Online DVD rental shop Netflix continued a pattern of growing revenue — and shrinking income — in the second quarter while promising it would fix the disparity starting with the current quarter.
Company reported revenue of $120.3 million, up 90% from the year-earlier quarter, while net income fell 12% to $2.9 million.
A price increase of $2 to $21.95 increased Netflix’s subscriber churn from 4.7% in the first quarter to 5.6% in the second. In a conference call, CEO Reed Hastings said the impact of the increase, announced April 15 and implemented June 15, has lasted longer than expected and would keep churn in the current quarter 0.5% higher than expected.
Subscriber total at the end of the quarter was just over 2 million, up 8% from the previous quarter and 87% from a year ago. When it announced the figures two weeks ago, investors were disappointed that Netflix didn’t beat its guidance, sending its shares plummeting over 10% (Daily Variety, July 6).
Hastings also said that Netflix would change its financial focus from growth as the top priority to balancing growth with higher earnings.
“You should expect no more higher growth, lower earnings announcements,” he told investors. “Our goal now domestically is to grow as fast as possible while generating growing, predictable earnings.”
Pledge was reflected in Netflix’s increased guidance. It now expects to earn between $12.6 million and $22.1 million this year, up from previous guidance of $10.5 million-$18.5 million. Revenue guidance was narrowed from a range of $485 million-$535 million to $511 million-$525 million.
Netflix shares were roughly flat on Thursday, closing at $32, but drooped as much as 16% in after-hours trading.