- Subscribers - 11.1 million
- Revenue - $423.1 million
- GAAP Net Income - $30.1 million
- GAAP EPS - $0.52 per diluted share
LOS GATOS, Calif., -- Netflix, Inc. (Nasdaq: NFLX) reported results for the third quarter ended September 30, 2009.
"Our business momentum is strong and our third quarter performance keeps us solidly on course for a record 2009," said Reed Hastings, Netflix co-founder and chief executive officer. "Our differentiated service, which combines DVDs delivered quickly by mail and movies streamed instantly over the Internet, is a key element driving our growth."
Third-Quarter 2009 Financial Highlights
Subscribers. Netflix ended the third quarter of 2009 with approximately 11,109,000 total subscribers, representing 28 percent year-over-year growth from 8,672,000 total subscribers at the end of the third quarter of 2008 and 5 percent sequential growth from 10,599,000 subscribers at the end of the second quarter of 2009.
Net subscriber change in the quarter was an increase of 510,000 compared to an increase of 261,000 for the same period of 2008 and an increase of 289,000 for the second quarter of 2009.
Gross subscriber additions for the quarter totaled 2,180,000, representing 43 percent year-over-year growth from 1,528,000 gross subscriber additions in the third quarter of 2008 and 13 percent quarter-over-quarter growth from 1,936,000 gross subscriber additions in the second quarter of 2009.
Of the 11,109,000 total subscribers at quarter end, 98 percent, or 10,835,000, were paid subscribers. The other 2 percent, or 274,000, were free subscribers. Paid subscribers represented 98 percent of total subscribers at the end of the third quarter of 2008 and at the end of the second quarter of 2009.
Revenue for the third quarter of 2009 was $423.1 million, representing 24 percent year-over-year growth from $341.3 million for the third quarter of 2008, and a 4 percent sequential increase from $408.5 million for the second quarter of 2009.
Gross margin(1) for the third quarter of 2009 was 34.9 percent compared to 34.2 percent for the third quarter of 2008 and 34.1 percent for the second quarter of 2009.
GAAP net income for the third quarter of 2009 was $30.1 million, or $0.52 per diluted share compared to GAAP net income of $20.4 million, or $0.33 per diluted share, for the third quarter of 2008 and GAAP net income of $32.4 million, or $0.54 per diluted share, for the second quarter of 2009. GAAP net income grew 48 percent on a year-over-year basis and GAAP EPS grew 58 percent on a year-over-year basis.
Non-GAAP net income was $32.1 million, or $0.55 per diluted share, for the third quarter of 2009 compared to non-GAAP net income of $22.1 million, or $0.36 per diluted share, for the third quarter of 2008 and non-GAAP net income of $34.4 million, or $0.58 per diluted share, for the second quarter of 2009. Non-GAAP net income grew 45 percent on a year-over-year basis and non-GAAP EPS grew 53 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 $3.2 million for the third quarter of 2009, compared to $3.0 million for the third quarter of 2008 and $3.3 million for the second quarter of 2009. 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 third quarter of 2009 was $26.86 per gross subscriber addition compared to $32.21 for the same period of 2008 and $23.88 for the second quarter of 2009.
Churn(3) for the third quarter of 2009 was 4.4 percent compared to 4.2 percent for the third quarter of 2008 and 4.5 percent for the second quarter of 2009. Churn includes free subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter.
Free cash flow(4) for the third quarter of 2009 was $25.5 million compared to $26.2 million in the third quarter of 2008 and $26.3 million for the second quarter of 2009.
Cash provided by operating activities for the third quarter of 2009 was $78.3 million compared to $60.5 million for the third quarter of 2008 and $75.3 million for the second quarter of 2009.
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