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(in millions except per share data and Streaming Content Obligations) |
Q2 '14 |
Q3 '14 |
Q4 '14 |
Q1 '15 |
Q2 '15 |
Q3 '15 Forecast |
||||||||||||
Total Streaming: |
||||||||||||||||||
Revenue |
$ |
1,146 |
$ |
1,223 |
$ |
1,305 |
$ |
1,400 |
$ |
1,481 |
$ |
1,593 |
||||||
Contribution Profit |
$ |
212 |
$ |
220 |
$ |
178 |
$ |
247 |
$ |
248 |
$ |
272 |
||||||
Contribution Margin |
18.5 |
% |
18.0 |
% |
13.6 |
% |
17.7 |
% |
16.7 |
% |
17.1 |
% |
||||||
Paid Memberships |
47.99 |
50.65 |
54.48 |
59.62 |
62.71 |
66.61 |
||||||||||||
Total Memberships |
50.05 |
53.06 |
57.39 |
62.27 |
65.55 |
69.10 |
||||||||||||
Net Additions |
1.69 |
3.02 |
4.33 |
4.88 |
3.28 |
3.55 |
||||||||||||
US Streaming: |
||||||||||||||||||
Revenue |
$ |
838 |
$ |
877 |
$ |
917 |
$ |
985 |
$ |
1,026 |
$ |
1,069 |
||||||
Contribution Profit |
$ |
227 |
$ |
251 |
$ |
257 |
$ |
312 |
$ |
340 |
$ |
349 |
||||||
Contribution Margin |
27.1 |
% |
28.6 |
% |
28.0 |
% |
31.7 |
% |
33.1 |
% |
32.6 |
% |
||||||
Paid Memberships |
35.09 |
36.27 |
37.70 |
40.32 |
41.06 |
42.51 |
||||||||||||
Total Memberships |
36.24 |
37.22 |
39.11 |
41.40 |
42.30 |
43.45 |
||||||||||||
Net Additions |
0.57 |
0.98 |
1.90 |
2.28 |
0.90 |
1.15 |
||||||||||||
International Streaming: |
||||||||||||||||||
Revenue |
$ |
307 |
$ |
346 |
$ |
388 |
$ |
415 |
$ |
455 |
$ |
524 |
||||||
Contribution Profit (Loss) |
$ |
(15 |
) |
$ |
(31 |
) |
$ |
(79 |
) |
$ |
(65 |
) |
$ |
(92 |
) |
$ |
(77 |
) |
Contribution Margin |
-5.0 |
% |
-8.9 |
% |
-20.3 |
% |
-15.6 |
% |
-20.2 |
% |
-14.7 |
% |
||||||
Paid Memberships |
12.91 |
14.39 |
16.78 |
19.30 |
21.65 |
24.10 |
||||||||||||
Total Memberships |
13.80 |
15.84 |
18.28 |
20.88 |
23.25 |
25.65 |
||||||||||||
Net Additions |
1.12 |
2.04 |
2.43 |
2.60 |
2.37 |
2.40 |
||||||||||||
Total (including DVD): |
||||||||||||||||||
Operating Income |
$ |
130 |
$ |
110 |
$ |
65 |
$ |
97 |
$ |
75 |
$ |
81 |
||||||
Net Income* |
$ |
71 |
$ |
59 |
$ |
83 |
$ |
24 |
$ |
26 |
$ |
31 |
||||||
EPS* |
$ |
0.16 |
$ |
0.14 |
$ |
0.19 |
$ |
0.05 |
$ |
0.06 |
$ |
0.07 |
||||||
Free Cash Flow |
$ |
16 |
$ |
(74 |
) |
$ |
(78 |
) |
$ |
(163 |
) |
$ |
(229 |
) |
||||
EBITDA |
$ |
172 |
$ |
155 |
$ |
110 |
$ |
140 |
$ |
119 |
||||||||
Shares (FD)* |
431.4 |
432.7 |
432.5 |
433.8 |
436.1 |
|||||||||||||
Streaming Content Obligations** ($B) |
7.7 |
8.9 |
9.5 |
9.8 |
10.1 |
|||||||||||||
* EPS and shares adjusted for 7-for-1 stock split. Q4'14 Net Income/EPS includes a $39m / $0.10 benefit from a tax accrual release related to resolution of tax audit | ||||||||||||||||||
**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
|
4
|
Reed Hastings, CEO |
David Wells, CFO |
5
|
IR Contact: |
PR Contact: |
Spencer Wang |
Jonathan Friedland |
Vice President, Finance & Investor Relations |
Chief Communications Officer |
408 540-3700 |
