On July 26, movie rental veteran Blockbuster (NYSE:BBI) released second-quarter earnings for the period ended July 1.
- The bright spot in this gloomy report was the 157% surge in total subscribers for the company's online rental service, Total Access. This brought the total customer base to 3 million, up from just 1.4 million in last year's second quarter.
- Total operating expenses decreased by $83.2 million, after the company realized a $77.7 million gain by selling its Gamestation operations to Britain's GAME.
- Margins plummeted as the company bought additional rental products to support customers' in-store exchanges. The extra demand came from spiking growth in Total Access.
- It looks like management improved its balance sheet, but keep in mind that the company paid down debt and registered a higher cash balance mostly through asset sales.
- Any discussion of Blockbuster these days feels incomplete without at least a nod to Netflix (NASDAQ:NFLX). Compare and contrast the companies here.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q2 2007 |
Q2 2006 |
Change | |
|---|---|---|---|
|
Sales |
$1,263 |
$1,300 |
(2.8%) |
|
Net Profit |
($36) |
$68 |
N/A |
|
EPS |
($0.20) |
$0.31 |
N/A |
|
Diluted Shares |
190.0 |
217.9 |
(12.8%) |
Get back to basics with the income statement.
Margin Checkup
|
Q2 2007 |
Q2 2006 |
Change* | |
|---|---|---|---|
|
Gross Margin |
50.3% |
56.2% |
(5.9) |
|
Operating Margin |
(1.1%) |
(0.2%) |
(0.9) |
|
Net Margin |
(2.8%) |
5.3% |
(8.1) |
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Cash + ST Invest. |
$148 |
$125 |
18.3% |
|
Inventory |
$720 |
$732 |
(1.6%) |
|
Liabilities |
Q2 2007 |
Q2 2006 |
Change |
|---|---|---|---|
|
Accounts Payable |
$378 |
$306 |
23.4% |
|
Total Debt* |
$817 |
$1004 |
(18.6%) |
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q2 2007 |
Q2 2006 |
Change | |
|---|---|---|---|
|
Cash From Ops. |
($40.3) |
($23.3) |
(73.0%) |
|
Capital Expenditures |
$19.5 |
$15.7 |
24.2% |
|
Free Cash Flow |
($59.8) |
($39.0) |
(53.3%) |
Free cash flow is a Fool's best friend.
Related Foolishness:
- Blockbuster's Joy-Buzzer Handshake
- Fool Video: Is Netflix in Trouble?
- Netflix Is Out in More Ways Than One
- Foolish Forecast: Blockbuster's Last Stand
- Foolish Fundamentals: Free Cash Flow
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 with no position in any other company mentioned. Netflix is a Stock Advisor pick. Fool rules are here.
