Summary
Netflix's second-quarter 2015 report shows robust global membership growth, up 31% year-over-year to over 65 million. This expansion fueled a 23% increase in consolidated revenues, reaching $1.64 billion. However, the company experienced a significant 42% decrease in operating income and a 63% drop in net income compared to the prior year. This decline is attributed to increased investments in content and international expansion, alongside higher interest expenses related to new debt issuance. The domestic streaming segment continues to be a strong performer, with revenues up 22% and contribution profit soaring by 50%, driven by membership growth and price adjustments. Conversely, the international segment, while showing impressive revenue growth of 48%, incurred a significantly larger contribution loss (up 502%) due to aggressive investment in new markets and content, compounded by unfavorable foreign currency exchange rates. The legacy DVD business continued its decline, with revenues down 16%. Investors should monitor the company's strategy of prioritizing global streaming growth, which necessitates substantial upfront investment in content and international markets, impacting near-term profitability.
Financial Highlights
47 data points| Revenue | $1.64B |
| Cost of Revenue | $1.12B |
| Gross Profit | $522.94M |
| R&D Expenses | $155.06M |
| Operating Income | $74.83M |
| Interest Expense | $35.22M |
| Net Income | $26.34M |
| EPS (Basic) | $0.01 |
| EPS (Diluted) | $0.01 |
| Shares Outstanding (Basic) | 4.25B |
| Shares Outstanding (Diluted) | 4.36B |
Key Highlights
- 1Global streaming memberships surged 31% year-over-year to 65.55 million as of June 30, 2015.
- 2Consolidated revenues grew 23% to $1.64 billion for the quarter ended June 30, 2015.
- 3Operating income decreased by 42% to $74.8 million, and net income fell 63% to $26.3 million, reflecting increased investment costs.
- 4Domestic streaming segment contribution profit increased by 50% to $339.8 million, with contribution margin improving to 33%.
- 5International streaming segment revenue increased by 48%, but contribution loss widened significantly to $91.9 million due to expansion costs and foreign currency impacts.
- 6Total streaming content obligations, a key indicator of future content spending, stood at $10.1 billion, with substantial amounts due in the next 1-3 years.
- 7Free cash flow turned negative for the quarter, reaching $(229.3) million, a significant decline from $16.3 million in the prior year, primarily due to increased content payments.