Netflix, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30,
2014
June 30,
2014
September 30,
2013 (1)
September 30,
2014
September 30,
2013 (1)
Revenues $ 1,409,432 $1,340,407 $ 1,105,999 $ 4,019,928 $ 3,199,332
Cost of revenues 954,394 914,848 798,900 2,738,428 2,296,526
Marketing 145,654 120,763 108,228 403,515 341,925
Technology and development 120,953 115,182 95,540 346,445 280,641
General and administrative 78,024 60,014 46,211 193,938 134,181
Operating income 110,407 129,600 57,120 337,602 146,059
Other income (expense):
Interest expense (13,486) (13,328) (7,436) (36,866) (21,704)
Interest and other income (expense) 616 1,100 (193) 3,117 (2,156)
Loss on extinguishment of debt — — — — (25,129)
Income before income taxes 97,537 117,372 49,491 303,853 97,070
Provision for income taxes 38,242 46,354 17,669 120,425 33,088
Net income $ 59,295 $ 71,018 $ 31,822 $ 183,428 $ 63,982
Earnings per share:
Basic $ 0.99 $ 1.18 $ 0.54 $ 3.06 $ 1.11
Diluted $ 0.96 $ 1.15 $ 0.52 $ 2.97 $ 1.06
Weighted-average common shares outstanding:
Basic 60,171 59,996 59,108 59,996 57,769
Diluted 61,820 61,634 60,990 61,669 60,578
(1) Certain prior period amounts have been reclassified from "Marketing" to "Cost of revenues" to conform to current period
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Netflix, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share and par value data)
As of
September 30,
2014
December 31,
2013
Assets
Current assets:
Cash and cash equivalents $ 1,183,217 $ 604,965
Short-term investments 483,602 595,440
Current content library, net 2,006,981 1,706,421
Other current assets 149,682 151,937
Total current assets 3,823,482 3,058,763
Non-current content library, net 2,631,882 2,091,071
Property and equipment, net 144,147 133,605
Other non-current assets 178,818 129,124
Total assets $ 6,778,329 $ 5,412,563
Liabilities and Stockholders' Equity
Current liabilities:
Current content liabilities $ 2,074,766 $ 1,775,983
Accounts payable 150,374 108,435
Accrued expenses 70,559 54,018
Deferred revenue 252,956 215,767
Total current liabilities 2,548,655 2,154,203
Non-current content liabilities 1,510,403 1,345,590
Long-term debt 900,000 500,000
Other non-current liabilities 94,397 79,209
Total liabilities 5,053,455 4,079,002
Stockholders' equity:
Common stock, $0.001 par value; 160,000,000 shares authorized at September 30,
2014 and December 31, 2013; 60,246,379 and 59,607,001 issued and
outstanding at September 30, 2014 and December 31, 2013, respectively 60 60
Additional paid-in capital 987,256 777,441
Accumulated other comprehensive income 1,645 3,575
Retained earnings 735,913 552,485
Total stockholders' equity 1,724,874 1,333,561
Total liabilities and stockholders' equity $ 6,778,329 $ 5,412,563
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Netflix, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30,
2014
June 30,
2014
September 30,
2013
September 30,
2014
September 30,
2013
Cash flows from operating activities:
Net income $ 59,295 $ 71,018 $ 31,822 $ 183,428 $ 63,982
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Additions to streaming content library (1,202,484) (813,314) (878,314) (2,765,197) (2,063,709)
Change in streaming content liabilities 346,752 78,359 310,191 467,355 327,175
Amortization of streaming content library 686,154 639,037 553,394 1,925,926 1,549,384
Amortization of DVD content library 18,269 16,923 17,546 51,313 53,492
Depreciation and amortization of property, equipment and
intangibles
14,357 12,977 11,452 39,716 35,529
Stock-based compensation expense 29,878 29,285 18,477 84,988 54,178
Excess tax benefits from stock-based compensation (21,060) (14,628) (20,492) (68,420) (52,475)
Other non-cash items 3,360 3,251 1,994 8,807 4,932
Loss on extinguishment of debt — — — — 25,129
Deferred taxes (7,892) (16,569) (2,424) (37,564) (11,212)
Changes in operating assets and liabilities:
Other current assets 12,960 (20,685) 9,920 27,341 37,955
Accounts payable 13,003 (3,086) (5,877) 32,729 6,004
Accrued expenses (6,980) 59,008 (11,451) 51,586 (5,089)
Deferred revenue 11,626 11,315 9,252 37,189 26,351
Other non-current assets and liabilities 5,323 3,133 (10,797) 15,747 4,760
