Netflix (NFLX) 21 Jan 222021 Q4 Earnings call transcript

Hello. And welcome to the Netflix Q4 2021 Earnings Interview. I'm Spencer Wang, VP of IR and Corporate Development.

Joining me today are Co-CEO, Reed Hastings; Co-CEO and Chief Content Officer, Ted Sarandos; COO and Chief Product Officer, Greg Peters; and CFO, Spence Neumann.

Our interviewer this quarter is Nidhi Gupta from Fidelity.

be statements we'll may actual reminder, vary. a making and forward-looking results As you off to over now Nidhi, to kick the Q&A.

Thank you all you all the to so I be to less that. can a Good the all blame I been over new you, see content productive, I've little for think again. Spencer. Great quarter. with

later As came in which usual, the during quarter, like I'd little to than bit adds expected. start with net you a

underperformance there. help Just understand us the

less X.X versus little Nidhi, a X.X,

million. XXX

it little a said Nidhi fairness, In was shy.

I'll what Nidhi says. So take

As with she net out. X.X we quite says, delivered -- paid how We we're first, million adds. pleased played the quarter delivered

ended So it titles had Squid big a two paying time. Casa about of million quarter the members. of in and December was Papel, And finale the Game in de Witcher, phenomenon, viewing. a show overall, becoming big the We performed. a We of started pleased shy La quarter all our tenth series movie percent we're returning with releases on The how global XXX a like just roughly we TV quite with biggest bit big with our

we growing, our grow was we So we forecasting. was have was acquisition as subscriber was again, -- hoping Viewing pretty or big was the liked healthy. not to a as large up. have acquisition in in flow-through net A can small perhaps would acquisition didn't just And margin, base. But paid adds. growing were our strong. change fast just quite overall, down. we quite as on as Churn Retention business the fast on see

considerations of kind what us of structural, previous Maybe guidance any what into expected it's we does in was was about terms key give guidance? some as were look any spend? help QX, content or you've And ahead done a bit what you just it for the return it the pause And on saturation? your competition raise below of of does Great. that sort anything in concerns understand QXs. whether went the and to Or you

that reflected in Sure. paid guidance, we same pretty what's business guided the No structural there we change saw see. X.X in in the in is to the And million much trends What's QX. net QX. we adds reflected

It's healthy pre-COVID say just is. why years world, COVID probably of happening out overhang to global viewing after macroeconomic not engagement, overall fully like that levels, parts in churn some And some we're our America, pandemic with So retention slower Latin of tough and bit kind still viewing the still of pinpoint recovered particular. to down. bit a pre-COVID unfortunately just than we're fully with hasn't And of, exactly but Healthy acquisition just levels. in up. a growing acquisition that's trying two to recovered. what It's of hasn't strain a that

But can't data of a growth, the point be or at just it competition. straight when which, competitive kind on line While using side look we marginal may there again, some impact on see pinpoint a some more we don't kind our impact, of from specifically. of we the

the March. in reflected The little what's March, Adam big the in at of known big our landing, Bridgerton that's I'd also say overall, later are titles titles So we also -- bit our least in Project X with in guide. a Season quarter

we week, announced our -- we prices In changing last know, quarter. countries you country, happens region with as our to we every year, of this also are Canada -- actually be largest taking in As largest while as QX it well.

quarter. a that's more little than impact typical So bit probably a

which million we were million. or year, years we a below XX were two Last right you're plan, above to million XX Nidhi, was But ago, X on shock. reflect

years, prior makes course, hey, of sort In of be guide said, confidence the steady, so reflect are it on we we incremental we will that’s forward pull the little Spence But can so when trends. hard read. as very a It’s And a have we COVID, that's but it going of with and to on number ever all, on. what's explanations accurate. have worry too And we with that. XX years. there's more potential sand competition kind of then having for But at about There's been. Amazon than not there's packed much we Hulu think

dissipates So over change XX very in in there. thesis that XX And confidence to entertainment. of it all feel overall, like becomes years, high the into everyone's any qualitative confidence doesn't streaming streaming. next because coming Linear

very size, market large. like So

better. Our execution and steady is getting

just we're figure like we to much so wants as it now, pause just work on on. some It the for COVID always we've and calm give again, us out, trying staying worked everything So noise. has introduced to

