Walmart to Discontinue Jet.com; Q1 Revenue Up 8.6%

Walmart, the world’s biggest brick-and-mortar retailer and the largest seller of DVDs and Blu-ray Discs, on May 19 reported it would discontinue Jet.com, which it acquired four years ago to assist in its effort to combat online goliath Amazon.

The announcement came in its financial report for the first quarter ended May 1, in which revenue totaled $134.6 billion, up 8.6% from the comparable period in 2019, in part due to “unprecedented demand” during the COVID-19 pandemic, according to Walmart. Since Walmart carries groceries, the chain was one of only a few retailers, mostly grocers and pharmacies, allowed to remain open after governors in most states closed all but “essential” businesses.

Operating income grew 5.6% to $5.2 billion. Walmart U.S. comp sales increased 10%, led by strength in food, consumables, health and wellness, and some general merchandise categories. Walmart U.S. eCommerce sales grew 74% with strong results for grocery pickup and delivery services, walmart.com, and marketplace, according to the company.

“More than ever, the news this quarter is our amazing associates. They are rising to the challenge to serve our customers and our communities. I’m proud of how they’re adapting and performing. Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future,” president and CEO Doug McMillon said in a statement.

The chain is nixing Jet.com, which it acquired in 2016 for $3 billion, because the Walmart.com brand is strong, it reported.

“Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com,” read the Walmart press release. “The acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy.”

On an afternoon earnings call with analysts May 19, McMillon elaborated, “While the  [Jet.com] brand name may still be used in the future, our resources, people and financials have been dominated by the Walmart brand because it has so much traction. We’re seeing the Walmart brand resonate regardless of income, geography or age. The Jet acquisition was critical to jumpstarting the progress we’ve made the last few years. Not only have we picked up traction with pickup and delivery, but our Walmart.com non-food e-commerce growth accelerated after the arrival of Marc and the Jet team.”

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The news comes on the heels of Walmart shedding online movie site Vudu. Last month, Comcast-owned movie ticket and transactional VOD service Fandango announced the acquisition of Vudu.com from Walmart for an undisclosed amount. Vudu, which Walmart acquired 10 years ago for $100 million, will continue backend support for Walmart’s online digital movie business, while existing Vudu subscribers will still have access to content stored in the cloud.

On an earnings call on the afternoon of May 19, McMillon noted that since the pandemic-triggered quarantine began in the middle of March, “we’ve hired more than 235,000 associates in the United States. The majority are on a temporary basis to help relieve some of the burden faced by our associates in stores and supply chain facilities, as well as to help provide opportunities for people who’ve been displaced from their previous jobs.”

He noted that as the pandemic spread, “we saw the mix of sales ship heavily towards food and consumables. … We experienced unprecedented demand in categories like paper goods, surface cleaners and grocery staples. For many of these items we were selling in two or three hours what we normally sell in two or three days.”

As the quarter progressed, McMillon added, “we saw a second phase related to entertaining and educating at home, puzzles and video games took off. Parents became teachers. Adult bicycles started selling out as parents started to join the kids. An overlapping trend then started emerging related to DIY and home related activities. Think games, home office, exercise equipment and alike. It was also clear a lot of people were taking a do-it-yourself approach as they bought items like bandanas and sewing machines to make masks. We can see customers looking to improve their indoor and outdoor living spaces, our home categories in stores and online took off.

“Toward the end of the quarter another phase emerged, COVID relief spending as it was heavily influenced by stimulus dollars leading to sales increases in categories such as apparel, televisions, video games, sporting goods and toys.”

Roku Announces Jump in Active Accounts, Streaming Hours in First Quarter

Roku estimated 39.8 million accounts were active at the end of the first quarter, a net increase of nearly 3 million since December 31, 2019, according to a company press release.

Roku also announced it expects first-quarter streaming hours will be 13.2 billion, a 49% year-over-year increase.

Beginning in late Q1 Roku started to see the effects of large numbers of people “sheltering at home,” according to the press release. “For Roku, this has resulted in an acceleration in new account growth and an increase in viewing,” the company stated.

