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Summary
- Netflix Inc crossed the 200 million paid subscribers mark for the first time.
- In FY20, Netflix added 37 million paid memberships translating into a total revenue of $25 billion.
- Netflix shares rallied by more than 14 per cent in the afterhours market session.
Netflix Inc (NASDAQ:NFLX), the California-headquartered over-the-top (OTT) content and streaming services provider, crossed the 200 million paid subscribers mark for the first time. After the cinema halls and theatres were closed down across the world due to Covid-19 restrictions and stay-at-home advisory, a lot of consumers relocated to OTT platforms and major streaming services to suffice the daily dose of entertainment.
The 200-million mark
Continuing the trend of user inclusion on OTT, Netflix added 8.5 million paid members to its platform globally steering the total subscriber count of more than 200 million users, the company said. For FY20, the net addition of paid subscribers saw a 31 per cent increase from FY19’s addition of 28 million memberships.
For the entire year, 37 million paid memberships were added translating into a total revenue of $25 billion, up 24 per cent from the previous fiscal year. The operating profit for the corresponding period swelled by 76 per cent to $4.6 billion.
Shares surge after hours
Following the development, Netflix shares rallied more than 14 per cent in the afterhours market session. According to the data available with Nasdaq, the stock of Netflix soared by 14.21 per cent to an intraday peak of $568.75 from the previous closing price of $497.98.
Netflix (19 Jan)
(Source: EODHD/Others, Thomson Reuters)
Key highlights of Q4 and FY20
- In the Q4 2020, the average paid streaming subscribers count jumped by 23 per cent as compared to the similar quarter a year earlier whereas the average revenue per membership stood flat on a reported and foreign exchange neutral basis.
- The paid memberships on Netflix have grown to 204 million at the end of 31 December 2020 from 111 million at the start of 2018 with the revenue per subscriber rising to $11.02 from $9.88.
- The operating margin of Netflix rose by 18 per cent in FY20, growing by 5 percentage points from the operation margin on 31 December 2019.
- The company recognised a revenue over 1 per cent from the guidance provided earlier, as the net paid additions in the reporting quarter of 8.7 million exceeded the forecast of 6 million.
- With the steep rise in the new paid memberships, the operating margin in Q4 FY20 jumped to 14.4 per cent realising a growth of 6 percentage points from Q4 FY19.
- The company acknowledged a higher-than-expected revenue based on new subscriber additions in the December quarter.
- The Asia Pacific (APAC) region has contributed the most to the net paid subscriber addition in FY20 with a 65 per cent increase year-on-year to 9.3 million.
- The Europe, the Middle East and Africa (EMEA) region registered a 41 per cent growth in the paid memberships over the year.
- With such a growth in these regions, 83 per cent of the paid net additions in FY20 accounted for outside the United States and Canada (UCAN) region.
Guidance
Netflix is targeting an operating margin of 20 per cent in FY21, two percentage points higher as compared to the operating margin of 18 per cent in FY20. The company had increased its operating margin guidance by 100 basis points from the erstwhile target of 19 per cent.
For the ongoing quarter of FY21, Netflix is expecting to add 6 million net paid subscribers. In the comparable quarter last year, the company garnered a paid subscriber count of 15.8 million, possibly due to the initial impact of the pandemic-led lockdowns.
