Why Netflix Will Be The Next $100 Billion Internet Company

1. Why Netflix Will Be
The Next $100 Billion
Internet Company
Gil Simon │ May 7, 2015

2. 2
This presentation is being furnished to you on a confidential basis to provide information and
analysis. The material presented is for general discussion, illustration and informational purposes
only. The opinions expressed herein are based on the current judgment and opinions of Apex
Capital, LLC as of 05/05/2015 and are subject to change without notice. References herein to
future revenues, earnings or share prices of Netflix, Inc. are included for discussion purposes only
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investment funds. As of the date of this presentation, those funds currently own common shares of
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3. Netflix: Proving the Naysayers Wrong
Why NFLX could be a $2,000 stock
Bears Say…
NFLX is a niche service facing significant
competition
Already one of the world’s largest media
subscription services, NFLX is watched 10-20x
more than its closest competitors
Content producers have all the leverage while
NFLX is just a distributor ripe to be squeezed
International growth will disappoint due to
entrenched competition and differing media
consumption habits
NFLX is a great service, but its financial results
will never justify its current price
NFLX’s global scale and growing checkbook
positions it as the buyer of choice for premium
licensed and original content
The desire to consume Hollywood content is
universal, and strong adoption in its early
international markets has given NFLX the
confidence to accelerate its global rollout
The company’s global subscription model along with
eventual pricing power will translate into profitability
well beyond consensus expectations
Says…
NFLX is an overvalued content
distributor with too many competitors
to meet lofty expectations
NFLX is quickly becoming one of
the most powerful media companies
in the world

4. We expect global subscribers to approach 150m by 2020
NFLX Has Tripled Its Subscriber Base in 3 Yrs.
Streaming Subscribers (millions)
2012 2013 2014 2015 2016 2017 2018 2019 2020
0
25
50
75
100
125
150 International Domestic
Already watched by ~45% of U.S. broadband households!
Source: Company filings and Apex projections

5. Global Rollout Continues to Ramp
Management expects international to eventually represent
2/3 of total subscribers
Canada
2010
Latin
America
2011
Australia
New Zealand
Japan (Q3)
20152013
Netherlands Germany
France
Austria
Belgium
Switzerland
Luxembourg
2014
UK
Ireland
Finland
Denmark
Sweden
Norway
2012
International expansion expected to be largely complete by YE2016
2016
ROW

6. 6
Netflix is Already The Scaled OTT Provider
Viewed 14x more than
closest OTT competitor…
…and 10x more than HBO
at a fraction of the price
Share of U.S.
downstream traffic in
peak evening hours1
Minutes watched
per household
per day2
1. Sandvine 2H 2014 Global Internet Phenomena; 2. Rentrak Q1 2015 data; 3. Amazon Prime annual rate on a monthly basis; 4. HBOGo free with linear subscription
Price/Mo: $8.99 $8.253 $7.99 $14.994
2.6%
1.4% 1.0%
34.9%
Price/Mo: $8.99 $14.99
111
12
14x 10x

7. 2015+
2014
2013
7
Content is King
And Netflix has become the new kingmaker
2012

8. 8
Consumers Already Love Netflix…
57% of the nearly 800 Netflix
users queried said that, if
forced to choose, they would
keep Netflix over traditional
pay TV; 49% reported
spending more time watching
Netflix than traditional pay TV.
- From ClearVoice/FBR Survey Says
Consumes Love It More Than TV by
Barton Crockett, FBR 4/16/2015
Netflix is the 5th most
popular network … [and] is
now considered a must
have channel right behind
most broadcast channels
and ESPN.
- From A Proprietary Service of
“Must See” TV by Marci Ryvicker,
Wells Fargo 3/11/2015
And the service is only getting better

9. 9
The Beauty of a Scaled Subscription Model
Global Subscribers (millions) 100m 150m
Average Subscription Price
Implied Global Streaming Revenue
$12
$14.4bn
$15
$18.0bn
$12
$21.6bn
$15
$27.0bn
Earnings Per Share1
$48.80
$65.06
$60.99
$81.33
$73.19
$97.59
$91.49
$121.99
@ 30% Operating Margin
@ 40% Operating Margin
$1,220
$1,627
$1,525
$2,033
$1,830
$2,440
$2,287
$3,050
@ 30% Operating Margin
@ 40% Operating Margin
Implied Share Price @ 25x
1. Assumes zero financial contribution from DVD segment, 30% blended global tax rate, and 62m shares outstanding
Note: Q1 2015 domestic and international streaming contribution margins were 32% and -16%, respectively
At 150m subscribers, each incremental $1 in price = $20 of EPS

10. 3-Year NFLX Price Target: $2,000
“PAY ATTENTION
TO THE FINE PRINT,
IT’S FAR MORE
IMPORTANT THAN
THE SELLING PRICE”
- Frank
Underwood
PAY ATTENTION TO THE FUNDAMENTALS, THEY SHOW FAR
MORE OPPORTUNITY THAN THE CURRENT SHARE PRICE