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Netflix Profit Tops Estimate; Stock Surges

Netflix Profit Tops Estimate; Stock Surges
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4/22/2013 5:36 PM ET

Netflix Inc. (NFLX: Quote) Monday reported a swing to profit in the first quarter, as the online video service provider added more subscribers and shored up revenues, partly offset by debt charges. Quarterly earnings came in well ahead of Wall Street estimates, as did revenues.

Netflix provided a robust guidance for the second quarter, which is indicated to top current Street estimates. Shares of the company, which saw a rally at the close of markets, further gained 26 percent in after-hours trade to touch a new high.

Netflix shares have been seeing steady gains even as the the company invested in movie rights and television shows to prop up its Internet streaming business. It is also pruning its DVD business and slashing related costs.

Netflix added 2.03 million domestic subscribers to end the quarter with 29.17 million members, compared to 23.41 million members a year ago.

The company benefited from its first Original series of 2013 House of Cards, and improved streaming contribution margin above 100 bps target.

International streaming saw the addition of 1.02 million customers to end the quarter with 7.14 million members, compared to 3.07 million members in the prior year.

DVD members meanwhile declined to 7.98 million from 10.09 million a year earlier, a trend which the company expects to continue.

"We've seen improvements in our business over the last year in content, in our product, in optimizing the way we process payments, and in the general recovery of our brand," the company said.

Among major U.S. licensing deals, Netflix entered into a multi-year agreement with Turner Broadcasting and Warner Bros. TV group for selected complete previous seasons of popular shows from Cartoon Network, Warner Bros. Animation and Adult Swim.

The company also ramped up its offering in the kids category via newly added content from Disney, Cartoon Network, and Dreamworks Animation.

Netflix posted quarterly revenues of $1.024 billion, compared to $870 million last year. On average, 30 analysts polled by Thomson Reuters estimated revenues of $1.02 billion.

The Los Gatos, California-based company reported quarterly net income of $3 million or $0.05 per share, compared to net loss of $4.6 million or $0.08 per share last year.

Results for the reporting quarter included debt-related charges of $25 million, excluding which, adjusted earnings would have been $19 million or $0.31 per share.

Analysts on consensus estimated earnings of $0.18 per share for the quarter. Analysts' estimates typically exclude special items.

For the second quarter, Netflix expects earnings of $14 million to $29 million or $0.23 to $0.48 per share. The company expects domestic streaming revenues of $665 million to $673 million, international streaming revenues of $156 million to $170 million, and domestic DVD contribution profit of $100 million to $112 million.

Analysts currently expect earnings of $0.29 per share on revenues of $1.06 billion for the second quarter.

The company expects second-quarter domestic streaming members of 29.40 million to 30.05 million and international members of 7.3 million to 7.9 million.

NFLX closed Monday at $174.37, up $11.00 or 6.73%, on a volume of 10 million shares. In after-hours, the stock gained $45.63 or 26.17% at $220.00. In the past year, the stock trended in a range of $52.81 - $197.62.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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