Revenue - $444.5 million
GAAP Net Income - $30.9 million
GAAP EPS - $0.56 per diluted share
LOS GATOS, Calif. -- Netflix, Inc. (Nasdaq: NFLX) today reported results for the fourth quarter and year ended December 31, 2009.
"Adding more than one million net new subscribers in the fourth quarter and nearly three million over the full year highlights the growing appeal of the Netflix service as we further expand access to and adoption of streaming movies and TV episodes over the Internet," said Reed Hastings, Netflix co-founder and chief executive officer. "In 2010, we expect to extend our operating momentum as we grow the business both rapidly and profitably."
Earnings Call Format
Netflix is changing the format of the company's fourth quarter earnings conference call. The call will consist solely of Q&A. In conjunction with the press release, the company has posted a written version of management's commentary to its Web site at http://ir.netflix.com. The conference call will be webcast today at 6:00 p.m. Eastern Time / 3:00 p.m. Pacific Time. If the format change is well received, future earnings calls will follow the same format. Please see conference call details below.
Fourth-Quarter and Fiscal-Year 2009 Financial Highlights
Subscribers. Netflix ended the fourth quarter of 2009 with approximately 12,268,000 total subscribers, representing 31 percent year-over-year growth from 9,390,000 total subscribers at the end of the fourth quarter of 2008 and 10 percent sequential growth from 11,109,000 subscribers at the end of the third quarter of 2009.
Net subscriber change in the quarter was an increase of 1,159,000 compared to an increase of 718,000 for the same period of 2008 and an increase of 510,000 for the third quarter of 2009.
Gross subscriber additions for the quarter totaled 2,803,000, representing 34 percent year-over-year growth from 2,085,000 gross subscriber additions in the fourth quarter of 2008 and 29 percent quarter-over-quarter growth from 2,180,000 gross subscriber additions in the third quarter of 2009.
Of the 12,268,000 total subscribers at quarter end, 97 percent, or 11,892,000, were paid subscribers. The other 3 percent, or 376,000, were free subscribers. Paid subscribers represented 98 percent of total subscribers at the end of the fourth quarter of 2008 and at the end of the third quarter of 2009.
Revenue for the fourth quarter of 2009 was $444.5 million, representing 24 percent year-over-year growth from $359.6 million for the fourth quarter of 2008, and a 5 percent sequential increase from $423.1 million for the third quarter of 2009. Revenue for fiscal 2009 was $1.67 billion, up 22 percent from $1.365 billion for fiscal 2008.
Gross margin(1) for the fourth quarter of 2009 was 38.0 percent compared to 35.2 percent for the fourth quarter of 2008 and 34.9 percent for the third quarter of 2009. Gross margin for fiscal 2009 was 35.4 percent compared to 33.3 percent for fiscal 2008.
GAAP net income for the fourth quarter of 2009 was $30.9 million, or $0.56 per diluted share compared to GAAP net income of $22.7 million, or $0.38 per diluted share, for the fourth quarter of 2008 and GAAP net income of $30.1 million, or $0.52 per diluted share, for the third quarter of 2009. GAAP net income grew 36 percent on a year-over-year basis and GAAP EPS grew 47 percent on a year-over-year basis.
GAAP net income for fiscal 2009 was $115.9 million, or $1.98 per diluted share compared to GAAP net income of $83.0 million, or $1.32 per diluted share, for fiscal 2008. GAAP net income grew 40 percent on a year-over-year basis and GAAP EPS grew 50 percent on a year-over-year basis.
Non-GAAP net income was $32.7 million, or $0.59 per diluted share, for the fourth quarter of 2009 compared to non-GAAP net income of $24.6 million, or $0.41 per diluted share, for the fourth quarter of 2008 and non-GAAP net income of $32.1 million, or $0.55 per diluted share, for the third quarter of 2009. Non-GAAP net income grew 33 percent on a year-over-year basis and non-GAAP EPS grew 44 percent on a year-over-year basis.
Non-GAAP net income was $123.5 million, or $2.11 per diluted share, for fiscal 2009 compared to non-GAAP net income of $90.7 million, or $1.44 per diluted share, for fiscal 2008. Non-GAAP net income grew 36 percent on a year-over-year basis and non-GAAP EPS grew 47 percent on a year-over-year basis.
Non-GAAP net income equals net income on a GAAP basis before stock-based compensation expense, net of taxes.
Stock-based compensation was $3.0 million for the fourth quarter of 2009, compared to $3.2 million for the fourth quarter of 2008 and for the third quarter of 2009. Stock-based compensation for fiscal 2009 was $12.6 million compared to $12.3 million for fiscal 2008. Stock-based compensation is presented in the same lines of the Consolidated Statements of Operations as cash compensation paid to the same individuals.
Subscriber acquisition cost(2) for the fourth quarter of 2009 was $25.23 per gross subscriber addition compared to $26.67 for the same period of 2008 and $26.86 for the third quarter of 2009. Subscriber acquisition cost for fiscal 2009 was $25.48 per gross subscriber addition compared to $29.12 for fiscal 2008.
Churn(3) for the fourth quarter of 2009 was 3.9 percent compared to 4.2 percent for the fourth quarter of 2008 and 4.4 percent for the third quarter of 2009. Churn includes free subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter.
Percentage of subscribers who watched instantly more than 15 minutes of a TV episode or movie in the fourth quarter of 2009 was 48 percent compared to 28 percent for the same period of 2008 and 41 percent for the third quarter of 2009.
Free cash flow(4) for the fourth quarter of 2009 was $30.2 million compared to $51.0 million in the fourth quarter of 2008 and $25.5 million for the third quarter of 2009. Free cash flow for fiscal 2009 was $97.1 million compared to $94.7 million in fiscal 2008.
Cash provided by operating activities for the fourth quarter of 2009 was $105.8 million compared to $92.1 million for the fourth quarter of 2008 and $78.3 million for the third quarter of 2009. Cash provided by operating activities for fiscal 2009 was $325.1 million compared to $284.0 million for fiscal 2008.
Business Outlook
The Company's performance expectations for the first quarter of 2010 and full-year 2010 are as follows:
Click to read full press release
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