netflix logoNetflix subscriber growth continues its upward path. The company added 6.74 million subscribers year-over-year in 1Q 2016, bringing total paid memberships to more than 81.5 million. U.S. membership increased a greater than expected 2.23 million as compared to 2.28 million a year ago. International memberships increased as well, and now account for 42% of Netflix’s total subscriber base, management highlighted in a letter to shareholders.

Expanding availability to 130 new countries contributed to Netflix subscriber growth, management reported April 18. Netflix’s growing portfolio of original content was another contributor to a first quarter that management described as ¨a great start to 2016.¨

Netflix was voted the best original content media company among premium TV or Internet video subscription services in a recent Morgan Stanley survey. Netlix’s first place finish – its first ever – highlights management’s commitment to expanding its original programming, which has grown to more than 600 hours.

Advertisement

Driving Netflix Subscriber Growth
Revenues for 1Q’16 totaled $1.813 billion, up more than $400 million from a year ago. Operating income dropped to $49 million – a 2.5 percent operating margin — down from $97 million, and a 6.2% margin, in 1Q’15, however. Net income rose to $28 million, or 6 cents/share, from $24 million, 5 cents/share.

U.S. streaming continues to account for the bulk of Netflix’s total revenue. Revenue for 1Q’16 totaled $1.161 billion, continuing a string of consecutive quarterly increases. Furthermore, U.S. streaming contributed $413 million to Netflix’s 1Q profit. The resulting 35.5% profit margin is up from 31.7% in 1Q’15.

International streaming revenues increased as Netflix continues to roll out the OTT streaming video service worldwide. International paid memberships grew to 31.99 million, up from 19.30 million a year ago, with the addition of a net 4.51 million subscribers.

1Q’16 international streaming revenues totaled $652 million as compared to $415 million a year ago, but that still resulted in a loss of $104 million. International streaming yielded a net loss of $65 million in 1Q’15.

Free cash flow was a negative $261 million as compared to a negative $163 million in 1Q’15. That means management continues to rely on banks, debt and equity markets to finance and sustain its growth strategy.

Looking ahead to 2Q´16, management forecasts total streaming revenue will reach $1.964 billion and contribute $323 million to the bottom line with the addition of a net 2.50 million subscribers, which would boost total paid memberships to 80.71 million.

2Q´16 streaming revenue is forecast to increase some $50 million to $1.210 billion, with profit contribution dropping $10 million to $403 million from 1Q. International streaming revenue is forecast to grow to $754 million, which would be an increase of around $100 million on a sequential quarterly basis. That would still result in a loss, but at a forecast $80 million, $20 million less than the contribution loss in 1Q.

2Q´16 operating income is projected to be $47 million, down $2 million sequentially, while net income is expected to be $9 million, which would be a sequential quarterly drop of $15 million.

Join the Conversation

Leave a Reply

Your email address will not be published.

Don’t Miss Any of Our Content

What’s happening with broadband and why is it important? Find out by subscribing to Telecompetitor’s newsletter today.

You have Successfully Subscribed!