NetFlix 2007 Annual Report Download - page 75

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NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
10. Related Party Transaction
In April 2007, Netflix entered into a license agreement with a company in which an employee had a
significant ownership interest at that time. Pursuant to this agreement, Netflix recorded a charge of $2.5 million
in technology and development expense. In January 2008, in conjunction with various arrangements Netflix paid
a total of $6.0 million to this same company, of which $5.7 million will be accounted for as an investment under
the cost method. In conjunction with these arrangements, the employee with the significant ownership interest in
the same company terminated his employment with Netflix.
11. Selected Quarterly Financial Data (Unaudited)
Quarter Ended
December 31 September 30 June 30 March 31
2007
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $302,355 $293,972 $303,693 $305,320
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102,305 $ 99,519 $107,000 $110,348
Netincome ........................................ $ 15,776 $ 15,732 $ 25,580 $ 9,864
Net income per share:
Basic ......................................... $ 0.24 $ 0.24 $ 0.38 $ 0.14
Diluted ....................................... $ 0.24 $ 0.23 $ 0.37 $ 0.14
Subscribers at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,479 7,028 6,742 6,797
2006
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $277,233 $255,950 $239,351 $224,126
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $107,885 $ 97,157 $ 88,772 $ 75,861
Netincome ........................................ $ 14,860 $ 12,781 $ 17,037 $ 4,404
Net income per share:
Basic ......................................... $ 0.22 $ 0.19 $ 0.29 $ 0.08
Diluted ....................................... $ 0.21 $ 0.18 $ 0.25 $ 0.07
Subscribers at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,316 5,662 5,169 4,866
F-24