of / Three
As of / Three Months Ended As of / Year Ended As of / Three Months Ended As of / Year Ended Months Ended
March 31, June 30, September 30, December 31, December 31, March 31, June 30, September 30, December 31, December 31, March 31,
2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2020

United States and Canada (UCAN)

Revenues (1) $ 1,976,157 $ 2,049,546 $ 2,094,850 $ 2,160,979 $ 8,281,532 $ 2,256,851 $ 2,501,199 $ 2,621,250 $ 2,671,908 $ 10,051,208 $ 2,702,776
Paid net membership additions (losses) 2,487 961 1,140 1,747 6,335 1,876 (132) 613 548 2,905 2,307
Paid memberships at end of period 60,909 61,870 63,010 64,757 64,757 66,633 66,501 67,114 67,662 67,662 69,969
Average paying memberships 59,666 61,390 62,440 63,884 61,845 65,695 66,567 66,808 67,388 66,615 68,816
Average monthly revenue per paying membership $11.04 $11.13 $11.18 $11.28 $11.16 $11.45 $12.52 $13.08 $13.22 $12.57 $13.09
% change as compared to prior-year period 12% 13% 13% 10% 12% 4% 12% 17% 17% 13% 14%
Constant currency % change as compared to prior-year period* 12% 13% 13% 10% 12% 4% 13% 17% 17% 13% 14%

Europe, Middle East and Africa (EMEA)

Revenues $ 886,649 $ 975,497 $ 1,004,749 $ 1,096,812 $ 3,963,707 $ 1,233,379 $ 1,319,087 $ 1,428,040 $ 1,562,561 $ 5,543,067 $ 1,723,474
Paid net membership additions 3,335 1,978 2,519 3,982 11,814 4,724 1,687 3,126 4,423 13,960 6,956
Paid memberships at end of period 29,339 31,317 33,836 37,818 37,818 42,542 44,229 47,355 51,778 51,778 58,734
Average paying memberships 27,672 30,328 32,577 35,827 31,601 40,180 43,386 45,792 49,567 44,731 55,256
Average monthly revenue per paying membership $10.68 $10.72 $10.28 $10.20 $10.45 $10.23 $10.13 $10.40 $10.51 $10.33 $10.40
% change as compared to prior-year period 25% 23% 11% 3% 14% -4% -6% 1% 3% -1% 2%
Constant currency % change as compared to prior-year period* 11% 11% 10% 6% 9% 2% 3% 6% 7% 4% 4%

Latin America (LATAM)

Revenues $ 540,182 $ 568,071 $ 562,307 $ 567,137 $ 2,237,697 $ 630,472 $ 677,136 $ 741,434 $ 746,392 $ 2,795,434 $ 793,453
Paid net membership additions 1,543 1,535 1,320 1,962 6,360 1,470 343 1,490 2,037 5,340 2,901
Paid memberships at end of period 21,260 22,795 24,115 26,077 26,077 27,547 27,890 29,380 31,417 31,417 34,318
Average paying memberships 20,489 22,028 23,455 25,096 22,767 26,812 27,719 28,635 30,399 28,391 32,868
Average monthly revenue per paying membership $8.79 $8.60 $7.99 $7.53 $8.19 $7.84 $8.14 $8.63 $8.18 $8.21 $8.05
% change as compared to prior-year period 18% 10% -3% -13% 1% -11% -5% 8% 9% 0% 3%
Constant currency % change as compared to prior-year period* 18% 18% 14% 6% 13% 7% 12% 17% 18% 13% 12%

Asia-Pacific (APAC)
Revenues $ 199,117 $ 221,252 $ 248,691 $ 276,756 $ 945,816 $ 319,602 $ 349,494 $ 382,304 $ 418,121 $ 1,469,521 $ 483,660
Paid net membership additions 893 978 1,089 1,146 4,106 1,534 801 1,543 1,748 5,626 3,602
Paid memberships at end of period 7,394 8,372 9,461 10,607 10,607 12,141 12,942 14,485 16,233 16,233 19,835
Average paying memberships 6,948 7,883 8,917 10,034 8,446 11,374 12,542 13,714 15,359 13,247 18,034
Average monthly revenue per paying membership $9.55 $9.36 $9.30 $9.19 $9.33 $9.37 $9.29 $9.29 $9.07 $9.24 $8.94
% change as compared to prior-year period 8% 6% 3% -4% 2% -2% -1% 0% -1% -1% -5%
Constant currency % change as compared to prior-year period* 4% 3% 5% 2% 3% 3% 5% 3% 0% 3% -3%

(1) Excludes DVD revenues of $366 million, $297 million and $64 million for the years ended December 31, 2018 and 2019, and the three months ended March 31, 2020, respectively. Total US revenues for the years ended December 31, 2018 and 2019, and the three
$2.5 billion, respectively.
* The company believes that constant currency information is useful in analyzing the underlying trends in average monthly revenue per paying membership. In order to exclude the effect of foreign currency rate fluctuations on average monthly revenue per paying membership, the Company estimates
assuming foreign exchange rates had remained constant with foreign exchange rates from each of the corresponding months of the prior-year period.

Statement of Cash Flows | 11

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