Netflix Shocks the Street, Not the Fool: Fool by Numbers
By Anders Bylund
October 23, 2007
On Oct. 22, movies-by-mail pioneer Netflix (Nasdaq: NFLX) released third-quarter earnings for the period ended Sept. 30, 2007.
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Few balance sheets are as easy to read as this one. Netflix records all sales as cash, so there are no accounts receivable, and the company is debt-free. It's as close to
cash accounting as a company with $1.1 billion in annual sales can get.
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Netflix grew its subscriber count by 4.2% sequentially over last quarter after reporting its
first-ever sequential drop in the second quarter. The monthly churn rate pulled back 0.4 percentage points to 4.2%, and the company spent $38 in marketing for each new subscriber -- down from $44 last quarter and $45 a year ago.
(Figures in millions, except per-share data)
Income Statement Highlights
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Q3 2007
|
Q3 2006
|
Change
|
|
Sales
|
$294.0
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$256.0
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14.9%
|
|
Net Profit
|
$15.7
|
$12.8
|
23.1%
|
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EPS
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$0.23
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$0.18
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27.8%
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Diluted Shares
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68.1
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70.3
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(3.2%)
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Get back to basics with the income statement.
Margin Checkup
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Q3 2007
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Q3 2006
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Change*
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Gross Margin
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33.9%
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38%
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(4.1)
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Operating Margin
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7.3%
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6.7%
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0.7
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Net Margin
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5.4%
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5%
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0.4
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*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
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Assets
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Q3 2007
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Q3 2006
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Change
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Cash + ST Invest.
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$386.2
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$368.7
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4.7%
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Liabilities
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Q3 2007
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Q3 2006
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Change
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Accounts Payable
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$89.5
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$82.0
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9.1%
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Long-Term Debt
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$0.0
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$0.0
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N/A
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The balance sheet reflects the company's health.
Cash Flow Highlights
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Q3 2007
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Q3 2006
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Change
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Cash From Ops.
|
$77.6
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$61.5
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26.2%
|
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Capital Expenditures
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$7.4
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$5.2
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41.7%
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Free Cash Flow
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$70.2
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$56.2
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24.8%
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Owner Earnings
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$27.6
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$14.3
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92.9%
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Free cash flow is a Fool's best friend.
Competitive Context
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Market Cap
|
Trailing P/E Ratio
|
CAPS Rating
|
Bull Ratio
|
|
Netflix
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$1,617
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21.3
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**
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79%
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Blockbuster (NYSE: BBI)
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$1,019
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N/A
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*
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47%
|
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Amazon.com (Nasdaq: AMZN)
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$37,433
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124.7
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**
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55%
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Apple (Nasdaq: AAPL)
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$150,883
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43.2
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***
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88%
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Movie Gallery (Nasdaq: MOVI)
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$6.6
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N/A
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*
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8%
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Using the latest reported numbers from Capital IQ.
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