Aside from the founder of Netflix, Reed Hastings, stepping down as the Co-CEO, Netflix Inc. (NFLX.O), the streaming pioneer, highlighted its better-than-expected subscription rate, predicted resuming its share buyback program in 2023 and announced its first ad-tier earnings results.
Netflix generated about $7.85B in revenue in the fourth quarter of 2022; its operating income was about $550M, and the operating margin for Q4 stayed steady at 7%. The dominant streaming company also reported a significant fall in earnings per share at a low price of $0.12.
In the company's Fourth Quarter 2022 Shareholder Letter, Netflix further explained the earnings per share were far behind their $0.36 prediction thanks to a $462M non-cash unrealized loss from the F/X remeasurement on their Euro-denominated debt as a consequence of the US dollar vs. the Euro depreciation in the fourth quarter of 2022. At the same time, the $5B of Euro bonds supported the leading streamer with some natural hedge on the relative value of the Euro for net income.
Amid new payment programs and ad offerings, the uncertain economic outlook, and a highly competitive market, Netflix reported a 7.7M increase in subscriptions, which exceeded the 4.5M projection. The company further explained its Q4 content slate drove customer acquisition and retention, bringing more new subscribers than expected. Netflix COO & Chief Product Officer Gregory Peters added in the Q4 2022 Earnings Interview that they saw solid growth from the incremental subscribers because of the lower price point. "We want to make that spectrum even wider as we seek to serve more members around the world, and we are trying to deliver appropriate value at those different price points, and we're doing a good job expanding that range," Peters said.
The company expects a $3B free cash flow for 2023 under a "no material swings in foreign exchange" assumption. Reinvesting the company's regular operations, funding new acquisitions, and maintaining minimum cash are the streaming giant's top priorities for its cash flow management. If there are no material acquisitions, the Nasdaq-Listed Company expects to restart its share buyback program in 2023.
Looking forward, Netflix remains ambitious on its double-digit revenue growth goal in 2023. To create a long-term, impactful value for all Netflix shareholders, increasing operating margin, producing growing positive free cash flow, and maintaining their strength of audience engagement are also part of its plan.
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