10-QPeriod: Q1 FY2009

NETFLIX INC Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:NFLX

Summary

Netflix, Inc. reported its first quarter 2009 financial results, showcasing continued growth and profitability. Revenue reached $394.1 million, a 20.8% increase year-over-year, driven by a 25% rise in average paying subscribers to 9.64 million. Net income grew significantly to $22.4 million, or $0.37 per diluted share, compared to $13.3 million, or $0.21 per diluted share, in the prior year's first quarter. This strong performance highlights the company's ability to scale its subscriber base and manage costs effectively, even as it invests in expanding its streaming content library. The company continues to see positive trends in key operational metrics. Subscriber acquisition cost decreased to $25.79, indicating improved marketing efficiency. While average monthly revenue per paying subscriber saw a slight dip to $13.63, this was largely due to the increasing popularity of lower-priced subscription plans. The company also maintained a healthy gross margin of 34.2%, improved from 31.7% in the prior year, signaling operational leverage and effective cost management, particularly with its DVD-by-mail service.

Financial Highlights

28 data points
Beta

Revenue

$394.10M

34.2% Gross Margin

Net Income

$22.36M

5.7% Net Margin

EPS (Diluted)

$0.01

Cash & Equivalents

$115.13M

Free Cash Flow

$59.06M

Financial Statements
Beta
Revenue$394.10M
Cost of Revenue$259.27M
Gross Profit$134.83M
R&D Expenses$24.20M
Operating Expenses$98.36M
Operating Income$36.47M
Interest Expense$670K
Net Income$22.36M
EPS (Basic)$0.01
EPS (Diluted)$0.01
Shares Outstanding (Basic)4.11B
Shares Outstanding (Diluted)4.25B

Key Highlights

  • 1Revenue increased by 20.8% year-over-year to $394.1 million.
  • 2Net income rose to $22.4 million ($0.37/share diluted) from $13.3 million ($0.21/share diluted) in Q1 2008.
  • 3Total subscribers grew by 25% year-over-year to 10.31 million.
  • 4Subscriber Acquisition Cost (SAC) improved significantly to $25.79 from $29.48 in Q1 2008.
  • 5Gross margin improved to 34.2% from 31.7% in Q1 2008, indicating better operational efficiency.
  • 6The company announced a $132 million stock repurchase program for 2009 and repurchased approximately $43 million in Q1.
  • 7Investments in streaming content are increasing, alongside the continued focus on the DVD-by-mail business.

Frequently Asked Questions

Netflix reported a strong Q1 2009 with revenue growing 20.8% year-over-year to $394.1 million. Net income also saw substantial growth, reaching $22.4 million, or $0.37 per diluted share, up from $13.3 million, or $0.21 per diluted share, in the same period last year.

Subscriber growth remains robust, with total subscribers reaching 10.31 million at the end of Q1 2009, a 25% increase from the prior year. The company has also become more efficient in acquiring new customers, as evidenced by a significant decrease in Subscriber Acquisition Cost (SAC) to $25.79, down from $29.48 in Q1 2008.

Netflix continues to offer a dual strategy of DVD-by-mail and streaming. While the DVD library remains extensive, the company is increasing its investments in streaming content. However, it notes that streaming content choices are currently limited compared to its DVD offerings, and it expects DVDs to remain the primary viewing method for most subscribers in the near future.

Netflix is involved in several legal proceedings, including purported anti-trust class action suits and patent infringement claims. The company also faces risks outlined in its prior filings, such as competition, dependence on third-party content providers, and the evolving landscape of digital content delivery. These are detailed in the 'Legal Proceedings' and 'Risk Factors' sections of the filing.