10-KPeriod: FY2009

NETFLIX INC Annual Report, Year Ended Dec 31, 2009

Filed February 22, 2010For Securities:NFLX

Summary

Netflix, Inc.'s 2009 Form 10-K report highlights a company experiencing significant growth in its subscriber base, driven by its hybrid model of DVD-by-mail and burgeoning streaming services. With over 12 million subscribers at the end of 2009, Netflix demonstrated robust revenue growth and improving operating income. The company's core strategy revolved around providing compelling value through a low monthly fee for access to both DVD and streaming content, leveraging its proprietary recommendation technology to enhance user experience and manage inventory. Looking ahead, Netflix explicitly stated its plan for limited international expansion in 2010 and anticipated that internet delivery of content would eventually surpass DVD as the primary viewing method. The report also detailed significant investments in technology and content acquisition, particularly for streaming, as it positioned itself for the future of digital media consumption. Despite facing intense competition and economic uncertainties, Netflix appeared to be executing its growth strategy effectively, focusing on subscriber acquisition and retention.

Financial Highlights

49 data points
Beta

Revenue

$1.67B

35.4% Gross Margin

Net Income

$115.86M

6.9% Net Margin

EPS (Diluted)

$0.03

Total Assets

$679.73M

Cash & Equivalents

$134.22M

Free Cash Flow

$279.13M

Financial Statements
Beta
Revenue$1.67B
Cost of Revenue$1.08B
Gross Profit$591.00M
R&D Expenses$114.54M
Operating Expenses$399.06M
Operating Income$191.94M
Interest Expense$6.47M
Net Income$115.86M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)3.96B
Shares Outstanding (Diluted)4.09B

Key Highlights

  • 112.2 million subscribers at year-end 2009, a 30.6% increase from the prior year.
  • 2Revenues grew by 22.4% to $1.67 billion in 2009.
  • 3Net income increased by 39.6% to $115.9 million in 2009.
  • 4Launched a new stock repurchase program authorized for up to $300 million.
  • 5Expanded streaming content library and capabilities, anticipating a shift from DVD to internet delivery.
  • 6Maintained a strong focus on proprietary recommendation and merchandising technology to enhance user experience and optimize library utilization.
  • 7Planned limited international expansion for the streaming service in 2010.

Frequently Asked Questions

Netflix's primary business model is a hybrid subscription service offering both DVD-by-mail rentals and unlimited movie and TV episode streaming over the internet. Subscribers pay a single low monthly fee for access to both services.

Netflix emphasizes its iconic brand with high customer satisfaction and loyalty, its personalized merchandising through proprietary recommendation technology, its growing scale leading to operational efficiencies and competitive pricing, and the convenience, selection, and fast delivery of its services.

Key risks include the inability to attract and retain subscribers due to intense competition and economic downturns, potential deterioration of the DVD format's popularity, challenges in securing content licenses for streaming, reliance on third-party devices for streaming, and the operational risks associated with its technology and delivery infrastructure.

Yes, the company states in the report that it plans to launch a limited international expansion with a streaming subscription service in 2010.