Netflix Soars with Subscriptions Jumping and Earnings Beat in Q1

Andrew Klips |

Shares of streaming movie provider Netflix Inc. (NFLX) are screaming ahead in after hours trading on Monday after the company surprised by crushing analyst expectations for first-quarter earnings and swinging to a profit from a loss in the year prior quarter.

During the first quarter, the Netflix added more than three million members, running its total in excess of 36 million. Collectively, members watched over four billion hours of films and television shows, a fact that chief executive disclosed earlier this month.

More than two million of the new streaming subscribers were in the United States, bringing the domestic total to 29.17 million. Netflix attributed part of the new success to its first original series, House of Cards starring Kevin Spacey.

For the quarter, the company reported $1.02 billion in revenue, compared to $870 million in the first quarter of 2012. Net income totaled $3 million, or 5 cents per share, including a $16 million loss on extinguishment of debt, net of taxes, related to the refinancing of a 8.5 percent bond in February, versus a net loss of $2 million, or 8 cents per share, in last year’s quarter. Excluding that loss, Netflix earned $19 million, or 31 cents per share.

The revenue was modestly above analyst predictions of $1 billion, but the profit figure far exceeded the 20 cents per share that was expected.

For more than one year, analysts were down on Netflix Inc. as the DVD rental business was losing steam, the unpopular DVD-only service Qwikster was killed-off before it ever launched and the company was fighting for space with other movie and show providers like Apple’s (AAPL) iTunes, Amazon’s (AMZN) Prime streaming service and Hulu.

Netflix has been putting hundreds of millions of dollars betting that its original content will drive more members and greater revenue. It worked with House of Cards. The company said out of millions of free trials during the quarter, less than 8,000 people cancelled, quelling thoughts that people would simply take the free trial, watch the series and then ditch the service.

Hemlock Grove, another new Netflix series launched last week, with more new additions coming later this year.

Netflix streaming service is now four-times bigger than its DVD rental service. DVD memberships declined in the latest quarter to 7.98 million members, down from 10.9 million in Q1 2012. Revenue from domestic DVD rentals fell from $320 million to $243 million.

Since bottoming in October around $53 per share, the stock has been on a tear as one of the best performing S&P 500 companies.

For the second quarter, Netflix sees total domestic streaming members in the range of 29.4 million to 30.05 million. Revenue is anticipated between $665 million and $673 million. The company expects net income in the range of $14 million to $29 million, or 23 cents to 48 cents per share.

Shares of NFLX rose nearly 7 percent in regular trading on Monday, but hit the gas pedal following the earnings beat and jump in subscribers. Shares advanced more than 32 percent to above $217 per share. The move marks the highest the shares have traded since September 2011.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 109.95 0.00 0.00 151,166
AMZN Amazon.com Inc. 764.72 0.00 0.00 6,139
NFLX Netflix Inc. 124.57 0.00 0.00 14,756
BOOM Dynamic Materials Corporation 16.50 0.00 0.00 0

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