Hacking NetFlix

Netflix Investor Day Webcast May 28th

Netflix announced that the May 28th Investor Day event will be webcast live from 8am to 12:30pm PT.

The event will include a keynote presentation by Reed Hastings, Netflix’s chief executive officer and co-founder, as well as presentations from the Netflix senior management team:

• Neil Hunt, Chief Product Officer
• Leslie Kilgore, Chief Marketing Officer
• Barry McCarthy, Chief Financial Officer
• Andy Rendich, VP of Operations
• Ted Sarandos, Chief Content Officer

Anyone can listen in at http://ir.netflix.com.

Netflix Financial Presentation Slides Provide Interesting Look at Business

Netflix included a presentation with the investor webcast, and the slides are an interesting look at the business over time. I've included a few of the slides here, but you can download the entire presentation online at http://ir.netflix.com (look for the First Quarter 2008 Earnings Conference Call under investor events).

The first slide shows subscriber growth over the past 2 years:

The net additions slide shows the impact of Blockbuster Online:

More after the jump:

Netflix Ends Q1 2008 with 8.2 Million Subs; $326.2 Million in Revenue

Netflix ended Q1 2008 with more than 8.2 million subscribers, a 10% increase over Q4 2007 and 21% over the same period last year. Revenue was $326.2 million, up 8% over last quarter and 7 percent over last year. GAAP net income was $13.4 million (0.21 per diluted share)

Two interesting record low metrics: subscriber acquisition cost dropped to $29.50, down from $47.46 last year and $34.60 last quarter, and churn dropped to 3.9%.

Netflix is projecting 8.3 to 8.5 million subscribers for Q2, and 9.1 to 9.7 for 2008, and has increased the revenue projection for 2008 to $1.35 to $1.39 billion.

The full press release is available online at Netflix Announces Q1 2008 Financial Results (PDF).

Netflix Q1 2008 Earnings & Webcast on April 21st, 2008

Netflix will announce Q1 earnings and host an investor webcast on January 21st, 2008 at 2pm (PT). Anyone can listen in at http://ir.netflix.com.

Netflix Annual Shareholder Meeting on May 21st, 2008

Netflix announced that the annual shareholders meeting will be held on May 21st at 3pm PT at the Netflix headquarters. Shareholders as of March 26th can vote on the following:

1. To elect three Class III directors to hold office until the 2011 Annual Meeting of Stockholders;
2. To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2008; and
3. To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.

Piper Jaffray Puts Netflix on Alpha List

StreetInsider reports that Piper Jaffray has added Netflix to its Alpha List.

The firm points out that Netflix.com's traffic is still outperforming Blockbuster.com (based on Alexa traffic data). Specifically, over the last three months, Netflix's site has seen an increase of ~16% in traffic, while Blockbuster's site has seen a drop of ~10% in traffic.

Surprisingly, DVD by mail only makes up less than 20% of the movie rental market. Piper believes this leaves Netflix with a huge area to grow. Additionally, as Blu-Ray is becoming more and more popular (especially after the death of HD DVD), Piper believes "consumers will continue to transition more and more to DVD by mail vs. retail rental stores."

Netflix Stock Hits $38 Per Share, A Multi-Year High

It's been a wild ride for Netflix shareholders over the past few years (see the Google Finance chart below), and today Netflix hit $38 per share. Cantor Fitzgerald upgraded Netflix to a "Buy" with a new target of $41 per share (up from $24 per share).

The firm says Blockbuster's (NYSE: BBI) recent initiatives to refocus on the profitability of its retail operations has created a significant window of opportunity for Netflix. Cantor cites Netflix's competitive advantages as scale, logistics expertise, and usage data, and believes that the market is not yet pricing in the possibility of this window being open for "a significantly longer period of time" than previously expected.

Cantor notes that Netflix currently has about 30% or more of its float shorted, possibly suggesting that the Company's uptrend could be intensified by a short squeeze.

Disclosure: I do not own shares of Netflix or Blockbuster.

Netflix's 2007 Annual Report

Netflix released the 2007 Annual Report, and you can download it from the Netflix website.

Here are a few tidbits from the report:

From the front page of the report: "SIC Code 7841 - Video Tape Rental." Netflix has never rented VHS tapes, and the DVD format has been around since 1995. Time for a new SIC code? (p. 1).

Ever wonder why titles disappear from Watch Instantly? "For titles delivered through our instant-watching feature, we generally license the content directly for a period of time. Following expiration of the license term, we are no longer able to distribute the content through our instant- watching feature unless we extend or renew the associated license agreement." (p. 8).

Netflix has approximately 90,000 titles on more than 69 million DVDs. (p. 9).

Netflix has more than 1,542 full-time and 1,128 part-time employees. (p. 10).

I guess high-def discs Blu-ray are not as durable as traditional DVDs: "These new high definition format DVDs appear to have higher damage rates than regular DVDs." (p. 18).

Is someone attacking Netflix's website? "Our Web site periodically experiences directed attacks intended to cause a disruption in service." (p. 19).

Netflix is involved in a number of legal proceedings, including the Frank Chavez class action lawsuit, Lycos patent infringement claim, Dennis Dilbeck anti-trust class lawsuit, and several other patent-infringement claims. (p. 65-66).

Netflix Updates Q1 2008 Guidance to More Than 8 Million Subscribers

Netflix issued a press release this morning to update guidance for Q1 and the rest of 2008:

Revised First Quarter-2008 Guidance:
• Ending subscribers of 8.16 million to 8.26 million, up from 7.85 million to 8.05 million
• Revenue of $324 million to $328 million, from $323 million to $328 million
• GAAP Net Income of $10 million to $14 million, from $9 million to $14 million
• GAAP EPS of $0.15 to $0.22 per diluted share, from $0.13 to $0.21 per diluted share

Revised Full Year 2008 Guidance:
• Ending subscribers of 8.9 million to 9.5 million, up from 8.4 million to 8.9 million
• Revenue of $1.345 billion to $1.385 billion, up from $1.3 billion to $1.35 billion
• GAAP Net Income of $75 million to $83 million, unchanged from prior guidance
• GAAP EPS of $1.18 to $1.30 per diluted share, up from $1.12 to $1.24 per diluted share

At the Jeffries 4th Annual Internet Conference this morning, Netflix CFO Barry McCarthy said that the faster than expected growth was caused by by longer lifetime customer value, better retention, and an acceleration of new subscriber additions at a lower cost. McCarthy said that this was one of the times that the company was "Firing on all cylinders."

As a result of the news, NFLX is up almost 10%. Netflix has had a wild ride over the past year:

Netflix to Buy Back $100 Million in Stock

Netflix issued a press release to announce that they will be buying back $100 million in stock in 2008.

Stock repurchases under this program may be made through open market transactions and, from time to time, privately negotiated transactions with third parties, and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, alternative investment opportunities and other market conditions. Repurchased shares would be returned to the status of authorized but un-issued shares of common stock.