Final level summary analysis

Vertical Analysis - Netflix

Income Statement

Period Ending IN THOUSANDS Forecast, 2020 December 31,2019 December 31,2018 December 31,2017 December 31,2016 December 31,2015

Total Revenue $24,392,547.00 100.00% $20,156,447.00 100.00% $15,794,341.00 100.00% $11,692,713.00 100.00% $8,830,669.00 100.00% $6,779,511.00 100.00%

Cost of Revenue $14,879,453.67 61.00% $12,440,213.00 61.72% $9,967,538.00 63.11% $8,033,000.00 68.70% $6,029,901.00 68.28% $4,591,476.00 67.73%

Gross Profit $9,513,093.33 39.00% $7,716,234.00 38.28% $5,826,803.00 36.89% $3,659,713.00 31.30% $2,800,768.00 31.72% $2,188,035.00 32.27%

Operating Expenses

Research and development $1,707,478.29 7.00% $1,545,149.00 7.67% $1,221,814.00 7.74% $953,710.00 8.16% $852,098.00 9.65% $650,788.00 9.60%

Selling, general and administrative $4,390,658.46 18.00% $3,566,831.00 17.70% $2,999,763.00 18.99% $1,867,324.00 15.97% $1,568,877.00 17.77% $1,231,421.00 18.16%

Total Operating Expenses $5,854,211.28 24.00% $5,111,980.00 25.36% $4,221,577.00 26.73% $2,821,034.00 24.13% $2,420,975.00 27.42% $1,882,209.00 27.76%

Operating Income or Loss $3,414,956.58 14.00% $2,604,254.00 12.92% $1,605,226.00 10.16% $838,679.00 7.17% $379,793.00 4.30% $305,826.00 4.51%

Income from Continuing Operations

Interest expense -$731,776.41 -3.00% -$626,023.00 -3.11% -$420,293.00 -2.66% -$238,204.00 -2.04% -$150,114.00 -1.70% -$132,716.00 -1.96%

Interest and other income (expense) $90,000.00 0.37% $84,000.00 0.42% $41,725.00 0.26% -$115,154.00 -0.98% $30,828.00 0.35% -$31,225.00 -0.46%

Income before taxes $2,927,105.64 12.00% $2,062,231.00 10.23% $1,226,458.00 7.77% $485,321.00 4.15% $260,507.00 2.95% $141,885.00 2.09%

Provision for (benefit from income taxes $201,100.00 0.82% $195,315.00 0.97% $15,216.00 0.10% -$73,608.00 -0.63% $73,829.00 0.84% $19,244.00 0.28%

Net Income From Continuing Ops $1,951,403.76 8.00% $1,324,893.00 6.57% $832,674.00 5.27% $205,571.00 1.76% $67,392.00 0.76% -$41,300.00 -0.61%

Net Income $2,683,180.17 11.00% $1,866,916.00 9.26% $1,211,242.00 7.67% $558,929.00 4.78% $186,678.00 2.11% $122,641.00 1.81%

Gross margin: Margin has increased; this means that management has not found a way to be more efficient (the percentage tell us how much of every dollar of sale makes it after covering cost of goods sold). Compare to previous years Netflix is doing good, compared to the industry average, which is 40.90% Netflix is lagging a bit behind with its 38%. (We want to see margins increase...) Cost of Revenue %: Netflix has been finding ways to produce their service cheaper per dollar of sales. We want to see margins decrease, and Netflix had a margin of 68% in 2015 and had a margin of 62% in 2019. The cost is going up because they are selling more, but they are also more efficient (homerun). Operating income or loss: Net income: