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(in millions except per share data and Streaming Content Obligations) |
Q4 '14 |
Q1 '15 |
Q2 '15 |
Q3 '15 |
Q4 '15 |
Q1 '16 Forecast |
||||||||||||
Total Streaming: |
||||||||||||||||||
Revenue |
$ |
1,305 |
$ |
1,400 |
$ |
1,481 |
$ |
1,581 |
$ |
1,672 |
$ |
1,813 |
||||||
Contribution Profit |
$ |
178 |
$ |
247 |
$ |
248 |
$ |
277 |
$ |
270 |
$ |
302 |
||||||
Contribution Margin |
13.6 |
% |
17.7 |
% |
16.7 |
% |
17.5 |
% |
16.2 |
% |
16.7 |
% |
||||||
Paid Memberships |
54.48 |
59.62 |
62.71 |
66.02 |
70.84 |
77.19 |
||||||||||||
Total Memberships |
57.39 |
62.27 |
65.55 |
69.17 |
74.76 |
80.86 |
||||||||||||
Net Additions |
4.33 |
4.88 |
3.28 |
3.62 |
5.59 |
6.10 |
||||||||||||
US Streaming: |
||||||||||||||||||
Revenue |
$ |
917 |
$ |
985 |
$ |
1,026 |
$ |
1,064 |
$ |
1,106 |
$ |
1,160 |
||||||
Contribution Profit |
$ |
257 |
$ |
312 |
$ |
340 |
$ |
344 |
$ |
379 |
$ |
416 |
||||||
Contribution Margin |
28.0 |
% |
31.7 |
% |
33.1 |
% |
32.4 |
% |
34.3 |
% |
35.9 |
% |
||||||
Paid Memberships |
37.70 |
40.32 |
41.06 |
42.07 |
43.40 |
45.40 |
||||||||||||
Total Memberships |
39.11 |
41.40 |
42.30 |
43.18 |
44.74 |
46.49 |
||||||||||||
Net Additions |
1.90 |
2.28 |
0.90 |
0.88 |
1.56 |
1.75 |
||||||||||||
International Streaming: |
||||||||||||||||||
Revenue |
$ |
388 |
$ |
415 |
$ |
455 |
$ |
517 |
$ |
566 |
$ |
653 |
||||||
Contribution Profit (Loss) |
$ |
(79 |
) |
$ |
(65 |
) |
$ |
(92 |
) |
$ |
(68 |
) |
$ |
(109 |
) |
$ |
(114 |
) |
Contribution Margin |
-20.3 |
% |
-15.6 |
% |
-20.2 |
% |
-13.1 |
% |
-19.2 |
% |
-17.5 |
% |
||||||
Paid Memberships |
16.78 |
19.30 |
21.65 |
23.95 |
27.44 |
31.79 |
||||||||||||
Total Memberships |
18.28 |
20.88 |
23.25 |
25.99 |
30.02 |
34.37 |
||||||||||||
Net Additions |
2.43 |
2.60 |
2.37 |
2.74 |
4.04 |
4.35 |
||||||||||||
Total (including DVD): |
||||||||||||||||||
Operating Income |
$ |
65 |
$ |
97 |
$ |
75 |
$ |
74 |
$ |
60 |
$ |
50 |
||||||
Net Income* |
$ |
83 |
$ |
24 |
$ |
26 |
$ |
29 |
$ |
43 |
$ |
11 |
||||||
EPS* |
$ |
0.19 |
$ |
0.05 |
$ |
0.06 |
$ |
0.07 |
$ |
0.10 |
$ |
0.03 |
||||||
Free Cash Flow |
$ |
(78 |
) |
$ |
(163 |
) |
$ |
(229 |
) |
$ |
(252 |
) |
$ |
(276 |
) |
|||
EBITDA |
$ |
110 |
$ |
140 |
$ |
119 |
$ |
123 |
$ |
111 |
||||||||
Shares (FD)* |
432.5 |
433.8 |
436.1 |
437.6 |
438.3 |
|||||||||||||
Streaming Content Obligations** ($B) |
9.5 |
9.8 |
10.1 |
10.4 |
10.9 |
|||||||||||||
*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. Q4'15 Net Income/EPS includes a $13m / $0.03 benefit from a tax accrual release related to resolution of tax audits. | ||||||||||||||||||
**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
|
5
|
6
|
Reed Hastings, CEO |
David Wells, CFO |
7
|
IR Contact: |
PR Contact: |
Spencer Wang |
Jonathan Friedland |
Vice President, Finance & Investor Relations |
Chief Communications Officer |
408 809-5360 |
310 734-2958 |
8
|
9
|
Three Months Ended |
Year Ended |
