Netflix signed up more international customers than expected in the fourth quarter of 2015, topped Wall Street earnings estimates and issued a bullish forecast for the current quarter.
The company’s shares climbed as much as 10% in after-hours trading on the earnings report.
CEO Reed Hastings and CFO David Wells, in a letter to investors, said Netflix surpassed 75 million members on Jan. 1, just hours after the end of the Q4 period. “Our quarter‐end 74.76 million members put us at over 17 million net additions for the year, showing how much the world is embracing Internet TV,” they wrote.
Netflix is boosting the tonnage of original content by 33% this year: In 2016, it expects to launch 600 hours of original programming, compared with 450 hours in 2015, the execs said. That will comprise new seasons of about 30 series — including “The Crown” and Baz Luhrmann’s “The Get Down” — eight original feature films, 35 new seasons of original kids’ series, a dozen documentaries and nine stand-up comedy specials.
“Increasingly, our goal is to own more of our original programming to allow for greater creative and business control and to ensure global access to content,” Hastings and Wells wrote.
The world’s biggest streaming-video subscription provider added a net 1.56 million U.S. streaming subs and 4.04 million subscribers internationally for the quarter. Previously, Netflix said it expected to add 1.65 million subs in the States and 3.5 million internationally in Q4.
Netflix said its members streamed 42.5 billion hours of video in 2015, up from 29 billion hours in 2014.
For the fourth quarter, Netflix posted revenue of $1.82 billion and earnings per share of 10 cents. Wall Street analysts had expected earnings of 2 cents per share on revenue of $1.83 billion.
The company ended 2015 with 74.76 million streaming customers worldwide, including 44.74 million in the U.S. For the first quarter of 2016, Netflix forecast 6.1 million net additions worldwide versus 4.88 million in the year-earlier quarter. For Q1, the company expects to add a net 4.35 million international subs (well over Wall Street’s consensus estimate of 2.9 million) and 1.76 million domestically (below analyst forecasts of 2.1 million).
Still, Netflix acknowledged that its growth in the U.S. is slowing. “Our high penetration in the U.S. seems to be making net additions harder than in the past,” the execs wrote.
In the second and third quarters of this year, a large number of U.S. Netflix subs will see a price hike for the standard two-HD-stream plan, which will rise to $9.99 per month. But the execs said they expect only “slightly elevated” churn.
Last October Netflix missed U.S. subscriber growth targets for Q3 2015, citing in part the payment industry’s transition to chip-based credit and debit cards. At this point, the card rollover continues to be “a background issue,” according to Hastings and Wells.
Earlier this month, Netflix surprised investors with the announcement earlier this month that it had expanded to 130 additional countries, bringing it to a total of 190 worldwide (virtually everywhere except China).
“In the last remaining major market, China, we have work and uncertainty ahead,” Hastings and Wells wrote. “We are building relationships, understanding the market, and seeking the conditions we require to provide our service to entertainment lovers there. Our expectations are modest and long‐term.” Hastings, on a call with investors, noted that it took Apple many years to obtain approval to sell iPhone in China.
Netflix also said in the letter that it is likely to raise additional debt in late 2016 or early 2017, citing expected investment in originals. The company most recently raised $1.5 billion in long-term debt in February 2015.
Meanwhile, Netflix’s legacy DVD‐by‐mail business — which operates only in the U.S. — had about 4.9 million members at the end of 2015 and generated $80 million in contribution profit in Q4. “We are pleased that our DVD business is managing the decline well, despite increasing postal costs,” the execs wrote.