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(in millions except per share data and Streaming Content Obligations) |
Q1 '14 |
Q2 '14 |
Q3 '14 |
Q4 '14 |
Q1 '15 |
Q2 '15 Forecast |
||||||||||||
Total Streaming: |
||||||||||||||||||
Revenue |
$ |
1,066 |
$ |
1,146 |
$ |
1,223 |
$ |
1,305 |
$ |
1,400 |
$ |
1,474 |
||||||
Contribution Profit |
$ |
166 |
$ |
212 |
$ |
220 |
$ |
178 |
$ |
247 |
$ |
227 |
||||||
Contribution Margin |
15.6 |
% |
18.5 |
% |
18.0 |
% |
13.6 |
% |
17.7 |
% |
15.4 |
% |
||||||
Paid Members |
46.14 |
47.99 |
50.65 |
54.48 |
59.62 |
62.47 |
||||||||||||
Total Members |
48.35 |
50.05 |
53.06 |
57.39 |
62.27 |
64.77 |
||||||||||||
Net Additions |
4.00 |
1.69 |
3.02 |
4.33 |
4.88 |
2.50 |
||||||||||||
US Streaming: |
||||||||||||||||||
Revenue |
$ |
799 |
$ |
838 |
$ |
877 |
$ |
917 |
$ |
985 |
$ |
1,024 |
||||||
Contribution Profit |
$ |
201 |
$ |
227 |
$ |
251 |
$ |
257 |
$ |
312 |
$ |
328 |
||||||
Contribution Margin |
25.2 |
% |
27.1 |
% |
28.6 |
% |
28.0 |
% |
31.7 |
% |
32.0 |
% |
||||||
Paid Members |
34.38 |
35.09 |
36.27 |
37.70 |
40.32 |
40.97 |
||||||||||||
Total Members |
35.67 |
36.24 |
37.22 |
39.11 |
41.40 |
42.00 |
||||||||||||
Net Additions |
2.25 |
0.57 |
0.98 |
1.90 |
2.28 |
0.60 |
||||||||||||
International Streaming: |
||||||||||||||||||
Revenue |
$ |
267 |
$ |
307 |
$ |
346 |
$ |
388 |
$ |
415 |
$ |
450 |
||||||
Contribution Profit (Loss) |
$ |
(35 |
) |
$ |
(15 |
) |
$ |
(31 |
) |
$ |
(79 |
) |
$ |
(65 |
) |
$ |
(101 |
) |
Contribution Margin |
-13.1 |
% |
-5.0 |
% |
-8.9 |
% |
-20.3 |
% |
-15.6 |
% |
-22.4 |
% |
||||||
Paid Members |
11.76 |
12.91 |
14.39 |
16.78 |
19.30 |
21.50 |
||||||||||||
Total Members |
12.68 |
13.80 |
15.84 |
18.28 |
20.88 |
22.78 |
||||||||||||
Net Additions |
1.75 |
1.12 |
2.04 |
2.43 |
2.60 |
1.90 |
||||||||||||
Total (including DVD): |
||||||||||||||||||
Operating Income |
$ |
98 |
$ |
130 |
$ |
110 |
$ |
65 |
$ |
97 |
$ |
59 |
||||||
Net Income* |
$ |
53 |
$ |
71 |
$ |
59 |
$ |
83 |
$ |
24 |
$ |
16 |
||||||
EPS* |
$ |
0.86 |
$ |
1.15 |
$ |
0.96 |
$ |
1.35 |
$ |
0.38 |
$ |
0.26 |
||||||
Free Cash Flow |
$ |
8 |
$ |
16 |
$ |
(74 |
) |
$ |
(78 |
) |
$ |
(163 |
) |
|||||
Shares (FD) |
61.5 |
61.6 |
61.8 |
61.8 |
62.0 |
|||||||||||||
Streaming Content Obligations** ($B) |
$ |
7.1 |
$ |
7.7 |
$ |
8.9 |
$ |
9.5 |
$ |
9.8 |
||||||||
*Q1'15 EPS would have been $0.77 excluding a F/X loss. Q4'14 Net Income/EPS includes a $39m / $0.63 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
|
Reed Hastings, CEO |
David Wells, CFO |
5
|
IR Contact: |
PR Contact: |
Spencer Wang |
Jonathan Friedland |
Vice President, Finance & Investor Relations |
Chief Communications Officer |
408 540-3700 |
310 734-2958 |
6
|
7
|
Three Months Ended |
|||||||||||
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
|||||||||
Revenues |
$ |
1,573,129 |
$ |
1,484,728 |
$ |
1,270,089 |
|||||
Cost of revenues |
1,046,401 |
1,014,332 |
869,186 |
||||||||
Marketing |
194,677 |
203,671 |
137,098 |
||||||||
Technology and development |
143,106 |
125,876 |
110,310 |
||||||||
General and administrative |
91,489 |
75,803 |
55,900 |
||||||||
Operating income |
97,456 |
65,046 |
97,595 |
||||||||
Other income (expense): |
|||||||||||
Interest expense |
(26,737 |
) |
(13,353 |
) |
(10,052 |
) |
|||||
Interest and other income (expense) |
(32,293 |
) |
(6,177 |
) |
1,401 |
||||||
Income before income taxes |
38,426 |
45,516 |
88,944 |
||||||||
Provision (benefit) for income taxes |
14,730 |
(37,855 |
) |
35,829 |
|||||||
Net income |
$ |
23,696 |
$ |
83,371 |
$ |
53,115 |
|||||
Earnings per share: |
|||||||||||
Basic |
$ |
0.39 |
$ |
1.38 |
$ |
0.89 |
|||||
Diluted |
$ |
0.38 |
$ |
1.35 |
$ |
0.86 |
|||||
Weighted-average common shares outstanding: |
|||||||||||
Basic |
60,518 |
60,321 |
59,817 |
||||||||
Diluted |
61,973 |
61,788 |
61,548 |
Three Months Ended |
||||
March 31, 2015 |
||||
Non-GAAP net income reconciliation: |
||||
GAAP net income |
$ |
23,696 |
||
Add: Foreign exchange impact |
33,696 |
|||
Less: Income tax effect |
(9,383 |
) |
||
Non-GAAP net income |
$ |
48,009 |
||
Non-GAAP earnings per share: |
||||
Basic |
0.79 |
|||
Diluted |
0.77 |
|||
Weighted-average common shares outstanding: |
||||
Basic |
60,518 |
|||
Diluted |
61,973 |
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 |
0.74 |
|||
Diluted |
0.72 |
|||
Weighted-average common shares outstanding: |
||||
Basic |
60,321 |
|||
Diluted |
61,788 |
8
|
As of |
|||||||
March 31, 2015 |
December 31, 2014 |
||||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
2,454,777 |
$ |
1,113,608 |
|||
Short-term investments |
502,931 |
494,888 |
|||||
Current content library, net |
2,370,447 |
2,125,702 |
|||||
Other current assets |
210,901 |
206,271 |
|||||
Total current assets |
5,539,056 |
3,940,469 |
|||||
Non-current content library, net |
3,312,353 |
2,773,326 |
|||||
Property and equipment, net |
145,816 |
149,875 |
|||||
Other non-current assets |
243,401 |
192,981 |
|||||
Total assets |
$ |
9,240,626 |
$ |
7,056,651 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Current content liabilities |
$ |
2,425,619 |
$ |
2,117,241 |
|||
Accounts payable |
190,567 |
201,581 |
|||||
Accrued expenses |
107,323 |
69,746 |
|||||
Deferred revenue |
285,340 |
274,586 |
|||||
Total current liabilities |
3,008,849 |
2,663,154 |
|||||
Non-current content liabilities |
1,861,791 |
1,575,832 |
|||||
Long-term debt |
2,400,000 |
900,000 |
|||||
Other non-current liabilities |
60,772 |
59,957 |
|||||
Total liabilities |
7,331,412 |
5,198,943 |
|||||
Stockholders' equity: |
|||||||
Common stock, $0.001 par value; 160,000,000 shares authorized at March 31, 2015 and December 31, 2014; 60,620,721 and 60,415,841 issued and outstanding at March 31, 2015 and December 31, 2014, respectively |
