Incremental operating margin 312 267 189 179 243 253 186 140 120 127 117 125

Incremental operating margin 312 267 189 179 243 253

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Incremental operating margin31.2%26.7%18.9%17.9%24.3%25.3%18.6%14.0%12.0%12.7%11.7%12.5%19.3%9.0%23.2%23.2%19.8%12.2%16.7%15.5%Operating income (reported)36.5 52.8 49.3 53.3 58.3 77.3 69.5 70.2 77.8 102.2 91.7 95.3 65.2 91.8 121.5 191.9 275.4 367.1 500.4 616.0 31%Operating margin (reported)9.3%12.9%11.7%12.0%11.8%14.9%12.6%11.7%11.4%13.8%11.9%11.5%6.5%7.6%8.9%11.5%12.7%12.2%12.9%13.2%EBITDA (adjusted ex-SBC)48.8 65.1 62.2 66.6 74.7 93.6 85.5 87.5 96.2 121.3 111.1 116.0 94.6 119.0 166.2 242.6 341.2 444.6 590.2 717.0 28%EBITDA margin12.4%15.9%14.7%15.0%15.1%18.0%15.5%14.6%14.0%16.4%14.5%14.1%9.5%9.9%12.2%14.5%15.7%14.7%15.2%15.4%Incremental EBITDA margin35.1%27.9%20.1%19.2%26.0%25.6%17.9%13.4%11.2%12.7%12.0%12.7%21.3%11.7%29.7%25.0%19.8%12.2%17.0%15.9%EBITDA (adjusted with SBC)45.6 61.8 59.0 63.6 69.2 86.7 78.2 79.5 87.1 111.5 101.0 105.2 81.9 107.0 154.0 230.0 313.6 404.8 541.0 660.1 28%EBITDA margin11.6%15.1%13.9%14.3%14.0%16.7%14.1%13.2%12.7%15.1%13.2%12.7%8.2%8.9%11.3%13.8%14.5%13.4%14.0%14.1%Interest expense on lease financing obligations(0.7) (0.7) (0.7) (0.7)(0.7) (0.6) (0.7) (0.7)(0.7) (0.7) (0.7) (0.7)(1.2) (1.2) (2.5) (2.7) (2.7) (2.8) (2.8) (2.8)Interest expense on debt- - - (3.8)(4.3) (4.3) (4.3) (4.3)(4.3) (4.3) (4.3) (4.3)- - - (3.8) (17.0) (17.0) (17.0) (17.0)Interest and other income1.6 0.9 1.8 2.4 1.0 0.9 0.9 0.9 0.7 0.7 0.6 0.6 15.9 20.3 12.5 6.7 3.6 2.6 2.9 4.3 Interest and other income, net (reported)0.9 0.2 1.1 (2.0)(4.0) (4.0) (4.1) (4.0)(4.2) (4.3) (4.3) (4.3)14.7 19.2 10.0 0.3 (16.1) (17.1) (16.9) (15.5)Non-recurring gains / (losses)- - - - - - - - - - - - - - - - - - - - Interest and other income, net (adjusted)0.9 0.2 1.1 (2.0)(4.0) (4.0) (4.1) (4.0)(4.2) (4.3) (4.3) (4.3)14.7 19.2 10.0 0.3 (16.1) (17.1) (16.9) (15.5)Pre-tax income (adjusted ex-SBC)40.5 56.3 53.7 54.3 59.9 80.3 72.7 74.1 82.7 107.7 97.5 101.9 92.6 115.9 143.8 204.8 287.0 389.8 532.6 657.4 32%Pre-tax margin (adjusted ex-SBC)10.3%13.8%12.7%12.2%12.1%15.4%13.1%12.3%12.1%14.6%12.7%12.3%9.3%9.6%10.5%12.3%13.2%12.9%13.8%14.1%Pre-tax income (reported)37.4 53.0 50.5 51.3 54.4 73.4 65.4 66.2 73.6 98.0 87.4 91.0 79.9 110.9 131.5 192.2 259.3 350.0 483.5 600.5 32%Pre-tax margin (reported)9.5%13.0%11.9%11.5%11.0%14.1%11.8%11.0%10.7%13.3%11.4%11.0%8.0%9.2%9.6%11.5%12.0%11.6%12.5%12.9%Provision for taxes (adjusted ex-SBC)16.3 21.8 21.6 21.6 24.3 32.7 30.5 29.6 33.1 43.1 39.0 40.8 36.0 46.2 53.1 81.3 117.1 155.9 211.7 259.7 30%Tax rate40.2%38.8%40.3%39.8%40.6%40.7%42.0%40.0%40.0%40.0%40.0%40.0%38.9%39.9%36.9%39.7%40.8%40.0%39.8%39.5%Provision for taxes (reported)15.0 20.5 20.3 20.4 22.1 29.9 27.4 26.5 29.4 39.2 34.9 36.4 31.1 44.3 48.5 76.3 105.9 140.0 192.2 237.2 31%Tax rate40.2%38.8%40.3%39.8%40.6%40.7%42.0%40.0%40.0%40.0%40.0%40.0%38.9%40.0%36.9%39.7%40.8%40.0%39.8%39.5%Net income (adjusted ex-SBC)24.2 34.5 32.1 32.7 35.5 47.6 42.2 44.5 49.6 64.6 58.5 61.1 56.6 69.7 90.7 123.5 169.8 233.9 320.9 397.7 33%Net income margin (adjusted ex-SBC)6.1%8.4%7.6%7.4%7.2%9.2%7.6%7.4%7.2%8.8%7.6%7.4%5.7%5.8%6.6%7.4%7.8%7.8%8.3%8.5%Net income (reported)22.4 32.4 30.1 30.9 32.3 43.5 38.0 39.7 44.2 58.8 52.4 54.6 48.8 66.6 83.0 115.9 153.5 210.0 291.3 363.3 33%Net income margin (reported)5.7%7.9%7.1%7.0%6.5%8.4%6.9%6.6%6.4%8.0%6.8%6.6%4.9%5.5%6.1%6.9%7.1%7.0%7.5%7.8%EPS (adjusted ex-SBC)0.40 0.58 0.55 0.59 0.65 0.88 0.78 0.83 0.93 1.21 1.09 1.14 0.82 1.01 1.44 2.11 3.14 4.37 6.02 7.49 34%EPS (reported)0.37 0.54 0.52 0.56 0.59 0.80 0.70 0.74 0.82 1.10 0.98 1.02 0.71 0.97 1.32 1.98 2.83 3.92 5.47 6.84 34%Basic shares58.7 57.9 56.1 53.6 52.9 52.5 52.1 51.9 51.8 51.7 51.7 51.6 62.5 67.1 61.0 56.6 52.4 51.7 51.5 51.3 Diluted shares60.7 59.7 57.9 55.5 54.8 54.3 53.9 53.7 53.6 53.5 53.5 53.4 69.2 68.9 62.8 58.4 54.2 53.5 53.3 53.1
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Netflix Revenue and Growth Analysis20092010E2011ECalendar YearMarJunSepDecMarJunSepDec-EMar-EJun-ESep-EDec-E20062007200820092010E2011E2012E2013EAs a % of total revenueTotal revenue100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%100.0%Subscription expenses54.6%55.0%55.1%52.1%52.6%51.1%52.9%53.0%54.0%54.5%54.5%55.0%53.4%55.1%55.8%54.2%52.4%54.5%55.0%55.5%Fulfillment expenses11.1%10.8%9.9%9.9%9.6%9.5%9.4%9.3%9.2%9.2%9.1%9.0%9.4%10.1%10.9%10.4%9.4%9.1%8.6%7.9%Total cost of revenue65.8%65.9%65.0%62.0%62.2%60.5%62.2%62.3%63.2%63.7%63.6%64.0%62.8%65.2%66.7%64.6%61.8%63.6%63.6%63.4%Gross profit34.2%34.1%35.0%38.0%37.8%39.5%37.8%37.7%36.8%36.3%36.4%36.0%37.2%34.8%33.3%35.4%38.2%36.4%36.4%36.6%Technology and development5.9%6.3%6.8%7.2%7.2%6.8%7.1%7.5%8.0%8.0%8.0%8.0%4.4%5.6%6.3%6.6%7.2%8.0%8.5%9.0%Marketing15.7%11.2%13.7%15.8%15.1%14.2%14.5%14.6%12.8%9.9%11.9%11.9%22.4%17.9%14.5%14.1%14.6%11.6%10.4%9.9%General and administrative2.9%2.9%2.4%2.7%2.9%2.6%2.5%2.8%3.5%3.5%3.5%3.5%3.0%3.9%3.2%2.7%2.7%3.5%3.5%3.5%Gain on disposal of DVDs-0.3%0.0%-0.4%-0.4%-0.3%-0.4%-0.2%-0.2%-0.2%-0.2%-0.2%-0.2%-0.5%-0.6%-0.5%-0.3%-0.3%-0.2%-0.2%-0.2%Depreciation and amortization2.3%2.2%2.3%2.3%2.2%1.8%1.6%1.5%1.4%1.3%1.2%1.2%1.7%1.8%2.4%2.3%1.8%1.3%1.1%0.9%Stock-based compensation0.8%0.8%0.8%0.7%1.1%1.3%1.3%1.3%1.3%1.3%1.3%1.3%1.3%1.0%0.9%0.8%1.3%1.3%1.3%1.2%Total operating expenses (adjusted ex-SBC)24.2%20.4%22.5%25.4%24.9%23.3%23.9%24.7%24.1%21.1%23.1%23.1%29.4%26.8%23.5%23.2%24.2%22.9%22.2%22.2%Operating income (adjusted ex-SBC)10.0%13.7%12.4%12.7%12.9%16.2%13.9%13.0%12.7%15.2%13.3%12.9%7.8%8.0%9.8%12.2%14.0%13.5%14.2%14.4%EBITDA (adjusted ex-SBC)12.4%15.9%14.7%15.0%15.1%18.0%15.5%14.6%14.0%16.4%14.5%14.1%9.5%9.9%12.2%14.5%15.7%14.7%15.2%15.4%Pre-tax income (adjusted ex-SBC)10.3%13.8%12.7%12.2%12.1%15.4%13.1%12.3%12.1%14.6%12.7%12.3%9.3%9.6%10.5%12.3%
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