COVID-19 – we cannot ignore it VIII – Netflix

Today another representative of an industry that might profit from the pandemic: Netflix. With people staying at home for more hours than before the lock-down, we see jigsaw-puzzles, knitting equipment and tools and materials for home-improvement becoming more popular. We expect people also to watch more movies and series and then Netflix would profit from the situation.

Photo by Andrea Piacquadio from Pexels

Again the Annual  and Quaterly reports were all in USD, hence no calculations. We agreed to take revenue, cash-flow from operations, equity and total liabilities and those could be obtained very easy. As promised the input-file is available (the output-file is the 3D-graph itself, of course – a .htm-file) and everybody who wants to try the 3D generator can download the full package for free – even without providing an email-address. It’s completely anonymous! If you like it I would appreciate if you drop me a line of course.

At a first glance, the conclusion might be that Netflix is really impacted in a positive way by the situation around COVID-19. Two red roofs in 2019 and suddenly a firm green one in 2020.

Double-clicking the screenshot will open the 3D-graph in your browser. Beware: thegraph haw so many companies that zooming out is necessary to see the whole picture! Clicking the right mouse-button and moving the mouse up and down at the same time, will zoom the graph in and out. For maniputalion of this 3D-graph: Clicking left while moving the mouse will tilt the graph in different directions. Double clicking in the graph translates it and readjusts the centre at the same time. Just try it – If you don’t know how to get the normal position back, refresh the page in your browser.

If we would have taken the net income, then all roofs would have been green and the more recent, the thicker. The funny thing is that the revenue for 2020 H1 was only slightly higher than for 2019 H2, so what’s going on? (Be aware that a red roof means the height of the building represents the total costs/cash outflow and the yellow part is the revenue. If the roof is green, it’s a part of the revenue).

Well, we know that Netflix invests a lot in their content and that’s really expensive. By the way:  they have to buy the content to be able to put it on the balance-sheet, because for content developed themselves that would not be allowed. Think about the major difference with the software-companies we wrote about in the past in comparison with e.g. Volkswagen. Buying content means a net outflow of cash, but not necessarily a decrease in net income, because the value remains in the company. It’s an investment! And what has happened with the investments during the three half years we show?  The Cash-flow statement has an entry called “Additions to content assets” (Q2 2020 statement – In the annual report a note is available for this topic). For our three periods the values are:

2019 H1

2019 H2

2020 H1

6.3 mln.

7.6 mln.

5.8 mln.

Keeping 1.8 (7.6 – 5.8) million in you pocket helps, although it doesn’t fully explain the sudden increase in cash-flow from operations, because that’s a change of over 3 mln. but it certainly helps.For the people who are curious and want to create an alternative graph: try and replace the cash-flow from operations with the net income as shown below:

2019 H1

2019 H2

2020 H1

615

1252

1429

Was this really a post about the financial upside of Corona? It wasn’t that easy to tell because so many things are changing with Netflix and in the end the revenue went up but then Netflix is growing anyway!

The financial input for 2020 H2 was taken from a spreadsheet. Because of this I didn’t see comments about COVID-19. A little bit later I found the 2020 Proxy and looked for relevant comments. I found something, but it was merely an operational statement: In connection with the recent COVID-19outbreak, management, with the support of our Boardand Audit Committee, quickly engaged, assessed andled our efforts to mitigate operational, employee andother risks to our business associated with thepandemic.

Then I found a post on Forbes telling us that Corona is bad for Netflix. I think that’s more what the graph tells is. The revenue is not exploding at all and although the cash-flow from operations went up – mainly because of cost-reduction. The profit (create the alternative graph yourself!) is rather stable.

Next time we will present the last industry profiting from the pandemic: information technology. Don’t forget to download your free copy of AnRep3D at our website. Short tutorials, explaining different parts of AnRep3D are available at our Youtube-channel The white-paper and inspirational graphs can be downloaded at the homepage of our website: https://anrep3d.com Follow @AnRep3D on Twitter, to be informed about new posts.

About AnRep3D

AnRep3D is the new company, founded after the handover of Scientassist (together with VRBI) to one of my sons. From now I will focus on three-dimensional graphs for the financial markets, showing the main figures from annual reports in comparison. As per 2021 a second product is available: EnRep3D. It is meant to visualise energy. Although the engine is the same, the texts, manual, website and examples (including blogposts) are focused at energy.
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