As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Less than one year | $ | 3,747,648 | $ | 2,972,325 | |||
Due after one year and through 3 years | 4,495,103 | 3,266,907 | |||||
Due after 3 years and through 5 years | 1,164,308 | 929,645 | |||||
Due after 5 years | 44,053 | 83,284 | |||||
Total streaming content obligations | $ | 9,451,112 | $ | 7,252,161 |
Year Ending December 31, | Future Minimum Payments | ||
(in thousands) | |||
2015 | $ | 35,501 | |
2016 | 37,078 | ||
2017 | 27,697 | ||
2018 | 19,804 | ||
2019 | 14,923 | ||
Thereafter | 76,130 | ||
Total minimum payments | $ | 211,133 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
United States | $ | 325,081 | $ | 159,126 | $ | 27,885 | |||||
Foreign | 24,288 | 11,948 | 2,595 | ||||||||
Income before income taxes | $ | 349,369 | $ | 171,074 | $ | 30,480 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
Current tax provision: | |||||||||||
Federal | $ | 86,623 | $ | 58,558 | $ | 34,387 | |||||
State | 9,866 | 15,154 | 7,850 | ||||||||
Foreign | 16,144 | 7,003 | 1,162 | ||||||||
Total current | 112,633 | 80,715 | 43,399 | ||||||||
Deferred tax provision: | |||||||||||
Federal | (10,994 | ) | (18,930 | ) | (26,903 | ) | |||||
State | (17,794 | ) | (2,751 | ) | (3,168 | ) | |||||
Foreign | (1,275 | ) | (363 | ) | — | ||||||
Total deferred | (30,063 | ) | (22,044 | ) | (30,071 | ) | |||||
Provision for income taxes | $ | 82,570 | $ | 58,671 | $ | 13,328 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
Expected tax expense at U.S. federal statutory rate of 35% | $ | 122,279 | $ | 59,878 | $ | 10,667 | |||||
State income taxes, net of Federal income tax effect | 13,274 | 8,053 | 2,914 | ||||||||
R&D tax credit | (18,655 | ) | (13,841 | ) | (1,803 | ) | |||||
Release of tax reserves on previously unrecognized tax benefits | (38,612 | ) | — | — | |||||||
Other | 4,284 | 4,581 | 1,550 | ||||||||
Provision for income taxes | $ | 82,570 | $ | 58,671 | $ | 13,328 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Deferred tax assets (liabilities): | |||||||
Stock-based compensation | $ | 100,397 | $ | 69,201 | |||
Accruals and reserves | 13,415 | 13,022 | |||||
Depreciation and amortization | (11,708 | ) | (11,159 | ) | |||
R&D credits | 21,014 | 19,196 | |||||
Other | (2,778 | ) | 824 | ||||
Total deferred tax assets | 120,340 | 91,084 | |||||
Valuation allowance | — | (481 | ) | ||||
Net deferred tax assets | $ | 120,340 | $ | 90,603 |
Balance as of December 31, 2012 | $ | 43,337 | |
Increases related to tax positions taken during prior periods | 4 | ||
Decreases related to tax positions taken during prior periods | (25 | ) | |
Increases related to tax positions taken during the current period | 24,915 | ||
Balance as of December 31, 2013 | $ | 68,231 | |
Decreases related to tax positions taken during prior periods | (39,015 | ) | |
Increases related to tax positions taken during the current period | 11,174 | ||
Decreases related to settlements with taxing authorities | (5,578 | ) | |
Balance as of December 31, 2014 | $ | 34,812 |
(in thousands) | ||||
Due within one year | $ | 113,864 | ||
Due after one year and through 5 years | 381,024 | |||
Total short-term investments | $ | 494,888 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
United States | $ | 138,704 | $ | 126,455 | |||
International | 11,171 | 7,150 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Less than one year | $ | 3,747,648 | $ | 2,972,325 | |||
Due after one year and through 3 years | 4,495,103 | 3,266,907 | |||||
Due after 3 years and through 5 years | 1,164,308 | 929,645 | |||||
Due after 5 years | 44,053 | 83,284 | |||||
Total streaming content obligations | $ | 9,451,112 | $ | 7,252,161 |
