Wall Street likes it, too.

A quick look at Netflix’s Q4 results: It added 8.33 million streaming subscribers around the world. The company had told Wall Street that it would add 6.3 million. “Beautiful,” per the company’s investor letter.

Netflix had told Wall Street it would add 1.25 million subscribers in the U.S. and another 5.05 million internationally. Instead, it added 1.98 million in the U.S. and another 6.36 million outside the U.S.

(Correction: An earlier version of this story incorrectly reported Netflix’s Q4 numbers, which exceeded the company’s previous forecast by two million subscribers.)

Netflix told investors that it would add 1.45 million domestic subs in Q1 and another 4.9 million outside the U.S.; Wall Street had expected 1.265 million and 3.73 million, respectively.

Netflix CEO Reed Hastings uses the rest of his letter to hit on themes he has come back to for many years: The company is growing, competition is growing, and Netflix’s spending on original content is growing.

The company still plans on spending up to $8 billion on content this year, up from roughly $6 billion in 2017. And it will boost its marketing budget for those shows from $1.3 billion to $2 billion, “because our testing results indicate this is wise,” Hastings writes. “We want great content, and we want the budget to make the hits we have really big, to drive our membership growth.” [An earlier version of this story incorrectly reported that Netflix was spending $8 billion on its original content. The $8 billion sum is for all of its programming.]

Also increasing: The company’s cash burn, which hit $2 billion last year. Eventually, Hastings says, the company’s margins will increase while its content spend starts to slow, and the company will turn free cash flow positive.

But this year the company expects its burn to increase to between $3 billion and $4 billion, which means it will have to borrow more money at expensive rates. No problem, Hastings writes: “High yield has rarely seen an equity cushion so thick.”


Recode – All Go to Source
Author:

Peter Kafka

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