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(in millions except per share data and Streaming Content Obligations) |
Q3 '14 |
Q4 '14 |
Q1 '15 |
Q2 '15 |
Q3 '15 |
Q4 '15 Forecast |
||||||||||||
Total Streaming: |
||||||||||||||||||
Revenue |
$ |
1,223 |
$ |
1,305 |
$ |
1,400 |
$ |
1,481 |
$ |
1,581 |
$ |
1,667 |
||||||
Contribution Profit |
$ |
220 |
$ |
178 |
$ |
247 |
$ |
248 |
$ |
277 |
$ |
257 |
||||||
Contribution Margin |
18.0 |
% |
13.6 |
% |
17.7 |
% |
16.7 |
% |
17.5 |
% |
15.4 |
% |
||||||
Paid Memberships |
50.65 |
54.48 |
59.62 |
62.71 |
66.02 |
70.42 |
||||||||||||
Total Memberships |
53.06 |
57.39 |
62.27 |
65.55 |
69.17 |
74.32 |
||||||||||||
Net Additions |
3.02 |
4.33 |
4.88 |
3.28 |
3.62 |
5.15 |
||||||||||||
US Streaming: |
||||||||||||||||||
Revenue |
$ |
877 |
$ |
917 |
$ |
985 |
$ |
1,026 |
$ |
1,064 |
$ |
1,101 |
||||||
Contribution Profit |
$ |
251 |
$ |
257 |
$ |
312 |
$ |
340 |
$ |
344 |
$ |
374 |
||||||
Contribution Margin |
28.6 |
% |
28.0 |
% |
31.7 |
% |
33.1 |
% |
32.4 |
% |
34.0 |
% |
||||||
Paid Memberships |
36.27 |
37.70 |
40.32 |
41.06 |
42.07 |
43.37 |
||||||||||||
Total Memberships |
37.22 |
39.11 |
41.40 |
42.30 |
43.18 |
44.83 |
||||||||||||
Net Additions |
0.98 |
1.90 |
2.28 |
0.90 |
0.88 |
1.65 |
||||||||||||
International Streaming: |
||||||||||||||||||
Revenue |
$ |
346 |
$ |
388 |
$ |
415 |
$ |
455 |
$ |
517 |
$ |
566 |
||||||
Contribution Profit (Loss) |
$ |
(31 |
) |
$ |
(79 |
) |
$ |
(65 |
) |
$ |
(92 |
) |
$ |
(68 |
) |
$ |
(117 |
) |
Contribution Margin |
-8.9 |
% |
-20.3 |
% |
-15.6 |
% |
-20.2 |
% |
-13.1 |
% |
-20.7 |
% |
||||||
Paid Memberships |
14.39 |
16.78 |
19.30 |
21.65 |
23.95 |
27.05 |
||||||||||||
Total Memberships |
15.84 |
18.28 |
20.88 |
23.25 |
25.99 |
29.49 |
||||||||||||
Net Additions |
2.04 |
2.43 |
2.60 |
2.37 |
2.74 |
3.50 |
||||||||||||
Total (including DVD): |
||||||||||||||||||
Operating Income |
$ |
110 |
$ |
65 |
$ |
97 |
$ |
75 |
$ |
74 |
$ |
49 |
||||||
Net Income* |
$ |
59 |
$ |
83 |
$ |
24 |
$ |
26 |
$ |
29 |
$ |
10 |
||||||
EPS* |
$ |
0.14 |
$ |
0.19 |
$ |
0.05 |
$ |
0.06 |
$ |
0.07 |
$ |
0.02 |
||||||
Free Cash Flow |
$ |
(74 |
) |
$ |
(78 |
) |
$ |
(163 |
) |
$ |
(229 |
) |
$ |
(252 |
) |
|||
EBITDA |
$ |
155 |
$ |
110 |
$ |
140 |
$ |
119 |
$ |
123 |
||||||||
Shares (FD)* |
432.7 |
432.5 |
433.8 |
436.1 |
437.6 |
|||||||||||||
Streaming Content Obligations** ($B) |
8.9 |
9.5 |
9.8 |
10.1 |
10.4 |
|||||||||||||
* 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
|
5
|
Reed Hastings, CEO |
David Wells, CFO |
6
|
IR Contact: |
PR Contact: |
Spencer Wang |
Jonathan Friedland |
Vice President, Finance & Investor Relations |
Chief Communications Officer |
408 540-3700 |
310 734-2958 |
7
|
8
|
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||||||||
