Netflix beats by $0.28, reports revs in-line; Sees GLobal Expansion Finishing Earlier than Expected; Expects to raise 'at least' $1 bln in debt
Reports Q4 (Dec) earnings of $0.72 per share, excluding non-recurring items, $0.28 better than the Capital IQ Consensus Estimate of $0.44; revenues rose 26.4% year/year to $1.49 bln vs the $1.49 bln consensus. Please see 16:08 for additional metrics.
Key Excerpts from Newsletter:
- "In October, we judged the leading factor of the similar decline in Q3 y/y net adds to be our May price change. Since then, with additional research, we now think that the decline in y/y net adds would have largely taken place independent of the price change. We've found our growth in net adds is strongest in the lower income areas of the US, which would not be the case if there was material price sensitivity. We think, instead, the reduction in y/y net additions is a natural progression in our large US market as we grow".
- "This year we plan to increase US contribution margins from 30% in Q1 to about 32% in Q1 2016 to about 34% in Q1 2017, etc. We'll re-evaluate the margin progression model again in early 2020 when we hopefully achieve 40% contribution margins".
- "In late Q1, we'll be launching Netflix in Australia and New Zealand. Later in the year, we'll launch additional major countries, in keeping with our global strategy".
- "Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards".
- "For China, we are still exploring options — all of them modest. We'll learn a great deal if we can successfully operate a small service in China centered on our original and other globally-licensed content. That is our preference, for the next few years, if we are able to acquire the necessary permissions".
- "We finished the quarter with $1.6 billion in cash and equivalents. Given we are investing faster in content (this Q1 will show a step up in cash use with all the original projects launching in the quarter) and the current favorable interest rate environment, we intend to raise at least a billion dollars, pending market conditions, of additional long-term debt in a similar manner to last year".