And offerings through. that we we've to Netflix-type and continue just this. took a bet seen bet big, on and ago move consume to go big to on I'd years say would a people film. That The was big to Netflix reiterate, movies

And one the anywhere bigger And of have global which we to one international that you our films X now take in kind we our what's and from around in in And change [ph]. become And it Spain really series ago I And on entertain investment goal. the that world ever. now biggest in to no big proven we in to started those with from our has way from perfectly programming. more is was have years that been through Korean. ago Club in unapologetically think we and XXXX we the out prove were theses sensations biggest confidence other And even possible with were bet milestones -- Lupin, XXXX, that of we've France about de against Game, Squid kind able could La have were and Papel great We Casa years We're and starting glad conditions, series that. de bigger all world. Cuervos. Elite with and that getting entire then betting

this It's and watched entertain the release the other kind for our can that world X could our of in built Don't And investment Up with it. ever They watched X we in most and that bet we movies this on So And Netflix. out, from audience hours big releases anywhere movies be and at can become our compete and course world feature films. attention. them was be back bet And world. to Notice number if Red look may budget proving thing. our the and effectively year, the number in year. anywhere Look you math not most great have And into big publish do it's theatrical the you the of for big storytelling global this that

those business of coming in confidence there. leaning our succeed the I kind we bets could It think pleasing consumer X first the in and through. I and think into models, So service, customers strengthens bet overall

looking Yeah. quarter And the And think of you've you've with probably of had. net you to number, the was the the flattish customers QXs. quality do you from previous get best it's of that to few that's sort adds? higher what and amount I great hurdle number subs the of last -- you What deliver sort just but the part read content a of line done QXs, terms of versus in this same of right? question, I at kind mean content in need that? obviously, Is

of a hit didn't was we lead didn't retention. Spence what, out we think But that things and to guess, we've it's would it to Not COVID of at kind classically in levels All XXXX a didn't those XXXX. only competition. see different hit all -- saying, you in a looking of see of just see particularly in engagement. come back I Well, pandemic, our We do half those to things. are the we I at

it growth, little all steady tougher business So the to and predict, of it's are makes pretty created of certainly a which a lot fundamentals bumpiness solid. the not linear but

it. Got

kind You help week. announced through, of over think time increase just churn you might flow U.S. frame understand this last Maybe will kind what expect? of what a price you us

of that the more pay been And business us look that to consumers investing, variety. over more changes ask to core you world say QX. do willing most disruption the out job premature yet. then well. to What couple grow we've years, is keep don't now for investment as we're share. I'd regard. out are that actually and an U.S., willing sort to that fees their indications for of that for good earn can as the streaming even any we in which there earliest which would and it think occasionally around competitors, haven't of we any them subscription the endorsement last the encourages generally, great that And value quarter really theory more have we to at that and done and in more a largely are well, the it's example, seeing that the come we actually deliver because is anticipate they cycle customers more also that at over ability core we in recently the services flowing better say we try of entertainment. we've sort members in other the look see and bigger And to we it next a paid Yeah. bit quarter, to when through seen and idea stories, have movies, Disney+ when growing entertainment significant And the great we've to back price if the that they're as Then generally look done theory we've I strong into rolled right you continue I at for core going, that in that. And the little it as we still sort if otherwise of that us storytelling,

feel streaming Yeah. by increases It's I priced. sort the your at are a price it those in about doesn't good seem constrained point like And too look steady you competitors your of where when U.S., competitors.

but U.S. about sort be statement? is we as as that runway, guess you're streaming we to I there sort streaming of about that share is Not get cable long your overnight, think sort about the other as a is price your think services? And think we relative should So to of really the service true comparison that opposed actually of we your runway? about as multiples in any of other you'll Should as thinking viewing

sort doing target that country metrics of priority the an see this -- tracking to listening price have in sort is of in walk don't engagement we're members we're and given any to. that our of we the we've our churn Mostly, where little keep terms of value and We signal and to more creating that more of a done job this a and time to those that it's our bit good acquisition things going. are ask kind really right at and sort for iteratively

think coming, don't then And We the it's or we unscripted, to as that. let's they're paying. do in movies -- as there, that value really are given So Netflix, comments for that things around have a say, a competition fulfilling for they and like TV good, or so see right? value shows, on getting what can now or good we immediately the games be that previous you that member if great stories, good replaceable just like market substitutable is to only equation need. we're job member any we feel And long incredible

