Everyone's favorite Whitney Tilson repeat-endorsed, slow motion trainwreck, NetFlix, has reported results after hours. They are, as expected, terrible with lots of cash burn, declining margins and excuses, and as a result the short squeeze is over and the stock is imploding after hours. Among the details:
- Q3 Gross profit declined to 26.8% from 27.6% in Q2 and 34.7% in Q3 2011.
- Total cash declined by $32 million
- Free cash flow was -$20 million, despite positive "net income"
- "Significant uses of cash in the quarter (relative to net income) were cash payments for content (in excess of the P&L expense), cash payments for PP&E (including cache boxes for our Open Connect program), and reductions in miscellaneous accounts payable and accrued expenses."
- Q3 Streaming content obligations were flat at a whopping $5 billion. $2.1 billion is due in the next year. The brilliance strikes here first. These obligations "not include obligations that we cannot quantify but could be significant." Uh... What?
And while the firm forecasts a net income loss in Q4 of ($13)MM to $2MM as seen in the table below, which means a far worse free cash flow loss in Q4, the absolute pearl was the following:
"The biggest issue holding back much stronger growth is payments."
Full NFLX outlook:
And the firm's letter to what investors are left (pdf).