Netflix, Inc.(NASDAQ:NFLX) earnings falls despite rising subscribers base

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Netflix, Inc.(NASDAQ: NFLX) stock fell over 2.5% on 22nd April, 2020 (as of 1:41 pm GMT-4 ; Source: Google finance) after the company posted mixed results for the first quarter of FY 20. Netflix has reported first-quarter net profit of $709 million compared to $344 million, in the year-ago period. The company has added more than double the new subscribers it had anticipated due to the spread of COVID-19 for record growth. Netflix has reported the addition of 15.77 million paid subscribers globally in the first quarter of 2020. The company’s biggest quarter for paid net additions to its subscriber total previously was 9.6 million in the year-ago quarter, according to FactSet. The analysts were projecting the global paid streaming subscriber additions of 8.22 million on average, according to FactSet, after Netflix projected 7 million new subscribers three months ago. Meanwhile, the company achieved the success from major hits such as “Tiger King: Murder, Mayhem and Madness” and ”Money Heist.” During the first quarter, the company generated net cash used in operating activities of +$260 million vs. -$380 million in the prior year period. Free cash flow were of tot al+$162 million compared to -$460 million in the year ago quarter. NFLX ended the quarter with cash of $5.2 billion, while the $750m unsecured credit facility remains undrawn.

Netflix World Headquarters

However, NFLX in the first quarter of FY 20 has reported the adjusted earnings per share of $1.57, missing the analysts’ estimates for the adjusted earnings per share of $1.64 according to analysts surveyed by FactSet. The company had reported the adjusted revenue of $5.77 billion in the first quarter of FY 20, and excluding a -$115m impact from F/X, streaming ARPU rose 8% year over year. The company posted the Operating margin of 16.6% (vs. 10.2% in the prior year quarter), which is lower than the 18.0% forecast as the company incurred $218m in incremental content costs due to paused productions and hardship fund commitments

The company’s guidance for the second quarter is in ahead of estimates at $1.81 per share and revenue of $6.05 billion, versus estimates for $1.54 per share and $5.97 billion. For the second quarter, the company expects the net subscriber additions to be 7.5 million. However, the second quarter has historically been the company’s most challenging. For fiscal 2020, the company expects FCF to be of -$1 billion or better (compared to the prior 2020 expectation of -$2.5 billion and -$3.3 billion actual in 2019).

 

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