||||||||||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2014 |
December 31, 2015 |
December 31, 2014 |
|||||||||||||||
Revenues |
$ |
1,823,333 |
$ |
1,738,355 |
$ |
1,484,728 |
$ |
6,779,511 |
$ |
5,504,656 |
|||||||||
Cost of revenues |
1,249,365 |
1,173,958 |
1,014,332 |
4,591,476 |
3,752,760 |
||||||||||||||
Marketing |
224,173 |
208,102 |
203,671 |
824,092 |
607,186 |
||||||||||||||
Technology and development |
180,859 |
171,762 |
125,876 |
650,788 |
472,321 |
||||||||||||||
General and administrative |
109,042 |
110,892 |
75,803 |
407,329 |
269,741 |
||||||||||||||
Operating income |
59,894 |
73,641 |
65,046 |
305,826 |
402,648 |
||||||||||||||
Other income (expense): |
|||||||||||||||||||
Interest expense |
(35,429 |
) |
(35,333 |
) |
(13,353 |
) |
(132,716 |
) |
(50,219 |
) |
|||||||||
Interest and other income (expense) |
(3,734 |
) |
3,930 |
(6,177 |
) |
(31,225 |
) |
(3,060 |
) |
||||||||||
Income before income taxes |
20,731 |
42,238 |
45,516 |
141,885 |
349,369 |
||||||||||||||
(Benefit) provision for income taxes |
(22,447 |
) |
12,806 |
(37,855 |
) |
19,244 |
82,570 |
||||||||||||
Net income |
$ |
43,178 |
$ |
29,432 |
$ |
83,371 |
$ |
122,641 |
$ |
266,799 |
|||||||||
Earnings per share: |
|||||||||||||||||||
Basic |
$ |
0.10 |
$ |
0.07 |
$ |
0.20 |
$ |
0.29 |
$ |
0.63 |
|||||||||
Diluted |
$ |
0.10 |
$ |
0.07 |
$ |
0.19 |
$ |
0.28 |
$ |
0.62 |
|||||||||
Weighted-average common shares outstanding: |
|||||||||||||||||||
Basic |
427,668 |
426,869 |
422,244 |
425,889 |
420,544 |
||||||||||||||
Diluted |
438,257 |
437,606 |
432,514 |
436,456 |
431,894 |
10
|
As of |
|||||||
December 31, 2015 |
December 31, 2014 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
1,809,330 |
$ |
1,113,608 |
|||
Short-term investments |
501,385 |
494,888 |
|||||
Current content assets, net |
2,905,998 |
2,166,134 |
|||||
Other current assets |
215,127 |
152,423 |
|||||
Total current assets |
5,431,840 |
3,927,053 |
|||||
Non-current content assets, net |
4,312,817 |
2,773,326 |
|||||
Property and equipment, net |
173,412 |
149,875 |
|||||
Other non-current assets |
284,802 |
192,246 |
|||||
Total assets |
$ |
10,202,871 |
$ |
7,042,500 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Current content liabilities |
$ |
2,789,023 |
$ |
2,117,241 |
|||
Accounts payable |
253,491 |
201,581 |
|||||
Accrued expenses |
140,389 |
69,746 |
|||||
Deferred revenue |
346,721 |
274,586 |
|||||
Total current liabilities |
3,529,624 |
2,663,154 |
|||||
Non-current content liabilities |
2,026,360 |
1,575,832 |
|||||
Long-term debt |
2,371,362 |
885,849 |
|||||
Other non-current liabilities |
52,099 |
59,957 |
|||||
Total liabilities |
7,979,445 |
5,184,792 |
|||||
Stockholders' equity: |
|||||||
Common stock |
1,324,809 |
1,042,870 |
|||||
Accumulated other comprehensive loss |
(43,308 |
) |
(4,446 |
) |
|||
Retained earnings |
941,925 |
819,284 |
|||||
Total stockholders' equity |
2,223,426 |
1,857,708 |
|||||
Total liabilities and stockholders' equity |
