Netflix closed a year where it had its biggest show ever in Squid Game, and its two biggest film releases ever, in Red Notice and Don’t Look up. The company however just missed its guidance for growth in streaming subscribers, ending the fourth quarter with 221.84 million, compared to its forecast of 222.06 million. For the full year, paid net adds totaled 18 million, from 37 million in 2020, helped by lockdown conditions. Going forward, the company sees a slowdown in new paid additions: it expects to add 2.50 million in the first quarter, after attracting 8.28 million in the fourth quarter and 3.98 million the year before.
This will put global streaming paid memberships for Q1 at 224.34 million. Netflix noted that while retention and engagement remain healthy, acquisition growth has not re-accelerated to pre-pandemic levels. “We think this may be due to several factors including the ongoing covid overhang and macro-economic hardship in several parts of the world, like Latin America,” it said.
Revenues rose in Q4 to USD 7.709 billion from 7.163 billion, helped by a 9 percent increase in average paid memberships and a 7 percent rise in the average revenue per membership, but the operating profit more than halved to USD 632 million from 1.960 billion. The operating margin also slipped, to 8.2 percent from 27.4 percent year-on-year. Netflix said this decline was expected given its large content slate in the quarter. The net profit also went lower, to USD 607 million from 1.707 billion, with diluted earnings per share at USD 133 from 3.75.
The operating cash flow was at a negative USD 403 million, from a positive 82 million in the previous quarter and a positive 777 million the year before. The free cash flow went to a negative USD 569 million, from a negative 106 million in Q4 and a positive 696 million the year before.
The US and Canada (UCAN region) added 1.2 million paid memberships in the quarter, against 0.9 million the year earlier, marking Netflix’s strongest quarter of member growth in the region since the early days of covid-19. In Asia Pacific, paid memberships advanced by 2.6 million against 2.0 million year-on-year, with strong growth in both Japan and India. EMEA was the largest contributor to paid net adds in the quarter, putting on 3.5 million from 4.5 million the year before. The region also delivered record quarterly revenue, passing USD 2.5 billion for the first time. Paid additions in Latin America went to 1.0 million, from 1.2 million in 2020.
The Squid Game and film Red Notice generated 1.65 billion and 364 million hours viewed in the first four weeks, as the best watched show and film, respectively. After that, the Witcher was the most watched show with 484 million hours viewed, followed by You (468 million), Emily in Paris (287 million) and Cobra Kai (274 million). The limited series Maid generated 469 million hours viewed.
For the first quarter, the company expects revenues at USD 7.903 billion, operating profit of USD 1.765 billion, a net profit of USD 1.304 billion and diluted EPS at 2.86. For the full year, the operating margin is seen at 19-20 percent, assuming no material swings in foreign currency from current levels.
