Earnings exceed estimates, Impressive subscription numbers - Report on Netflix

Jul 23, 2015, 09:20 ET from www.aciassociation.com

NEW YORK, July 23, 2015 /PRNewswire/ --

ACI Association has initiated research coverage on Netflix, Inc. (NASDAQ: NFLX). Select highlights from the internally released reports are being made available to the general public (included below), with access to the entirety of the research available to new members.

Today, membership is open to readers on a complementary basis at the following URL: http://www.aciassociation.com/?c=NFLX

Highlights from our NFLX Report include:

  • Q2 Revenues slightly misses Consensus Estimate - On July 15, 2015, Netflix, Inc. reported Q2 2015 consolidated revenues of $1.64 billion, which reflected a growth of 22.7% Y-o-Y but the same fell marginally short of the Zacks Consensus Estimate of $1.65 billion. The year-over-year growth was driven by higher revenues growth in both International and Domestic Streaming segments. International Streaming revenues, which accounts for 27.7% of the total revenues, soared 47.9% Y-o-Y to $454.7 million, largely attributable to robust growth in paid members. Domestic revenues, with 62.4% revenue accountability, came in at $1.03 billion, 22.4% higher from the year-ago quarter. Meanwhile, revenues from the Domestic DVD revenues witnessed a 15.8% Y-o-Y decline to $164 million.
  • Earnings Stays Slightly Above Estimates - Consolidated contribution profit margin during the quarter was 19.8% versus 22.7% in the year-ago quarter. Operating income was $74.8 million, compared to $129.6 million while operating margin declined 510 bps to 4.6%. GAAP net income was $26.3 million, compared with $71.0 million in the year-ago quarter. Adjusted EBITDA came in at $119 million, compared to $171.8 million in the year-ago quarter. The video streaming giant beat on earnings reported an EPS of $0.06 after adjusted for stock-split as against Zacks Consensus Estimate of $0.05. The results drove shares of Netflix by about 10% in the after-hours trading session, reflecting positive investors' sentiments.
  • New Member Addition Exceed's Company's Prior Guidance - Netflix also boasted impressive subscription numbers and recorded addition of 3.3 million new streaming members vis-a-vis 1.7 million in the prior year quarter. The numbers even exceeded the company's guidance of 2.5 million for Q2 2015. In total, Netflix now has over 65 million subscribers across the globe, with over 42 million in the US and 23 million internationally. The Company gained 0.9 million members in the US and added 2.4 million members internationally in Q2 2015.
  • Outlook - For Q3 2015, management forecasts domestic and international streaming revenues to be $1,069 million and $524 million, respectively, resulting total streaming revenues of $1,593 million. Further, management expects to add 1.15 million subscribers in the domestic streaming segment and 2.4 million subscribers in the international segment. Domestic streaming contribution profit is expected to be $349 million with contribution margin of around 32.6% in the quarter. Netflix forecasts operating income of $81 million and net income of $31 million for the third quarter. Earnings per share is expected to be $0.07.  

To find out how this influences our rating on Netflix, Inc., read the full report in its entirely here: http://www.aciassociation.com/?c=NFLX

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