This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Netflix Inc. (NFLX: chart) on January 23, 2008.

Management:

Founder and CEO: Reed Hastings
CFO: Barry McCarthy
VP Investor Relations: Deborah Crawford

Key Investor Issues:

- GAAP EPS rose from 21 cents to 24 cents, year-on-year.
- Revenues for fiscal 2007 were $1.205 billion, 21% higher than $996.7 million in fiscal 2006.

Fiscal Year 2007 Financial Highlights:

- GAAP net income for fiscal 2007 was $67 million versus $49.1 million for fiscal 2006.
- Earnings per diluted share rose from 71 cents fiscal 2006 to 97 cents fiscal 2007.
- Gross margin for fiscal 2007 was 34.8% versus 37.1% for fiscal 2006.

Fourth Quarter 2007 Financial Highlights:

The fourth quarter ending subscriber base of about 7.5 million represented an 18% year-on-year increase from about 6.3 million total subscribers at the end of fourth quarter in 2006.

The sequential growth was 6% from about 6.7 million subscribers at the end of the third quarter in 2007. The gross subscriber additions year-over-year were flat while a 15% growth was recorded quarter-over-quarter from about 1.3 million in the third quarter of 2007. The company reported that 98% or about 7.3 million of the total 7.5 million subscribers were paid while the remaining 2% were free subscribers.

Non-GAAP net income was $17.8 million, or 27 cents per diluted share compared with $16.8 million or 24 cents per diluted share for the fourth quarter year 2006.

Sequentially, non-GAAP net income marginally increased 1.14% from third quarter level of $17.6 million to $17.8 million in the fourth quarter.

The company recorded non-GAAP net income of $74.2 million, or $1.08 per diluted for fiscal year 2007 compared with non-GAAP net income of $56.8 million, or 82 cents per diluted share for fiscal year 2006.

The management reported gross margin of 33.8% for the fourth quarter of 2007 versus 38.9% for the last year quarter.

Sequentially, gross margin slightly eased from 33.9% to 33.8%.

Quarterly free cash flow decreased from the third quarter figure of $36.1 million to fourth quarter of $21 million. The full year cash flow for fiscal 2007 was $45.5 million versus $62 million for fiscal 2006.

Cash from operating activities in the fourth quarter was $84.4 million, a decrease from fourth quarter 2006 figure of $87.1 million.

Sequentially, cash from operating activities rose from $77.6 million in the third quarter to the current fourth quarter level of $84.4 million.

The subscriber acquisition cost (SAC) for the fourth quarter 2007 was $34.60 per gross subscriber addition, compared with $44.31 for the same period of 2006. The third quarter figure was $37.91.

Churn, which includes free and paying subscribers who elect not to renew their monthly subscription for the service during the quarter, was 4.1% for the fourth quarter compared with 3.9% for the same quarter last year and 4.2% for the third quarter fiscal 2007.