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(in millions except per share data and Streaming Content Obligations) |
Q2 '13 |
Q3 '13 |
Q4 '13 |
Q1 '14 |
Q2 '14 |
Q3 '14 Forecast |
||||||||||||
Total Streaming: |
||||||||||||||||||
Revenue |
$ |
837 |
$ |
884 |
$ |
962 |
$ |
1,066 |
$ |
1,146 |
$ |
1,224 |
||||||
Contribution Profit |
$ |
85 |
$ |
92 |
$ |
117 |
$ |
166 |
$ |
212 |
$ |
203 |
||||||
Contribution Margin |
10.2 |
% |
10.4 |
% |
12.2 |
% |
15.6 |
% |
18.5 |
% |
16.6 |
% |
||||||
Paid Members |
35.63 |
38.01 |
41.43 |
46.14 |
47.99 |
50.89 |
||||||||||||
Total Members |
37.56 |
40.28 |
44.35 |
48.35 |
50.05 |
53.74 |
||||||||||||
Net Additions |
1.24 |
2.73 |
4.07 |
4.00 |
1.69 |
3.69 |
||||||||||||
Domestic Streaming: |
||||||||||||||||||
Revenue |
$ |
671 |
$ |
701 |
$ |
741 |
$ |
799 |
$ |
838 |
$ |
877 |
||||||
Contribution Profit |
$ |
151 |
$ |
166 |
$ |
174 |
$ |
201 |
$ |
227 |
$ |
245 |
||||||
Contribution Margin |
22.5 |
% |
23.7 |
% |
23.4 |
% |
25.2 |
% |
27.1 |
% |
27.9 |
% |
||||||
Paid Members |
28.62 |
29.93 |
31.71 |
34.38 |
35.09 |
36.52 |
||||||||||||
Total Members |
29.81 |
31.09 |
33.42 |
35.67 |
36.24 |
37.58 |
||||||||||||
Net Additions |
0.63 |
1.29 |
2.33 |
2.25 |
0.57 |
1.33 |
||||||||||||
International Streaming: |
||||||||||||||||||
Revenue |
$ |
166 |
$ |
183 |
$ |
221 |
$ |
267 |
$ |
307 |
$ |
347 |
||||||
Contribution Profit (Loss) |
$ |
(66 |
) |
$ |
(74 |
) |
$ |
(57 |
) |
$ |
(35 |
) |
$ |
(15 |
) |
$ |
(42 |
) |
Contribution Margin |
-39.7 |
% |
-40.6 |
% |
-25.9 |
% |
-13.1 |
% |
-5.0 |
% |
-12.1 |
% |
||||||
Paid Members |
7.01 |
8.08 |
9.72 |
11.76 |
12.91 |
14.37 |
||||||||||||
Total Members |
7.75 |
9.19 |
10.93 |
12.68 |
13.80 |
16.16 |
||||||||||||
Net Additions |
0.61 |
1.44 |
1.74 |
1.75 |
1.12 |
2.36 |
||||||||||||
Total (including DVD): |
||||||||||||||||||
Operating Income |
$ |
57 |
$ |
57 |
$ |
82 |
$ |
98 |
$ |
130 |
$ |
103 |
||||||
Net Income |
$ |
29 |
$ |
32 |
$ |
48 |
$ |
53 |
$ |
71 |
$ |
55 |
||||||
EPS |
$ |
0.49 |
$ |
0.52 |
$ |
0.79 |
$ |
0.86 |
$ |
1.15 |
$ |
0.89 |
||||||
Free Cash Flow |
$ |
13 |
$ |
7 |
$ |
5 |
$ |
8 |
$ |
16 |
||||||||
Shares (FD) |
60.6 |
61.0 |
61.3 |
61.5 |
61.6 |
|||||||||||||
Streaming Content Obligations* ($B) |
$ |
6.4 |
$ |
6.5 |
$ |
7.3 |
$ |
7.1 |
$ |
7.7 |
||||||||
*Corresponds to our total known streaming content obligations as defined in our financial statements and related notes in our most recently filed SEC Form 10-K |
1
|
2
|
3
|
In-Store Gift Cards Coming This Fall
We are introducing physical gift cards in select stores in the U.S., Canada, Mexico, and Germany starting later this year. In mature markets, gift cards will extend our brand presence and make it easier to access Netflix. In newer markets, gift cards help build the brand and provide an easier alternative for consumers to join Netflix in markets with developing online payments.
|
4
|
5
|
6
|
Reed Hastings, CEO |
David Wells, CFO |
IR Contact: |
PR Contact: |
Erin Kasenchak
|
Jonathan Friedland
|
Director, Investor Relations
|
Chief Communications Officer
|
408 540-3691
|
310 734-2958 |
7
|
8
|
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2014 |
March 31,
2014
|
June 30,
2013 (1)
|
June 30, 2014 |
June 30, 2013 (1) |
|||||||||||||||
Revenues |
$ |
1,340,407 |
$ |
1,270,089 |
$ |
1,069,372 |
$ |
2,610,496 |
$ |
2,093,333 |
|||||||||
Cost of revenues |
914,848 |
869,186 |
760,674 |
1,784,034 |
1,497,626 |
||||||||||||||
Marketing |
120,763 |
137,098 |
114,611 |
257,861 |
233,697 |
||||||||||||||
Technology and development |
115,182 |
110,310 |
93,126 |
225,492 |
185,101 |
||||||||||||||
General and administrative |
60,014 |
55,900 |
43,844 |
115,914 |
87,970 |
||||||||||||||
Operating income |
129,600 |
97,595 |
57,117 |
227,195 |
88,939 |
||||||||||||||
Other income (expense): |
|||||||||||||||||||
Interest expense |
(13,328 |
) |
(10,052 |
) |
(7,528 |
) |
(23,380 |
) |
(14,268 |
) |
|||||||||
Interest and other income (expense) |
1,100 |
1,401 |
(2,940 |
) |
2,501 |
(1,963 |
) |
||||||||||||
Loss on extinguishment of debt |
— |
— |
— |
— |
(25,129 |
) |
|||||||||||||
Income before income taxes |
117,372 |
88,944 |
46,649 |
206,316 |
47,579 |
||||||||||||||
Provision for income taxes |
46,354 |
35,829 |
17,178 |
82,183 |
15,419 |
||||||||||||||
Net income |
$ |
71,018 |
$ |
53,115 |
$ |
29,471 |
$ |
124,133 |
$ |
32,160 |
|||||||||
Earnings per share: |
|||||||||||||||||||
Basic |
$ |
1.18 |
$ |
0.89 |
$ |
0.51 |
$ |
2.07 |
$ |
0.56 |
|||||||||
Diluted |
$ |
1.15 |
$ |
0.86 |
$ |
0.49 |
$ |
2.02 |
$ |
0.53 |
|||||||||
Weighted-average common shares outstanding: |
|||||||||||||||||||
Basic |
59,996 |
59,817 |
58,192 |
59,907 |
57,089 |
||||||||||||||
Diluted |
61,634 |
61,548 |
60,590 |
61,592 |
60,369 |
9
|
As of |
|||||||
June 30, 2014 |
December 31, 2013 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
1,214,244 |
$ |
604,965 |
|||
Short-term investments |
500,121 |
595,440 |
|||||
Current content library, net |
1,786,341 |
1,706,421 |
|||||
Other current assets |
167,674 |
151,937 |
|||||
Total current assets |
3,668,380 |
3,058,763 |
|||||
Non-current content library, net |
2,348,796 |
2,091,071 |
|||||
Property and equipment, net |
141,715 |
133,605 |
|||||
Other non-current assets |
166,931 |
129,124 |
|||||
Total assets |
$ |
6,325,822 |
$ |
5,412,563 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Current content liabilities |
$ |
1,858,020 |
$ |
1,775,983 |
|||
Accounts payable |
137,226 |
108,435 |
|||||
Accrued expenses |
98,548 |
54,018 |
|||||
Deferred revenue |
241,330 |
215,767 |
|||||
Total current liabilities |
2,335,124 |
2,154,203 |
|||||