• | For content that does not premiere on the Netflix service (representing the vast majority of content), the Company amortizes on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years. |
• | For content that premieres on the Netflix service, the Company expects more upfront viewing due to the additional merchandising and marketing efforts for this original content available only on Netflix. Hence, the Company amortizes on an accelerated basis over the amortization period, which is the shorter of four years or the license period, beginning with the month of first availability. If a subsequent season is added, the amortization period is extended by a year. |
• | If the cost per title cannot be reasonably estimated, the license fee is not capitalized and costs are expensed on a straight line basis over the license period. This typically occurs when the license agreement does not specify the number of titles, the license fee per title or the windows of availability per title. |
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands, except per share data) | |||||||||||
Basic earnings per share: | |||||||||||
Net income | $ | 266,799 | $ | 112,403 | $ | 17,152 | |||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 60,078 | 58,198 | 55,521 | ||||||||
Basic earnings per share | $ | 4.44 | $ | 1.93 | $ | 0.31 | |||||
Diluted earnings per share: | |||||||||||
Net income | $ | 266,799 | $ | 112,403 | $ | 17,152 | |||||
Convertible Notes interest expense, net of tax | — | 49 | 195 | ||||||||
Numerator for diluted earnings per share | 266,799 | 112,452 | 17,347 | ||||||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 60,078 | 58,198 | 55,521 | ||||||||
Convertible Notes shares | — | 715 | 2,331 | ||||||||
Employee stock options | 1,621 | 1,848 | 1,052 | ||||||||
Weighted-average number of shares | 61,699 | 60,761 | 58,904 | ||||||||
Diluted earnings per share | $ | 4.32 | $ | 1.85 | $ | 0.29 |
Year ended December 31, | ||||||||
2014 | 2013 | 2012 | ||||||
(in thousands) | ||||||||
Employee stock options | 131 | 198 | 1,207 |
As of December 31, | Estimated Useful Lives (in Years) | |||||||||
2014 | 2013 | |||||||||
(in thousands) | ||||||||||
Information technology assets | $ | 189,274 | $ | 139,306 | 3 years | |||||
Furniture and fixtures | 25,758 | 21,011 | 3 years | |||||||
Building | 40,681 | 40,681 | 30 years | |||||||
Leasehold improvements | 57,339 | 51,194 | Over life of lease | |||||||
DVD operations equipment | 89,144 | 96,361 | 5 years | |||||||
Capital work-in-progress | 12,495 | 8,643 | ||||||||
Property and equipment, gross | 414,691 | 357,196 | ||||||||
Less: Accumulated depreciation | (264,816 | ) | (223,591 | ) | ||||||
Property and equipment, net | $ | 149,875 | $ | 133,605 |
December 31 | September 30 | June 30 | March 31 | ||||||||||||
(in thousands, except for per share data) | |||||||||||||||
2014 | |||||||||||||||
Total revenues | $ | 1,484,728 | $ | 1,409,432 | $ | 1,340,407 | $ | 1,270,089 | |||||||
Gross profit | 470,396 | 455,038 | 425,559 | 400,903 | |||||||||||
Net income | 83,371 | 59,295 | 71,018 | 53,115 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.38 | $ | 0.99 | $ | 1.18 | $ | 0.89 | |||||||
Diluted | 1.35 | 0.96 | 1.15 | 0.86 | |||||||||||
2013 | |||||||||||||||
Total revenues | $ | 1,175,230 | $ | 1,105,999 | $ | 1,069,372 | $ | 1,023,961 | |||||||
Gross profit | 354,553 | 307,099 | 308,698 | 287,009 | |||||||||||
Net income (loss) | 48,421 | 31,822 | 29,471 | 2,689 | |||||||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.81 | $ | 0.54 | $ | 0.51 | $ | 0.05 | |||||||
Diluted | 0.79 | 0.52 | 0.49 | 0.05 |
Foreign currency | Change in unrealized gains on available-for-sale securities | Total | |||||||||
(in thousands) | |||||||||||
Balance as of December 31, 2012 | $ | 1,381 | $ | 1,538 | $ | 2,919 | |||||
