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This excerpt taken from the NFLX 8-K filed Jan 23, 2008. Fourth-Quarter and Fiscal-Year 2007 Financial Highlights Revenue for the fourth quarter of 2007 was $302.4 million, representing 9 percent year-over-year growth from $277.2 million for the fourth quarter of 2006, and 3 percent sequential increase from $294.0 million for the third quarter of 2007. Revenue for fiscal 2007 was $1.205 billion, up 21 percent from $996.7 million for fiscal 2006. GAAP net income for the fourth quarter of 2007 was $15.8 million, or $0.24 per diluted share, compared to GAAP net income of $14.9 million, or $0.21 per diluted share, for the fourth quarter of 2006 and GAAP net income of $15.7 million, or $0.23 per diluted share, for the third quarter of 2007. GAAP net income for fiscal 2007 was $67.0 million, or $0.97 per diluted share, compared to GAAP net income of $49.1 million, or $0.71 per diluted share, for fiscal 2006. Non-GAAP net income was $17.8 million, or $0.27 per diluted share, for the fourth quarter of 2007, compared to non-GAAP net income of $16.8 million, or $0.24 per diluted share, for the fourth quarter of 2006 and non-GAAP net income of $17.6 million, or $0.26 per diluted share, for the third quarter of 2007. Non-GAAP net income was $74.2 million, or $1.08 per diluted share, for fiscal 2007 compared to non-GAAP net income of $56.8 million, or $0.82 per diluted share for fiscal 2006.
Non-GAAP net income equals net income on a GAAP basis before stock-based compensation expense, net of taxes. Gross margin1 for the fourth quarter of 2007 was 33.8 percent, compared to 38.9 percent for the fourth quarter of 2006 and 33.9 percent for the third quarter of 2007. Gross margin for fiscal 2007 was 34.8 percent, compared to 37.1 percent for fiscal 2006. Free cash flow2 for the fourth quarter of 2007 was $21.0 million, compared to $22.5 million in the fourth quarter of 2006 and $36.1 million for the third quarter of 2007. Free cash flow for fiscal 2007 was $45.5 million as compared to $62.0 million in fiscal 2006. Cash provided by operating activities for the fourth quarter of 2007 was $84.4 million, compared to $87.1 million for the fourth quarter of 2006 and $77.6 million for the third quarter of 2007. Cash provided by operating activities for fiscal 2007 was $290.1 million, compared to $247.9 million for fiscal 2006. Subscribers. Netflix ended the fourth quarter of 2007 with approximately 7,479,000 total subscribers, representing 18 percent year-over-year growth from 6,316,000 total subscribers at the end of the fourth quarter of 2006 and 6 percent sequential growth from 7,028,000 subscribers at the end of the third quarter of 2007. Net subscriber change in the quarter was an increase of 451,000, compared to an increase of 654,000 for the same period of 2006 and an increase of 286,000 for the third quarter of 2007. Gross subscriber additions for the quarter totaled 1,495,000, essentially flat year-over-year from 1,493,000 gross subscriber additions in the fourth quarter of 2006 and 15 percent quarter-over-quarter growth from 1,297,000 gross subscriber additions in the third quarter of 2007. Of the 7,479,000 total subscribers at quarter end, 98 percent, or 7,326,000 were paid subscribers. The other 2 percent, or 153,000, were free subscribers. Paid subscribers represented 97 percent of total subscribers at the end of the fourth quarter of 2006 and at the end of the third quarter of 2007. Subscriber acquisition cost3 for the fourth quarter of 2007 was $34.60 per gross subscriber addition, compared to $44.31 for the same period of 2006 and $37.91 for the third quarter of 2007. SAC for fiscal 2007 was $40.88 per gross subscriber addition compared to $42.96 for fiscal 2006. Churn4 for the fourth quarter of 2007 was 4.1 percent, compared to 3.9 percent for the fourth quarter of 2006 and 4.2 percent for the third quarter of 2007. Churn includes free subscribers as well as paying subscribers who elect not to renew their monthly subscription service during the quarter. Stock-based compensation for the fourth quarter of 2007 was $3.2 million, compared to $3.1 million in the fourth quarter of 2006 and the third quarter of 2007. Stock-based compensation for fiscal 2007 was $12.0 million, compared to $12.7 million for fiscal 2006. Stock-based compensation is presented in the same lines of the Consolidated Statements of Operations as cash compensation paid to the same individuals.
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