Non-current content liabilities |
1,390,770 |
1,345,590 |
|||||
Long-term debt |
900,000 |
500,000 |
|||||
Other non-current liabilities |
90,223 |
79,209 |
|||||
Total liabilities |
4,716,117 |
4,079,002 |
|||||
Stockholders' equity: |
|||||||
Common stock, $0.001 par value; 160,000,000 shares authorized at June 30 2014 and December 31, 2013; 60,091,015 and 59,607,001 issued and outstanding at June 30, 2014 and December 31, 2013, respectively |
60 |
60 |
|||||
Additional paid-in capital |
926,525 |
777,441 |
|||||
Accumulated other comprehensive income |
6,502 |
3,575 |
|||||
Retained earnings |
676,618 |
552,485 |
|||||
Total stockholders' equity |
1,609,705 |
1,333,561 |
|||||
Total liabilities and stockholders' equity |
$ |
6,325,822 |
$ |
5,412,563 |
10
|
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2014 |
March 31,
2014
|
June 30, 2013 |
June 30, 2014 |
June 30, 2013 |
|||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||||
Net income |
$ |
71,018 |
$ |
53,115 |
$ |
29,471 |
$ |
124,133 |
$ |
32,160 |
|||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||||||||
Additions to streaming content library |
(813,314 |
) |
(749,399 |
) |
(593,454 |
) |
(1,562,713 |
) |
(1,185,395 |
) |
|||||||||
Change in streaming content liabilities |
78,359 |
42,244 |
7,284 |
120,603 |
16,984 |
||||||||||||||
Amortization of streaming content library |
639,037 |
600,735 |
510,250 |
1,239,772 |
995,990 |
||||||||||||||
Amortization of DVD content library |
16,923 |
16,121 |
17,709 |
33,044 |
35,946 |
||||||||||||||
Depreciation and amortization of property, equipment and intangibles |
12,977 |
12,382 |
12,026 |
25,359 |
24,077 |
||||||||||||||
Stock-based compensation expense |
29,285 |
25,825 |
17,955 |
55,110 |
35,701 |
||||||||||||||
Excess tax benefits from stock-based compensation |
(14,628 |
) |
(32,732 |
) |
(20,368 |
) |
(47,360 |
) |
(31,983 |
) |
|||||||||
Other non-cash items |
3,251 |
2,196 |
1,188 |
5,447 |
2,938 |
||||||||||||||
Loss on extinguishment of debt |
— |
— |
— |
— |
25,129 |
||||||||||||||
Deferred taxes |
(16,569 |
) |
(13,103 |
) |
(2,040 |
) |
(29,672 |
) |
(8,788 |
) |
|||||||||
Changes in operating assets and liabilities: |
|||||||||||||||||||
Other current assets |
(20,685 |
) |
35,066 |
33,762 |
14,381 |
28,035 |
|||||||||||||
Accounts payable |
(3,086 |
) |
22,812 |
(5,138 |
) |
19,726 |
11,881 |
||||||||||||
Accrued expenses |
59,008 |
(442 |
) |
10,494 |
58,566 |
6,362 |
|||||||||||||
Deferred revenue |
11,315 |
14,248 |
7,693 |
25,563 |
17,099 |
||||||||||||||
Other non-current assets and liabilities |
3,133 |
7,291 |
7,111 |
10,424 |
15,557 |
||||||||||||||
Net cash provided by operating activities |
56,024 |
36,359 |
33,943 |
92,383 |
21,693 |
||||||||||||||
