2. The Evolution
1998 Offered DVD rentals
2000 Revenue sharing with Warner Bros. and Columbia
2002 Publicly Listed
2003 Subscribers top 1M
2007 Billionth DVD delivery
2010 Surpassed 20M subscribers & named #1 eComm
company for customer satisfaction
5. Competitive Landscape
Product Life Cycle and Key Competitors
Subscribers by Provider
20
mln
Blu-Ray DVD
10
mln
VOD
Streaming
Video
5 mln VCR
Introduction Growth Maturity Decline
6. Financial Summary Chart 7
Margins remain healthy despite significant growth
40.0%
30.0%
20.0%
Netflix actively managing operating costs relative to sales while maintaining aggressive growth
10.0%
0%
Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Sep-11
Gross Profit %
Operating Income % of Sales
-$13 bln Market Cap., $230 per share - $160 mln Net Income
- P/E Ratio= 85x vs. Peer group = 50x - Return on Equity= 26%
- $2.2 bln Sales (11’ growth 30%) - BB + S&P rating
7. User Growth
30,000
22,500
No. Subscribers
15,000
7,500
Mar-09 Jun-09
Sep-09 Dec-09
Mar-10 Jun-10
Sep-10 0
Dec-10
Mar-11
Sep-11
• Subscriber average growth at 40%
• Customer churn rates remain flat at 4%
• Impact to be seen following streaming cost increase in September 2011
• Potential offset with international expansion
8. Financial Summary
Ability to monetize subscriber growth
Average subscriber growth 40%
Manage churn rate below market average
n&
Focus on internal cost management
d itio
Maintain healthy gross margins C on wth
al Gro
anci or
Fit for Purpose Balance Sheet Fin ed f
thy ition
40% of assets are content related Heal os
P
High cash balances / Bank revolver capacity
Investment in Technology
Low / moderate Debt to Equity- 40%
Strong cash flow to service debt
Other Considerations
Cost pressure (competition, streaming video and international expansion)
Investors have significant expectations
