Summary
Netflix reported its first quarterly results of 2012 with a consolidated net loss of $4.6 million, a significant shift from the previous year's profit, although revenues saw a 21.0% year-over-year increase to $869.8 million. This loss was largely driven by aggressive international expansion and increased content acquisition costs, which overshadowed the strong growth in domestic streaming subscribers. The company is actively transitioning its business model, with streaming now being the primary growth driver, while the DVD subscriber base continues its decline. Despite the net loss, the company highlighted robust subscriber growth in its domestic streaming segment, adding 1.7 million net subscribers in Q1 2012. International streaming also showed substantial growth, with a 65% increase in subscribers, though it continues to be a significant contributor to losses due to expansion efforts. Management is focused on improving the domestic streaming contribution margin and anticipates modest sequential revenue growth, driven by continued streaming subscriber increases, while expecting the consolidated net loss to narrow in the second quarter. Investors should note the substantial commitments for future content licensing and the company's potential need for additional financing.
Financial Highlights
49 data points| Revenue | $869.79M |
| Cost of Revenue | $623.93M |
| Gross Profit | $245.86M |
| R&D Expenses | $82.80M |
| Operating Expenses | $247.79M |
| Operating Income | -$1.94M |
| Interest Expense | $4.97M |
| Net Income | -$4.58M |
| EPS (Basic) | $-0.00 |
| EPS (Diluted) | $-0.00 |
| Shares Outstanding (Basic) | 3.88B |
| Shares Outstanding (Diluted) | 3.88B |
Key Highlights
- 1Reported a consolidated net loss of $4.6 million in Q1 2012, a stark contrast to the profit in Q1 2011, largely due to international expansion costs and content investments.
- 2Consolidated revenues increased by 21.0% year-over-year to $869.8 million, driven by subscriber growth.
- 3Domestic streaming subscriptions saw strong net additions of 1,739,000, contributing to a domestic streaming contribution margin of 13.1%.
- 4International streaming subscribers grew by 65% sequentially to 3.1 million, but the segment reported a contribution loss of $102.7 million due to expansion efforts.
- 5Domestic DVD subscriptions continued their decline, with a net loss of 1,076,000 subscribers during the quarter.
- 6Free cash flow significantly decreased by 97.3% year-over-year to $2.1 million, reflecting increased investments in content and international markets.
- 7The company faces substantial future streaming content obligations totaling over $3.6 billion.