$ |
10,202,871 |
$ |
7,042,500 |
11
|
Three Months Ended |
Year Ended |
||||||||||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2014 |
December 31, 2015 |
December 31, 2014 |
|||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||||
Net income |
$ |
43,178 |
$ |
29,432 |
$ |
83,371 |
$ |
122,641 |
$ |
266,799 |
|||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|||||||||||||||||||
Additions to streaming content assets |
(1,550,326 |
) |
(1,304,466 |
) |
(1,013,822 |
) |
(5,771,652 |
) |
(3,773,019 |
) |
|||||||||
Change in streaming content liabilities |
240,250 |
104,684 |
125,770 |
1,162,413 |
593,125 |
||||||||||||||
Amortization of streaming content assets |
961,861 |
871,403 |
730,353 |
3,405,382 |
2,656,279 |
||||||||||||||
Amortization of DVD content assets |
18,793 |
18,589 |
20,178 |
79,380 |
71,491 |
||||||||||||||
Depreciation and amortization of property, equipment and intangibles |
15,488 |
16,047 |
14,312 |
62,283 |
54,028 |
||||||||||||||
Stock-based compensation expense |
35,860 |
32,834 |
30,251 |
124,725 |
115,239 |
||||||||||||||
Excess tax benefits from stock-based compensation |
25,683 |
(37,726 |
) |
(20,921 |
) |
(80,471 |
) |
(89,341 |
) |
||||||||||
Other non-cash items |
7,774 |
10,866 |
6,475 |
31,628 |
15,282 |
||||||||||||||
Deferred taxes |
12,036 |
(29,417 |
) |
7,501 |
(58,655 |
) |
(30,063 |
) |
|||||||||||
Changes in operating assets and liabilities: |
|||||||||||||||||||
Other current assets |
(62,755 |
) |
66,695 |
(30,539 |
) |
18,693 |
(9,198 |
) |
|||||||||||
Accounts payable |
49,031 |
6,762 |
51,083 |
51,615 |
83,812 |
||||||||||||||
Accrued expenses |
(39,619 |
) |
10,883 |
4,050 |
48,810 |
55,636 |
|||||||||||||
Deferred revenue |
16,982 |
27,985 |
21,630 |
72,135 |
58,819 |
||||||||||||||
Other non-current assets and liabilities |
(18,981 |
) |
(20,540 |
) |
(68,153 |
) |
(18,366 |
) |
(52,406 |
) |
|||||||||
Net cash (used in) provided by operating activities |
(244,745 |
) |
(195,969 |
) |
(38,461 |
) |
(749,439 |
) |
16,483 |
||||||||||
Cash flows from investing activities: |
|||||||||||||||||||
Acquisition of DVD content assets |
(20,799 |
) |
(14,467 |
) |
(23,365 |
) |
(77,958 |
) |
(74,790 |
) |
|||||||||
Purchases of property and equipment |
(12,854 |
) |
(37,820 |
) |
(15,491 |
) |
(91,248 |
) |
(69,726 |
) |
|||||||||
Other assets |
2,262 |
(3,760 |
) |
(431 |
) |
(1,912 |
) |
1,334 |
|||||||||||
Purchases of short-term investments |
(146,582 |
) |
(66,444 |
) |
(71,597 |
) |
(371,915 |
) |
(426,934 |
) |
|||||||||
Proceeds from sale of short-term investments |
114,832 |
43,887 |
45,022 |
259,079 |
385,300 |
||||||||||||||
Proceeds from maturities of short-term investments |
22,580 |
31,125 |
14,721 |
104,762 |
141,950 |
||||||||||||||
Net cash used in investing activities |
(40,561 |
) |
(47,479 |
) |
(51,141 |
) |
(179,192 |
) |
(42,866 |
) |
|||||||||
Cash flows from financing activities: |
|||||||||||||||||||
Proceeds from issuance of common stock |
