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Calculate the financial ratios such as :Liquidity Ratios, Profitiabilty Ratios, Activity Ratios, Leverage Ratios and another ratios you think it is important make the financial analysis and discussion coparing between two years and your recommendation.
In 2011, Netflix surpassed US$3.2 billion in sales, an annual revenue growth of 50% over 2010 (US$2.1 billion). Subscriber growth was the most important metric for Netflix because its revenue growth was directly correlated to its subscriber growth. Netflix grew from 12 million subscribers in 2009 to 20 million in 2010, and then to 27 million in 2012. International operations were set to expand to become a major source of sales growth for the company in the coming years.
However, by 2012, Netflix faced challenges from its pricing changes in the United States and its expansion into international markets, even stating that it expected revenue per subscriber to drop from its 2011 level of US$11.5634 as subscribers choose the streaming only option of US$7.99 over the more expensive streaming and DVD delivery option. For future revenue growth, Netflix needed to increase its subscribers numbers both domestically and internationally.
Netflix, Inc. Consolidated Statements of
Year ended December 31
2011
2010
2009
Operations5s (in thousands, except
Revenues
Cost of revenues:
$3,204,577
$2,162,625
$1,670,269
per-share data)
Subscription
1,789,596
1,154,109
909,461
Fulfillment expenses
250,305
203,246
169,810
Total cost of revenues
2,039,901
1,357,355
1,079,271
Gross profit
1,164,676
805,270
590,998
Operating expenses:
Marketing
402,638
293,839
237,744
Technology and development
259,033
163,329
114,542
General and administrative
117,937
64,461
46,773
Legal settlement
9,000
Total operating expenses
788,608
521,629
399,059
Operating income
376,068
283,641
191,939
Other income (expense):
Interest expense
(20,025)
(19,629)
(6,475)
Interest and other income
3,479
3,684
6,728
Income before income taxes
359,522
267,696
192,192
Provision for income taxes
133,396
106,843
76,332
Net income
$226,126
$160,853
$115,860
Net income per share:
Basic
$4.28
$3.06
$2.05
Diluted
$4.16
$2.96
$1.98
Weighted-average common shares outstanding:
52,847
52,529
56,560
54,369
54,304
58,416
EXHIBIT 2 Netflix, Inc. Consolidated Balance Sheets55
As of December 31
(in thousands, except share and
Assets
Current assets:
Cash and cash equivalents
$508,053
$194,499
Short-term investments
289,758
155,888
Current content library, net
919,709
181,006
Prepaid content
56,007
62,217
Other current assets
57,330
43.621
Total current assets
1.830,857
637,231
Non-current content library, net
1,046,934
180,973
Property and equipment, net
136,353
128,570
Other non-current assets
55,052
35,293
Total assets
$3,069,196
$982,067
Liabilities and stockholders' equity
Current liabilities:
Content accounts payable
$924,706
$168,695
Other accounts payable
87,860
54,129
Accrued expenses
63,693
38,572
Deferred revenue
148,796
127,183
Total current liabilities
1,225,055
388,579
Long-term debt
200,000
Long-term debt due to related party
-
Non-current content liabilities
739,628
48,179
Other non-current liabilities
61,703
55,145
Total liabilities
2,426,386
691,903
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at December 31, 2011 and 2010; no shares
issued and outstanding at December 31, 2011 and 2010
Common stock, $0.001 par value; 160,000,000 shares authorized at December 31, 2011 and 2010; 55,398,615 and 52,781,949 issued and outstanding at December 31, 2011 and 2010, respectively
55
53
Additional paid-in capital
219,119
51,622
Accumulated other comprehensive income
706
750
Retained earnings
422,930
237,739
Total stockholders' equity
642,810
290,164
Total liabilities and stockholders' equity
EXHIBIT 3
Netflix, Inc. Consolidated Statements of Cash Flows55 (in thousands)
Year Ended December 31
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Additions to streaming content library
(2,320,732)
(406,210)
(64,217)
Change in streaming content liabilities
1,460,400
167,836
(4,014)
Amortization of streaming content library
699,128
158,100
48,192
Amortization of DVD content library
96,744
142,496
171,298
Depreciation and amortization of property, equipment. and intangibles
43,747
38,099
38,044
Stock-based compensation expense
61,582
27,996
12,618
Excess tax benefits from stock-based compensation
(45,784)
(62,214)
(12,683)
Other non-cash items
(4,050)
(9,128)
(7,161)
Deferred taxes
(18,597)
(962)
6,328
Gain on sale of business
(1,783)
Changes in operating assets and liabilities:
6,211
(35,476)
(5,643)
(4,775)
(18,027)
(5,358)
24,314
18,098
1,537
68,902
67,209
13,169
21,613
27,086
16,970
Other non-current assets and liabilities
2,883
645
1,906
Net cash provided by operating activities
317,712
276,401
325,063
Cash flows from investing activities:
Acquisition of DVD content library
(85,154)
(123,901)
(193,044)
Purchases of short-term investments
(223,750)
(107,362)
(228,000)
Proceeds from sale of short-term investments
50,993
120,857
166,706
Proceeds from maturities of short-term investments
38,105
15,818
35,673
Purchases of property and equipment
(49,682)
(33,837)
(45,932)
Proceeds from sale of business
7,483
Other assets
3,674
12,344
11,035
Net cash used in investing activities
(265,814)
(116,081)
(246,079)
Cash flows from financing activities:
Principal payments of lease financing obligations
(2,083)
(1,776)
(1,158)
Proceeds from issuance of common stock upon exercise of options
19,614
49,776
35,274
Proceeds from public offering of common stock, net of issuance costs
199,947
45,784
62,214
12,683
Borrowings on line of credit, net of issuance costs
18,978
Payments on line of credit
(20,000)
Proceeds from issuance of debt, net of issuance costs
198,060
193,917
Repurchases of common stock
(199,666)
(210,259)
(324,335)
Net cash provided by (used in) financing activities
261,656
(100,045)
(84,641)
Net increase (decrease) in cash and cash equivalents
313,554
60,275
(5,657)
Cash and cash equivalents, beginning of year
194,499
134,224
139,881
Cash and cash equivalents, end of year
S194,499
$134,224
Supplemental disclosure:
Income taxes paid
$79,069
$56,218
$58,770
Interest paid
19,395
20,101
3,878
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