NFLX
Netflix call: Streamer sees strong retention, and buyback intentions
(updated)
- Netflix (NASDAQ:NFLX) shares were up 11.9% after hours when the
company launched its post-Q4 earnings executive interview (still
ongoing), where Barclays analyst Kannan Venkateshwar quizzed company
leaders about results that showed a subscriber-number bounceback from
Q3's
disappointment.
- Asked if Q1 subscriber guidance for 6M might still be a little soft,
the company guided to 6M paid net adds and that's "still a big number,"
CFO
Spence Neumann says, particularly in the context of a big 2020. Speaking
to
the issue of pull-forward subs and what it meant for 2021, he declined to
give a full-year number - "It's hard enough to project the next 90 days,
let along the next 12 months" - but says retention is better than a year
ago and acquisition is strong.
- There's a lot of room for growth when looking at worldwide regions,
Neumann says; even in the U.S./Canada region it's at 60% penetration and
still growing. "So we're still a very small share of even just pay TV
penetration in most markets around the world, and a small share of
viewing," so there's a lot of "headroom."
- In the U.S., co-CEO Reed Hasting says, "we're still under 10% of
television viewing time ... we have a lot of subscribers here in the
U.S.,
but we still have a lot more viewing time that we would like to earn."
- And on the new capital allocation information in this quarter's letter
- cash flow and buyback guidance - Neumann says "the philosophy remains
unchanged" but that Netflix has turned the corner as far as
self-sustainability. Netflix will be "disciplined stewards" of the
capital
but that "we won't build up excess cash." It will maintain $10B-$15B of
gross debt to retain access to debt markets if needed. But after
investing
aggressively for growth, excess cash will go back to holders through
buybacks.
- *Updated:* Disney's (NYSE:DIS) success is brought up, and Venkateshwar
asks whether Netflix is underachieving? "The annualized return over 18
years being 40% ... if that's underperformance, we'll do more of that,"
Hastings jokes. He praises Disney, though, saying the giant has "great
stories" and "it's gonna be great for the world that Disney and Netflix
are
competing show by show, movie by movie ... we're very fired up about
catching them in family animation, maybe even passing them, we'll see."
Shows like Netflix's recent hit *Bridgerton* "I don't think you're gonna
see on Disney anytime soon."
- Chief Product Officer Greg Peters says the experimental shuffle
program selector - allowing subscribers to jump in on Netflix and just
start watching some program, as though they were turning on a linear TV -
will go global.
- *Updated:* How does Netflix judge balance, amid the much-ballyhooed
plan to release at least 70 movies this year? When people haven appetite
to
watch a movie, "they could do it at home. And they could do it on the big
screen or they could do it on their phone," co-CEO and content chief Ted
Sarandos says. "That evolution will continue to grow and expand well
beyond
a movie a week - because we're talking about serving a global audience
with
incredibly diverse tastes."
- "Hopefully with Warner Bros.' sort of COVID move, what we'll see
post-COVID, in the second half of the year, is that people both go to the
theaters in significant numbers and watch their films, and they're
premiered simultaneously on HBO Max - and that will really set a path for
simultaneous," Hastings says in reaction to WarnerMedia's (NYSE:T)move
to collapse the theatrical release window. "It's good for the film,
helps both online and in streaming and also in the theaters." But that's
what Netflix has been trying to since starting to make films of this
size,
Sarandos says.
- *Updated:* As Venkateshwar brings up acquisitions, such as Sony's
purchase of Crunchyroll, "many people subscribe to a multiple of
different services, so acquiring another one just for their members
doesn't
really help us," IR VP Spencer Wong says. Netflix wants the focus to
remain
on capturing and earning each subscription organically, he says.
Acquisitions are for things that can boost the core business, but when it
comes to content "historically, we've been builders, not buyers,"
Sarandos
says.