Other comprehensive income before reclassifications | 1,772 | (1,597 | ) | 175 | |||||||
Amounts reclassified from accumulated other comprehensive income | — | 481 | 481 | ||||||||
Net increase (decrease) in other comprehensive income | 1,772 | (1,116 | ) | 656 | |||||||
Balance as of December 31, 2013 | $ | 3,153 | $ | 422 | $ | 3,575 | |||||
Other comprehensive (loss) income before reclassifications | (7,768 | ) | 337 | (7,431 | ) | ||||||
Amounts reclassified from accumulated other comprehensive (loss)income | — | (590 | ) | (590 | ) | ||||||
Net decrease in other comprehensive (loss) income | (7,768 | ) | (253 | ) | (8,021 | ) | |||||
Balance as of December 31, 2014 | $ | (4,615 | ) | $ | 169 | $ | (4,446 | ) |
Year ended December 31, | ||||||||
2014 | 2013 | 2012 | ||||||
(in thousands) | ||||||||
Employee stock options | 131 | 198 | 1,207 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
Current tax provision: | |||||||||||
Federal | $ | 86,623 | $ | 58,558 | $ | 34,387 | |||||
State | 9,866 | 15,154 | 7,850 | ||||||||
Foreign | 16,144 | 7,003 | 1,162 | ||||||||
Total current | 112,633 | 80,715 | 43,399 | ||||||||
Deferred tax provision: | |||||||||||
Federal | (10,994 | ) | (18,930 | ) | (26,903 | ) | |||||
State | (17,794 | ) | (2,751 | ) | (3,168 | ) | |||||
Foreign | (1,275 | ) | (363 | ) | — | ||||||
Total deferred | (30,063 | ) | (22,044 | ) | (30,071 | ) | |||||
Provision for income taxes | $ | 82,570 | $ | 58,671 | $ | 13,328 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Deferred tax assets (liabilities): | |||||||
Stock-based compensation | $ | 100,397 | $ | 69,201 | |||
Accruals and reserves | 13,415 | 13,022 | |||||
Depreciation and amortization | (11,708 | ) | (11,159 | ) | |||
R&D credits | 21,014 | 19,196 | |||||
Other | (2,778 | ) | 824 | ||||
Total deferred tax assets | 120,340 | 91,084 | |||||
Valuation allowance | — | (481 | ) | ||||
Net deferred tax assets | $ | 120,340 | $ | 90,603 |
Year ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands, except per share data) | |||||||||||
Basic earnings per share: | |||||||||||
Net income | $ | 266,799 | $ | 112,403 | $ | 17,152 | |||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 60,078 | 58,198 | 55,521 | ||||||||
Basic earnings per share | $ | 4.44 | $ | 1.93 | $ | 0.31 | |||||
Diluted earnings per share: | |||||||||||
Net income | $ | 266,799 | $ | 112,403 | $ | 17,152 | |||||
Convertible Notes interest expense, net of tax | — | 49 | 195 | ||||||||
Numerator for diluted earnings per share | 266,799 | 112,452 | 17,347 | ||||||||
Shares used in computation: | |||||||||||
Weighted-average common shares outstanding | 60,078 | 58,198 | 55,521 | ||||||||
Convertible Notes shares | — | 715 | 2,331 | ||||||||
Employee stock options | 1,621 | 1,848 | 1,052 | ||||||||
Weighted-average number of shares | 61,699 | 60,761 | 58,904 | ||||||||
Diluted earnings per share | $ | 4.32 | $ | 1.85 | $ | 0.29 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
Expected tax expense at U.S. federal statutory rate of 35% | $ | 122,279 | $ | 59,878 | $ | 10,667 | |||||
State income taxes, net of Federal income tax effect | 13,274 | 8,053 | 2,914 | ||||||||
R&D tax credit | (18,655 | ) | (13,841 | ) | (1,803 | ) | |||||
Release of tax reserves on previously unrecognized tax benefits | (38,612 | ) | — | — | |||||||
Other | 4,284 | 4,581 | 1,550 | ||||||||
Provision for income taxes | $ | 82,570 | $ | 58,671 | $ | 13,328 |
Year Ending December 31, | Future Minimum Payments | ||
(in thousands) | |||
2015 | $ | 35,501 | |
2016 | 37,078 | ||
2017 | 27,697 | ||
2018 | 19,804 | ||
2019 | 14,923 | ||
Thereafter | 76,130 | ||
Total minimum payments | $ | 211,133 |
Year Ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
(in thousands) | |||||||||||
United States | $ | 325,081 | $ | 159,126 | $ | 27,885 | |||||
