Password Sharing Woes, Ads, 'ARM,' Price Hikes And More: Key Takeaways From Netflix's Q1 Earnings Call

Netflix Inc NFLX stock lost more than a fourth of its market capitalization in extended trading on Tuesday after the streaming giant's quarterly results failed to impress investors.

Russia Exit Hit:  Netflix's decision to stop streaming in Russia led to subscriber loss and had spillover effect too in parts of the EMEA region, Co-CEO Reed Hastings  said on the call.

"We saw that in the central and eastern European countries," Hastings said.

The company also said macroeconomic strain in Latin American countries led to elevated churn.

Password Sharing To Come With Higher Costs:  Netflix hinted at making it costlier for those subscribers opting to share passwords with their family and/or friends.

The company said over 30 million households in the U.S. and Canada use shared passwords for accessing Netflix, while the global tally is at 100 million.

"However, our relatively high household penetration - when including the large number of households sharing accounts - combined with competition, is creating revenue growth headwinds," the company said.

ARM Over Subscriber Count:  ARM, or average revenue per member, and engagement will be more relevant than subscriber numbers over time, CFO Spencer Neumann said. 

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Impact of Price Increases:  When asked about the impact of price increases on churn, COO Gregory Peters said those are significantly revenue-accretive, adding that it sometimes causes a blip in churn and a marginal effect on customer acquisition.

"A majority of members recognize the company is investing, and the incremental amount it is charging for is to bring more entertainment value to them," he said.

Neumann said the slightly elevated churn relative to expectations is not due to the price increases but macro strain and competition.

Netflix Warming to Ad-Supported Plans:  Netflix executives see ads as an exciting opportunity and said the company was intersted in exploring it more. 

Hastings conceded that the ad model works, giving the example of Hulu and Walt Disney Company DIS.

"I'm sure we'll just get in and figure it out as opposed to test it and maybe do it or not do it," he said.

Revenue, Net Adds To Grow In H2:  Despite a guidance for a decline in net adds in the second quarter, the company said revenue would grow this year, albeit a slower pace. Netflix expects to return to paid net add growth in the second-half.

Price Cut In India:  Netflix executives said the price cuts announced in India were a long term bet on growth in the country.

Addition Of Sports:  Although Netflix did not sound very confident about sports content bumping up profits, it signaled excitement about the success of its sports-adjacent features such as "Formula 1: Drive to Survive."

Following its latest quarterly results, Netflix shares plunged 25.73% to $258.90 after the bell on Tuesday.

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