8,171 |
35,089 |
3,750 |
77,980 |
60,544 |
||||||||||||||
Proceeds from issuance of debt |
— |
— |
— |
1,500,000 |
400,000 |
||||||||||||||
Issuance costs |
— |
— |
— |
(17,629 |
) |
(7,080 |
) |
||||||||||||
Excess tax benefits from stock-based compensation |
(25,683 |
) |
37,726 |
20,921 |
80,471 |
89,341 |
|||||||||||||
Principal payments of lease financing obligations |
54 |
(61 |
) |
(280 |
) |
(545 |
) |
(1,093 |
) |
||||||||||
Net cash (used in) provided by financing activities |
(17,458 |
) |
72,754 |
24,391 |
1,640,277 |
541,712 |
|||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(3,343 |
) |
(7,741 |
) |
(4,398 |
) |
(15,924 |
) |
(6,686 |
) |
|||||||||
Net (decrease) increase in cash and cash equivalents |
(306,107 |
) |
(178,435 |
) |
(69,609 |
) |
695,722 |
508,643 |
|||||||||||
Cash and cash equivalents, beginning of period |
2,115,437 |
2,293,872 |
1,183,217 |
1,113,608 |
604,965 |
||||||||||||||
Cash and cash equivalents, end of period |
$ |
1,809,330 |
$ |
2,115,437 |
$ |
1,113,608 |
$ |
1,809,330 |
$ |
1,113,608 |
|||||||||
Three Months Ended |
Year Ended |
||||||||||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2014 |
December 31, 2015 |
December 31, 2014 |
|||||||||||||||
Non-GAAP free cash flow reconciliation: |
|||||||||||||||||||
Net cash (used in) provided by operating activities |
$ |
(244,745 |
) |
$ |
(195,969 |
) |
$ |
(38,461 |
) |
$ |
(749,439 |
) |
$ |
16,483 |
|||||
Acquisition of DVD content assets |
(20,799 |
) |
(14,467 |
) |
(23,365 |
) |
(77,958 |
) |
(74,790 |
) |
|||||||||
Purchases of property and equipment |
(12,854 |
) |
(37,820 |
) |
(15,491 |
) |
(91,248 |
) |
(69,726 |
) |
|||||||||
Other assets |
2,262 |
(3,760 |
) |
(431 |
) |
(1,912 |
) |
1,334 |
|||||||||||
Non-GAAP free cash flow |
$ |
(276,136 |
) |
$ |
(252,016 |
) |
$ |
(77,748 |
) |
$ |
(920,557 |
) |
$ |
(126,699 |
) |
12
|
As of / Three Months Ended |
As of/ Year Ended |
||||||||||||||||||
December 31, 2015 |
September 30, 2015 |
December 31, 2014 |
December 31, 2015 |
December 31, 2014 |
|||||||||||||||
Domestic Streaming |
|||||||||||||||||||
Total memberships at end of period |
44,738 |
43,181 |
39,114 |
44,738 |
39,114 |
||||||||||||||
Paid memberships at end of period |
43,401 |
42,068 |
37,698 |
43,401 |
37,698 |
||||||||||||||
Revenues |
$ |
1,105,933 |
$ |
1,063,961 |
$ |
917,442 |
$ |
4,180,339 |
$ |
3,431,434 |
|||||||||
Cost of revenues |
647,059 |
644,914 |
573,193 |
2,487,193 |
2,201,761 |
||||||||||||||
Marketing |
79,833 |
74,835 |
87,423 |
317,646 |
293,453 |
||||||||||||||
Contribution profit |
379,041 |
344,212 |
256,826 |
1,375,500 |
936,220 |
||||||||||||||
International Streaming |
|||||||||||||||||||
Total memberships at end of period |
30,024 |
25,987 |
18,277 |
30,024 |
18,277 |
||||||||||||||
Paid memberships at end of period |
27,438 |
23,951 |
16,778 |
27,438 |
16,778 |
||||||||||||||
Revenues |
$ |
566,405 |
$ |
516,870 |
$ |
387,797 |
$ |
1,953,435 |
$ |
1,308,061 |
|||||||||
