Author | 亚兰

U.S. video streaming service provider Netflix (NASDAQ: NFLX) released the fourth quarter of 2019 results this morning. The report shows that Netflix achieved revenue of US $ 5.467 billion in the fourth quarter of 2019, an increase of 31% year-on-year, slightly higher than market expectations of US $ 5.45 billion; diluted US stocks revenue of US $ 1.3, far higher than market expectations of US $ 0.53.

With the strong growth of Netflix’s fourth quarter revenue, the company’s full-year revenue exceeded US $ 20 billion for the first time, reaching US $ 20.156 billion. At the same time, Netflix’s fourth-quarter net profit also performed well, at $ 587 million, an increase of 338% from $ 134 million in the same period last year.

In terms of paid subscribers, Netflix’s global paid subscribers reached 167 million in the fourth quarter, a net increase of 8.76 million compared to the previous quarter. The growth of paying users was mainly due to the increase in paying users in the international market, with a net increase of 8.34 million in the quarter, and also making the company’s paying users in the international market more than 100 million for the first time.

Affected by the stronger-than-expected financial report data and the steady growth of user data, the company’s stock price rose 2.26% after the market to close at $ 345.75. For reference, in the past 52 weeks, the highest price of Netflix was $ 385.99 and the lowest price was $ 252.28.

Netflix’s stock price trend over the past year

But the dual benefits of revenue and net profit will not dispel market concerns about the future of Netflix.

On the one handNetflix’s domestic US streaming business is stagnant. The fourth quarter revenue was 2.458 billion US dollars, the growth rate was lower than the company’s overall average, 23.1%. In the fourth quarter, the number of domestic subscribers increased less than expected, and the outlook for the number of new subscribers in the first quarter of fiscal 2020 failed to meet expectations. Behind this is the impact of strong competitors such as Disney + and Apple TV +.

On the other hand, The cash outflow from operating activities has increased significantly, the marginal contribution margin has declined, and the debt situation remains severe.

How does Netflix perform?


Financially, Netflix’s fourth-quarter revenue was $ 5.467 billion, an increase of 31% from $ 4.187 billion in the same period last year. Among them, the international market’s streaming media revenue is still the most critical factor driving high-speed growth, reaching 2.94 billion US dollars, an increase of 39.7% year-on-year; the US domestic streaming media business revenue is 2.458 billion US dollars, the growth rate is lower than the company’s overall average of 23.1%.

In terms of profitability, Netflix achieved a net profit of US $ 587 million in the quarter and adjusted EBITDA of US $ 586 million, maintaining a good profitability.

However, the company ’s net cash outflow from operating activities for the quarter was significantly higher than the previous quarters, at US $ -1.46 billion. This is mainly because Netflix increased its investment in new content production and paid off part of its content production debts in the fourth quarter. The increase in content assets and the decrease in content liabilities have led to a significant increase in cash outflows from operating activities.

Compared to the previous two quarters, the company’s overall marginal contribution margin has decreased to 20.5%.

This is mainly because the company launched more episodes and movies in the fourth quarter, so the corresponding market fee investment increased significantly in the fourth quarter, which led to a decline in the marginal contribution margin.

In terms of market, although the international media streaming business has contributed higher revenue growth, its marginal contribution margin is only 11.2%, which is far lower than the US domestic market’s 30.8%. This shows that the rapid growth of streaming media business in the international market is based on higher input content costs and market promotion. Therefore, the overall profit distribution of the international market is obviously weaker than the US domestic market.

But it’s good to know that Compared with the same period last year, the company still shows a continuous optimization trend. The marginal profit margin in the United States has increased by 1.2 percentage points compared with the same period last year; while the marginal profit margin in the international market has increased from 3.9% in the same period last year to 11.2% in this quarter, which has greatly improved profitability.

In the fourth quarter, Netflix’s asset-liability ratio was 78%, maintaining a relatively stable level; its current ratio showed an upward trend in the fourth quarter, which was mainly due to the company’s cash issue of US $ 2.2 billion in the quarter, resulting in cash levels As a whole, the current ratio has increased in the short term.

In the long run, Netflix has repeatedly relied on bond issuance for financing in the case of continued negative cash flow from operating activities. (2 bonds issued in 2019 Raise fundsGold nearly US $ 4.5 billion) to maintain high investment in content, and its own debt service risk continues to increase.

In terms of expense composition, Netflix’s R & D and management expenses remained stable in the fourth quarter, while market expenses rose significantly due to seasonal effects in the fourth quarter (Christmas and New Year).

