July 26, 2005, 12:00 AM

Q2 earnings at Netflix jump 97% to $164.5 million

Online DVD rental service Netflix Inc. returned to profitability in the second quarter, with net income soaring 97% to $5.7 million from $2.9 million a year earlier. Netflix had a net loss of $8.8 million in the first quarter.

Online DVD rental service Netflix Inc. returned to profitability in a big way in the second quarter, with net income soaring 97% to $5.7 million from $2.9 million a year earlier. Netflix had reported a net loss of $8.8 million in the first quarter.

The company attributed the improvement to lower-than-expected marketing costs, better-than-expected cost management, and lower-than-expected stock-based compensation expense.

Netflix, the 18th largest online retialers as ranked by Internet Retailer’s Top 400 Guide to Retail Web Sites, reported second-quarter revenues of $164.5 million, a 37% increase from $120.3 million in the year-ago period and a 7% increase from $154.1 million in the first quarter. Subscribers increased 53% to 3.2 million, including 3.1 million paid subscribers. That compares with 2.1 million subscribers a year earlier.

Acquisition cost per subscriber reached $37.25 in the second quarter, compared with $35.12 a year earlier and $37.89 in the first quarter.

CEO Reed Hastings said he is confident that Netflix will hit 4 million subscribers and reach profitability by year’s end, and will emerge as the clear-cut market leader in its battle with Blockbuster Inc.

The company said it expects to end the year with net income of between $2.4 million and $11.9 million, a sharp increase from its previous guidance of a loss of between $5 million to $15 million.

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