On July 23, online DVD rental pioneer Netflix
- For more analysis on Netflix, Foolish contributor Rick Munarriz digs into the earnings release.
- Solid earnings and sales, with a healthy cash balance and widening income margins -- you wouldn't know from the numbers that Netflix is in a bitter battle for market share with old-line incumbent Blockbuster
(NYSE:BBI) . - That is, unless you also look at subscriber additions, where Netflix actually lost more customers than it gained this quarter -- for the first time in company history.
- In response to Blockbuster's aggressive value proposition for consumers, Netflix has cut its own plan rental prices and balanced that revenue sacrifice with a lower marketing budget. In the current situation, management thinks that presenting cheaper rentals is the way to win customers' hearts, rather than a full-on marketing blitz.
- Settling the patent lawsuit against Blockbuster added $4.1 million to net income, or $0.06 per share.
- Netflix is a two-star stock in CAPS, our free interactive stock database. That's a step up from Blockbuster's one-star (out of five) ranking.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q2 2007 |
Q2 2006 |
Change |
|
|---|---|---|---|
|
Sales |
$303.7 |
$239.4 |
26.9% |
|
Net Profit |
$25.6 |
$17.0 |
50.1% |
|
EPS |
$0.37 |
$0.25 |
48.0% |
|
Diluted Shares |
69.9 |
69.2 |
1.0% |
Get back to basics with the income statement.
Margin Checkup
|
Q2 2007 |
Q2 2006 |
Change* |
|
|---|---|---|---|
|
Gross Margin |
35.2% |
37.2% |
(2.0) |
|
Operating Margin |
12.6% |
10.0% |
2.6 |
|
Net Margin |
8.4% |
7.1% |
1.3 |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$378.0 |
$341.7 |
10.6% |
|
Content Library |
$113.9 |
$79.0 |
44.1% |
|
Liabilities |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$70.8 |
$70.8 |
0.0% |
|
Long-Term Debt |
$0.0 |
$0.0 |
N/A |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q2 2007 |
Q2 2006 |
Change |
|
|---|---|---|---|
|
Cash From Ops. |
$72.1 |
$53.3 |
35.3% |
|
Capital Expenditures |
$9.0 |
$3.9 |
130.4% |
|
Free Cash Flow |
$63.2 |
$49.4 |
27.8% |
Free cash flow is a Fool's best friend.
Related Foolishness:
- Red Mailers, Blue Investors
- Foolish Forecast: Netflix Is the Cat's Meow
- Blockbuster's Joy-Buzzer Handshake
- Fool.com: Wrath of the DVD [Post of the Day] February 14, 2007
Netflix is an official Motley Fool Stock Advisor recommendation and an honorary Rule Breaker. Read all about it with a handful of free 30-day trial passes.
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.
At the time of publication, Anders Bylund was a Netflix shareholder, but had no other position in any company mentioned. Fool rules are here.