Foreign | 24,288 | 11,948 | 2,595 | ||||||||
Income before income taxes | $ | 349,369 | $ | 171,074 | $ | 30,480 |
December 31 | September 30 | June 30 | March 31 | ||||||||||||
(in thousands, except for per share data) | |||||||||||||||
2014 | |||||||||||||||
Total revenues | $ | 1,484,728 | $ | 1,409,432 | $ | 1,340,407 | $ | 1,270,089 | |||||||
Gross profit | 470,396 | 455,038 | 425,559 | 400,903 | |||||||||||
Net income | 83,371 | 59,295 | 71,018 | 53,115 | |||||||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.38 | $ | 0.99 | $ | 1.18 | $ | 0.89 | |||||||
Diluted | 1.35 | 0.96 | 1.15 | 0.86 | |||||||||||
2013 | |||||||||||||||
Total revenues | $ | 1,175,230 | $ | 1,105,999 | $ | 1,069,372 | $ | 1,023,961 | |||||||
Gross profit | 354,553 | 307,099 | 308,698 | 287,009 | |||||||||||
Net income (loss) | 48,421 | 31,822 | 29,471 | 2,689 | |||||||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.81 | $ | 0.54 | $ | 0.51 | $ | 0.05 | |||||||
Diluted | 0.79 | 0.52 | 0.49 | 0.05 |
As of/Year ended December 31, 2014 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 39,114 | 18,277 | 5,767 | — | |||||||||||
Revenues | $ | 3,431,434 | $ | 1,308,061 | $ | 765,161 | $ | 5,504,656 | |||||||
Cost of revenues | 2,201,761 | 1,154,117 | 396,882 | 3,752,760 | |||||||||||
Marketing | 293,453 | 313,733 | — | 607,186 | |||||||||||
Contribution profit (loss) | $ | 936,220 | $ | (159,789 | ) | $ | 368,279 | $ | 1,144,710 | ||||||
Other operating expenses | 742,062 | ||||||||||||||
Operating income | 402,648 | ||||||||||||||
Other income (expense) | (53,279 | ) | |||||||||||||
Provision for income taxes | 82,570 | ||||||||||||||
Net income | $ | 266,799 |
As of/Year ended December 31, 2014 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 3,476,226 | $ | 1,392,701 | $ | 30,101 | $ | 4,899,028 | |||||||
Amortization of content library | 1,657,673 | 998,606 | 71,491 | 2,727,770 |
As of/Year ended December 31, 2013 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 33,420 | 10,930 | 6,930 | — | |||||||||||
Revenues | $ | 2,751,375 | $ | 712,390 | $ | 910,797 | $ | 4,374,562 | |||||||
Cost of revenues | 1,863,376 | 782,304 | 471,523 | 3,117,203 | |||||||||||
Marketing | 265,232 | 204,418 | 292 | 469,942 | |||||||||||
Contribution profit (loss) | $ | 622,767 | $ | (274,332 | ) | $ | 438,982 | $ | 787,417 | ||||||
Other operating expenses | 559,070 | ||||||||||||||
Operating income | 228,347 | ||||||||||||||
Other income (expense) | (57,273 | ) | |||||||||||||
Provision for income taxes | 58,671 | ||||||||||||||
Net income | $ | 112,403 |
As of/Year ended December 31, 2013 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 2,973,023 | $ | 804,690 | $ | 19,779 | $ | 3,797,492 | |||||||
Amortization of content library | 1,420,076 | 701,905 | 71,325 | 2,193,306 |
As of/Year ended December 31, 2012 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 27,146 | 6,121 | 8,224 | — | |||||||||||
Revenues | $ | 2,184,868 | $ | 287,542 | $ | 1,136,872 | $ | 3,609,282 | |||||||
Cost of revenues | 1,570,600 | 483,295 | 598,163 | 2,652,058 | |||||||||||
Marketing | 245,259 | 193,390 | 559 | 439,208 | |||||||||||
Contribution profit (loss) | $ | 369,009 | $ | (389,143 | ) | $ | 538,150 | $ | 518,016 | ||||||
Other operating expenses | 468,024 | ||||||||||||||
Operating income | 49,992 | ||||||||||||||
Other income (expense) | (19,512 | ) | |||||||||||||
Provision for income taxes | 13,328 | ||||||||||||||
Net income | $ | 17,152 |
As of/Year ended December 31, 2012 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 2,317,070 | $ | 527,235 | $ | 29,865 | $ | 2,874,170 | |||||||
Amortization of content library | 1,152,446 | 438,772 | 65,396 | 1,656,614 |