Great.

in understand that also trying what India achieve Maybe made the help in change direction. us with change? to price You just other a price you're

Yeah.

about operating think there doing that's in different the the across in over the of been we've consumers' and offering set a dimensions. whole follows cetera. more been that activities years I India tastes, service learning et many many, And broadening that we've Indian it

increased core of programming and So that and it's at to attractive the variety programming expand to seeking and obviously people is and content that in appeals India. range it's and an provide the the more

more place increase the our on price While of partnerships theory decrease to do range we that did it those been which and the like have the partners all we service to find of those And those those long-term wanted and best in Indian and not available us. Indian this sum India And there, also plans or really we're more exchange. we when was it consumers. we point, of for to a that consumers. we trying thinking the We of of of sort to that what's many, will looked again, sort making accessibility more we therefore, the incremental just right features more mobile, across that watch a those it people that of types time to to doing saw lower And activities. unlocks sure that entry lens at that where the we're with and payments retention, to to of is the would all And deliver gets to that in with prices we're do features go-to-market basic guess maximization, many, revenue TV many to that total attractiveness about the value and with felt some market it at we've like plan through our value the those sort create had but good at ability under more plan things. the

still And so revenue basically in up to decreases, early we're of it's adds. -- this very at the in result looking anticipated per And we more a I price decrease subscriber in India. we're average member, while case, as make that say going ARM, would it

read of to it. takes we lens on seeing are a it of clean And get positive the that But some these supports data changes. through read early of a that very retention, these very on revenue maximization effects, couple a like months much

know, And what's India all might household. you unique is about month is It as per Nidhi, about well viewers not that $X per cable. --

pricing of expectations. consumer radically different which does than impact the the So world, rest

or approach in is the so If rightsizing consider like it India? isn't it months result, But far. if you result, desired XX now, doesn't give Or would you giving this forward right. the and of you spend fast from it either of money months the consider media the push market Right, sort that confidence an model? maybe your content you desired And see or you sounds guess, term? I you examples want there do India? how words, make in this outside that it in success other of industry to are ad-supported can you give for X long hard in

the would long even. we've in a Greg, Japan? We time break experience it then, about for Brazil, adjust years. of thought why think great you don't never first was I brutal I in it it the experience couple in before we And our got because this we'd talk be business. know materially

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how that we're that So figure some I way think quite in consumers bullish know service out attractive India isn't fundamentally can't We love for entertainment. offering be that different tailor who Indian our sure. to to we to

I to at that, it. away optimism a us gives of so just work And to lot think continue

would I ahead, add Reed. -- just sorry, go

successful us there. single got every The The we've been great we major but in market, haven't spinning. news is leaning as that the thing frustrates other flywheel in definitely in why is we're India,

the one in And there bunch. an easy wasn't

going though have talk about and fit, business paying business the was And can different in I is say, believe like country. local touched product is also every pretty be than super what very well world, million that on, as world. anywhere Entertainment still adoption country our games, much And hard TV is loves even every of and And what and we it's so to on everyone members -- XXX basic more see but terrific Ted hard. around a fundamentally specific. around we even curve. scales it's everywhere. terrific film for as we it the is It's market content and with travel that kind with that you a that's created Well, like model what

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thing a business it. it difficult. easy also So replicate actually that for about really scales well, is be it'd but our it's that is good super Otherwise, to everybody

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So for will that And that start fit, they we think this be market fits built the a product something to and early to it good all India product content on the in love, is to are -- up start going reasons, flowering they in value live that their and can't invested life same people idea really without. through that is it. it going

that audience on and we how in story just incredible to learning you as the well, stories but we're But Ted. that how around we places bring even in Because like we're from But down obviously, members, to And even anticipate how translate -- that triple scale, learning dubbing, things, way. compelling time simple like subtitled that we've you minutes. things I'll subtitling just as world, these it do And global I that run X describe us. titles gets 'XX actually that. these ways. even in maybe million all how point mean, minutes a have an wouldn't that something to and now time literally nostalgic to run or also means them it's make as eerie these more And still our and can't at to that million effective dubbed increasingly and to localization to better you evocative emotionally present like and X

fascinating out that quickly going what do evocative to really means. learning that things story and every is much There's -- that and in is every communicate language about descriptor incredibly culture You just day. easily there's world, similarly a the work to to what emotionally how find around have and that we're so

infrastructure for where of that zero places many there and out, those dubbing. subtitling built we was in And

content well. that speaking travels Well, of

Ted, South mentioned, spot as you new And been you success relative this XX more unique you're your What launching sort And think shows maybe seen do drove the factors the are markets? of Korea? in adoption you've said, what really like you in that to here a importantly, has curve as Korea, for bright can there over what South you. year. look other

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growth XXXX in XXXX. over XXX% So

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is film So under growing. kind Folks but market growth TV rates, of it And and is healthy. a pre-COVID TV. pay love where the still

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it -- penetrated That you've call XXX to outside sort TAM, stepping XXX talked Maybe That's globally China. just that. million of into back, Great. about XX% of your million your homes makes sense.

playing you at thought obviously, homes of still they're how XXX pricing you to lower, growing. or subscribers? actually many or how strategy higher the changed expected of you you than your And higher, than process in have get penetration XXX are million terms As markets how lower on your seeing expected? whether some your there, it's XXX or to Has various get content million strategy sort evolve frame might all levels, ultimately these out to all next you're million the can some time of

I'd Nidhi, the PTV look pay high thirds that it. We're about TV on U.S., the say, two watermark. at Yeah. at in we of comparison

to thirds first And of harder the in that. appealing on two than going we're so the have terms more back and more be third sports of is superhero. unscripted, we And all Because don't news. definitely working

might get pay XX% say, TV. we combination we You In think well, a a of or higher something we some such of that's is a to experience. should accomplishment. good to linear and TV, better if the better But pricing also lower old TV TV, streaming than ourselves, than ways, experience pay be

So the smaller effects why. COVID definitely be growth. just why I'm could well slower market we than not frustrating where for be thought. you're as it kind it could That's on us pushing current of sure

of thought, there, want It's we everyone's we'll going we're than But adoption, TV compelling, that still Netflix of of, get on to incredibly original really but those So long-term. we the kinds try thinking (inaudible). if thesis we become slower be about to the rigorous to possible smart things. a complexity, be focused

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of offering So a great film key for equation. us, is, part a film that having

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then zero add people that's pieces then term you titles. big the of that pull a about those products Bridgerton franchise short our one. in if having think strong we those people we're a a Squid value where talk like complete coming But franchises. So and already be consumer are it's few really world continuum And will those to through, of that or bigger years a to world able And course, or doing in to think you Game next hope to the feel what various together. of the and there's connection through muscles

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been for makings all into one of tapping Stranger instead cloud? Things it's of to trying So is from building point I kind can. you proof you Can build that those whole And a it a XX that's think years. of franchise

reception know been the the a and on but the engagement gaming as And bit. what to very learnings exciting well? It's little your days, during some from have touched early what launches been see subscriber it's of has quarter. Greg, base? worldwide We I sort

Yeah.

generally, do getting the you to is daily out, not the we can where are engagement games on active of service? learn As basically to monthly our get the on we from users, what games. all that. point growing still do point this this building of performing? as have to great is all And number are games And But consistently members users do What plumbing patterns? and discovery want those from infrastructure active seeing to days. what to it's the they now technical our the you games to we're because tremendously just what And very the it's really members. we're early exciting which been these now we to it's patterns, have launch How a get globally say, surprisingly, all are point

to capacity, regard. sort sort this as seeing now game that I'm allows this, super to gradually set of over which to in about is value IP process. the Reed think about, really, We've to the to of been generally what And period you're you us see next brings about doing good studio. get our in deliver own we now this excited space. of been done we're We've level that And are is value and hiring in a that. But unlock get the it a we're were when acquisition so incredible are a some that we're interactive members. experiences talking really that incrementally experience tied we've around parallel talent growth building And that an I to with excited deliver that development internal of where the to that of can going that that timed we time

aspirations at to just this reaction gaming? of gamers couple I'm acquisitions to number why obviously big last of consolidate a acquisitions given of sort in is of sort least that time smaller it the to to the build to anchor that variety Netflix more because weeks, announce consume big titles and organically. we've of your Just that's is acquisitions video of their your well-known a obviously make compared efficient what in curious to Would big wider major participating Given where be content. into seen difficult sort to way a something around of companies or product? your we buy tend some couple isn't titles tend

some that whole to recognize. to the it it, game the And mean are accessing open and develop also a the think see we And game IP thesis that I have the And with back But like to large to licensing, ability let's connect endorsement to think call to take the activity are We was some a opportunity world in year degree, I experiences. the long-term and happen Well, multiyear actually subscription cloth over in of those. around model titles, to great consumers space. and the see I exciting we franchises or that see core to we’re out building excited it's test huge being around games the connected that we interactive come. of you'll will big an about experiences see a that that, people too.

stories bunch experimental very and things. open. the center universes, on connected those a would properties to I that more really we're to the of for in magnify other going of the to that ability that say be create fans characters, of prize the We're and around try building eyes But that So the places we value have sort stories. the we're long-term are our

time two have questions. we for Nidhi, more

Okay. for extreme everyone world. picture you this Maybe have fitness the the bigger there's education, interactive content, whole and back content, and content, have VR of world you of lean it's or Reed, subscription of Spencer, more just about the couple I than or a question end, and And is gaming but millions more now hundreds a is metaverse. sort at there global interactive talking XD inside that's you, or of But semi nailed questions. around might really of whether this households product

obviously already the gotten sort of do subscription spectrum you of of about your broad much long-term? around on thinking content, you how it this But going sort You've as gaming. want wrap look to of at

much say in But at would being very have proposition. there's just you be to When to, it. high a That's how dilutive of want we We it. that the be you differentially of no point whole number. do great

you letter and a really Google in did with there. And -- to just Ted to we there. be well we really it how great to at We the going the several built took to like we're And so inning. get on franchise, the effort, trends lot what It's it years going Search that's us think third getting of English able saw do a strong original calls film just we're series.

got one. And were gaming, focused Of documentaries. all the course, then we've unscripted, a big international initially content. got on We've the mobile is gaming which

And press and thing when got job walk, in best say doing Greg category. continue but nail sake mobile and we would run the the in that. been at that. to for of absolute just you I release, definitely Because gaming, terrific having we like is then by in have of where crawl, world-leading it we're X top and please not we'll ask, XX for our we're gaming be and and should are a what's like best okay, the So the today, for to the our some next? being of a it Ted just film producers on And or on members the work let's

take So that. we're up we'll winning for queue question. When in it games. Then the

do perhaps growth Or and expecting? have level sort of to does the games gave lot you more impact, Great. that but level that around the margin letter lower to Does on we're of does consumer with with Spence, do the you in over just more turning the a of like it lower -- and margins. of sort have products? explanation outside -- FX about, some it these to incremental talking guidance of revenue a for investments of of you're

it's No, really FX, just Nidhi.

about lost we of revenue So the $X we in letter, margin. as points about 'XX said in of through expected X That's billion FX.

just of about you in delivering couple of years. of if back look add I year. on, of that right And we we're on So pace margin forget on our at points margin kind were per last and our over guide X the can't adding

FX last all the really in of really move happening happened X And year. that's last the here. that's So months

investment want unnecessarily rightsize rightsize structure, we our are then And to said always able levels, where is in cost to currencies to order our coming healthy our be we've time, don't into growth business swing a will for fast. we over what pricing appropriately way opportunities. We the in. our to want the So -- our in invest

And to so do time gives this some us it.

margin us year investment, our just content in a our a but lot in investment little there. X, two points gives all to we -- along. roughly game still too. And over been say We up. want no factoring of change to So talk growth, there's it We're catch time, X But our committed period. of X will increase I We've any back average a growth year-over-year. still in QX. in last healthy year What we'd What the very deceleration. but this XX% growth Obviously, we QX, you've grow that's you're growth this -- for X faster, bit XX% the is our about in seen like revenue with ended of about points guide but there's again year business. in to FX. of seeing because There's revenue drag misleading

