Netflix unapologetic on lower Q1 results as it pledges more spending on original content, international expansion

Netflix set another subscriber record in the first quarter of 2015, chalking up 4.9 million new members worldwide to bring its total to 62.3 million subs. But its international operations took a financial hit, falling by $48 million due partly to a stronger U.S. dollar, the SVOD provider said in a letter to shareholders.

The provider recorded actual EPS of 38 cents on just $24 million of income and revenue of $1.57 billion, down quite a bit from its fourth-quarter EPS of $1.35 on net income of $83 million. Free cash flow is -$163 million, well above the fourth quarter's -$78 million. And Netflix issued $1.5 billion in debt in February, something for which the company was unapologetic. "We will continue to invest aggressively in original content which is cash intensive," Netflix said in the shareholder letter.

What's more, Wall Street didn't seem too fussed about the numbers. Shares immediately jumped 12 percent in after-hours trading, likely driven in part by Netflix's continuing global rollout and focus on content, but also by its continuing climb in subscriber numbers.

Netflix saw a record-setting 13 million new subscribers in 2014, but its main competitor, Amazon Prime, also saw huge growth, adding 53 percent more subscribers to its rolls in the same period. Netflix had 4.33 million global subs in the fourth quarter.

The provider forecast that it will add 600,000 U.S. subscribers in the second quarter but its international expansion will continue to impact its earnings in the first half of the year. "We'll have a full quarter of content expenses in ANZ in Q2 and expect the international segment loss to grow to $101 million, increasing throughout the back half of 2015 as we expand to additional markets (consistent with what we've said)," the letter said.

Netflix also promised an improved TV user interface by the second half of 2015, and said it will evolve from using HTTP to HTTPS (secure HTTP) to protect users' privacy while browsing and viewing content on the service.

For more:
- see the shareholder letter (PDF)
- listen to the webcast
- Re/code has this story

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