Netflix Coasts Into 2008: Fool by Numbers
By
Anders Bylund
January 24, 2008
|
On Jan. 23, online video pioneer Netflix (Nasdaq: NFLX) released earnings for the 2007 fiscal year -- a period ended Dec. 31, 2007.
- My prediction of 7.5 million subscribers proved correct -- 6% growth from the previous quarter and 18% year over year.
- On the other hand, it cost Netflix only $40.88 to attract each new customer in 2007, compared to $42.96 per head in 2006. Light marketing at the end of the year helped the company cross the finish line at just $34.60 per gross addition in the fourth quarter.
- Ponder this chain reaction: 18% more subscribers begat 21% higher sales, which in turn sired 36% fatter net profits, father of 37% EPS growth. This is one efficient business machine.
(Figures are in millions, except per-share data.)
Income Statement Highlights
|
FY 2007
|
FY 2006
|
Change
|
|
Sales
|
$1,205.3
|
$996.7
|
20.9%
|
|
Net Profit
|
$67.0
|
$49.1
|
36.4%
|
|
EPS
|
$0.97
|
$0.71
|
36.6%
|
|
Diluted Shares
|
68.9
|
69.1
|
(0.3%)
|
Get back to basics with the income statement.
Margin Checkup
|
FY 2007
|
FY 2006
|
Change*
|
|
Gross Margin
|
34.8%
|
37.1%
|
(2.3)
|
|
Operating Margin
|
7.6%
|
6.5%
|
1.1
|
|
Net Margin
|
5.6%
|
4.9%
|
0.6
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
FY 2007
|
FY 2006
|
Change
|
|
Cash + Short-term Investments
|
$385.1
|
$400.4
|
(3.8%)
|
|
Content Library
|
$132.5
|
$104.9
|
26.3%
|
|
Liabilities
|
FY 2007
|
FY 2006
|
Change
|
|
Accounts Payable
|
$104.4
|
$93.9
|
11.3%
|
|
Long-Term Debt
|
$0.0
|
$0.0
|
N/A
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
FY 2007
|
FY 2006
|
Change
|
|
Cash From Ops.
|
$290.1
|
$247.9
|
17.1%
|
|
Capital Expenditures
|
$44.3
|
$27.3
|
61.9%
|
|
Free Cash Flow
|
$245.9
|
$220.5
|
11.5%
|
|
Owner Earnings
|
$247.4
|
$178.8
|
38.3%
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
|
CAPS Rating
|
|
Apple (Nasdaq: AAPL)
|
$122,193
|
30.5
|
***
|
|
Amazon.com (Nasdaq: AMZN)
|
$30,711
|
85.4
|
**
|
|
Time Warner Cable (NYSE: TWC)
|
$24,228
|
23.3
|
**
|
|
Netflix
|
$1,563
|
25.1
|
**
|
|
Blockbuster (NYSE: BBI)
|
$674
|
N/A
|
*
|
Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.
Related Foolishness:
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