(1) | A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. Memberships are assigned to territories based on the geographic location used at time of sign up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. |
Shares Available for Grant | Options Outstanding | Weighted- Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in Thousands) | ||||||||||||
Number of Shares | Weighted- Average Exercise Price | ||||||||||||||
Balances as of December 31, 2011 | 7,013,508 | 2,957,754 | $ | 66.59 | |||||||||||
Granted | (1,803,798 | ) | 1,803,798 | 73.94 | |||||||||||
Exercised | — | (188,552 | ) | 21.85 | |||||||||||
Canceled | 48 | (48 | ) | 35.95 | |||||||||||
Expired | (1,160,721 | ) | — | ||||||||||||
Balances as of December 31, 2012 | 4,049,037 | 4,572,952 | $ | 71.33 | |||||||||||
Granted | (642,720 | ) | 642,720 | 208.94 | |||||||||||
Exercised | — | (1,688,774 | ) | 73.75 | |||||||||||
Balances as of December 31, 2013 | 3,406,317 | 3,526,898 | $ | 95.25 | |||||||||||
Granted | (545,573 | ) | 545,573 | 402.85 | |||||||||||
Exercised | — | (808,840 | ) | 75.65 | |||||||||||
Balances as of December 31, 2014 | 2,860,744 | 3,263,631 | $ | 151.53 | 6.14 | $ | 654,673 | ||||||||
Vested and exercisable at December 31, 2014 | 3,263,631 | $ | 151.53 | 6.14 | $ | 654,673 |
Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Dividend yield | — | % | — | % | — | % | ||||||
Expected volatility | 41% - 48% | 51% - 54% | 55% - 65% | |||||||||
Risk-free interest rate | 2.39% - 2.83% | 1.87% - 2.71% | 1.61% - 2.01% | |||||||||
Suboptimal exercise factor | 2.66 - 5.44 | 2.33 - 3.92 | 2.26 - 3.65 | |||||||||
Valuation data: | ||||||||||||
Weighted-average fair value (per share) | $ | 211.22 | $ | 113.74 | $ | 41.00 | ||||||
Total stock-based compensation expense (in thousands) | 115,239 | 73,100 | 73,948 | |||||||||
Total income tax benefit related to stock options (in thousands) | 43,999 | 28,096 | 28,537 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
United States | $ | 138,704 | $ | 126,455 | |||
International | 11,171 | 7,150 |
As of/Year ended December 31, 2014 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 39,114 | 18,277 | 5,767 | — | |||||||||||
Revenues | $ | 3,431,434 | $ | 1,308,061 | $ | 765,161 | $ | 5,504,656 | |||||||
Cost of revenues | 2,201,761 | 1,154,117 | 396,882 | 3,752,760 | |||||||||||
Marketing | 293,453 | 313,733 | — | 607,186 | |||||||||||
Contribution profit (loss) | $ | 936,220 | $ | (159,789 | ) | $ | 368,279 | $ | 1,144,710 | ||||||
Other operating expenses | 742,062 | ||||||||||||||
Operating income | 402,648 | ||||||||||||||
Other income (expense) | (53,279 | ) | |||||||||||||
Provision for income taxes | 82,570 | ||||||||||||||
Net income | $ | 266,799 |
As of/Year ended December 31, 2014 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 3,476,226 | $ | 1,392,701 | $ | 30,101 | $ | 4,899,028 | |||||||
Amortization of content library | 1,657,673 | 998,606 | 71,491 | 2,727,770 |
As of/Year ended December 31, 2013 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 33,420 | 10,930 | 6,930 | — | |||||||||||
Revenues | $ | 2,751,375 | $ | 712,390 | $ | 910,797 | $ | 4,374,562 | |||||||
Cost of revenues | 1,863,376 | 782,304 | 471,523 | 3,117,203 | |||||||||||
Marketing | 265,232 | 204,418 | 292 | 469,942 | |||||||||||
Contribution profit (loss) | $ | 622,767 | $ | (274,332 | ) | $ | 438,982 | $ | 787,417 | ||||||
Other operating expenses | 559,070 | ||||||||||||||
Operating income | 228,347 | ||||||||||||||
Other income (expense) | (57,273 | ) | |||||||||||||
Provision for income taxes | 58,671 | ||||||||||||||
Net income | $ | 112,403 |
As of/Year ended December 31, 2013 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 2,973,023 | $ | 804,690 | $ | 19,779 | $ | 3,797,492 | |||||||
Amortization of content library | 1,420,076 | 701,905 | 71,325 | 2,193,306 |
