Netflix Q4 profit jumps 45%
Subscriber growth beats forecast, costs fall
By Danny King -- Video Business, 1/26/2009
JAN. 26 | Netflix today said its fourth-quarter profit surged 45% as its customer base grew faster than it forecast, while it cut costs related to acquiring new subscribers. The company also announced plans to repurchase as much as 10% of its stock.
Net income for the quarter was $22.7 million, or 38¢ a share, up from $15.7 million, or 23¢, a year earlier, Netflix, the largest U.S. movie-rental service via mail, said in a statement today. Sales rose 19% to $359.6 million, and the company had 9.39 million year-end subscribers, up 26% from a year earlier and more than its October forecast of as much as 9.15 million.
Netflix also cut its average subscriber acquisition cost by 23% to $26.67 and increased the number of customers paying extra to rent Blu-ray titles from the company to about 700,000. The company was expected to earn 34¢ a share on $354.2 million, the average analyst estimate in a Thomson Financial survey.
"Our October forecast of slowing growth turned out to be wrong," Netflix chief financial officer Barry McCarthy said on a conference call with analysts today.
Netflix has been trying to boost subscribers by augmenting its by-mail service with an expanded inventory of titles through its video-streaming service. The company, which characterized its streaming users in the "millions" but wasn't more specific, this month reached agreements to have its digital titles available to be streamed directly to LG Electronics and Vizio TVs, after securing similar pacts last year for TiVo digital video recorders, Microsoft Xbox 360 videogame consoles and Samsung Blu-ray Disc players.
Earlier today, Netflix said it reached an agreement with Cablevision-owned IFC to make episodes of the cable channel's The Whitest Kids U' Know available for video-streaming the day after episodes are aired. Last fall, Netflix reached agreements to carry video-streaming content from Liberty Media's Starz movie channel, Walt Disney's Disney Channel and CBS.
"We're in discussions with nearly every consumer electronics company and one by one will be able to cover the Blu-ray category and Internet TV category over the next few years," Netflix CEO Reed Hastings said on the call.
In October, the company twice cut its fourth-quarter forecasts, with the most recent sales and subscriber estimates at as much as $357 million and as many as 9.15 million, respectively.
Netflix also forecast today that it would widen its first-quarter subscriber base to as many as 10.3 million, up as much as 25% from a year earlier, while sales will be as much as $393 million. Additionally, the company announced plans to buy back as much as $175 million in stock. Netflix stock rose about 8% in extended trading today.