In terms of business, Netflix ’s minimalist business model is known as “revenue = number of users x membership fee”. It attracts users to pay by investing in high-quality content to increase revenue, continue to invest in content, gain more users and revenue, and form a positive cycle. . So the actual situation of Netflix can be seen through the data of the two most relevant dimensions-users and content.

In terms of users, Netflix added 8.76 million new paid users for streaming services worldwide in the fourth quarter, slightly lower than the 8.84 million in the same period last year, but exceeded analyst expectations. According to data provided by financial information provider FactSet, analysts had previously expected on average that Netflix will have 7.9 million new paid subscribers for streaming services worldwide in the fourth quarter.

By region, Netflix added 420,000 new paid users for streaming services in the United States in the fourth quarter, down from 1.53 million in the same period last year; and 8.33 million new international users, up from the same period last year 7.31 million people. As of the end of the fourth quarter, Netflix’s total global paid subscribers reached 16709 million, a net increase of 8.76 million compared to the previous quarter. The growth of users mainly comes from the international market, and the international market paysThe number of users also exceeded 100 million for the first time in the quarter.

Netflix points out that The recent changes in paid prices, as well as the latest launch of rival streaming platforms, are the reasons for the slow growth in subscribers in the United States and Canada.

In terms of new international users, Europe, the Middle East, and Africa contributed the highest growth, with 4.42 million in the quarter; Latin America and the Asia-Pacific region contributed 2.04 million and 1.75 million new paid users, respectively.

In terms of user revenue contribution, the ARPU value in the United States and Canada is the highest in each region, reaching US $ 13.22; the ARPU value in Latin America is the lowest, being only US $ 8.18; Europe, the Middle East and Africa, and the Asia Pacific region are USD 10.51 and USD 9.07.

International Netflix Users

In terms of content, content spending remains high. But have to say, vigorously work wonders.

Just this month, Netflix received 24 nominations for the 2020 Oscars. This is the first time in the history of the US Academy Awards that the most nominated production company is an online video service provider.

Oscar nomination statistics

In the film submitted by Netflix, the gangster epic “Irish” by the famous director Martin Scorsese received 10 nominations, 6 nominations for “Marriage Story”, and 3 “The Two Popes” Nominations, Netflix ’s first animated film “Claus” was nominated for best animation.

Furthermore, Netflix has been nominated for two documentaries, “American Factory” and “Edge of Democracy,” and a short documentary film “Life Beats Me”.

The first Oscar-nominated movie “Rome” without box office records in history

2020, the world of streaming media

2020 is definitely a year for global streaming media events.

In the past year alone, players from all walks of the world have made preparations: Disney + gained 10 million registered users on the first day of launch; hardware advantages coupled with low-cost Apple TV + also caused the industry Strong response; Amazon Prime Video seems to be dying, but in fact its subscribers are close to 100 million.

While the number of entries is still increasing, Warner plans to launch HBO Max for the first time in 2020-it will not only includeIncluding the entire content of HBO Now, it will also provide new original episodes and copyright content of the HBO cable channel; Comcast’s NBC Universal will launch Peacock in the United States in July.

This is Netflix’s first financial report after Disney’s entry. It is optimistic that the data in this financial report does not show signs of Netflix being affected by competition.

Netflix CFO Spencer Neumann responded in a conference call: “In the U.S. market, we have grown in the fourth quarter, even as a result of new product launches from competitors. Therefore, we have a new path and will develop our business Focus on improving user satisfaction and views. “

Netflix CEO Reed Hastings believes that the first thing Disney + will steal is the cable TV business. “Of course, they will have some impact on us, but our future growth will still come from those viewers who lose cable.”

But is the fact really as the executives said, Perhaps the financial report that will enter the era of competition in the future will have more reference value. In this global context, how Chinese counterparts will respond will become another topic worth considering.

The following is the compilation and compilation of the earnings report phone call that has been organized by Shenxiang:

Excerpts from key points-

Netflix will continue to pursue its past strategy of “pleasing our customers and helping us to grow with the help of our customers” in the next decade. In the future, the focus of business development will be on improving user satisfaction and viewing volume.

Competitiveness and price lead to user loss, and competition will sweep the world in the coming year.

Netflix does not have a fixed price increase model. But indeedIn fact, you can see the right time to raise prices through the increase in views, participation, and user numbers.

A very small number of users are transitioning to higher-priced members, but the conversion trend is extremely flat, and such slow growth is mainly due to smart TVs and high-definition TVs. At present, we do not see any trends in the transition from ordinary members to senior members.

Netflix expects to increase its cash flow level in 2020, from a negative $ 3.3 billion to a negative $ 2.5 billion, and hopes that the cash flow will gradually become positive in the next few years.