61 |
60 |
|||||
Additional paid-in capital |
1,109,327 |
1,042,810 |
|||||
Accumulated other comprehensive loss |
(43,154 |
) |
(4,446 |
) |
|||
Retained earnings |
842,980 |
819,284 |
|||||
Total stockholders' equity |
1,909,214 |
1,857,708 |
|||||
Total liabilities and stockholders' equity |
$ |
9,240,626 |
$ |
7,056,651 |
9
|
Three Months Ended |
|||||||||||
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
|||||||||
Cash flows from operating activities: |
|||||||||||
Net income |
$ |
23,696 |
$ |
83,371 |
$ |
53,115 |
|||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|||||||||||
Additions to streaming content library |
(1,611,925 |
) |
(1,008,262 |
) |
(749,399 |
) |
|||||
Change in streaming content liabilities |
626,325 |
125,770 |
42,244 |
||||||||
Amortization of streaming content library |
749,518 |
730,353 |
600,735 |
||||||||
Amortization of DVD content library |
21,185 |
20,178 |
16,121 |
||||||||
Depreciation and amortization of property, equipment and intangibles |
15,167 |
14,312 |
12,382 |
||||||||
Stock-based compensation expense |
27,441 |
30,251 |
25,825 |
||||||||
Excess tax benefits from stock-based compensation |
(29,001 |
) |
(20,921 |
) |
(32,732 |
) |
|||||
Other non-cash items |
6,306 |
6,475 |
2,196 |
||||||||
Deferred taxes |
(37,042 |
) |
7,501 |
(13,103 |
) |
||||||
Changes in operating assets and liabilities: |
|||||||||||
Other current assets |
23,109 |
(36,099 |
) |
35,066 |
|||||||
Accounts payable |
(10,625 |
) |
51,083 |
22,812 |
|||||||
Accrued expenses |
35,922 |
4,050 |
(442 |
) |
|||||||
Deferred revenue |
10,754 |
21,630 |
14,248 |
||||||||
Other non-current assets and liabilities |
21,788 |
(68,153 |
) |
7,291 |
|||||||
Net cash (used in) provided by operating activities |
(127,382 |
) |
(38,461 |
) |
36,359 |
||||||
Cash flows from investing activities: |
|||||||||||
Acquisition of DVD content library |
(22,906 |
) |
(23,365 |
) |
(14,914 |
) |
|||||
Purchases of property and equipment |
(13,036 |
) |
(15,491 |
) |
(13,334 |
) |
|||||
Other assets |
225 |
(431 |
) |
295 |
|||||||
Purchases of short-term investments |
(90,940 |
) |
(71,597 |
) |
(60,546 |
) |
|||||
Proceeds from sale of short-term investments |
51,948 |
45,022 |
143,048 |
||||||||
Proceeds from maturities of short-term investments |
31,887 |
14,721 |
3,090 |
||||||||
Net cash (used in) provided by investing activities |
(42,822 |
) |
(51,141 |
) |
57,639 |
||||||
Cash flows from financing activities: |
|||||||||||
Proceeds from issuance of common stock |
10,916 |
3,750 |
32,448 |
||||||||
Proceeds from issuance of debt |
1,500,000 |
— |
400,000 |
||||||||
Issuance costs |
(17,232 |
) |
— |
(6,727 |
) |
||||||
Excess tax benefits from stock-based compensation |
29,001 |
20,921 |
32,732 |
||||||||
Principal payments of lease financing obligations |
(251 |
) |
(280 |
) |
(267 |
) |
|||||
