Netflix revenues: crossing the 200 million subscriber mark



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Investors had high expectations ahead Netflixof (NASDAQ: NFLX) report on the fourth quarter results this week. Even though CEO Reed Hastings and his team warned of slowing growth three months ago, the fourth quarter period typically brings increased engagement as people watch more TV and upgrade their streaming gear for vacations.

Yet Netflix surpassed those lofty Wall Street targets and set a new annual growth record along the way for 2020. The news was even better on the financial front, which looks set to include gushing cash flow for the foreseeable future. .

Let’s take a closer look.

A family watching television together.

Image source: Getty Images.

Not nearly finished growing up

Netflix has topped previous management forecasts of subscriber additions to land at 6 million. Its actual earnings – $ 8.5 million – nearly matched the $ 8.8 million success boost the company made a year ago.

It was a welcome sight for investors who feared Netflix was on the verge of expanding its global business. Walt disney built a huge subscriber platform for its Disney + streaming service in its first year, after all, which could have put pressure on the streaming leader in 2020.

Instead, Netflix added 37 million paying members in 2020 from its previous record of 29 million set in 2018. These users have remained very engaged, with a flood of exclusive content attracting massive audiences. Midnight sky, a Netflix film released during the period, drew 72 million viewers in its first month on the service. Management also stated that the series Bridgerton was “extremely popular” while promising more detailed audience statistics along the way.

Profits and cash flow

Netflix has tried to keep up with the earnings surge fueled by all of this growth, but management couldn’t put money back into the business quickly enough. As a result, the operating margin jumped above management’s long-term target of around 3% per year, from 13% to 18% in 2020.

NFLX Cash from Operations (TTM) Chart

NFLX Cash from Operations (TTM) data by YCharts

Cash flow was also strong, with outflows reaching just $ 138 million for the quarter, translating into a positive $ 1.9 billion for the year. This is in line with management’s forecast at the end of October, but Netflix’s new outlook clearly shows the company is on an improving financial trajectory.

Positive cash flow from here

Executives now believe they will break even in 2021 to mark the company’s first year without needing loans since it began promoting original content. Cash flow is expected to improve from there thanks to this ever-increasing profitability and growing user base.

Netflix’s near-term forecast calls for a sharp slowdown in subscriber numbers as it compares to the start of COVID-19 lockdowns from early 2019. Management said the company is still expected to push its base of global users to around 210 million by the end of March.

Executives assumed large direct cash returns from share buybacks that would likely begin later in the year. But the main reasons for the shareholder celebrations include the fact that Netflix has clearly established itself as the leader in a competitive industry that is likely to grow for many years to come.

Management has had to aggressively allocate liquidity since 2012 to protect and expand this valuable market position. But the huge returns from these successes will start to appear in 2021 and beyond.



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