As of/Year ended December 31, 2012 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total members at end of period (1) | 27,146 | 6,121 | 8,224 | — | |||||||||||
Revenues | $ | 2,184,868 | $ | 287,542 | $ | 1,136,872 | $ | 3,609,282 | |||||||
Cost of revenues | 1,570,600 | 483,295 | 598,163 | 2,652,058 | |||||||||||
Marketing | 245,259 | 193,390 | 559 | 439,208 | |||||||||||
Contribution profit (loss) | $ | 369,009 | $ | (389,143 | ) | $ | 538,150 | $ | 518,016 | ||||||
Other operating expenses | 468,024 | ||||||||||||||
Operating income | 49,992 | ||||||||||||||
Other income (expense) | (19,512 | ) | |||||||||||||
Provision for income taxes | 13,328 | ||||||||||||||
Net income | $ | 17,152 |
As of/Year ended December 31, 2012 | |||||||||||||||
Domestic Streaming | International Streaming | Domestic DVD | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Total content library, net | $ | 2,317,070 | $ | 527,235 | $ | 29,865 | $ | 2,874,170 | |||||||
Amortization of content library | 1,152,446 | 438,772 | 65,396 | 1,656,614 |
(1) | A membership (also referred to as a subscription) is defined as the right to receive either the Netflix streaming service or Netflix DVD service. Memberships are assigned to territories based on the geographic location used at time of sign up as determined by the Company's internal systems, which utilize industry standard geo-location technology. The Company offers free-trial memberships to new and certain rejoining members. For inclusion in the definition of a member in the above metrics, a method of payment is required to be provided even during the free-trial period. Total members therefore include those who are on a free-trial and have provided a method of payment. A membership is canceled and ceases to be reflected in the above metrics as of the effective cancellation date. Voluntary cancellations become effective at the end of the prepaid membership period, while involuntary cancellation of the service, as a result of a failed method of payment, becomes effective immediately. |
Foreign currency | Change in unrealized gains on available-for-sale securities | Total | |||||||||
(in thousands) | |||||||||||
Balance as of December 31, 2012 | $ | 1,381 | $ | 1,538 | $ | 2,919 | |||||
Other comprehensive income before reclassifications | 1,772 | (1,597 | ) | 175 | |||||||
Amounts reclassified from accumulated other comprehensive income | — | 481 | 481 | ||||||||
Net increase (decrease) in other comprehensive income | 1,772 | (1,116 | ) | 656 | |||||||
Balance as of December 31, 2013 | $ | 3,153 | $ | 422 | $ | 3,575 | |||||
Other comprehensive (loss) income before reclassifications | (7,768 | ) | 337 | (7,431 | ) | ||||||
Amounts reclassified from accumulated other comprehensive (loss)income | — | (590 | ) | (590 | ) | ||||||
Net decrease in other comprehensive (loss) income | (7,768 | ) | (253 | ) | (8,021 | ) | |||||
Balance as of December 31, 2014 | $ | (4,615 | ) | $ | 169 | $ | (4,446 | ) |
Balance as of December 31, 2012 | $ | 43,337 | |
Increases related to tax positions taken during prior periods | 4 | ||
Decreases related to tax positions taken during prior periods | (25 | ) | |
Increases related to tax positions taken during the current period | 24,915 | ||
Balance as of December 31, 2013 | $ | 68,231 | |
Decreases related to tax positions taken during prior periods | (39,015 | ) | |
Increases related to tax positions taken during the current period | 11,174 | ||
Decreases related to settlements with taxing authorities | (5,578 | ) | |
Balance as of December 31, 2014 | $ | 34,812 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Total content library, gross | $ | 8,497,403 | $ | 6,474,688 | |||
Accumulated amortization | (3,598,375 | ) | (2,677,196 | ) | |||