Net cash provided by financing activities |
1,522,434 |
24,391 |
458,186 |
||||||||
Effect of exchange rate changes on cash and cash equivalents |
(11,061 |
) |
(4,398 |
) |
301 |
||||||
Net increase (decrease) in cash and cash equivalents |
1,341,169 |
(69,609 |
) |
552,485 |
|||||||
Cash and cash equivalents, beginning of period |
1,113,608 |
1,183,217 |
604,965 |
||||||||
Cash and cash equivalents, end of period |
$ |
2,454,777 |
$ |
1,113,608 |
$ |
1,157,450 |
|||||
Three Months Ended |
|||||||||||
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
|||||||||
Non-GAAP free cash flow reconciliation: |
|||||||||||
Net cash (used in) provided by operating activities |
$ |
(127,382 |
) |
$ |
(38,461 |
) |
$ |
36,359 |
|||
Acquisition of DVD content library |
(22,906 |
) |
(23,365 |
) |
(14,914 |
) |
|||||
Purchases of property and equipment |
(13,036 |
) |
(15,491 |
) |
(13,334 |
) |
|||||
Other assets |
225 |
(431 |
) |
295 |
|||||||
Non-GAAP free cash flow |
$ |
(163,099 |
) |
$ |
(77,748 |
) |
$ |
8,406 |
10
|
As of / Three Months Ended |
|||||||||||
March 31, 2015 |
December 31, 2014 |
March 31, 2014 |
|||||||||
Domestic Streaming |
|||||||||||
Total members at end of period |
41,397 |
39,114 |
35,674 |
||||||||
Paid members at end of period |
40,315 |
37,698 |
34,377 |
||||||||
Revenues |
$ |
984,532 |
$ |
917,442 |
$ |
798,617 |
|||||
Cost of revenues |
582,529 |
573,193 |
517,094 |
||||||||
Marketing |
89,551 |
87,423 |
80,258 |
||||||||
Contribution profit |
312,452 |
256,826 |
201,265 |
||||||||
International Streaming |
|||||||||||
Total members at end of period |
20,877 |
18,277 |
12,683 |
||||||||
Paid members at end of period |
19,304 |
16,778 |
11,755 |
||||||||
Revenues |
$ |
415,397 |
$ |
387,797 |
$ |
267,118 |
|||||
Cost of revenues |
375,278 |
350,211 |
245,267 |
||||||||
Marketing |
105,126 |
116,248 |
56,840 |
||||||||
Contribution profit (loss) |
(65,007 |
) |
(78,662 |
) |
(34,989 |
) |
|||||
Domestic DVD |
|||||||||||
Total members at end of period |
5,564 |
5,767 |
6,652 |
||||||||
Paid members at end of period |
5,470 |
5,668 |
6,509 |
||||||||
Revenues |
$ |
173,200 |
$ |
179,489 |
$ |
204,354 |
|||||
Cost of revenues |
88,594 |
90,928 |
106,825 |
||||||||
Contribution profit |
84,606 |
88,561 |
97,529 |
||||||||
Consolidated |
|||||||||||
Revenues |
$ |
1,573,129 |
$ |
1,484,728 |
$ |
1,270,089 |
|||||
Cost of revenues |
1,046,401 |
1,014,332 |
869,186 |
||||||||
Marketing |
194,677 |
203,671 |
137,098 |
||||||||
Contribution profit |
332,051 |
266,725 |
263,805 |
||||||||
Other operating expenses |
234,595 |
201,679 |
166,210 |
||||||||
Operating income |
97,456 |
65,046 |
97,595 |
||||||||
Other income (expense) |
(59,030 |
) |
(19,530 |
) |
(8,651 |
) |
|||||
Provision (benefit) for income taxes |
14,730 |
(37,855 |
) |
35,829 |
|||||||
Net income |
$ |
23,696 |
$ |
83,371 |
$ |
53,115 |
11
|