Netflix beats Q4 outlook with strong int'l customer growth

News Broadband Global 19 JAN 2017
Netflix beats Q4 outlook with strong int'l customer growth

Netflix reported better-than-expected results for the fourth quarter, led by strong subscriber growth outside the US. The company added 1.93 million new streaming customers in the US and 5.12 million elsewhere, compared to its forecast for net additions of 1.45 million in the US and 3.75 million abroad. Netflix finished the year with a total 93.8 million streaming customers, of which 47 percent are outside the US. 

Netflix subscribers, US and international (2014 Q4 - 2016 Q4)

Revenues and profit also beat expectations. Streaming revenue rose 41 percent year-on-year to USD 2.351 billion, ahead of the company's guidance of USD 2.344 billion, and the contribution profit was up 74 percent to USD 470 million with a 20 percent margin, compared to the outlook of USD 440 million and 18.8 percent. Net profit of USD 67 million was better than the USD 56 million forecast, despite a USD 22 million forex charge. 

For Q1, Netflix forecast somewhat slower growth due to a strong comparison with the year-earlier period and new series releases weighted toward the second half. It expects 5.2 million net adds, with 1.5 million in the US and 3.7 million internationally. Revenues will still be up strongly at an estimated USD 2.52 billion, and contribution profit is projected to more than double year-on-year to USD 623 million in Q2, giving a margin of nearly 25 percent. 

The international operations are expected to turn to a small profit in Q1, after narrowing the loss to USD 67 million in Q4. However, the rest of 2017 they will be back in the red, due to further investment costs, Netflix said. The full-year loss is projected to be less than the USD 307 million in 2015. 

Netflix said it plans to increase its spending on original productions further in 2017, to USD 6 billion from USD 5 billion last year. Its cash burn continued to worsen in Q4, to negative free cash flow of USD 639 million from USD 276 million a year earlier and USD 506 million in Q3. Free cash flow is expected to be a negative USD 2 billion over the full year 2017, compared to minus USD 1.7 billion last year. The company plans to continue to issue debt to finance the deficit. 

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