When Netflix (NASDAQ: NFLX) reports its first-quarter results next week, investors will be watching a number of items. Revenue, operating margin, and the company's cash burn, for instance, are figures worth checking on when the first-quarter update is posted.
But one number, as usual, will likely get more attention than the rest: Netflix's paid member additions. The streaming-TV giant's paying members are its the lifeblood -- and trends in this metric help investors gauge the health of the company's overall platform.
Looking for more strong growth
In Netflix's fourth quarter of 2018, paid members increased by 8.8 million sequentially. This was a record high for quarterly net paid member additions, putting total paying members at 139 million -- up an impressive 29 million compared to the year-ago quarter. The net paid member additions for the period were primarily fueled by international growth, where Netflix added 7.3 million members. Domestic paid member additions in the quarter were 1.5 million.
Highlighting Netflix's momentum, these net additions were more than a million members above what management forecast for the quarter -- a notable achievement since management strives for accuracy in its forecasts.
For the company's first quarter, management said in its fourth-quarter update that it expects more strong growth. The company guided for 8.9 million net paid additions in Q1 -- well above the 8.3 million paid members Netflix added in the first quarter of 2018. Of Netflix's projected first-quarter net paid member additions, management expects 1.6 million to be in the U.S. and 7.3 million to come from international markets.
It makes sense that Netflix is expecting slightly stronger growth in paid members in Q1. The company's first quarter follows the holiday period, when many customers sign up with free trials and begin paying on those free trials during Q1.
When it comes to Netflix's outlook for second-quarter net paid member additions, look for the figure to be quite a bit lower than first-quarter additions. This is normal seasonality for Netflix. Last year, for instance, Netflix added 5.5 million paid members in Q2, down from 8.3 million in Q1.
On the other hand, investors should look for Netflix to keep up its trend of adding more members than in year-ago periods. Growing by 5.5 million paid members in the second quarter of 2018, it's reasonable to expect Netflix to guide for around 6.5 million net paid member additions in the second quarter of 2019.
Netflix reports its first-quarter results after the market closes on Tuesday, April 16.
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