For the three months ended March 31, 2020, Roku expects revenue to be slightly higher.

“Consumers are turning to Roku now more than ever,” said Roku CEO Anthony Wood in a statement. “As the leading TV streaming platform in the U.S., Roku is proud to provide easy access to live news, free movies and TV, great paid content, and helpful programming for individuals and families who are sheltering at home. We have been working closely with advertisers to help update their plans to reflect new viewing patterns and adjust their overall marketing mix which has been affected by social distancing. While we expect some marketers to pause or reduce ad investments in the near term, we believe that the targeted and measurable TV ads and unique sponsorship capabilities that Roku offers are highly beneficial to brands today.”

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The company is revising its outlook in light of the pandemic.

“While we believe that our offerings to consumers, content providers and advertisers will enable our company to deliver value in these uncertain times, the wider business and consumer impacts, as well as the duration of the pandemic, are unclear and thus we are withdrawing our prior 2020 outlook,” said Steve Louden, Roku’s CFO, in a statement.

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Roku ended the first quarter with an estimated $587 million of cash, cash equivalents, restricted cash and short-term investments. This includes a $70 million draw-down from its revolving credit facility. “We decided it was prudent to draw down our credit facility in light of current financial market conditions,” Louden said in a statement.

Estimated results for the first quarter are $307 million to $317 million in net revenue; $139 million to $144 million in gross profit; a net loss of $60 million to $55 million; and adjusted EBITDA shortfall of $23 million to $18 million.

Roku will release first-quarter 2020 financial results May 7.

Roku CFO to Step Down

Roku Dec. 16 announced that CFO Steve Louden plans to step down after helping the company hire his successor.

Louden joined Roku as CFO in 2015 and “played an important role in establishing Roku as a fast-growing public company,” according to a company press release.

“He intends to return home to the Seattle area with his family after assisting with a smooth transition,” according to the release.

“Steve has been a valuable member of our leadership team. He managed our finances through our transition to a public company and rapid expansion into new areas of streaming,” said Anthony Wood, Roku founder and CEO, in a statement. “I look forward to working with Steve during the transition as we hire our next CFO and continue to execute our strategy and build value for our customers, employees and shareholders.”

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“I’m very proud of Roku’s accomplishments,” Louden said in a statement. “Given the company’s strong financial position and exciting growth plans and my desire to relocate with my family back to Seattle, this is the right time for me to help Roku bring on a new financial leader.”

Netflix Breaks Out Subs by Region, Sees Higher Revenue Growth Outside U.S.

Netflix Dec. 16 for the first time broke out revenue and subscriber numbers for three international regions in a filing with the Securities and Exchange Commission.

The numbers show higher revenue growth rates outside the United States and Canada over the past three years.

In those two countries, according to an 8K filing, Netflix said its subscription streaming revenue was up nearly 21% for the first nine months of 2019 compared to the comparable period last year, rising to nearly $7.4 billion from $6.12 billion.

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During that same period, SVOD revenue in the Europe, Middle East and Africa region grew 39%, to $3.98 billion from $2.87 billion. Revenue was up 57% in Asia-Pacific, to $1.05 billion in the first nine months of 2019 from $668 million in the first nine months of 2018, and 27% in Latin America, to $2.05 billion from $1.67 billion.

Comparing SVOD revenue for the first nine months of 2019 with the comparable period two years ago, the United States saw gains of 51%, compared to revenue hikes of 79% in Latin America, 144% in Europe, the Middle East and Africa, and 163% in Asia Pacific.

At the end of September 2019, Netflix had 67.11 million paid subscribers in the United States and Canada; 47.36 million in Europe, the Middle East and Africa; 29.38 million in Latin America; and 14.49 million in Asia.

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The company says that beginning in the fourth quarter, it will report financials for the same four regions. Netflix previously reported financials in just two categories, the United States and Canada and globally.

 

Sony Pictures Entertainment Takes Full Ownership of Game Show Network

Sony Pictures Entertainment has acquired AT&T’s minority stake in Game Show Network for $500 million, the two companies announced.

