April 18, 2007, 12:00 AM

Netflix Q1 revenue rises 36% to $305 million

Online DVD rental company Netflix today reported first-quarter revenue of $305.3 million, up 36% from a year ago, and that it ended the quarter with 6.8 million subscribers, up 40% from a year ago.

Kurt Peters

Executive Editor

Online DVD rental company Netflix Inc. posted a 36% year-over-year increase in revenue to $305.3 million for the first quarter ended March 31, and finished the quarter with 6.8 million subscribers, up 40% from a year ago, it said today.

"Our first-quarter results were in line with our guidance, but at the low end of the range, reflecting the impact of increased competition," says co-founder and CEO Reed Hastings. "Our business continues to grow and to generate profits, and we are pushing into online video to lead the next generation of movie viewing." Hastings will deliver the June 6 keynote address, The Transformation of the Movie Rental Industry, at the Internet Retailer Conference & Exhibition, June 4-7 in San Jose.

Although Hastings didn’t note Netflix’s competition by name, retail chain Blockbuster Inc. reported growth in its online business last year even as overall sales declined and said it expects to have 3 million online subscribers as of the end of Q1 2007, or double its number of subscribers from five months earlier. Blockbuster will report its Q1 numbers on May 2.

Netflix, No. 21 in the Internet Retailer Top 500 Guide, reported Q1 net income of $9.9 million, up 125% from $4.4 million in the year-ago quarter. Q1 non-GAAP net income, which excludes stock-based compensation expense, was $11.5 million, up 80% from $6.4 million a year ago.

Netflix also reported a 23% year-over-year increase in subscriber acquisition cost, to $47.46 per gross subscriber addition.

Gross margin for Q1 was 36.1%, up from 33.8% in the year-ago quarter, Netflix said. It ended Q1 with free cash flow of $18 million, up 54% from $11.7 million a year ago.

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