NetFlix 2007 Annual Report Download - page 38

Download and view the complete annual report

Please find page 38 of the 2007 NetFlix annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 83

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83

Results of Operations
The following table sets forth, for the periods presented, the line items in our consolidated statements of
operations as a percentage of total revenues. The information contained in the table below should be read in
conjunction with the financial statements and notes thereto included in Item 8, Financial Statements and
Supplementary Data of this Annual Report on Form 10-K.
Year Ended December 31,
2007 2006 2005
Revenues ............................................................ 100.0% 100.0% 100.0%
Cost of revenues:
Subscription ...................................................... 55.1 53.4 57.7
Fulfillmentexpenses ............................................... 10.1 9.5 10.6
Totalcostofrevenues .......................................... 65.2 62.9 68.3
Grossprofit........................................................... 34.8 37.1 31.7
Operating expenses:
Technologyanddevelopment ........................................ 5.9 4.9 5.2
Marketing ........................................................ 18.1 22.6 21.2
Generalandadministrative .......................................... 4.4 3.6 5.2
GainondisposalofDVDs ........................................... (0.6) (0.5) (0.3)
Gainonlegalsettlement............................................. (0.6) — —
Totaloperatingexpenses ........................................ 27.2 30.6 31.3
Operatingincome ...................................................... 7.6 6.5 0.4
Other income (expense):
Interest and other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.6 0.8
Incomebeforeincometaxes.............................................. 9.3 8.1 1.2
Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 3.2 (5.0)
Netincome ........................................................... 5.6% 4.9% 6.2%
Revenues
Year Ended December 31,
2007 2006 2005
(in thousands, except percentages and average monthly
subscription revenue per paying subscriber)
Revenues ........................................... $1,205,340 $996,660 $682,213
Percentage change over prior period . . . . . . . . . . . . . . . . . . . . . . 20.9% 46.1%
Other data:
Average number of paying subscribers . . . . . . . . . . . . . . . . 6,718 5,083 3,169
Percentage change over prior period . . . . . . . . . . . . . . . . . . 32.2% 60.4%
Average monthly revenue per paying subscriber . . . . . . . . $ 14.95 $ 16.34 $ 17.94
Percentage change over prior period . . . . . . . . . . . . . . . . . . (8.5)% (8.9)%
We currently generate all of our revenues in the United States. We derive substantially all of our revenues
from monthly subscription fees and recognize subscription revenues ratably during each subscriber’s monthly
subscription period.
The increase in our revenues in 2007 as compared to 2006 was primarily a result of the substantial growth in
the average number of paying subscribers arising from increased consumer awareness of the benefits of online
33