Netflix is pushing out content like the Bling Empire series to attract viewers.
Courtesy of Netflix
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Netflix
It posted better-than-expected subscriber growth in the fourth quarter, adding 7.66 million net new subscribers, more than the company’s forecast of 4.5 million.
Even the company declared Founder and co-CEO Reid Hastings is moving into the role of executive chairman to “complete our succession process.” Chief Operating Officer Greg Peters will join Ted Sarandos as co-CEO of the company, Netflix said.
Revenue was in line with the company’s forecast of $7.85 billion, up 1.8% from a year ago, while earnings per share came in less than expected by 12 cents.
The 7% operating margin was up from 8.2% a year ago, but higher than the company’s forecast of 4.2%. Operating income was $550 million, beating the company’s forecast of $330 million.
Wall Street consensus estimates had fourth-quarter revenue of $7.9 billion, with earnings per share of 55 cents. Analysts had expected net additions of 4.6 million.
“2022 was a tough year, with a bumpy start but a bright finish,” Netflix said in a statement. “We believe we have a clear path to re-accelerate our revenue growth: continue to improve all aspects of Netflix, launch pay-as-you-go and
Creating our ads.”
For the March quarter, Netflix forecast revenue of $8.2 billion and earnings per share of $2.82. The company has discontinued its previous practice of providing specific guidance on subscriber growth, although the company said it expects “modestly” positive net additions in the first quarter, a decline from the fourth quarter of “normal seasonality” and recent strong growth. , “It may have pushed some development forward.”
Current Wall Street estimates for the March quarter call for revenue of $8.1 billion, profit of $2.99 a share and the addition of 2.6 million net new subscribers.
Netflix shares rose 6.5% in late trading shortly after the report.
While Netflix appointed Scott Stuber as head of film, the company named Bela Bajaria, who was head of global television, as chief content officer. In a blog post, Hastings wrote that he will “spend more time on philanthropy” while “focusing on the betterment of Netflix’s stock.”
As for the recent introduction of the ad-supported subscription tier, the company said it is “pleased with our progress to date.”
That said, Netflix is seeing very little transition from other subscription tiers to an ad-supported plan. The company added that it continues to believe advertising will generate incremental revenue and profits, but the impact in 2023 “will be moderate as it builds slowly over time.”
Netflix said it expects a wider rollout of “paid sharing,” the company’s answer to widespread password sharing, later this quarter.
The company expects extraordinary net additions to model, with higher growth in the second quarter than the first quarter. But the company said overall revenues should improve as “borrowed households” operate their own accounts.
Netflix has long been targeting double-digit revenue growth, expanding operating margins and continuing to have positive free cash flow. In 2023, the company expects constant currency revenue growth to accelerate throughout the year. Netflix said it expects year-over-year growth in both operating profit and operating margin. Netflix now expects operating margins of 18% to 20% in 2023; In the first quarter, it expects an operating margin of 20% from 25%, citing “the timing of content spending.”
The company said full-year free cash flow was $1.6 billion, beating its forecast of $1 billion.
By 2023, Netflix projects “at least $3 billion” in free cash flow. The company ended the quarter with $14 billion in total debt, compared to its target of $10 billion to $15 billion. The company has $6 billion in cash and short-term investments. Netflix expects to start buying back shares in 2023, assuming no material acquisitions.
Eric J. Write to Savitz at [email protected]