Revenues |
$ |
1,738,355 |
$ |
1,644,694 |
$ |
1,409,432 |
$ |
4,956,178 |
$ |
4,019,928 |
|||||||||
Cost of revenues |
1,173,958 |
1,121,752 |
954,394 |
3,342,111 |
2,738,428 |
||||||||||||||
Marketing |
208,102 |
197,140 |
145,654 |
599,919 |
403,515 |
||||||||||||||
Technology and development |
171,762 |
155,061 |
120,953 |
469,929 |
346,445 |
||||||||||||||
General and administrative |
110,892 |
95,906 |
78,024 |
298,287 |
193,938 |
||||||||||||||
Operating income |
73,641 |
74,835 |
110,407 |
245,932 |
337,602 |
||||||||||||||
Other income (expense): |
|||||||||||||||||||
Interest expense |
(35,333 |
) |
(35,217 |
) |
(13,486 |
) |
(97,287 |
) |
(36,866 |
) |
|||||||||
Interest and other income (expense) |
3,930 |
872 |
616 |
(27,491 |
) |
3,117 |
|||||||||||||
Income before income taxes |
42,238 |
40,490 |
97,537 |
121,154 |
303,853 |
||||||||||||||
Provision for income taxes |
12,806 |
14,155 |
38,242 |
41,691 |
120,425 |
||||||||||||||
Net income |
$ |
29,432 |
$ |
26,335 |
$ |
59,295 |
$ |
79,463 |
$ |
183,428 |
|||||||||
Earnings per share: |
|||||||||||||||||||
Basic |
$ |
0.07 |
$ |
0.06 |
$ |
0.14 |
$ |
0.19 |
$ |
0.44 |
|||||||||
Diluted |
$ |
0.07 |
$ |
0.06 |
$ |
0.14 |
$ |
0.18 |
$ |
0.42 |
|||||||||
Weighted-average common shares outstanding: |
|||||||||||||||||||
Basic |
426,869 |
425,340 |
421,194 |
425,289 |
419,972 |
||||||||||||||
Diluted |
437,606 |
436,097 |
432,742 |
435,849 |
431,683 |
9
|
As of |
|||||||
September 30, 2015 |
December 31, 2014 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
2,115,437 |
$ |
1,113,608 |
|||
Short-term investments |
494,205 |
494,888 |
|||||
Current content library, net |
2,695,184 |
2,125,702 |
|||||
Other current assets |
264,887 |
206,271 |
|||||
Total current assets |
5,569,713 |
3,940,469 |
|||||
Non-current content library, net |
3,891,790 |
2,773,326 |
|||||
Property and equipment, net |
181,268 |
149,875 |
|||||
Other non-current assets |
273,496 |
192,981 |
|||||
Total assets |
$ |
9,916,267 |
$ |
7,056,651 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Current content liabilities |
$ |
2,622,964 |
$ |
2,117,241 |
|||
Accounts payable |
209,365 |
201,581 |
|||||
Accrued expenses |
179,350 |
69,746 |
|||||
Deferred revenue |
329,739 |
274,586 |
|||||
Total current liabilities |
3,341,418 |
2,663,154 |
|||||
Non-current content liabilities |
1,966,854 |
1,575,832 |
|||||
Long-term debt |
2,400,000 |
900,000 |
|||||
Other non-current liabilities |
40,677 |
59,957 |
|||||
Total liabilities |
7,748,949 |
5,198,943 |
|||||
Stockholders' equity: |
|||||||
Common stock |
1,306,461 |
1,042,870 |
|||||
Accumulated other comprehensive loss |
(37,890 |
) |
(4,446 |
) |
|||
Retained earnings |
898,747 |
819,284 |
|||||
Total stockholders' equity |