Analyst: Before discussing this quarter’s earnings report, I would like to talk about your thoughts on the new year and the new decade. What do you think is the biggest strategic achievement in 2019? What do you want to achieve in the future?

CEO (Reed Hastings ) : Over the past two decades, we have all adhered to the same strategy-” please our users, and help us to complete growth with the help of users. ” We have taken various approaches: At first, it was in the form of mailing a DVD, and then it became a combination of various methods. If everyone is concerned, we have made a lot of efforts in investing in movies to make it a very strong section of Netflix. But even with a consistent strategy, we are still learning how to please our customers, both in terms of products, markets and content. In the next ten years, we predict that business will continue as usual, and we will use the powerful resources available to do better than before.

Analyst: Now let’s talk about earnings. First, the outlook for the coming quarter. The past Q4 was very strong relative to the outlook at the time. The first quarter and last year were not so strong. You mentioned that there was a point in time in the first and second quarters. But what the investors care about is how will they perform throughout the year? The comparison between 2019 and 2018 is very similar, and it was very good in the fourth quarter. Can we think that it will be the same in 2020?

CFO (Spencer Neumann) : Our long-term opportunity is stillIt is quite large and has not changed at all, which must be clarified first. We will not provide an outlook for the entire year, but you can take a look at the outlook for the first quarter. As always, this will be the best-performing first quarter ever, and we expect to reach 7 million new paying users. Therefore, the number of 7 million is still a considerable increase. From a historical perspective, the number of newly added paying users in the quarter exceeded 7 million, which only happened four times. The numbers still tell a few questions.

It reflects some of the conditions we face in the United States, and we mentioned in our earnings report that this is due to user loss due to competition and prices. In the fourth quarter of last year, this kind of competition did not last the entire quarter, and we expect that the first quarter will face competition throughout the quarter, and this kind of competition will sweep the whole world in the next year. Therefore, we want to carefully consider the impact of these factors on the business.

In addition, we also mentioned the seasonal problems in the first and second quarters. That is, in the first half of this year, we think that it will be more balanced. Considering the price measures in the second quarter of 2019, we think that the situation in the first half of this year will be similar to 2018 and 2019.

Analyst: Regarding competition, you mentioned churn and its possible impact. Can you talk about the impact of competition on user growth and user engagement? Especially user participation, I know it ’s too early to talk about this, but Disney ’s related products are obviously more concerned about the children and home market. Do you find any changes in user participation in these products?

CFO: First of all, the good news is that in the US market, we were still growing in the fourth quarter, even as a result of new products from competitors. Therefore, we take a different approach and focus our business development on improving user satisfaction and views. As you can see, in the fourth quarter, the global and even the US market saw an increase in user views. As long as we can continue to improve, it will get better and better.

CEO: Disney products (Disney +) There are many products, such as “The Mandalorian”. They will first snatch the cable TV business. Of course, they will have some impact on us, but our future growth will still come from those viewers who lose the cable TV.

Analyst: I want to end upCompare the US and overseas markets. Obviously the US market is more mature, and this is also a market that Disney will focus on when it releases new content in the fourth quarter. Of course, they also released these contents globally. For example, in the first quarter, they expanded the scope to the European market. Can you talk about your thoughts on this?

CEO: Disney will be upgraded to a global service in a short period of time. In addition, there are other global competitors. I don’t know if you still remember, we competed with YouTube for a long time. We compete in many ways, including views. Spencer mentioned that our unit user views have increased because our content has become higher quality and our services have become better.

Analyst: In response to the pricing issues discussed in the previous quarter, you said that the increase of competitors will not have any impact on your pricing. So, do you have any latest progress and plans for this issue?

Chief Product Officer (Greg Peters) : If you have Note that our US market ’s total revenue for the fourth quarter increased by 23% year-on-year, and the growth was still very significant. We don’t think there is anything that will fundamentally change our outlook for the future. Our model is that if we continue to invest and do well, our users will continue to pay us membership fees, which stem from awesome stories, comfortable product experiences, and value created for users. At the same time, we occasionally charge users a little extra money to keep this forward cycle running. So far, many models have proved that this model is feasible.

Analyst: Historically, you have raised prices quite a few times. Do you consider raising the price annually in some more mature markets? For example, some users are already quite familiar with fixed cable fees.

Chief Product: We do not currently have a fixed model, nor do we have a certain correct model. We mainly listen to our users, and of course, it is also reflected in their participation. We actually use it as our guideline, which also sends us a signal when we can raise prices. We really don’t have any fixed patterns.