310 734-2958 |
6
|
7
|
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
|||||||||||||||
Revenues |
$ |
1,644,694 |
$ |
1,573,129 |
$ |
1,340,407 |
$ |
3,217,823 |
$ |
2,610,496 |
|||||||||
Cost of revenues |
1,121,752 |
1,046,401 |
914,848 |
2,168,153 |
1,784,034 |
||||||||||||||
Marketing |
197,140 |
194,677 |
120,763 |
391,817 |
257,861 |
||||||||||||||
Technology and development |
155,061 |
143,106 |
115,182 |
298,167 |
225,492 |
||||||||||||||
General and administrative |
95,906 |
91,489 |
60,014 |
187,395 |
115,914 |
||||||||||||||
Operating income |
74,835 |
97,456 |
129,600 |
172,291 |
227,195 |
||||||||||||||
Other income (expense): |
|||||||||||||||||||
Interest expense |
(35,217 |
) |
(26,737 |
) |
(13,328 |
) |
(61,954 |
) |
(23,380 |
) |
|||||||||
Interest and other income (expense) |
872 |
(32,293 |
) |
1,100 |
(31,421 |
) |
2,501 |
||||||||||||
Income before income taxes |
40,490 |
38,426 |
117,372 |
78,916 |
206,316 |
||||||||||||||
Provision for income taxes |
14,155 |
14,730 |
46,354 |
28,885 |
82,183 |
||||||||||||||
Net income |
$ |
26,335 |
$ |
23,696 |
$ |
71,018 |
$ |
50,031 |
$ |
124,133 |
|||||||||
Earnings per share: |
|||||||||||||||||||
Basic |
$ |
0.06 |
$ |
0.06 |
$ |
0.17 |
$ |
0.12 |
$ |
0.30 |
|||||||||
Diluted |
$ |
0.06 |
$ |
0.05 |
$ |
0.16 |
$ |
0.12 |
$ |
0.29 |
|||||||||
Weighted-average common shares outstanding: |
|||||||||||||||||||
Basic |
425,340 |
423,624 |
419,974 |
424,486 |
419,349 |
||||||||||||||
Diluted |
436,097 |
433,809 |
431,441 |
434,958 |
431,141 |
8
|
As of |
|||||||
June 30, 2015 |
December 31, 2014 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
2,293,872 |
$ |
1,113,608 |
|||
Short-term investments |
502,886 |
494,888 |
|||||
Current content library, net |
2,510,946 |
2,125,702 |
|||||
Other current assets |
292,806 |
206,271 |
|||||
Total current assets |
5,600,510 |
3,940,469 |
|||||
Non-current content library, net |
3,640,767 |
2,773,326 |
|||||
Property and equipment, net |
171,396 |
149,875 |
|||||
Other non-current assets |
242,188 |
192,981 |
|||||
Total assets |
$ |
9,654,861 |
$ |
7,056,651 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Current content liabilities |
$ |
2,556,180 |
$ |
2,117,241 |
|||
Accounts payable |
211,729 |
201,581 |
|||||
Accrued expenses |
150,406 |
69,746 |
|||||
Deferred revenue |
301,754 |
274,586 |
|||||
Total current liabilities |
3,220,069 |
2,663,154 |
|||||
Non-current content liabilities |
1,942,624 |
1,575,832 |
|||||
Long-term debt |
2,400,000 |
900,000 |
|||||
Other non-current liabilities |
60,093 |
59,957 |
|||||
Total liabilities |
7,622,786 |
5,198,943 |
|||||
Stockholders' equity: |
|||||||
Common stock |
1,200,880 |
1,042,870 |
|||||
Accumulated other comprehensive loss |
(38,120 |
) |
(4,446 |
) |
|||
Retained earnings |
869,315 |
819,284 |
|||||
Total stockholders' equity |
2,032,075 |
1,857,708 |
