Breaking Down Netflix's Mixed Fourth-Quarter Results

Check out the latest Netflix earnings call transcript.

Netflix (NFLX -3.92%) delivered a mixed fourth-quarter earnings release last week. The company missed modestly on top-line expectations, but enjoyed record subscriber growth. Better yet, Netflix also expects to add even more subscribers in the first quarter, while rolling out a massive price increase to boot.

In this segment from Industry Focus: Tech, host Dylan Lewis and Fool.com contributor Evan Niu discuss the streaming pioneer's latest quarterly results.

A full transcript follows the video.

This video was recorded on Jan. 18, 2019.

Dylan Lewis: Let's kick things off talking about Netflix and some of the results they posted. This is a company that a ton of Fools follow and are always eagerly awaiting updates on.

Even Niu: It's a very polarizing company. The stock is one of the most volatile earnings movers in general. It's always a fun one to watch. Results were mixed overall. Revenue came in at $4.19 billion. Market was expecting $4.21 billion, so a tiny miss there. The good news is, earnings per share came in at $0.30 versus the $0.24 consensus. They actually were able to beat on the bottom line despite a slight miss up top.

One of the big things this quarter is that they recorded a record number of subscriber growth globally. They added 8.8 million total members, of which 1.5 million was in the U.S. and 7.3 million internationally. That's a huge growth number outside of the U.S. They're adding a ton of members. Now, worldwide total memberships are around 139 million.

Lewis: With this business, there's always been a focus on what the top and bottom lines looked like. But so much of the growth story for them is what's going on with the subscribers. For them to be putting up a big number like that, and for them also to be forecasting they'll be putting up another pretty big number next quarter, is super encouraging, especially when you have the news earlier in the week that they're going to be raising prices. Those are two really easy levers for them to continue to raise revenue down the road.

Niu: That forecast, they're expecting to add 8.9 million global net additions in the first quarter. Like you mentioned, that's another back-to-back record of membership additions. I think that's pretty encouraging, even though their revenue forecast for the first quarter came in a little bit light relative to expectations. They were expecting about $4.5 billion in revenue, whereas analysts were at $4.6 billion. Again, kind of a minor shortfall there. But I'm still really encouraged by the strong membership numbers.

Lewis: Yeah, I think that long term, you have to love that those numbers are going in the right direction. At a certain point, I think the other numbers catch up. If you're really sweating the fact that Netflix missed by $0.2 billion on their top line, you're not really focusing on the right part of the narrative for this company.

Niu: Exactly. That's been the long-term story. They keep on investing heavily into this original content, and that really continues to drive this membership growth. As you mentioned earlier with this price increase, they're really milking more out of all of their members. That's going to help drive some growth, too, even on top of this membership growth. These price increases are effective for a lot of markets, they're rolling out these increases. And then, at the same time -- we've talked about this before -- them cutting out mobile in-app subscriptions, which is a blow to companies like Apple or Alphabet. That's going to help them boost their margin between cutting costs on distribution, increasing up-front pricing. The mobile side of it really affects new and returning customers. Knowing that they're still able to add new members or returning customers, none of which will be subject to those mobile platform fees if they're signing up through mobile platforms, a lot of things to like here.