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Netflix, Inc. (NFLX) Tops Q1 EPS by 5c

April 21, 2014 4:02 PM EDT

Netflix, Inc. (NASDAQ: NFLX) reported Q1 EPS of $0.86, $0.05 better than the analyst estimate of $0.81. Revenue for the quarter came in at $1.27 billion versus the consensus estimate of $1.27 billion.

Our U.S. streaming service grew by 2.25 million net members to 35.7 million members. Our net additions for Q1 were 0.22 million more than prior year Q1. As we’ve discussed previously, U.S. net additions in Q2 will generally be lower than in the prior year Q2, even in a year with full year growth, due to increased seasonality. This Q2, we expect our domestic net additions to be about 0.11 million below the prior year Q2.

International performance in Q1 was also strong. Membership grew by 1.75 million, bringing our international total to 12.7 million members with 72% more net additions than prior year Q1. Due to rapid growth in our international segment we aren’t experiencing the same level of seasonality as in the U.S., and we anticipate over 50% y/y growth in Q2 net additions despite slight headwinds from the World Cup.

International revenues currently amount to 25% of our total streaming revenue and we anticipate our international segment to eventually surpass our U.S. market, similar to other Internet firms. International contribution losses shrank by $22 million q/q, with losses more than halved on a y/y basis due to the strong growth in paid members. Our present international segment is on a path to achieve profitability this year. However, our substantial expansion into new European markets (with corresponding investments in content and marketing) in the second half of 2014 will keep our expanded international segment at a net loss. As we’ve discussed in prior investor letters, we intend to continue our international expansion over the coming years, so our near term profits will be quite modest as we invest in this large global opportunity.


Free cash flow in the quarter was $8 million versus net income of $53 million. As we’ve highlighted in previous letters, investments in our original series as well as certain non-original licenses, can require higher initial cash payments over the P&L expense. With further international expansion in the second half of this year reducing net income, we expect free cash flow in Q4 to also be reduced.

For earnings history and earnings-related data on Netflix, Inc. (NFLX) click here.



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