Netflix reports Q1 (Mar) results, revs in-line; guides Q2 EPS above consensus, revs below consensus; net adds in Q1 of +3.98 mln vs prior guidance of +6.00 mln (549.57 -4.87)
- Reports Q1 (Mar) earnings of $3.75 per share, includes a $253 mln unrealized gain from F/X remeasurement on our Euro denominated debt, is not comparable to the S&P Capital IQ Consensus of $2.94; revenues rose 24.2% year/year to $7.16 bln vs the $7.13 bln S&P Capital IQ Consensus.
- Co issues mixed guidance for Q2 (Jun), sees EPS of $3.16 vs. $2.67 S&P Capital IQ Consensus; sees Q2 revs of $7.302 bln vs. $7.37 bln S&P Capital IQ Consensus.
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Operating Metrics:
- Global streaming paid net adds in Q1 of +3.98 mln vs prior guidance of +6.00 mln and vs +8.51 mln in Q4
- NFLX guides to Q2 global streaming net adds of +1.00 mln
- UCAN (US & Canada) ARPU in Q1 was $14.25 vs $13.09 a year ago and vs $13.51 in Q4
- EMEA ARPU was $11.56 vs $10.40 a year ago
- Operating margin improved to 27.4% in Q1 vs 25.0% prior guidance and vs 16.6% a year ago
- Co guides to Q2 operating margin of 25.5% vs 21.8% consensus
- Commentary:
- Co finished Q1 with 208 mln paid memberships, up 14% yr/yr, but below guidance of 210 mln paid memberships. "We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020 and a lighter content slate in the first half of this year, due to Covid-19 production delays. We continue to anticipate a strong second half with the return of new seasons of some of our biggest hits and an exciting film lineup."
- These dynamics are also contributing to a lighter content slate in 1H21, and hence, co believes slower membership growth. In Q1, net adds were below guidance primarily due to acquisition, as retention in Q1 was in line with expectations.
- With similar pull forward and delayed slate dynamics plus typical seasonality expected to impact Q2, co projects paid net additions of 1m with UCAN and LATAM regions expected to be roughly flattish in memberships.
- Co anticipates paid membership growth will re-accelerate in 2H21 as co ramps into a very strong back half slate with the return of big hits.
- Competition: "We don't believe competitive intensity materially changed in the quarter or was a material factor in the variance as the over-forecast was across all of our regions. We also saw similar percentage year-over-year declines in paid net adds in all regions...whereas the level of competitive intensity varies by country.