NETFLIX'S FOURTH QUARTER EARNINGS

Netflix has reported its earnings for the fourth quarter of 2019. The report for the earnings shows that the company beat the top and bottom lines for the quarter, however, the guidance for the first quarter does not seem impressive. Following the report, shares of Netflix climbed as much as 2.3% after Tuesday's (Jan. 21) trading hours.

Below are the key figures of the report as compiled by Bloomberg:

·       Earnings per share: $1.30 per share, however, that’s not comparable to Refinitiv estimates

·       Revenue: $5.47 billion vs. $5.45 billion expected, per Refinitiv

·       Domestic (U.S. and Canada) paid subscriber additions: 550,000 vs. 589,000 expected, per FactSet estimates

·       International paid subscriber additions: 8.33 million vs. 7.17 million expected, per FactSet

 

Netflix expects to report earnings of $1.66 per share on revenue of $5.73 billion for the first quarter of this year. However, analysts expect earnings of $1.20 per share and $5.76 billion in revenue. The company also disclosed that it expects to have 7 million new customers in the first quarter, which is quite lower than analysts' expectation of 7.86 million users.

The company saw a negative free cash flow of $1.7 billion for the fourth quarter and expects to see a negative free cash flow of about $2.5 billion for 2020. Netflix stressed that its cash burn peaked in 2019 and it's now moving slowly toward being free cash flow positive in the future.

CEO of the company, Hastings said concerning the firm's cash flow: “We’re on the glide path, slowly, towards positive free cash flow. We’re excited about that but that’s not coming from shrinking back our content spending. That’s coming from the increase in revenue and operating income.”

The company told shareholders in a letter that the low membership growth in the U.S. and Canada was due to the recent price changes and the recent launch of other viral streaming platforms. The company saw muted impact from competitive launches outside the U.S.  Competitive streaming platforms such as Disney+ are yet to be launched globally.

The company said, “As always, we are working hard to improve our service to combat these factors and push net adds higher over time."

CEO, Hastings stressed that the company was not going to incorporate advertising, but will battle if it were competing with big companies like Google or Facebook. He said, “Instead, we think if we don’t have exposure to that ... we’re in a much more positive place. We’re not integrating everybody’s data, we’re not controversial that way. We’ve got a much simpler business model.”

Another strategy has been put in place by the company to measure the number of households that watch contents on the platform, having counted a view as 70% of a single episode or an entire film being watched. However, it now plans to count a view as any account that has watched a TV show or movie for at least two minutes, which is long enough to indicate the choice was intentional.

This fourth-quarter result marks Netflix’s first earnings report since the launch of new rival streaming services like Disney+ and Apple TV+; and analysts will be watching to see if these newly launched streaming platforms will have any impact on Netflix’s results.