Netflix Q1 2009 Results: 10.3 Million Subs & $394 Million Revenue

Update: SeekingAlpha has posted a transcript of the webcast.

Netflix has had another strong quarter, and announced that they now have more than 10.3 million subscribers along with $394 million in revenue.

“First quarter results showed strong momentum driven by consumer attraction to our unlimited rental proposition,” said Reed Hastings, Netflix co-founder and chief executive officer. “We added more net 

subscribers than in any previous quarter in our history and grew year-over-year GAAP EPS by 76 percent.” 

Highlights from the release:

• Q1 Subscribers hit 10.3 million, up  from 9.3 million subscribers in Q4 2008.
• Revenue increased to $394.1 million in Q1, up from $359.6 million in Q4.
• Gross margin was 34.2%, a slight decrease from Q4.
• GAAP net income was $22.4 million.
• Subscriber acquisition cost was $25.79, down from $26.67 in Q4.
• Churn was 4.2%, unchanged from Q4.

The business outlook for 2009:

• Q2 subscribers at 10.4 to 10.6 million, and 11.2 to 11.8 for the year.
• Revenue of $403 to $409 million in Q2, with $1.63 to $1.67 billion for 2009.
• GAAP net income of $27 - $32 million for Q2, and $96 to $106 million for the year.

Interesting items from the Earnings Webcast today:

• Netflix has been testing a machine for testing DVDs for scratches and cracks, and will be rolling this out to all 58 shipping centers this year.
• Saturday processing will also be rolled out to all shipping centers this year.
• Hastings said that DVD rental kiosks are their biggest threat, and there are now more kiosks than video stores.
• New releases only account for about a third of rentals. 
• Netflix is considering a streaming-only plan, but does not have plans to launch one at this time.

Comments

[Davis Freeberg]

Given how quickly kiosks are growing and the potential threat that they could have to Netflix, wouldn't it make sense for them to try and buy Redbox? After their IPO brokedown, I would have thought that they would pounce, but instead they let Coinstar buyout all of it. With Coinstar trading under a billion, Netflix could probably buy Redbox and get a nice coin counting business on the side. A merger would probably distract their focus a bit, but they could easily spin off the non-DVD businesses and still pick up revenue and net income in the process. Probably wouldn't be a popular option with shareholders in the short term, but would give them a dynamite combination that they could exploit in the future.

[Fleshman03]

Was there any talk of charging for streaming?

[MCW]

SATURDAY SHIPPING EVERYWHERE! That is awesome news. More bang for your buck, no one can complain about that.

And the other complaint I always see is about scratched discs, and they are getting machines to check for that too!

Well done Netflix... this is good.

[Web]

@Fleshman03

The claim that Netflix was going to charge for streaming was made by a wallstreet analyst with no connection to Netflix at all.

I personally think he was talking about a streaming only plan in which yes they would charge for that.

Not sure why people hopped on this so much ... my guess is most people didn't actually read the article fully :)

[Drew]

Can someone tell me why Saturday shipping is such a big deal? I've gotten DVD's on Saturdays before?

And when the Post Office cuts out delivery on Saturdays, what's the point?

[tsrblke]

@Drew,

A disk that ships on Friday evening will still arrive on Saturday. This would be better defined as "Friday processing" (Meaning if you drop a disc in the mail Friday, it will arrive saturday and you should see a new disc monday, assuming they don't hold on to anything for a day.)

The post office is considering dropping mail on various days. Actually Tuesday is the lowest mail volume day (according to MSNBC reports) so they may drop that. (Although they'd have to weigh the pros and cos of dropping a work day.)

[banter]

@ Fleshman03

"Netflix is considering a streaming-only plan, but does not have plans to launch one at this time. "

The earlier speculation was only that and people ran with it.