2,167,318 |
1,857,708 |
|||||
Total liabilities and stockholders' equity |
$ |
9,916,267 |
$ |
7,056,651 |
10
|
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||||||||
Cash flows from operating activities: |
|||||||||||||||||||
Net income |
$ |
29,432 |
$ |
26,335 |
$ |
59,295 |
$ |
79,463 |
$ |
183,428 |
|||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|||||||||||||||||||
Additions to streaming content library |
(1,308,943 |
) |
(1,273,677 |
) |
(1,202,484 |
) |
(4,194,545 |
) |
(2,765,197 |
) |
|||||||||
Change in streaming content liabilities |
104,684 |
191,154 |
346,752 |
922,163 |
467,355 |
||||||||||||||
Amortization of streaming content library |
871,403 |
822,600 |
686,154 |
2,443,521 |
1,925,926 |
||||||||||||||
Amortization of DVD content library |
18,589 |
20,813 |
18,269 |
60,587 |
51,313 |
||||||||||||||
Depreciation and amortization of property, equipment and intangibles |
16,047 |
15,581 |
14,357 |
46,795 |
39,716 |
||||||||||||||
Stock-based compensation expense |
32,834 |
28,590 |
29,878 |
88,865 |
84,988 |
||||||||||||||
Excess tax benefits from stock-based compensation |
(37,726 |
) |
(39,427 |
) |
(21,060 |
) |
(106,154 |
) |
(68,420 |
) |
|||||||||
Other non-cash items |
10,866 |
6,682 |
3,360 |
23,854 |
8,807 |
||||||||||||||
Deferred taxes |
(29,417 |
) |
(4,232 |
) |
(7,892 |
) |
(70,691 |
) |
(37,564 |
) |
|||||||||
Changes in operating assets and liabilities: |
|||||||||||||||||||
Other current assets |
71,172 |
(39,614 |
) |
12,960 |
54,667 |
27,341 |
|||||||||||||
Accounts payable |
6,762 |
6,447 |
13,003 |
2,584 |
32,729 |
||||||||||||||
Accrued expenses |
10,883 |
41,624 |
(6,980 |
) |
88,429 |
51,586 |
|||||||||||||
Deferred revenue |
27,985 |
16,414 |
11,626 |
55,153 |
37,189 |
||||||||||||||
Other non-current assets and liabilities |
(20,540 |
) |
(633 |
) |
5,323 |
615 |
15,747 |
||||||||||||
Net cash (used in) provided by operating activities |
(195,969 |
) |
(181,343 |
) |
(37,439 |
) |
(504,694 |
) |
54,944 |
||||||||||
Cash flows from investing activities: |
|||||||||||||||||||
Acquisition of DVD content library |
(14,467 |
) |
(19,786 |
) |
(15,530 |
) |
(57,159 |
) |
(51,425 |
) |
|||||||||
Purchases of property and equipment |
(37,820 |
) |
(27,538 |
) |
(21,032 |
) |
(78,394 |
) |
(54,235 |
) |
|||||||||
Other assets |
(3,760 |
) |
(639 |
) |
341 |
(4,174 |
) |
1,765 |
|||||||||||
Purchases of short-term investments |
(66,444 |
) |
(67,949 |
) |
(123,883 |
) |
(225,333 |
) |
(355,337 |
) |
|||||||||
Proceeds from sale of short-term investments |
43,887 |
48,412 |
107,568 |
144,247 |
340,278 |
||||||||||||||
Proceeds from maturities of short-term investments |
31,125 |
19,170 |
32,125 |
82,182 |
127,229 |
||||||||||||||
Net cash (used in) provided by investing activities |
