Netflix Nets Some Gains: Fool by Numbers

On April 18, Netflix (Nasdaq: NFLX) released first-quarter earnings for the period ended March 31.

• Foolish contributor Rick Munarriz takes a look at this quarter's earnings here. For a look at last quarter, check out this article.
• Revenues jumped 36.2% to $305.3 million, and net profit more than doubled, thanks to 40% growth in Netflix's total subscriber base year over year.
• Subscriber acquisition costs rose 23.4%, while the subscriber churn rate (turnover) increased by 7.3%.
• Even with strong growth and increased margins, the company lowered its guidance for both revenue and subscriber numbers.
• The movie-rental business -- whether online or retail -- hasn't been a favorite of our Motley Fool CAPS community. Netflix has earned only two stars; rival Blockbuster (NYSE: BBI) and movie retailer Movie Gallery (Nasdaq: MOVI) both have the lowest one-star rating.

(Figures in millions, except per-share data.)

Income Statement Highlights

	Q1 2007	Q1 2006	Change
Sales	$305.3	$224.1	36.2%
Net Profit	$9.9	$4.4	124%
EPS	$0.14	$0.07	100%
Diluted Shares	70.7	66.5	6.3%

Get back to basics with the income statement.

Margin Checkup

	Q1 2007	Q1 2006	Change*
Gross Margin	36.1%	33.9%	2.3
Operating Margin	3.7%	2.1%	1.5
Net Margin	3.2%	2%	1.3

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q1 2007	Q1 2006	Change
Cash + ST Invest.	$388.0	$227.8	70.3%
Accounts Rec.	N/A	N/A	N/A
DVD Library	$114.1	$74.0	54.2%

Liabilities	Q1 2007	Q1 2006	Change
Accounts Payable	$94	$78	20.5%
Long-Term Debt	$0.0	$0.0	N/A

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q1 2007	Q1 2006	Change
Cash From Ops.	$63	$46	37%
Capital Expenditures	$18.0	$6.7	169.4%
Free Cash Flow	$45.0	$39.3	14.5%

Free cash flow is a Fool's best friend.

Related Foolishness:

• Netflix Makes the Right Friends
• Is Netflix the Next XM?
• Date Netflix, Marry Amazon, Kill Blockbuster

Netflix is a current Stock Advisor recommendation, and XM Radio is a former Rule Breakers pick. Try out these or any other Foolish newsletter, free for 30 days.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.