Netflix: (NASDAQ: NFLX) Shares rose on Tuesday as a result of overseas trading, following a strong fourth quarter update. Netflix not only predicted better revenue for subscribers, but also said it aimed to stabilize cash flow in the near future. Indeed, the management is so confident in this result that it is already considering the use of certain excess cash flows in the share repurchase program.

Here are the main results from the results of the fourth quarter of the flow giant.

Image source: Getty Images.

Netflix Q4 revenue. Raw numbers

Metric:

2020 4th quarter

2019 4th quarter

Change:

Income:

$ 6.64 billion

$ 5.47 billion

21.5%

Earnings per share

$ 1.19:

$ 1.30:

(8%)

Subscribers:

203.7:

167.0 million

21.9%

Source: Netflix fourth-quarter shareholder letter. Table by author.

Netflix’s fourth-quarter revenue rose 22 percent year-on-year to $ 6.64 billion, beating analysts’ average revenue of $ 6.63 billion. Earnings per share of $ 1.19 per share were lower than analysts forecast at $ 1.30, but the company’s earnings per share in particular included a non-cash $ 258 million in cash recalculation from the company’s euro-denominated debt. Quarterly net income would be almost 50% higher if this non-cash unrealized loss.

The quarter was fed by a 22% annual increase in subscribers. Netflix added 8.51 paid members in the quarter, well ahead of management at 6 million net additions.

Highlighting Netflix’s incredible momentum for 2020, the company managed to add a record 37 million new members during the year.

Large cash flows are expected on the horizon

Whether Netflix’s financial results or subscribers’ performance were significant, the star of the quarter was management’s comment on cash flows. “We think we are very close to being stable. [free cash flow] positive For the whole of 2021 we currently forecast that free cash flow will be close to maximum

Free cash flow, which is equal to the cash generated by operations, less capital expenditures, is the cash that a business generates after accounting for all operating and investment activities. It represents the cash that can be used to pay off debt, repurchase shares, make acquisitions, or even pay dividends.

Netflix has long been known for burning cash as it spends heavily on content creation. The high cost of content has forced the company to re-enter the debt markets to raise capital. But the greater Netflix sales and the larger economies of scale today mean that those days will soon be over. The management explained.

Together with our $ 8.2 billion cash balance and our $ 750 million non-repayable loan, we believe we no longer need to raise external funding for our day-to-day operations. Our 5.375% bonds for February 1, 2021 are repaid in the first quarter. We plan to repay the bond at maturity in cash, as we currently exceed our minimum cash needs.

Moreover, the company said it would consider using some of its excess cash to repurchase the shares.

Shares of growth stock rose as much as 13% during trading on Tuesday as investors applauded Netflix’s improving financial condition.

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