SPE now owns 100% of the multimedia entertainment company offering original and classic game programming to millions of subscribers through the U.S.-based cable network. It also offers online and mobile games to millions of users through GSN Games. Following the transaction, the Game Show Network channel will continue to be carried on DirecTV.

Prior to the transaction, SPE owned a 58% stake in Game Show Network, and AT&T owned the remaining 42%.

Game Show Network will continue to be managed by Sony Pictures Television with Mark Feldman continuing as president and CEO of the multimedia outlet.

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“We’re excited to bring Game Show Network fully into the Sony Pictures Entertainment portfolio,” said Mike Hopkins, chairman, Sony Pictures Television, in a statement. “The acquisition allows us to work more closely with the company’s talented team to deliver the best iconic game shows, develop and syndicate new game show IP for audiences across the nation, as well as to advance the fast-growing GSN Games business, all of which directly aligns with our strategy of developing targeted direct-to-consumer offerings.”

Game Show Network television programming includes originals such as “America Says,” “The Chase,” “Common Knowledge” and “Catch 21,” syndicated shows including “Wheel of Fortune” and “Family Feud,” and classics including “The $25,000 Pyramid” and “Card Sharks.” GSN Games’ collection of mobile games includes GSN Casino, Bingo Bash, Wheel of Fortune Slots, Solitaire TriPeaks and WorldWinner.

Netflix Unveils Executive Pay for 2019 — and Hastings’ Salary Isn’t the Highest

In the coming year, Chief content officer Ted Sarandos will get the top salary — $18 million — and CEO and chairman of the board Reed Hastings will garner the most stock options — 30.8 million, Netflix announced in an SEC filing on its executive compensation.

Hasting’s salary is a mere $700,000 (the same as in 2018), as the executive is taking most of his compensation in stock options. Sarandos will pick up 13.5 million stock options. In the end, Hastings and Sarandos should make about the same in salary and options.

Still, Sarandos’ salary jumped considerably. His salary for 2018 was $12 million with 14.25 million options.

Chief product officer Greg Peters will have a salary of $10 million (up from $6 million in 2018), with 6.8 million options.

Among the other executives, CFO David Wells and general counsel and secretary David Hyman will each earn $3.5 million in salary (roughly a $1 million raise for both from 2018). Wells garners 2.8 million options, with Hyman getting 3.85 million.

MoviePass Takes Out Emergency Loan, Stock Plummets Further

Helios and Matheson Analytics, majority owner of MoviePass, July 27 disclosed an issue with its payment system to exhibitors that required an emergency loan of $6.2 million.

In a regulatory filing, HMNY said the $5 million in cash proceeds received from the loan would be used to pay MoviePass’ merchant and fulfillment processors.

It warned that if it was unable to make required payments to processors, they could cease making payments to theaters enabling MoviePass’ more than 3 million ($9.95 monthly) subscribers free daily access to a screening. The service said such an interruption occurred July 26.

“Such interruptions could have a material adverse effect on MoviePass’ ability to retain its subscribers,” said the filing. “This would have an adverse effect on the company’s financial position and results of operations.”

Ominous words as one of the summer’s biggest blockbusters – Paramount Pictures’ Mission: Impossible – Fallout– opens nationwide.

Simply put: MoviePass cannot afford to continue paying face-value for each ticket used by subscribers. And big chain exhibitors such as AMC and Regal have refused to split revenue or cut ticket prices for MoviePass.

The news further rattled investors, who continue to dump HMNY shares – down 57% in midday trading at around $2.94 per share.

Just 72 hours earlier, HMNY initiated a 1-for-250 shares reverse-stock split that briefly inflated shares to $21. The stock has been freefalling ever since.

 

 

Netflix Misses on Sub Growth, Stock Falls

Netflix naysayers and short sellers got their wish July 16 after the market close when the SVOD pioneer disclosed it added just 670,000 net domestic subscribers in the second quarter, ended June 30 – down from more than 1 million net sub additions in the previous-year period.

The SVOD, which had projected 1.2 million domestic sub additions in the quarter, ended the period with 57.4 million domestic subs.

