January 21, 2023

Here’s the latest earnings summarized for you. If you like it, please share it with your friends.

  • Q4’22 revenue, operating profit, and membership growth exceeded forecast, leading the industry in streaming engagement, revenue, and profit. [Positive]
  • Q4 content slate outperformed expectations, including popular series and films [Positive]
  • Successfully launched a new, lower-priced ad-supported plan in November and pleased with the early results [Positive]
  • Delivered on the high-end of operating profit margin target for full year 2022 and expect to increase operating margin in 2023 compared to 2022. [Positive]
  • In 2022, the company generated $32B of revenue, $5.6B in operating income, $2.0B of net cash from operating activities, and $1.6B of free cash flow (FCF), and expects at least $3B of FCF in 2023, assuming no material swings in foreign exchange (F/X) [Positive]
  • Ted Sarandos and Greg Peters are now co-CEOs of Netflix, with Reed Hastings as Executive Chairman, completing the company’s succession process [Neutral]
  • Bela Bajaria, formerly Head of Global TV, has become Chief Content Officer and Scott Stuber has become Chairman of Netflix Film [Neutral]
  • Year over year revenue growth of 2% in Q4 (10% on a foreign exchange (F/X) neutral basis) was driven by a 4% increase in average paid memberships. Average Revenue per Member (ARM) declined 2% year over year, but grew 5% on a F/X neutral basis [Neutral]
  • The company has a clear path to reaccelerate revenue growth by continuing to improve all aspects of Netflix, launching paid sharing, and building its ads offering. [Positive]
  • The company’s north stars remain pleasing members and building greater profitability over time. [Positive]

Overall, the company has exceeded forecast in Q4’22 in terms of revenue, operating profit, and membership growth, which is a positive sign for the company’s future. The company’s successful launch of a new, lower-priced ad-supported plan, and the high-end delivery of operating profit margin target for full year 2022 also indicate positive growth. Additionally, the company’s expectation of at least $3B of free cash flow in 2023, and the completion of the succession process with Ted Sarandos and Greg Peters as co-CEOs, also bodes well for the future. This could have a positive impact on the stock price. However, the effect of the leadership change on the stock price is uncertain.

Link to the full earnings: https://s22.q4cdn.com/959853165/files/doc_financials/2022/q4/FINAL-Q4-22-Shareholder-Letter.pdf

Link on community: https://www.skool.com/invest-retire-community-1699/netflix-nflx-top-10-insights-for-q4-2022-earnings

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About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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