Thread by @EntStrategyGuy

1/ Welcome back to my quarterly “Netflix Earnings Report”. I put a tight time limit on today’s article because I’m trying to get my #StreamingRatingsReport finished so quick hits only today.

2021 Q4 Edition. End of year!

2/ As always, I write this before I read what the internet says (and collectively decides is true). To keep my own opinions honest.

3/ Is it just me, or was this a bad quarter?

Curious how the stock reacts, because it had been dropping, so this may have been priced in. But I see more bad news than good.

3/ Let’s start U.S. subscribers. Or UCAN, with Canada. This is the best quarter of growth since 2020 Q2, with 1.2 million adds. So good! But honestly, with only 3 million global adds forecast in Q1 2022, you have to wonder if the US is tapped out on adds.

4/ I'll update my long term subscriber trends, but with this quarter, Netflix is officially grew in the UCAN by 1.7%. Since 2018, that's growth of 16%. Since 2019, that's growth of 11%. In other words...growth really is slowing.

5/ So if you see someone forecasting growth in the UCAN above 80 million subs in the next five years, I'd ask for the data.

6/ Free cash flow. (Profit is opinion; cash is a fact) was negative for the year.

That surprises me. I thought they’d go all out to keep it positive this year. But they still say this matches the “approximately break even” forecast.

entertainmentstrategyguy.com/2021/01/22/net…

7/ So yes, I do think there was an overreaction to last year's FCF being positive. Right now, that was a blip (the Covid Caveat) not a real trend.

8/ But the upside is the negative cash flow bought their two biggest movies (Red Notice and Don’t Look Up), The Witcher and Squid Game. So content wise, great quarter, and it led to gains.

9/ But the cynical among us would note this seems like the opposite of pricing power: Netflix has to spend all the revenue it makes to produce content to keep the revenue coming. If they pull back from content, no one else will, and other Tech firms have even deeper pockets.

10/ If this is a “moat”, I don’t see it. And the FCF is what worries me.

11/ Reading through, this chart screams to me “slowing subscriber growth” a la a Bass Diffusion curve/S-Curve, but that’s only because 2022/2021 are below 2020, which was above 2018/2019, but what do I know.

12/ I also normally don’t do “operating margin”, but going flat seems “sub-optimal” to the bulls case. Again, what do I know.

Honestly, the growth in operating margin has always been the biggest weak point in the bear case. And now?

13/ On to content: Big question for the content junkies: do we get any new stats, or just repeating the Netflix Top 10x4 data?

Yes and no. The cool thing is that they’ll provide the 28-day viewership numbers, maybe even for films that didn’t crack the top 10. I can use that.

14/ No data on mobile gaming.

15/ No specific guidance on FCF, only “cash flow positive going forward”. Which says to me 2022 is lower than $1B.

16/ And back to real life. The answer is the market did not like this earnings call.

Basically, now flat since July 2020, when it went to $500 on Covid lockdown news.

17/ Apparently Disney also getting hammered. If you read my Ankler column today, this paragraph explains that:

theankler.com/p/esg-the-wors…

18/ Man, meant to highlight this too: