Netflix steps on the growth accelerator. After the measures to put a stop to shared passwords, The pay television company has strongly increased revenues and profits over the last year. In the first quarter of 2024, Netflix closed with 269.6 million paying subscribers, 27 million more than a year ago. In the first three months of 2024, net additions have been 9.33 million, somewhat lower than those of previous quarters, but well above analysts' forecasts. That, the prospect of lower profit growth in the second quarter and the cash generation figures have left some doubts in analysts and investors and have caused the shares to fall on the stock market.
Netflix achieved record revenues of $9,370 million in the first quarter of the year, 14.8% more than in the same period of 2023. Net profit soared to $2,332 million, 79% more than a year before. Those numbers also far exceed expectations. Cash generated from operations, however, has grown only 2%, to $2,213 million, and free cash flow even less, according to Figures reported to the United States Securities and Exchange Commission (the SEC).
The company expects to achieve revenues of $9,471 million and profits of $2,063 million in the current quarter. Those revenue forecasts are somewhat below what the market expected. For the entire fiscal year 2024, Netflix forecasts revenue growth between 13% and 15% and increases its operating margin forecast from 24% to 25%.
The company attracted new customers from all over the world. Netflix has recovered from a slowdown in 2021 and 2022 to grow at its fastest pace since the start of the pandemic. This is largely due to their offensive against people who used another user's account. The company estimated that more than 100 million people were using an account for which they had not paid and is managing to convince millions of them to sign up and pay for access.
Along with the password protection, The other source of growth has been its service with reduced-price ads. The number of subscribers to advertising-supported plans increased 65% quarter-on-quarter (after a sequential increase of almost 70% in the third and fourth quarters of 2003). The advertising plan accounts for more than 40% of all subscriptions in the markets where it is available.
Netflix has taken advantage of the presentation of results to announce that it will stop reporting on the number of quarterly subscribers and revenue per subscriber starting in the first quarter of next year. Those metrics have long been the main way analysts and investors assessed the company's performance.
Now, he's pivoting toward more traditional metrics: “We focus on revenue and operating margin as our primary financial metrics, and engagement (i.e., time spent) as our best indicator of customer satisfaction. In the beginning, when we had little revenue or profit, increasing subscriber numbers was a good indicator of our future potential. But now we are generating very substantial profits and free cash flow (FCF). “We are also developing new revenue streams, such as advertising and our additional members feature, so subscriptions are just one component of our growth,” it is justified. “In addition, as we have evolved our pricing and plans from one to multiple tiers with different pricing by country, each incremental payment subscription has a very different business impact,” he adds.
The success of 'The Snow Society'
“Nearly 270 million households in more than 190 countries subscribe to Netflix. With more than two people per household on average, we have an audience of more than 500 million people. No entertainment company had ever programmed on this scale and with this ambition before. To satisfy such a large audience, we need a lot of great stories that appeal to many different tastes, and by great we mean movies, series and games that our members like (that is, we take an audience-centric approach to quality) ”, he states in his letter to shareholders.
Netflix highlights that for the third time in the last four years, its films made its production company the most nominated studio at the Hollywood Oscars. The results note highlights that The Snow Society, the film by Juan Antonio Bayona, swept the Goya in Spain with 12 victories, the most of any film in two decades. “With 98.5 million views, it is now our second most viewed non-English language film of all time, a great example of how our films can be critically acclaimed, win awards and attract huge audiences,” he says. your results report.
Accelerating growth in subscribers, revenue and profits has led Netflix to trade near its all-time highs. This Thursday they closed the session at 611.15 dollars, giving the company a market value of almost 265,000 million dollars, although in the negotiations after normal session hours they have reacted downwards, with falls that have reached be 5%. The price has risen more than 30% so far this year and around 90% in the last 12 months. The stock is still 13% away from its closing high of $691.69 in November 2021.
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