(47,479 |
) |
(48,330 |
) |
(20,411 |
) |
(138,631 |
) |
8,275 |
||||||||||
Cash flows from financing activities: |
|||||||||||||||||||
Proceeds from issuance of common stock |
35,089 |
23,804 |
9,877 |
69,809 |
56,794 |
||||||||||||||
Proceeds from issuance of debt |
— |
— |
— |
1,500,000 |
400,000 |
||||||||||||||
Issuance costs |
— |
(397 |
) |
— |
(17,629 |
) |
(7,080 |
) |
|||||||||||
Excess tax benefits from stock-based compensation |
37,726 |
39,427 |
21,060 |
106,154 |
68,420 |
||||||||||||||
Principal payments of lease financing obligations |
(61 |
) |
(287 |
) |
(275 |
) |
(599 |
) |
(813 |
) |
|||||||||
Net cash provided by financing activities |
72,754 |
62,547 |
30,662 |
1,657,735 |
517,321 |
||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
(7,741 |
) |
6,221 |
(3,839 |
) |
(12,581 |
) |
(2,288 |
) |
||||||||||
Net (decrease) increase in cash and cash equivalents |
(178,435 |
) |
(160,905 |
) |
(31,027 |
) |
1,001,829 |
578,252 |
|||||||||||
Cash and cash equivalents, beginning of period |
2,293,872 |
2,454,777 |
1,214,244 |
1,113,608 |
604,965 |
||||||||||||||
Cash and cash equivalents, end of period |
$ |
2,115,437 |
$ |
2,293,872 |
$ |
1,183,217 |
$ |
2,115,437 |
$ |
1,183,217 |
|||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||||||||
Non-GAAP free cash flow reconciliation: |
|||||||||||||||||||
Net cash (used in) provided by operating activities |
$ |
(195,969 |
) |
$ |
(181,343 |
) |
$ |
(37,439 |
) |
$ |
(504,694 |
) |
$ |
54,944 |
|||||
Acquisition of DVD content library |
(14,467 |
) |
(19,786 |
) |
(15,530 |
) |
(57,159 |
) |
(51,425 |
) |
|||||||||
Purchases of property and equipment |
(37,820 |
) |
(27,538 |
) |
(21,032 |
) |
(78,394 |
) |
(54,235 |
) |
|||||||||
Other assets |
(3,760 |
) |
(639 |
) |
341 |
(4,174 |
) |
1,765 |
|||||||||||
Non-GAAP free cash flow |
$ |
(252,016 |
) |
$ |
(229,306 |
) |
$ |
(73,660 |
) |
$ |
(644,421 |
) |
$ |
(48,951 |
) |
11
|
As of / Three Months Ended |
As of/ Nine Months Ended |
||||||||||||||||||
September 30, 2015 |
June 30, 2015 |
September 30, 2014 |
September 30, 2015 |
September 30, 2014 |
|||||||||||||||
Domestic Streaming |
|||||||||||||||||||
Total memberships at end of period |
43,181 |
42,300 |
37,219 |
43,181 |
37,219 |
||||||||||||||
Paid memberships at end of period |
42,068 |
41,057 |
36,265 |
42,068 |
36,265 |
||||||||||||||
Revenues |
$ |
1,063,961 |
$ |
1,025,913 |
$ |
877,150 |
$ |
3,074,406 |
$ |
2,513,992 |
|||||||||
Cost of revenues |
644,914 |
612,691 |
565,251 |
1,840,134 |
1,628,568 |
||||||||||||||
Marketing |
74,835 |
73,427 |
61,045 |
237,813 |
206,030 |
||||||||||||||
Contribution profit |
344,212 |
339,795 |
250,854 |
996,459 |
679,394 |
||||||||||||||
International Streaming |
|||||||||||||||||||
