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Monday, January 22, 2018

=Netflix (NFLX) reported earnings on Mon 22 Jan 2018 (a/h)



Netflix reports EPS in-line, revs in-line with higher than expected subs; guides Q1 EPS and revs above consensus; guides FY18 content spend, FCF, operating margin 
  • Reports Q4 (Dec) GAAP earnings of $0.41 per share, in-line with the Capital IQ Consensus of $0.41; revenues rose 32.6% year/year to $3.29 bln vs the $3.28 bln Capital IQ Consensus. 
    • International Net sub additions 6.36 mln vs 5.05 mln guidance; Int'l rev and ASP grew 59% and 12% year over year, respectively.
    • Domestic Net Additions 1.98 mln vs 1.25 mln guidance; Domestic contribution profit increased 5% year-over-year although contribution margin of 34.4% declined both on a year-over-year and sequential basis due to higher marketing spend
    • In Q4, free cash flow amounted to -$524 million, bringing full year 2017 FCF to -$2.0 billion, at the lower end of the -$2.0 to -$2.5 billion range we had previously indicated. This was largely due to the timing of content payments, which will now occur in 2018.
  • Co issues upside guidance for Q1, sees EPS of $0.63 vs. $0.56 Capital IQ Consensus Estimate; sees Q1 revs of $3.686 bln vs. $3.49 bln Capital IQ Consensus Estimate. 
    • For Q1, we project global net adds of 6.35 million (vs. 5.0m in the year ago quarter), with 1.45m in the US and 4.90m internationally.
  • "As we wrote last quarter, our primary profit metric is operating margin and we are targeting a full year 2018 target of 10%, up about 300 basis points year over year, as in the prior year. We believe our big investments in content are paying off."
  • In 2017, average streaming hours per membership grew by 9% year-over-year. With greater than expected member growth (resulting in more revenue), we now plan to spend $7.5-8.0 billion on content on a P&L basis in 2018. 
  • "In the near term, however, membership, revenue and original content spend are booming. We're growing faster than we expected, which allows us to invest more in original content than we had planned, so our FCF will be around negative $3B-4B in 2018." 

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