By
Anders Bylund
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More Articles
January 24, 2008
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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
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FY 2006
|
Change
|
|
Sales
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$1,205.3
|
$996.7
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20.9%
|
|
Net Profit
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$67.0
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$49.1
|
36.4%
|
|
EPS
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$0.97
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$0.71
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36.6%
|
|
Diluted Shares
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68.9
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69.1
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(0.3%)
|
Get back to basics with the income statement.
Margin Checkup
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FY 2007
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FY 2006
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Change*
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|
Gross
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34.8%
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37.1%
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(2.3)
|
|
Operating
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7.6%
|
6.5%
|
1.1
|
|
Net
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5.6%
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4.9%
|
0.6
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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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FY 2007
|
FY 2006
|
Change
|
|
Cash + Short-term Investments
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$385.1
|
$400.4
|
(3.8%)
|
|
Content Library
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$132.5
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$104.9
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26.3%
|
|
Liabilities
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FY 2007
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FY 2006
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Change
|
|
Accounts Payable
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$104.4
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$93.9
|
11.3%
|
|
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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FY 2007
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FY 2006
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Change
|
|
Cash From Ops.
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$290.1
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$247.9
|
17.1%
|
|
Capital Expenditures
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$44.3
|
$27.3
|
61.9%
|
|
Free Cash Flow
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$245.9
|
$220.5
|
11.5%
|
|
Owner Earnings
|
$247.4
|
$178.8
|
38.3%
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Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
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CAPS Rating
|
|
Apple (Nasdaq: AAPL )
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$122,193
|
30.5
|
***
|
|
Amazon.com (Nasdaq: AMZN )
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$30,711
|
85.4
|
**
|
|
Time Warner Cable (NYSE: TWC )
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$24,228
|
23.3
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**
|
|
Netflix
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$1,563
|
25.1
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**
|
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Blockbuster (NYSE: BBI )
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$674
|
N/A
|
*
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Using the latest reported numbers from Capital IQ. Keep your partners close and the competition in your vest pocket.
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