Revenue topped $3.9 billion, which was up from $2.8 billion during the previous-year period, but below Netflix’s projected revenue of $3.93 billion.

Wall Street, which has sent Netflix shares to market-leading highs over the past year, reacted swiftly. Shares are down more than 14% in after-hours trading, with a market cap loss around $1.3 billion.

Internationally, Netflix added 4.5 million net subs, below the 5 million projected. The service ended the period with 72.7 million subs outside the United States. Netflix ended Q2 with more 130 million subs globally, compared to almost 104 million a year ago.

In the shareholder letter, co-founder/CEO Reed Hastings and CFO David Wells tried to downplay the subscriber misses as result of internal forecast “accuracy.”

“Meaning, in some quarters we will be high and other quarters low relative to our guidance,” Hastings and Wells wrote. “This Q2, we over-forecasted global net additions … as acquisition growth was slightly lower than we projected.”

Going forward, Netflix is putting the brakes on sub growth. In the current third quarter, it is projecting global net adds of 5 million compared with 5.3 million in Q3 2017. Netflix is projecting 650,000 domestic net new subs (versus 850,000 last year) and 4.35 million internationally (4.45 million).

In the investor interview, Hastings and Wells shrugged off the sub miss as a “movie” they saw two years ago.

“We never did find an explanation to that, other than there’s some lumpiness in the business, and we continued to perform after that,” Hastings said.

Netflix generated net income of $384 million on revenue of $3.9 billion, up from income of $66 million and revenue of $2.7 billion. It ended the period with third-party content obligations of $18.4 billion — up from $15.7 billion a year ago.

Netflix ended the period with 2.9 million combined disc/streaming subs — down from 3.7 million subs last year. The segment generated $52.9 million operating profit on revenue of $92.9 million — nearly a 57% margin — compared an operating margin of 54% on income of $62 million and revenue of $114.7 million.

Meanwhile, Netflix generated a negative $559 million free cash flow (FCF) in Q2 compared to a negative $608 million FCF in the year-ago quarter. Free cash flow is a measure of a company’s fiscal performance. Technically, FCF is the difference between a businesses’ cash flow and capital expenditures.

Indeed, Netflix said it expects to generate negative FCF from $3 billion to $4 billion for the full year 2018, which implies that its content cash spending will be weighted to the second half of the year. The service completed a $1.9 billion bond deal in Q2, which brought its gross debt level at $8.4 billion, and a cash balance of $3.9 billion. Netflix said its debt level is about 5% of the company’s enterprise level, or total value.

“While interest rates have risen, and the federal tax rate is now lower [reducing the tax shield on interest costs)], we judge that our after-tax cost of debt continues to be lower than our cost of equity, so we anticipate that we’ll continue to finance our capital needs in the high yield market,” Hastings and Wells wrote.

 

Verizon Loses 22,000 Video Subs in First Quarter

Verizon Communications April 24 announced it lost 22,000 video subscribers in the first quarter, ended March 31. It lost 13,000 video subs in the previous-year period. The telecom said the losses were “indicative” of the continued cord-cutting trend regarding traditional linear pay-TV bundles.

Verizon shed 84,000 Fios TV subs over the past year. It ended the period with 4.59 million subs compared to 4.68 subs last year.

Meanwhile, Verizon added 66,000 high-speed Internet customers in the quarter, ending the period with more than 5.9 million subs. That 228,000 more broadband subs than a year ago.

In Verizon’s media business, Oath, gross revenue decreased about 13% from fourth-quarter 2017, to $1.9 billion, which the telecom attributed to seasonally lower display advertising performance.

In February, Verizon melded its struggling mobile streaming video app, Go90, into Oath, which also includes AOL, HuffPost, Engadget, TechCrunch, Tumblr and Yahoo.

Oath represents Verizon’s mobile-first media strategy targeting global audiences and future growth from premium content distribution and “programmatic advertising” opportunities.

“We began 2018 with strong momentum, and we expect it to continue throughout the year,” CEO Lowell McAdam said in a statement. “We are positioning Verizon for long-term growth while executing our strategy today and leading the way for the next cycle of growth for the industry.”