January 23, 2013, 5:33 PM

A Q4 profit of $7.9 million exceeds Netflix’s expectations

Overall revenue increases to $3.61 billion in 2012.

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Netflix is expecting more consumers to subscribe this year as the e-retailer debuts its original programming.

Netflix Inc. today reported a $7.9 million profit for the year, despite the online DVD rental company’s own predictions that an annual loss was possible.

For the fiscal year ended Dec. 31, Netflix, No. 9 in the Internet Retailer Top 500 guide, reported:

  • Total revenue increased by 12.8% to $3.61 billion from $3.20 billion in 2011.
  • Net income of $7.9 million, a 77.6% decrease from a $35.2 million profit last year.
  • Paid subscribers increased by 40.6% to 30.36 million from 21.60 million.

The report sent Netflix’s stock price up, reaching $103.26 late today, a 5.6% increase from Tuesday’s close of $97.81.

Netflix has been rebounding since it shelved plans in the fall of 2011 to split the company into two divisions, one for DVD rentals and the other for streaming content online. “We added more than 2 million members in Q4 to end the year with more than 27 million domestic members,” Netflix CEO Reed Hastings told shareholders in a letter. “Our holiday season was particularly strong, driven by consumers buying new electronic devices, including tablets and smart TVs.”

Netflix’s move to create original programming, including the Feb. 1 debut of “House of Cards,” the “Hemlock Grove” horror series and the fourth season of “Arrested Development,” are expected to increase the number of subscribers, Hastings says. These shows will be released on the same day across all of Netflix’s markets, he says. “Success with our originals will also enhance the global reputation of Netflix as a source of unique, must-view content,” he says.

For the fourth quarter Netflix reported:

  • Revenue grew by 7.9% to $945.2 million from $875.6 million in the fourth quarter of 2011.
  • Net income fell year over year 92.4% to $17.2 million from $226.1 million. Netflix had predicted in its third quarter report that Q4 net income would range from a profit of $2 million to a loss of $13 million.
  • Total subscribers, including domestic and international, increased 41.7% to about 33.3 million from 23.5 million.
  • Total U.S subscribers increased 24.9% to 27.1 million from 21.7 million in the fourth quarter of 2011.
  • International subscribers grew year over year 221.1% to 6.1 million from 1.9 million.

For the first quarter of 2013, Netflix forecasts flat net income ranging to a profit of $14 million, and that its total subscriptions will span 28.5 million to 29.2 million.

Netflix is the single biggest retailer ranked in the books/music/video merchandise category in the 2012 Top 500 guide. In 2012, Netflix accounted for $3.20 billion—51.5%—of all merchandise category sales of $6.22 billion.

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