Netflix reports subscriber gains
It adds a record number of customers in its first quarter as it expands overseas.
Netf lix Inc., home to “House of Cards” and recent entry “The Unbreakable Kimmy Schmidt,” reported first-quarter results that exceeded Wall Street projections as the company’s aggressive expansion overseas sent the number of subscribers past 60 million for the first time.
The on-demand video company said Wednesday that it added a record 4.9 million customers from January to March, with more than half of that number coming from overseas. Netf lix said its 62.3 million subscribers watched some 10 billion hours of programming during the first quarter.
But what really revved up Wall Street was Netf lix’s forecast of gaining an additional 2 million subscribers during the second quarter as it continues its expansion into Japan and other markets. Netf lix stock soared 13% in after-hours trading after it closed at $475.46 in the regular session.
“The markets will respond first and foremost to subscriber growth,” said David Miller, an analyst at Topeka Capital Markets. “And they blew it out.”
The Los Gatos, Calif., company said that profit fell to $23.6 million, or 38 cents a share, during the quarter. However, Netf lix pointed out that results would have been 77 cents a share after excluding foreign exchange losses. The results were below the year-ago period’s profit of $53 million, or 86 cents a share. Analysts, on average, expected a profit of 69 cents a share.
Revenue came in at $1.57 billion, up 24% from the year-ago period.
Netf lix has been in the midst of a global push for new customers as it has seen new members taper off in the U.S. The company has launched in France, Australia, New Zealand and Cuba, among other territories. The company added 2.6 million members outside the U.S., exceeding its own forecast of 2.25 million.
Netf lix expects to complete its 200-country expansion by 2016. It also plans to shift some of its U.S. marketing budget over to its international operations to help fund the rollout.
“We think strong U.S. growth benefited from our ever-improving content, including the launch of the third season of ‘House of Cards’ and new shows ‘Unbreakable Kimmy Schmidt’ and ‘Bloodline,’ ” Netf lix Chief Executive Reed Hastings and Chief Financial Officer David Wells said in a letter to shareholders. “Our original content strategy is playing out as we hoped, driving lots of viewing in an economic way for Netflix while bolstering the positive perception of our brand and service around the world.”
Hastings and Wells played down concerns of rising competition on the digital front. HBO this month launched its online-only service HBO Now. They believe that the two services should not be viewed as substitutes for one another, but as complementary.
The letter also pointed out that other multichannel video programming distributors, such as Apple Inc., Dish Network Corp. and Sony Corp., should be viewed as more of a threat to the “current pay TV bundle than to Netflix.”