QX So of constant year-over-year about we remember, currency a comp QX prices 'XX, also materialized. it in the what when and may really of you in tough is through XX% adjusted for year-over-year increased to U.S. -- QX which I was growth. is the because under It's argue, FX would flowed QX 'XX

So the tough. is year-over-year comp

So now, the least is, right plus QX, underlying XX%, at the business more growth like organic XX%. in XX%, in revenue XX%,

love to growth underlying business. We'd So growing be the that's dismiss very don't but growth love the have quarter. still healthy business. the in the in still And just -- FX in least not very healthy want faster. that's swings, at that's negative to to that. I We'd

will it's Nidhi, you your one I earnings grant extra interview, question. last since

flow? and of for terms cash cash to peaked take will And on to last you with I of and flow And year. reaching balance that I M&A it's but been Congratulations for but in XX years how how your will kind Spence. very buybacks this cash to to last have amortization? become you'll that, milestone. question, this spend sustainably feel the we maybe related be that flow free I've waiting of like It's this question, cash will one, sort of exciting also it ratio ask content free one this converge? free positive earnings long have

end wanted people you with more exciting There's Nidhi. on me, the many I with to speak can't so believe to call.

us We're is It business big model been be that. flow cash to going appreciate positive we for said The a has out. milestone you So what there. excited for proving forward.

in over time that's as of So increasing cash. profits, well terms as great margins profit our

on the priority growth to our and M&A capabilities not the of is Spencer, our been about and se. film, our invest can top excess too, not organically, after and tactic business, as business capacity a chime we've in us first, we're healthy whether strategy accelerate and seen. per across games of IP, but cash TV accelerate it's calls, use is or to terms our going sit but in, you've as there's cash, in of all content be acquisition just opportunistically cash talked over to In the is if and of business for to of prior that, strategy, you strategically as to our invest what's M&A like the And that stewards we've left in responsible said.

tune Our to beyond through repurchase. done. we're to capital we months as did of the that, about excess is and share as year X our shareholders And repurchase. in of it's sheet, revenue the we'll balance to million been, that up allocation $X billion which share opportunistically $XXX plan of have on authorized We have last is roughly in return form cash

So that's still plan. our

much of want growth In same, those there. and the as very the converge ratios business. a put don't I in prediction flow a when We're a terms still in earnings -- out cash mode and to look

multiyear So over in to it It's converge time, don't period. And I but will direction it peak. a so. do continue to going over been want to specific the declare right continue a will

the part. capital Nidhi, that, is to The allocation only thing I add would just on

to ended of $XX We target billion quarter gross above Just to billion. billion $XX balance the slightly about you, debt remind mark. $XX the is for our sheet

down So anticipate said delevering is of But of QX. be use the on terms we in EPS the in should paying you free just obviously question. lastly, bit $XXX million in about cash. cash a will something we as And flow then letter,

so euro turn remeasurement bonds any now Ted to I'm quarter, remind there. non-cash in a So below-the-line like skew I thank over closing for just of questions. EPS just take to to that But going and you you, his there to sort the out want your remarks for items some call are it -- to our of can given us home.

and businesses you creators out can with people The it who thanks that fans creative appreciate. value to for people a so big games and a today. it of deliver what figure environment build these Nidhi, for know film how then to feed they that love and built TV much for thank proposition love, has and

may of there linear to think are business. to global I with the be no by conditions, games absolutely very migration positively and subscription absolutely and that's There's of value. that call you and a the but love when fan-friendly transactional local Films and great or hard series fans define high-quality over thrilled to that yourself well We're of you, a thrill programming, happening kind happening. more time That's it's question pretty world. with moving models services you events happening, that. that be even to continue what all from by to to also it's world. growing little it. from We're revenue, those old around time and delivered doing to The are affinity growing grow pace are models by that we're planning profits audience improve this growing and in by the great

other I'd is So give once the X again, you them. you Where of in Nidhi, if person, this. I've one? I got can see

for Ted, one I you. found

Thank you, Nidhi.