|||||
Total liabilities and stockholders' equity |
$ |
9,654,861 |
$ |
7,056,651 |
9
|
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
|||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||||
Net income |
$ |
26,335 |
$ |
23,696 |
$ |
71,018 |
$ |
50,031 |
$ |
124,133 |
|||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|||||||||||||||||||
Additions to streaming content library |
(1,273,677 |
) |
(1,611,925 |
) |
(813,314 |
) |
(2,885,602 |
) |
(1,562,713 |
) |
|||||||||
Change in streaming content liabilities |
191,154 |
626,325 |
78,359 |
817,479 |
120,603 |
||||||||||||||
Amortization of streaming content library |
822,600 |
749,518 |
639,037 |
1,572,118 |
1,239,772 |
||||||||||||||
Amortization of DVD content library |
20,813 |
21,185 |
16,923 |
41,998 |
33,044 |
||||||||||||||
Depreciation and amortization of property, equipment and intangibles |
15,581 |
15,167 |
12,977 |
30,748 |
25,359 |
||||||||||||||
Stock-based compensation expense |
28,590 |
27,441 |
29,285 |
56,031 |
55,110 |
||||||||||||||
Excess tax benefits from stock-based compensation |
(39,427 |
) |
(29,001 |
) |
(14,628 |
) |
(68,428 |
) |
(47,360 |
) |
|||||||||
Other non-cash items |
6,682 |
6,306 |
3,251 |
12,988 |
5,447 |
||||||||||||||
Deferred taxes |
(4,232 |
) |
(37,042 |
) |
(16,569 |
) |
(41,274 |
) |
(29,672 |
) |
|||||||||
Changes in operating assets and liabilities: |
|||||||||||||||||||
Other current assets |
(39,614 |
) |
23,109 |
(20,685 |
) |
(16,505 |
) |
14,381 |
|||||||||||
Accounts payable |
6,447 |
(10,625 |
) |
(3,086 |
) |
(4,178 |
) |
19,726 |
|||||||||||
Accrued expenses |
41,624 |
35,922 |
59,008 |
77,546 |
58,566 |
||||||||||||||
Deferred revenue |
16,414 |
10,754 |
11,315 |
27,168 |
25,563 |
||||||||||||||
Other non-current assets and liabilities |
(633 |
) |
21,788 |
3,133 |
21,155 |
10,424 |
|||||||||||||
Net cash (used in) provided by operating activities |
(181,343 |
) |
(127,382 |
) |
56,024 |
(308,725 |
) |
92,383 |
|||||||||||
Cash flows from investing activities: |
|||||||||||||||||||
Acquisition of DVD content library |
(19,786 |
) |
(22,906 |
) |
(20,981 |
) |
(42,692 |
) |
(35,895 |
) |
|||||||||
Purchases of property and equipment |
(27,538 |
) |
(13,036 |
) |
(19,869 |
) |
(40,574 |
) |
(33,203 |
) |
|||||||||
Other assets |
(639 |
) |
225 |
1,129 |
(414 |
) |
1,424 |
||||||||||||
Purchases of short-term investments |
(67,949 |
) |
(90,940 |
) |
(170,908 |
) |
(158,889 |
) |
(231,454 |
) |
|||||||||
Proceeds from sale of short-term investments |
48,412 |
51,948 |
89,662 |
100,360 |
232,710 |
||||||||||||||
Proceeds from maturities of short-term investments |
19,170 |
31,887 |
92,014 |
51,057 |
95,104 |
||||||||||||||
Net cash (used in) provided by investing activities |
(48,330 |
) |
(42,822 |
) |
(28,953 |
) |
(91,152 |
) |
28,686 |
||||||||||
Cash flows from financing activities: |
|||||||||||||||||||
Proceeds from issuance of common stock |
23,804 |
10,916 |
14,469 |
34,720 |
46,917 |
||||||||||||||
Proceeds from issuance of debt |
— |
1,500,000 |
— |
1,500,000 |
400,000 |
||||||||||||||
Issuance costs |
(397 |
) |
(17,232 |
) |
(353 |
) |
(17,629 |
) |
(7,080 |
) |
|||||||||
Excess tax benefits from stock-based compensation |
39,427 |
29,001 |
14,628 |
68,428 |
47,360 |
||||||||||||||
Principal payments of lease financing obligations |
(287 |
) |
(251 |
) |
(271 |
) |
(538 |
) |
(538 |
) |
|||||||||
Net cash provided by financing activities |
62,547 |
1,522,434 |
28,473 |
1,584,981 |
486,659 |
||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
6,221 |
(11,061 |
) |
1,250 |
(4,840 |
) |
1,551 |
||||||||||||
Net (decrease) increase in cash and cash equivalents |
(160,905 |
) |
1,341,169 |
56,794 |
1,180,264 |
609,279 |
|||||||||||||
Cash and cash equivalents, beginning of period |
2,454,777 |
1,113,608 |
1,157,450 |
1,113,608 |
604,965 |
||||||||||||||
Cash and cash equivalents, end of period |
$ |
2,293,872 |
$ |
2,454,777 |
$ |
1,214,244 |
$ |
2,293,872 |
$ |
1,214,244 |
|||||||||
Three Months Ended |
Six Months Ended |
||||||||||||||||||
June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
|||||||||||||||
Non-GAAP free cash flow reconciliation: |
|||||||||||||||||||
Net cash (used in) provided by operating activities |
$ |
(181,343 |
) |
$ |
(127,382 |
) |
$ |
56,024 |
$ |
(308,725 |
) |
$ |
92,383 |
||||||
Acquisition of DVD content library |
(19,786 |
) |
(22,906 |
) |
(20,981 |
) |
(42,692 |
) |
(35,895 |
) |
|||||||||
Purchases of property and equipment |
(27,538 |
) |
(13,036 |
) |
(19,869 |
) |
(40,574 |
) |
(33,203 |
) |
|||||||||
Other assets |
(639 |
) |
225 |
1,129 |
(414 |
) |
1,424 |
||||||||||||
Non-GAAP free cash flow |
$ |
(229,306 |
) |
$ |
(163,099 |
) |
$ |
16,303 |
$ |
(392,405 |
) |
$ |
24,709 |
10
|
As of / Three Months Ended |
As of/ Six Months Ended |
||||||||||||||||||
June 30, 2015 |
March 31, 2015 |
June 30, 2014 |
June 30, 2015 |
June 30, 2014 |
|||||||||||||||
Domestic Streaming |
|||||||||||||||||||
Total memberships at end of period |
42,300 |
41,397 |
36,244 |
42,300 |
36,244 |
||||||||||||||
Paid memberships at end of period |
41,057 |
40,315 |
35,085 |
41,057 |
35,085 |
||||||||||||||
Revenues |
$ |
1,025,913 |
$ |
984,532 |
$ |
838,225 |
$ |
2,010,445 |
$ |
1,636,842 |
|||||||||
Cost of revenues |
612,691 |
582,529 |
546,223 |
1,195,220 |
1,063,317 |
||||||||||||||
Marketing |
73,427 |
89,551 |
64,727 |
162,978 |
144,985 |
||||||||||||||
Contribution profit |
339,795 |
312,452 |
227,275 |
652,247 |
428,540 |
||||||||||||||
International Streaming |
|||||||||||||||||||
Total memberships at end of period |
23,251 |
20,877 |
13,801 |
23,251 |
13,801 |
||||||||||||||
Paid memberships at end of period |
21,649 |
19,304 |
12,907 |
21,649 |
12,907 |
||||||||||||||
Revenues |
$ |
454,763 |