Cash flows from investing activities: |
|||||||||||||||||||
Acquisition of DVD content library |
(20,981 |
) |
(14,914 |
) |
(14,023 |
) |
(35,895 |
) |
(35,216 |
) |
|||||||||
Purchases of property and equipment |
(19,869 |
) |
(13,334 |
) |
(8,088 |
) |
(33,203 |
) |
(20,206 |
) |
|||||||||
Other assets |
1,129 |
295 |
1,087 |
1,424 |
5,137 |
||||||||||||||
Purchases of short-term investments |
(170,908 |
) |
(60,546 |
) |
(146,050 |
) |
(231,454 |
) |
(381,673 |
) |
|||||||||
Proceeds from sale of short-term investments |
89,662 |
143,048 |
33,979 |
232,710 |
115,207 |
||||||||||||||
Proceeds from maturities of short-term investments |
92,014 |
3,090 |
5,410 |
95,104 |
9,830 |
||||||||||||||
Net cash (used in) provided by investing activities |
(28,953 |
) |
57,639 |
(127,685 |
) |
28,686 |
(306,921 |
) |
|||||||||||
Cash flows from financing activities: |
|||||||||||||||||||
Proceeds from issuance of common stock |
14,469 |
32,448 |
28,846 |
46,917 |
67,992 |
||||||||||||||
Proceeds from issuance of debt |
— |
400,000 |
— |
400,000 |
500,000 |
||||||||||||||
Issuance costs |
(353 |
) |
(6,727 |
) |
— |
(7,080 |
) |
(9,414 |
) |
||||||||||
Redemption of debt |
— |
— |
— |
— |
(219,362 |
) |
|||||||||||||
Excess tax benefits from stock-based compensation |
14,628 |
32,732 |
20,368 |
47,360 |
31,983 |
||||||||||||||
Principal payments of lease financing obligations |
(271 |
) |
(267 |
) |
(255 |
) |
(538 |
) |
(658 |
) |
|||||||||
Net cash provided by financing activities |
28,473 |
458,186 |
48,959 |
486,659 |
370,541 |
||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
1,250 |
301 |
(2,590 |
) |
1,551 |
(4,926 |
) |
||||||||||||
Net increase (decrease) in cash and cash equivalents |
56,794 |
552,485 |
(47,373 |
) |
609,279 |
80,387 |
|||||||||||||
Cash and cash equivalents, beginning of period |
1,157,450 |
604,965 |
418,051 |
604,965 |
290,291 |
||||||||||||||
Cash and cash equivalents, end of period |
$ |
1,214,244 |
$ |
1,157,450 |
$ |
370,678 |
$ |
1,214,244 |
$ |
370,678 |
|||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2014 |
March 31, 2014 |
June 30, 2013 |
June 30, 2014 |
June 30, 2013 |
|||||||||||||||
Non-GAAP free cash flow reconciliation: |
|||||||||||||||||||
Net cash provided by operating activities |
$ |
56,024 |
$ |
36,359 |
$ |
33,943 |
$ |
92,383 |
$ |
21,693 |
|||||||||
Acquisition of DVD content library |
(20,981 |
) |
(14,914 |
) |
(14,023 |
) |
(35,895 |
) |
(35,216 |
) |
|||||||||
Purchases of property and equipment |
(19,869 |
) |
(13,334 |
) |
(8,088 |
) |
(33,203 |
) |
(20,206 |
) |
|||||||||
Other assets |
1,129 |
295 |
1,087 |
1,424 |
5,137 |
||||||||||||||
Non-GAAP free cash flow |
$ |
16,303 |
$ |
8,406 |
$ |
12,919 |
$ |
24,709 |
$ |
(28,592 |
) |
11
|