Total content library, net | 4,899,028 | 3,797,492 | |||||
Current content library, net | 2,125,702 | 1,706,421 | |||||
Non-current content library, net | $ | 2,773,326 | $ | 2,091,071 |
As of December 31, | Estimated Useful Lives (in Years) | |||||||||
2014 | 2013 | |||||||||
(in thousands) | ||||||||||
Information technology assets | $ | 189,274 | $ | 139,306 | 3 years | |||||
Furniture and fixtures | 25,758 | 21,011 | 3 years | |||||||
Building | 40,681 | 40,681 | 30 years | |||||||
Leasehold improvements | 57,339 | 51,194 | Over life of lease | |||||||
DVD operations equipment | 89,144 | 96,361 | 5 years | |||||||
Capital work-in-progress | 12,495 | 8,643 | ||||||||
Property and equipment, gross | 414,691 | 357,196 | ||||||||
Less: Accumulated depreciation | (264,816 | ) | (223,591 | ) | ||||||
Property and equipment, net | $ | 149,875 | $ | 133,605 |
As of December 31, 2014 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 1,007,543 | $ | — | $ | — | $ | 1,007,543 | |||||||
Level 1 securities: | |||||||||||||||
Money market funds | 111,759 | — | — | 111,759 | |||||||||||
Level 2 securities: | |||||||||||||||
Corporate debt securities | 295,500 | 432 | (199 | ) | 295,733 | ||||||||||
Government securities | 168,749 | 120 | (95 | ) | 168,774 | ||||||||||
Asset and mortgage-backed securities | 112 | — | — | 112 | |||||||||||
Certificate of deposits | 3,600 | — | — | 3,600 | |||||||||||
Agency securities | 26,665 | 5 | (1 | ) | 26,669 | ||||||||||
Total | $ | 1,613,928 | $ | 557 | $ | (295 | ) | $ | 1,614,190 |
As of December 31, 2013 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 483,959 | $ | — | $ | — | $ | 483,959 | |||||||
Level 1 securities: | |||||||||||||||
Money market funds | 126,208 | — | — | 126,208 | |||||||||||
Level 2 securities: | |||||||||||||||
Corporate debt securities | 316,465 | 1,245 | (654 | ) | 317,056 | ||||||||||
Government securities | 143,812 | 287 | (18 | ) | 144,081 | ||||||||||
Asset and mortgage-backed securities | 93,118 | 229 | (418 | ) | 92,929 | ||||||||||
Certificate of deposits | 23,425 | — | — | 23,425 | |||||||||||
Agency securities | 17,951 | — | (2 | ) | 17,949 | ||||||||||
Total | $ | 1,204,938 | $ | 1,761 | $ | (1,092 | ) | $ | 1,205,607 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 1,113,608 | $ | 604,965 | |||
Short-term investments | 494,888 | 595,440 | |||||
Non-current assets (1) | 5,694 | 5,202 | |||||
Total | $ | 1,614,190 | $ | 1,205,607 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Total content library, gross | $ | 8,497,403 | $ | 6,474,688 | |||
Accumulated amortization | (3,598,375 | ) | (2,677,196 | ) | |||
Total content library, net | 4,899,028 | 3,797,492 | |||||
Current content library, net | 2,125,702 | 1,706,421 | |||||
Non-current content library, net | $ | 2,773,326 | $ | 2,091,071 |
As of December 31, 2014 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 1,007,543 | $ | — | $ | — | $ | 1,007,543 | |||||||
Level 1 securities: | |||||||||||||||
Money market funds | 111,759 | — | — | 111,759 | |||||||||||
Level 2 securities: | |||||||||||||||
Corporate debt securities | 295,500 | 432 | (199 | ) | 295,733 | ||||||||||
Government securities | 168,749 | 120 | (95 | ) | 168,774 | ||||||||||
Asset and mortgage-backed securities | 112 | — | — | 112 | |||||||||||
Certificate of deposits | 3,600 | — | — | 3,600 | |||||||||||
Agency securities | 26,665 | 5 | (1 | ) | 26,669 | ||||||||||
Total | $ | 1,613,928 | $ | 557 | $ | (295 | ) | $ | 1,614,190 |
As of December 31, 2013 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(in thousands) | |||||||||||||||
Cash | $ | 483,959 | $ | — | $ | — | $ | 483,959 | |||||||
Level 1 securities: | |||||||||||||||
Money market funds | 126,208 | — | — | 126,208 | |||||||||||
Level 2 securities: | |||||||||||||||
