Check out the latest Netflix earnings call transcript.
Streaming-TV giant Netflix (NFLX -9.09%) just wrapped up the books for 2018, reporting its fourth-quarter results after market close on Thursday. Finishing the year strong, the company impressively added nearly 29 million new paid members during the year -- significantly more than the 22 million it added in 2017. This brought total paid members by the end of the year to 139 million, up 26% year over year.
As investors look over Netflix's fourth-quarter results, here's a look at some of the key takeaways from the quarter.
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Revenue and earnings per share
Netflix's fourth-quarter revenue came in at $4.19 billion, up 27% from the year-ago quarter. Notably, the key metric was lower than management's guidance for revenue of $4.2 billion. But management's guidance is not conservative but rather representative of the company's actual internal forecast, which strives for accuracy.
Earnings per share declined from $0.41 in the fourth quarter of 2017 to $0.30. The key metric handily beat management's guidance for EPS of $0.23. The company's decline in earnings per share came as Netflix's operating margin narrowed from 7.5% in the year-ago quarter to 5.2%, reflecting significant content investments during the quarter.
Net member additions
Of the 29 million new paying members Netflix added in 2018, 8.84 million joined during the company's fourth quarter. This was well ahead of Netflix's guidance for 7.6 million paid member additions during the period.
This growth in members was driven by "high member satisfaction" as the company continued to roll out quality content during the quarter. Some of the quarter's standouts were Bird Box and The Christmas Chronicles.
Guidance
Management provided plenty of guidance for investors to mull over, including expectations for member growth, revenue growth, free cash flow, and operating margin. Here's a look at management's forecasts.
For its first quarter, management guided for 8.9 million paid member additions. Higher than the 8.3 million Netflix added in the first quarter of 2018, this signals that the company is confident in its ability to continue delivering value for customers.
Management expects first-quarter revenue to come in at about $4.5 billion, up 21% year over year.
The company forecast for its operating margin to increase sequentially to 8.9%. In addition, management expects its operating margin to "grow over the course of the year," with its full-year operating margin coming in at 13% -- up from 10% for the full year of 2018.
Finally, Netflix maintained its guidance for free cash flow in 2019 to be about negative $3 billion -- in line with its negative free cash flow in 2018. But management says it expects free cash flow to "improve each year thereafter (assuming, as we do, no material transactions)."