Total memberships at end of period |
25,987 |
23,251 |
15,843 |
25,987 |
15,843 |
||||||||||||||
Paid memberships at end of period |
23,951 |
21,649 |
14,389 |
23,951 |
14,389 |
||||||||||||||
Revenues |
$ |
516,870 |
$ |
454,763 |
$ |
345,685 |
$ |
1,387,030 |
$ |
920,264 |
|||||||||
Cost of revenues |
451,251 |
422,966 |
291,942 |
1,249,495 |
803,906 |
||||||||||||||
Marketing |
133,267 |
123,713 |
84,609 |
362,106 |
197,485 |
||||||||||||||
Contribution profit (loss) |
(67,648 |
) |
(91,916 |
) |
(30,866 |
) |
(224,571 |
) |
(81,127 |
) |
|||||||||
Domestic DVD |
|||||||||||||||||||
Total memberships at end of period |
5,060 |
5,314 |
5,986 |
5,060 |
5,986 |
||||||||||||||
Paid memberships at end of period |
4,971 |
5,219 |
5,899 |
4,971 |
5,899 |
||||||||||||||
Revenues |
$ |
157,524 |
$ |
164,018 |
$ |
186,597 |
$ |
494,742 |
$ |
585,672 |
|||||||||
Cost of revenues |
77,793 |
86,095 |
97,201 |
252,482 |
305,954 |
||||||||||||||
Contribution profit |
79,731 |
77,923 |
89,396 |
242,260 |
279,718 |
||||||||||||||
Consolidated |
|||||||||||||||||||
Revenues |
$ |
1,738,355 |
$ |
1,644,694 |
$ |
1,409,432 |
$ |
4,956,178 |
$ |
4,019,928 |
|||||||||
Cost of revenues |
1,173,958 |
1,121,752 |
954,394 |
3,342,111 |
2,738,428 |
||||||||||||||
Marketing |
208,102 |
197,140 |
145,654 |
599,919 |
403,515 |
||||||||||||||
Contribution profit |
356,295 |
325,802 |
309,384 |
1,014,148 |
877,985 |
||||||||||||||
Other operating expenses |
282,654 |
250,967 |
198,977 |
768,216 |
540,383 |
||||||||||||||
Operating income |
73,641 |
74,835 |
110,407 |
245,932 |
337,602 |
||||||||||||||
Other income (expense) |
(31,403 |
) |
(34,345 |
) |
(12,870 |
) |
(124,778 |
) |
(33,749 |
) |
|||||||||
Provision for income taxes |
12,806 |
14,155 |
38,242 |
41,691 |
120,425 |
||||||||||||||
Net income |
$ |
29,432 |
$ |
26,335 |
$ |
59,295 |
$ |
79,463 |
$ |
183,428 |
12
|
Three Months Ended |
|||||||||||||||||||
September 30, 2014 |
December 31, 2014 |
March 31, 2015 |
June 30, 2015 |
September 30, 2015 |
|||||||||||||||
Non-GAAP Adjusted EBITDA reconciliation: |
|||||||||||||||||||
GAAP net income |
$ |
59,295 |
$ |
83,371 |
$ |
23,696 |
$ |
26,335 |
$ |
29,432 |
|||||||||
Add: |
|||||||||||||||||||
Interest and other (income) expense |
12,870 |
19,530 |
59,030 |
34,345 |
31,403 |
||||||||||||||
Provision (benefit) for income taxes |
38,242 |
(37,855 |
) |
14,730 |
14,155 |
12,806 |
|||||||||||||
Depreciation and amortization of property, equipment and intangibles |
14,357 |
14,312 |
15,167 |
15,581 |
16,047 |
||||||||||||||
Stock-based compensation expense |
29,878 |
30,251 |
27,441 |
28,590 |
32,834 |
||||||||||||||
Adjusted EBITDA |
$ |
154,642 |
$ |
109,609 |
$ |
140,064 |
$ |
119,006 |
$ |
122,522 |
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 |
13
|