Corporate debt securities | 316,465 | 1,245 | (654 | ) | 317,056 | ||||||||||
Government securities | 143,812 | 287 | (18 | ) | 144,081 | ||||||||||
Asset and mortgage-backed securities | 93,118 | 229 | (418 | ) | 92,929 | ||||||||||
Certificate of deposits | 23,425 | — | — | 23,425 | |||||||||||
Agency securities | 17,951 | — | (2 | ) | 17,949 | ||||||||||
Total | $ | 1,204,938 | $ | 1,761 | $ | (1,092 | ) | $ | 1,205,607 |
As of December 31, | |||||||
2014 | 2013 | ||||||
(in thousands) | |||||||
Cash and cash equivalents | $ | 1,113,608 | $ | 604,965 | |||
Short-term investments | 494,888 | 595,440 | |||||
Non-current assets (1) | 5,694 | 5,202 | |||||
Total | $ | 1,614,190 | $ | 1,205,607 |
(in thousands) | ||||
Due within one year | $ | 113,864 | ||
Due after one year and through 5 years | 381,024 | |||
Total short-term investments | $ | 494,888 |
Shares Available for Grant | Options Outstanding | Weighted- Average Remaining Contractual Term (in Years) | Aggregate Intrinsic Value (in Thousands) | ||||||||||||
Number of Shares | Weighted- Average Exercise Price | ||||||||||||||
Balances as of December 31, 2011 | 7,013,508 | 2,957,754 | $ | 66.59 | |||||||||||
Granted | (1,803,798 | ) | 1,803,798 | 73.94 | |||||||||||
Exercised | — | (188,552 | ) | 21.85 | |||||||||||
Canceled | 48 | (48 | ) | 35.95 | |||||||||||
Expired | (1,160,721 | ) | — | ||||||||||||
Balances as of December 31, 2012 | 4,049,037 | 4,572,952 | $ | 71.33 | |||||||||||
Granted | (642,720 | ) | 642,720 | 208.94 | |||||||||||
Exercised | — | (1,688,774 | ) | 73.75 | |||||||||||
Balances as of December 31, 2013 | 3,406,317 | 3,526,898 | $ | 95.25 | |||||||||||
Granted | (545,573 | ) | 545,573 | 402.85 | |||||||||||
Exercised | — | (808,840 | ) | 75.65 | |||||||||||
Balances as of December 31, 2014 | 2,860,744 | 3,263,631 | $ | 151.53 | 6.14 | $ | 654,673 | ||||||||
Vested and exercisable at December 31, 2014 | 3,263,631 | $ | 151.53 | 6.14 | $ | 654,673 |
Year Ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Dividend yield | — | % | — | % | — | % | ||||||
Expected volatility | 41% - 48% | 51% - 54% | 55% - 65% | |||||||||
Risk-free interest rate | 2.39% - 2.83% | 1.87% - 2.71% | 1.61% - 2.01% | |||||||||
Suboptimal exercise factor | 2.66 - 5.44 | 2.33 - 3.92 | 2.26 - 3.65 | |||||||||
Valuation data: | ||||||||||||
Weighted-average fair value (per share) | $ | 211.22 | $ | 113.74 | $ | 41.00 | ||||||
Total stock-based compensation expense (in thousands) | 115,239 | 73,100 | 73,948 | |||||||||
Total income tax benefit related to stock options (in thousands) | 43,999 | 28,096 | 28,537 |
• | For content that does not premiere on the Netflix service (representing the vast majority of content), the Company amortizes on a straight-line basis over the shorter of each title’s contractual window of availability or estimated period of use, beginning with the month of first availability. The amortization period typically ranges from six months to five years. |
• | For content that premieres on the Netflix service, the Company expects more upfront viewing due to the additional merchandising and marketing efforts for this original content available only on Netflix. Hence, the Company amortizes on an accelerated basis over the amortization period, which is the shorter of four years or the license period, beginning with the month of first availability. If a subsequent season is added, the amortization period is extended by a year. |
• | If the cost per title cannot be reasonably estimated, the license fee is not capitalized and costs are expensed on a straight line basis over the license period. This typically occurs when the license agreement does not specify the number of titles, the license fee per title or the windows of availability per title. |