* Adjusted Q1 EPS 31 cents vs consensus estimate of 19 cents
* 'House of Cards' series provides "halo effect" - CEO
* Netflix forecasts Q2 subscriber growth to slow
By Lisa Richwine
April 22 Netflix Inc impressed
investors with solid subscriber growth and better-than-expected
profits in the first quarter, sending shares of the video
subscription service soaring 24 percent higher in after-hours
A big push into original shows, a strategy aimed at hooking
new customers with content they can't get anywhere else, seems
to be working, with its February release of the series "House of
Cards", a drama starring Kevin Spacey, generating plenty of
It was the second quarter in a row that Netflix has
surprised on the upside, and its shares have become one of Wall
Street's hottest performers this year, rising more than 80
percent. On Monday, its shares climbed to $216.62 in after-hours
trade after closing at $174.37 on Nasdaq.
The results could help alleviate some analysts' concerns
that Netflix may not grow fast enough to pay the costs of its
international expansion and its bills from Walt Disney Co
, Time Warner Inc's Warner Bros, CBS Corp
and other Hollywood studios that provide it with movies and TV
shows to stream to subscribers over the Internet.
The Los Gatos, California-based company beat Wall Street
analysts' forecasts with $19 million in net income, excluding a
loss for retiring debt, and adjusted earnings per share of 31
cents. Analysts had forecast an average of 19 cents per share,
according to Thomson Reuters I/B/E/S.
Revenue for the quarter was $1.0 billion, up 17 percent from
a year earlier.
Netflix said it signed up 2 million new customers for its
$8-a-month U.S. streaming service, the largest part of its
business, with a total of 29.2 million members.
"The launch of 'House of Cards' provided a halo effect on
our entire service," Netflix Chief Executive Officer Reed
Hastings and Chief Financial Officer David Wells said in a
letter to shareholders.
Hastings, in an interview, said "House of Cards" provided a
"very modest, positive impact" on subscriber growth in the first
quarter, and its value would increase with future seasons.
Viewing for another only-on-Netflix show, horror series
"Hemlock Grove" exceeded the first few days of "House of Cards"
Hastings said. The company did not provide specific viewing
Investors pushed shares higher on Monday in response to the
subscriber numbers, as well as higher profit margins from the
U.S. streaming business, said BMO Capital Markets analyst Edward
"You had solid subscriber growth," Williams said.
Netflix said it added 1 million streaming subscribers in its
markets outside the United States, which include Canada and
parts of Europe and Latin America, bringing the global total to
36 million. It said it would launch the service in a new
European market in the second half of 2013.
The company also said it will introduce a new plan in early
May for $11.99 a month to allow four simultaneous streams from
the same account, instead of the current limit of two for which
it charges $7.99 a month. It expects less than 1 percent of
members to sign up for it.
Netflix forecast in a letter to its shareholders that
subscriber growth would slow from the first quarter's 2 million
new streaming customers in the United States to up to 880,000
in the current quarter. That's slightly more than the same
period a year ago, helped by the May 26 release of one-time Fox
TV comedy "Arrested Development."
Some Wall Street analysts are still on the fence about
Netflix. Prior to the results, 19 of 35 analysts rated Netflix
"hold", nine rated it a "buy" and six recommended "sell".