Netflix 2020 - Financial Results on Power BI

I would say it's hard you being using the internet and not knowing what is Netflix. The company is a giant on the streaming world, and was one of the first ones to do this service. It started with dvd delivery and completely changed its business model to streaming on the meanwhile. (This one knew how to innovate)

Out of the most famous series in the past few months, a big part of them are in Netflix or were produced by them. Some of the examples are Narcos, Orange is the New blac, Bojack Horseman (what a show!), The Witcher, Stranger Things, Sex Educantion and the one that seems like EVERYBODY is talking about... Dark.

Yeah, I am sure you've watched at least one episode or heard about some of these shows, and Netflix is more and more focusing on the production of movies, series and documentaries for our entertainment.

The company is a success with its originals, bringing a lot of new clients to its base and keeping them with good service. In case you are not aware, the company is also listed on the Stock Market and you can be a business associate for a little bit more than U$450 a share. (price from July 6th 2020)

Alright, but what the financial results can tell us about this company?

Starting from the results

Starting on the Income statement, we see an income or U$ 20bi in 2019. With an average growth of 26% per year since 2010. Not bad!

We could also see a huge growth on the operational expenses. One good point though is that since 2016 the expenses growth is not greater than the Income growth. (we will see more details about the expenses in the next parts of this text)

Something that I found really interesting was the growth of its margins. Coming from a net margin of only 1,81% in 2015 to 12,29% in 2020, and an operational margin from 4,51% to 16,61% in the same period. (Looks like streaming services is profitable.) It's a really interesting growth showing an improvement on its operational capacity.

And what about all these negative numbers?!

Yeah, I found really interesting the fact that the company does not generate cash flow! Since 2011 it's investors could not see a positive cash flow in a year!

What could be the answer for that, you may ask? Well, in 2011 the company was not even close to what it is today. Very few people knew about the company. They expanded their business from the US only in 2010, going to Canada only. In 9 years a lot of things changed in the company, including its numbers. The income went from U$3bi to U$20bi, number of clients growing more and more and becoming the biggest streaming company out there. But as Milton Friedman would say "there is no free lunch".

And this growth did not happen out of nowhere. We can see that the negative cash flow can be explained, in parts, in its GIANT investment in content creation (Netflix Originals)

The company has in its strategy to depend less and less from other producers and companies and to create their own shows and movies. An interesting differential because after all... Why would I watch Netflix if I have the same things on my tv already? Or worse, lots of other companies are starting their own streaming services. Making things differently is harder and harder for Netflix.

The company increased its expenses in content by aboyt U$10bi from 2015 to 2019, a really big growth that looks like is bringing some good results for the company, since we could the a significant growth in the income and margins too.

During this period, we could also see very important Netflix Originals that got in peoples attention and taste. Think about it for a while... out of all the most famous series in the past years, how many were Netflix Originals? Quite a lot.

Is there a light in the end of the tunnel?

Netlix is one of the most famous companies in the american stock market. Its part of the famous FAANG companies (Facebook, Amazon, Apple, Netflix and Google) which is an acronym for the companies that are complete leaders in their segments.

Netflix growth in the past few years was really incredible, including its shares that came from about U$97 in 2015 to more than U$450 in 2020.

Some important factors that might scare a little bit is the growth of competitors in the sector. And they are not small, like Amazon, HBO, Disney etc. Besides the existence of smaller companies that are also in the market.

The numbers show a possible improvement in the financial situation for the company with a small decrease in its debt, significant improvement in its margins and a positive quarter for its cash flow after 22 negative quarters in a row.

Netflix is still the leader in the sector and if it keeps the quality in their productions can be there for quite some time still. What is left for us is observe and see what happens in this "streaming war" that is developing.

Originally posted here

Like what you see? Get in contact and let's create something similar for yourself!