Cost of revenues |
530,880 |
451,251 |
350,211 |
1,780,375 |
1,154,117 |
||||||||||||||
Marketing |
144,340 |
133,267 |
116,248 |
506,446 |
313,733 |
||||||||||||||
Contribution profit (loss) |
(108,815 |
) |
(67,648 |
) |
(78,662 |
) |
(333,386 |
) |
(159,789 |
) |
|||||||||
Domestic DVD |
|||||||||||||||||||
Total memberships at end of period |
4,904 |
5,060 |
5,767 |
4,904 |
5,767 |
||||||||||||||
Paid memberships at end of period |
4,787 |
4,971 |
5,668 |
4,787 |
5,668 |
||||||||||||||
Revenues |
$ |
150,995 |
$ |
157,524 |
$ |
179,489 |
$ |
645,737 |
$ |
765,161 |
|||||||||
Cost of revenues |
71,426 |
77,793 |
90,928 |
323,908 |
396,882 |
||||||||||||||
Contribution profit |
79,569 |
79,731 |
88,561 |
321,829 |
368,279 |
||||||||||||||
Consolidated |
|||||||||||||||||||
Revenues |
$ |
1,823,333 |
$ |
1,738,355 |
$ |
1,484,728 |
$ |
6,779,511 |
$ |
5,504,656 |
|||||||||
Cost of revenues |
1,249,365 |
1,173,958 |
1,014,332 |
4,591,476 |
3,752,760 |
||||||||||||||
Marketing |
224,173 |
208,102 |
203,671 |
824,092 |
607,186 |
||||||||||||||
Contribution profit |
349,795 |
356,295 |
266,725 |
1,363,943 |
1,144,710 |
||||||||||||||
Other operating expenses |
289,901 |
282,654 |
201,679 |
1,058,117 |
742,062 |
||||||||||||||
Operating income |
59,894 |
73,641 |
65,046 |
305,826 |
402,648 |
||||||||||||||
Other income (expense) |
(39,163 |
) |
(31,403 |
) |
(19,530 |
) |
(163,941 |
) |
(53,279 |
) |
|||||||||
(Benefit) provision for income taxes |
(22,447 |
) |
12,806 |
(37,855 |
) |
19,244 |
82,570 |
||||||||||||
Net income |
$ |
43,178 |
$ |
29,432 |
$ |
83,371 |
$ |
122,641 |
$ |
266,799 |
13
|
Three Months Ended |
|||||||||||||||||||
December 31, 2014 |
March 31, 2015 |
June 30, 2015 |
September 30, 2015 |
December 31, 2015 |
|||||||||||||||
Non-GAAP Adjusted EBITDA reconciliation: |
|||||||||||||||||||
GAAP net income |
$ |
83,371 |
$ |
23,696 |
$ |
26,335 |
$ |
29,432 |
$ |
43,178 |
|||||||||
Add: |
|||||||||||||||||||
Interest and other (income) expense |
19,530 |
59,030 |
34,345 |
31,403 |
39,163 |
||||||||||||||
Provision (benefit) for income taxes |
(37,855 |
) |
14,730 |
14,155 |
12,806 |
(22,447 |
) |
||||||||||||
Depreciation and amortization of property, equipment and intangibles |
14,312 |
15,167 |
15,581 |
16,047 |
15,488 |
||||||||||||||
Stock-based compensation expense |
30,251 |
27,441 |
28,590 |
32,834 |
35,860 |
||||||||||||||
Adjusted EBITDA |
$ |
109,609 |
$ |
140,064 |
$ |
119,006 |
$ |
122,522 |
$ |
111,242 |
Three Months Ended |
||||||||
December 31, 2014 |
December 31, 2015 |
|||||||
Non-GAAP net income reconciliation: |
||||||||
GAAP net income |
$ |
83,371 |
$ |
43,178 |
||||
Less: Release of tax accrual |
(38,612 |
) |
(13,438 |
) |
||||
Non-GAAP net income |
$ |
44,759 |
$ |
29,740 |
||||
Non-GAAP earnings per share: |
||||||||
Basic |
0.11 |
0.07 |
||||||
Diluted |
0.10 |
0.07 |
||||||
Weighted-average common shares outstanding: |
||||||||
Basic |
422,244 |
427,668 |
||||||
Diluted |
432,514 |
438,257 |
14
|