Netflix releases fourth-quarter 2013 results

Wednesday, January 22nd, 2014 
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LOS GATOS, Calif. — Netflix, Inc. (NASDAQ: NFLX) has released its fourth-quarter 2013 financial results.

Highlights from the letter to shareholders:

“We ended 2013 with over 44 million members. We had higher domestic net additions than in 2012, growing international success, and an impressive first slate of original series. We expect to end Q1 with 48 million members.

Summary results (in millions)

                                                        F'cast
                Q4 '12  Q1 '13  Q2 '13  Q3 '13  Q4 '13  Q1 '14
                ------  ------  ------  ------  ------  ------
Domestic:
 Net Additions    2.05    2.03    0.63    1.29    2.33    2.25
 Total Members   27.15   29.17   29.81   31.09   33.42   35.67
 Paid Members    25.47   27.91   28.62   29.93   31.71   34.26

International:
 Net Additions    1.81    1.02    0.61    1.44    1.74    1.60
 Total Members    6.12    7.14    7.75    9.19   10.93   12.53
 Paid Members     4.89    6.33    7.01    8.08    9.72   11.52

Domestic

Domestic net additions in Q4 of 2.33 million were 14% higher than prior year Q4 at 2.05 million. We expect this momentum to continue in Q1 with net additions of 2.25 million to exceed the prior year by about 11%.

International

We saw healthy growth in net additions of 1.74 million in Q4 to end the year at 10.93 million members. Q4 net additions were down slightly from the prior year Q4, as we launched four Nordic markets in Q4 2012 versus the relatively smaller Netherlands launch in Q3 2013.

In Q1 of 2014, we are forecasting an almost 60% increase in net additions from the prior year, from 1.02 million to 1.60 million.

We plan later this year to embark on a substantial European expansion.

Product

During Q4, we rolled out our new user-interface for TV devices. This user interface is coupled with our new technology platform for TV devices, which has a smaller footprint and is higher performing, allowing us to reach lower-powered devices and enabling future growth into new areas.

During the quarter, we also completed the roll out of the Netflix streaming application into Virgin Media’s set-top box for UK members and have been quite pleased with the implementation and reception. We followed up with two similar platforms based on the same technology, Denmark’s Waoo! which went live in Q4, and Com Hem in Sweden, which was just recently launched.

We anticipate rolling out our first domestic MVPD integrations soon with some of the smaller MVPDs.

At CES this year, we promoted Ultra High Definition (UHD) 4K technology with several key consumer electronics partners, announcing that House of Cards season 2 will be in 4K as well as all 5 seasons of Breaking Bad, and our future original series. 4K streams are encoded at 15.6Mbps, well within reach of a significant minority of our members, and the reach of capable 20Mbps broadband connections will continue to grow. Since the number of 4K displays sold in 2014 and the number of available hours of 4K content both will be relatively modest, the short-term impact of 4K is mainly on consumer perception of Netflix as a leader in Internet TV.

We continue to invest in personalization for content discovery, which adds value to our content catalogs by presenting more relevant content to each user, driving more hours of viewing and better retention.”