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The problem of Netflix's cash consumption will further worsen before it improves, the company said on Tuesday.
The streaming video service provider is now expecting its operations and investments to consume $ 3.5 billion in cash this year, company officials said in a letter to shareholders. . That's about $ 500 million more than its investments and operations last year, and about $ 500 million more than the company's forecast in January.
Netflix has changed its corporate structure to increase taxes this year, the company said in its letter, released as part of the release of its first quarter results. The company also plans to invest more than expected in real estate and other infrastructure, he added.
Read it: Netflix slips after beating estimates of growth in the number of subscribers in the first quarter, but gives only weak forecasts for the coming months
But Netflix has promised that the company's free cash flow, which represents the net amount that a company generates or consumes in its business, minus the amount it invests in real estate, equipment and supplies. Other long-term assets, would begin to recover next year. .
"We are still forecasting improved free cash flow in 2020 and then every year thereafter, due to growth in our membership base, revenues and operating margins," says the letter. .
Despite steady profits, Netflix has recorded negative free cash flow each year since 2011. The gap between its net income and its cash outflows is mainly due to an accounting problem that results from its huge and ongoing investments in original series and films. The company typically makes these investments – and spends real money – in this years' content before having to cost them in its income statement.
In order to finance its cash flow deficits, the company has repeatedly visited the bond market to sell debt. The company's long-term debt now stands at $ 10.3 billion, up from $ 6.5 billion at the end of the first quarter of last year.
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