Net cash (used in) provided by operating activities (37,439) 56,024 34,693 54,944 56,386
Cash flows from investing activities:
Acquisition of DVD content library (15,530) (20,981) (15,471) (51,425) (50,687)
Purchases of property and equipment (21,032) (19,869) (10,828) (54,235) (31,034)
Other assets 341 1,129 (1,329) 1,765 3,808
Purchases of short-term investments (123,883) (170,908) (116,116) (355,337) (497,789)
Proceeds from sale of short-term investments 107,568 89,662 81,185 340,278 196,392
Proceeds from maturities of short-term investments 32,125 92,014 48,890 127,229 58,720
Net cash (used in) provided by investing activities (20,411) (28,953) (13,669) 8,275 (320,590)
Cash flows from financing activities:
Proceeds from issuance of common stock 9,877 14,469 25,561 56,794 93,553
Proceeds from issuance of debt — — — 400,000 500,000
Issuance costs — (353) — (7,080) (9,414)
Redemption of debt — — — — (219,362)
Excess tax benefits from stock-based compensation 21,060 14,628 20,492 68,420 52,475
Principal payments of lease financing obligations (275) (271) (258) (813) (916)
Net cash provided by financing activities 30,662 28,473 45,795 517,321 416,336
Effect of exchange rate changes on cash and cash equivalents (3,839) 1,250 1,559 (2,288) (3,367)
Net (decrease) increase in cash and cash equivalents (31,027) 56,794 68,378 578,252 148,765
Cash and cash equivalents, beginning of period 1,214,244 1,157,450 370,678 604,965 290,291
Cash and cash equivalents, end of period $ 1,183,217 $ 1,214,244 $ 439,056 $ 1,183,217 $ 439,056
Three Months Ended Nine Months Ended
September 30,
2014
June 30,
2014
September 30,
2013
September 30,
2014
September 30,
2013
Non-GAAP free cash flow reconciliation:
Net cash (used in) provided by operating activities $ (37,439) $ 56,024 $ 34,693 $ 54,944 $ 56,386
Acquisition of DVD content library (15,530) (20,981) (15,471) (51,425) (50,687)
Purchases of property and equipment (21,032) (19,869) (10,828) (54,235) (31,034)
Other assets 341 1,129 (1,329) 1,765 3,808
Non-GAAP free cash flow $ (73,660) $ 16,303 $ 7,065 $ (48,951) $ (21,527)
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Netflix, Inc.
Segment Information
(unaudited)
(in thousands)
As of / Three Months Ended As of/ Nine Months Ended
September 30,
2014
June 30,
2014
September 30,
2013 (1)
September 30,
2014
September 30,
2013 (1)
Domestic Streaming
Total members at end of period 37,219 36,244 31,092 37,219 31,092
Paid members at end of period 36,265 35,085 29,925 36,265 29,925
Revenues $ 877,150 $ 838,225 $ 701,083 $ 2,513,992 $ 2,010,821
Cost of revenues 565,251 546,223 473,965 1,628,568 1,366,897
Marketing 61,045 64,727 60,637 206,030 194,779
Contribution profit 250,854 227,275 166,481 679,394 449,145
International Streaming
Total members at end of period 15,843 13,801 9,188 15,843 9,188
Paid members at end of period 14,389 12,907 8,084 14,389 8,084
Revenues $ 345,685 $ 307,461 $ 183,051 $ 920,264 $ 490,972
Cost of revenues 291,942 266,697 209,811 803,906 561,103
Marketing 84,609 56,036 47,537 197,485 146,919
Contribution profit (loss) (30,866) (15,272) (74,297) (81,127) (217,050)
Domestic DVD
Total members at end of period 5,986 6,261 7,148 5,986 7,148
Paid members at end of period 5,899 6,167 7,014 5,899 7,014
Revenues $ 186,597 $ 194,721 $ 221,865 $ 585,672 $ 697,539
Cost of revenues 97,201 101,928 115,124 305,954 368,526
Marketing — — 54 — 227
Contribution profit 89,396 92,793 106,687 279,718 328,786
Consolidated
Revenues $ 1,409,432 $ 1,340,407 $ 1,105,999 $ 4,019,928 $ 3,199,332
Cost of revenues 954,394 914,848 798,900 2,738,428 2,296,526
Marketing 145,654 120,763 108,228 403,515 341,925
Contribution profit 309,384 304,796 198,871 877,985 560,881
Other operating expenses 198,977 175,196 141,751 540,383 414,822
Operating income 110,407 129,600 57,120 337,602 146,059
Other income (expense) (12,870) (12,228) (7,629) (33,749) (23,860)
Loss on extinguishment of debt — — — — (25,129)
Provision for income taxes 38,242 46,354 17,669 120,425 33,088
Net income $ 59,295 $ 71,018 $ 31,822 $ 183,428 $ 63,982
(1) Certain prior period amounts have been reclassified from "Marketing" to "Cost of revenues" to conform to current period
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