$ |
415,397 |
$ |
307,461 |
$ |
870,160 |
$ |
574,579 |
|||||||||
Cost of revenues |
422,966 |
375,278 |
266,697 |
798,244 |
511,964 |
||||||||||||||
Marketing |
123,713 |
105,126 |
56,036 |
228,839 |
112,876 |
||||||||||||||
Contribution profit (loss) |
(91,916 |
) |
(65,007 |
) |
(15,272 |
) |
(156,923 |
) |
(50,261 |
) |
|||||||||
Domestic DVD |
|||||||||||||||||||
Total memberships at end of period |
5,314 |
5,564 |
6,261 |
5,314 |
6,261 |
||||||||||||||
Paid memberships at end of period |
5,219 |
5,470 |
6,167 |
5,219 |
6,167 |
||||||||||||||
Revenues |
$ |
164,018 |
$ |
173,200 |
$ |
194,721 |
$ |
337,218 |
$ |
399,075 |
|||||||||
Cost of revenues |
86,095 |
88,594 |
101,928 |
174,689 |
208,753 |
||||||||||||||
Contribution profit |
77,923 |
84,606 |
92,793 |
162,529 |
190,322 |
||||||||||||||
Consolidated |
|||||||||||||||||||
Revenues |
$ |
1,644,694 |
$ |
1,573,129 |
$ |
1,340,407 |
$ |
3,217,823 |
$ |
2,610,496 |
|||||||||
Cost of revenues |
1,121,752 |
1,046,401 |
914,848 |
2,168,153 |
1,784,034 |
||||||||||||||
Marketing |
197,140 |
194,677 |
120,763 |
391,817 |
257,861 |
||||||||||||||
Contribution profit |
325,802 |
332,051 |
304,796 |
657,853 |
568,601 |
||||||||||||||
Other operating expenses |
250,967 |
234,595 |
175,196 |
485,562 |
341,406 |
||||||||||||||
Operating income |
74,835 |
97,456 |
129,600 |
172,291 |
227,195 |
||||||||||||||
Other income (expense) |
(34,345 |
) |
(59,030 |
) |
(12,228 |
) |
(93,375 |
) |
(20,879 |
) |
|||||||||
Provision for income taxes |
14,155 |
14,730 |
46,354 |
28,885 |
82,183 |
||||||||||||||
Net income |
$ |
26,335 |
$ |
23,696 |
$ |
71,018 |
$ |
50,031 |
$ |
124,133 |
11
|
Three Months Ended |
|||||||||||||||||||
June 30, 2014 |
September 30, 2014 |
December 31, 2014 |
March 31, 2015 |
June 30, 2015 |
|||||||||||||||
Non-GAAP Adjusted EBITDA reconciliation: |
|||||||||||||||||||
GAAP net income |
$ |
71,018 |
$ |
59,295 |
$ |
83,371 |
$ |
23,696 |
$ |
26,335 |
|||||||||
Add: |
|||||||||||||||||||
Interest and other (income) expense |
12,228 |
12,870 |
19,530 |
59,030 |
34,345 |
||||||||||||||
Provision (benefit) for income taxes |
46,354 |
38,242 |
(37,855 |
) |
14,730 |
14,155 |
|||||||||||||
Depreciation and amortization of property, equipment and intangibles |
12,977 |
14,357 |
14,312 |
15,167 |
15,581 |
||||||||||||||
Stock based compensation |
29,285 |
29,878 |
30,251 |
27,441 |
28,590 |
||||||||||||||
Adjusted EBITDA |
$ |
171,862 |
$ |
154,642 |
$ |
109,609 |
$ |
140,064 |
$ |
119,006 |
Three Months Ended |
||||
December 31, 2014 |
||||
Non-GAAP net income reconciliation: |
||||
GAAP net income |
$ |
83,371 |
||
Less: Release of tax accrual |
(38,612 |
) |
||
Non-GAAP net income |
$ |
44,759 |
||
Non-GAAP earnings per share: |
||||
Basic |
0.11 |
|||
Diluted |
0.10 |
|||
Weighted-average common shares outstanding: |
||||
Basic |
422,244 |
|||
Diluted |
432,514 |
12
|