- Netflix is up 12.7% after hours as of 7 p.m.
|Today, 6:24 PM|23 Comments
Netflix call: Streamer sees strong retention, and buyback intentions
(updated)
- Netflix (NASDAQ:NFLX) shares were up 11.9% after hours when the
company launched its post-Q4 earnings executive interview (still
ongoing), where Barclays analyst Kannan Venkateshwar quizzed company
leaders about results that showed a subscriber-number bounceback from
Q3's
disappointment.
- Asked if Q1 subscriber guidance for 6M might still be a little soft,
the company guided to 6M paid net adds and that's "still a big number,"
CFO
Spence Neumann says, particularly in the context of a big 2020. Speaking
to
the issue of pull-forward subs and what it meant for 2021, he declined to
give a full-year number - "It's hard enough to project the next 90 days,
let along the next 12 months" - but says retention is better than a year
ago and acquisition is strong.
- There's a lot of room for growth when looking at worldwide regions,
Neumann says; even in the U.S./Canada region it's at 60% penetration and
still growing. "So we're still a very small share of even just pay TV
penetration in most markets around the world, and a small share of
viewing," so there's a lot of "headroom."
- In the U.S., co-CEO Reed Hasting says, "we're still under 10% of
television viewing time ... we have a lot of subscribers here in the
U.S.,
but we still have a lot more viewing time that we would like to earn."
- And on the new capital allocation information in this quarter's letter
- cash flow and buyback guidance - Neumann says "the philosophy remains
unchanged" but that Netflix has turned the corner as far as
self-sustainability. Netflix will be "disciplined stewards" of the
capital
but that "we won't build up excess cash." It will maintain $10B-$15B of
gross debt to retain access to debt markets if needed. But after
investing
aggressively for growth, excess cash will go back to holders through
buybacks.
- *Updated:* Disney's (NYSE:DIS) success is brought up, and Venkateshwar
asks whether Netflix is underachieving? "The annualized return over 18
years being 40% ... if that's underperformance, we'll do more of that,"
Hastings jokes. He praises Disney, though, saying the giant has "great
stories" and "it's gonna be great for the world that Disney and Netflix
are
competing show by show, movie by movie ... we're very fired up about
catching them in family animation, maybe even passing them, we'll see."
Shows like Netflix's recent hit *Bridgerton* "I don't think you're gonna
see on Disney anytime soon."
- Chief Product Officer Greg Peters says the experimental shuffle
program selector - allowing subscribers to jump in on Netflix and just
start watching some program, as though they were turning on a linear TV -
will go global.
- *Updated:* How does Netflix judge balance, amid the much-ballyhooed
plan to release at least 70 movies this year? When people haven appetite
to
watch a movie, "they could do it at home. And they could do it on the big
screen or they could do it on their phone," co-CEO and content chief Ted
Sarandos says. "That evolution will continue to grow and expand well
beyond
a movie a week - because we're talking about serving a global audience
with
incredibly diverse tastes."
- "Hopefully with Warner Bros.' sort of COVID move, what we'll see
post-COVID, in the second half of the year, is that people both go to the
theaters in significant numbers and watch their films, and they're
premiered simultaneously on HBO Max - and that will really set a path for
simultaneous," Hastings says in reaction to WarnerMedia's (NYSE:T)move
to collapse the theatrical release window. "It's good for the film,
helps both online and in streaming and also in the theaters." But that's
what Netflix has been trying to since starting to make films of this
size,
Sarandos says.
- *Updated:* As Venkateshwar brings up acquisitions, such as Sony's
purchase of Crunchyroll, "many people subscribe to a multiple of
different services, so acquiring another one just for their members
doesn't
really help us," IR VP Spencer Wong says. Netflix wants the focus to
remain
on capturing and earning each subscription organically, he says.
Acquisitions are for things that can boost the core business, but when it
comes to content "historically, we've been builders, not buyers,"
Sarandos
says.
- Netflix is up 12.7% after hours as of 7 p.m.
|Today, 6:24 PM|23 Comments
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