As of / Three Months Ended |
As of/ Six Months Ended |
||||||||||||||||||
June 30, 2014 |
March 31,
2014
|
June 30,
2013 (1)
|
June 30, 2014 |
June 30, 2013 (1) |
|||||||||||||||
Domestic Streaming |
|||||||||||||||||||
Total members at end of period |
36,244 |
35,674 |
29,807 |
36,244 |
29,807 |
||||||||||||||
Paid members at end of period |
35,085 |
34,377 |
28,624 |
35,085 |
28,624 |
||||||||||||||
Revenues |
$ |
838,225 |
$ |
798,617 |
$ |
671,089 |
$ |
1,636,842 |
$ |
1,309,738 |
|||||||||
Cost of revenues |
546,223 |
517,094 |
452,598 |
1,063,317 |
892,932 |
||||||||||||||
Marketing |
64,727 |
80,258 |
67,177 |
144,985 |
134,142 |
||||||||||||||
Contribution profit |
227,275 |
201,265 |
151,314 |
428,540 |
282,664 |
||||||||||||||
International Streaming |
|||||||||||||||||||
Total members at end of period |
13,801 |
12,683 |
7,747 |
13,801 |
7,747 |
||||||||||||||
Paid members at end of period |
12,907 |
11,755 |
7,014 |
12,907 |
7,014 |
||||||||||||||
Revenues |
$ |
307,461 |
$ |
267,118 |
$ |
165,902 |
$ |
574,579 |
$ |
307,921 |
|||||||||
Cost of revenues |
266,697 |
245,267 |
184,400 |
511,964 |
351,292 |
||||||||||||||
Marketing |
56,036 |
56,840 |
47,335 |
112,876 |
99,382 |
||||||||||||||
Contribution profit (loss) |
(15,272 |
) |
(34,989 |
) |
(65,833 |
) |
(50,261 |
) |
(142,753 |
) |
|||||||||
Domestic DVD |
|||||||||||||||||||
Total members at end of period |
6,261 |
6,652 |
7,508 |
6,261 |
7,508 |
||||||||||||||
Paid members at end of period |
6,167 |
6,509 |
7,369 |
6,167 |
7,369 |
||||||||||||||
Revenues |
$ |
194,721 |
$ |
204,354 |
$ |
232,381 |
$ |
399,075 |
$ |
475,674 |
|||||||||
Cost of revenues |
101,928 |
106,825 |
123,676 |
208,753 |
253,402 |
||||||||||||||
Marketing |
— |
— |
99 |
— |
173 |
||||||||||||||
Contribution profit |
92,793 |
97,529 |
108,606 |
190,322 |
222,099 |
||||||||||||||
Consolidated |
|||||||||||||||||||
Revenues |
$ |
1,340,407 |
$ |
1,270,089 |
$ |
1,069,372 |
$ |
2,610,496 |
$ |
2,093,333 |
|||||||||
Cost of revenues |
914,848 |
869,186 |
760,674 |
1,784,034 |
1,497,626 |
||||||||||||||
Marketing |
120,763 |
137,098 |
114,611 |
257,861 |
233,697 |
||||||||||||||
Contribution profit |
304,796 |
263,805 |
194,087 |
568,601 |
362,010 |
||||||||||||||
Other operating expenses |
175,196 |
166,210 |
136,970 |
341,406 |
273,071 |
||||||||||||||
Operating income |
129,600 |
97,595 |
57,117 |
227,195 |
88,939 |
||||||||||||||
Other income (expense) |
(12,228 |
) |
(8,651 |
) |
(10,468 |
) |
(20,879 |
) |
(16,231 |
) |
|||||||||
Loss on extinguishment of debt |
— |
— |
— |
— |
(25,129 |
) |
|||||||||||||
Provision for income taxes |
46,354 |
35,829 |
17,178 |
82,183 |
15,419 |
||||||||||||||
Net income |
$ |
71,018 |
$ |
53,115 |
$ |
29,471 |
$ |
124,133 |
$ |
32,160 |
12
|