Earnings: Netflix Profit Nearly Triples in 2Q06; Spending On New Customers Up, Too

Netflix (NFLX) is beginning to sound a lot like a satellite radio company, leading its 2Q06 earnings release with word that its on pace to reach 20 million subscribers by 2010-2012. Netflix co-founder and CEO Reed Hastings also projects 50 percent year-over-year earnings growth “for the next several years.” So how did Netflix do in 2Q06?
— Revenue rose 46 percent, to $239.4 million from $164 million in 2Q05, and up 7 percent over 1Q06.
— Net income nearly tripled to $16.8 million, or $0.23 earnings per share, from $5.7 million,. or $0.09 in 1Q06.
— Gross margin for 2Q06 was 37.1 percent, compared to 28.2 percent in the same quarter last year and 33.8 percent sequentially.
— Subscribers total 5.1 million paid, about 62 percent over 2Q05 and 6 percent over 1Q06.
— One down note: gaining new customers cost more in 2Q06, $43.95, up 74 percent compared to $38.13 in 2Q05 and $38.47 in 1Q06.
That last bulletpoint helps explain the market’s response, sending shares down some 20 percent in late trading on concerns about competition even though Netflix beat Thomson First Call estimates of $0.18.
Earnings | Webcast

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