If you missed the Netflix ads or Netflix story of late, you must not be living in the United States. Regular listeners of my show know that Netflix is one of my beat-up horses. I was on record saying that it is a company with a bloated stock price and potentially an accounting scam artist. Chickens are coming home to roost? (via Zero Hedge)
At last check Netflix’ stock was down about 10% following an earnings report that was about as ugly as they get. While the company beat Q2EPS consensus of $1.12, coming with a number of $1.26, it missed revenue estimates of $790.5 MM at $789 MM. What’s worse, it forecasted Q3 EPS of $0.72-$1.07, far below the $1.23 consensus, while it sees revenues of $780-$805 MM on consensus of $842 MM. And digging deeper, the rot was pervasive in virtually every line item. But don’t worry: according to NFLX, it is now bearing the Pirate Bay scourge. Not. But at least Jim Cramer loves it.
- The company anticipates its current Qtr end subscribers of 24.6 million (up from 22.8 million) to barely grow to a range of 24.6 to 25.4 million
- Gross profit declined to 37.9% from 39.0% sequentially, and from 39.4% Q/Q
- The domestic subscriber acquisition cost jumped from $14.38 to $15.09
- Average monthly revenue per subscriber dropped to $11.49 – the lowest in the past 3 years, and certainly the lowest under the current business model
- The company had 1.3 million free domestic subscribers, and 110K foreign subs
- Of the company’s $86 million in cash from operations, $40 million came from working capital: a traditional “source” of cash for the company
- Take away this traditional, but non-recurring working capital fudge and instead of adding $25 million in cash, the company would have burned through $15 million in cash in Q2.