Earnings: Netflix Rides High On 68 Percent Profit Growth In Q1

imageStrong demand for cheap entertainment bolstered Netflix’s revenues, and lower subscriber acquisition costs boosted the company’s profits. Net income came in at $22.4 million for Q1 ($0.37 per diluted share), up 68 percent year-over-year (though down slightly sequentially.)

Revenue came in at $394.1 million, up 21 percent year-over-year, and up 10 percent from the previous quarter. The company narrowly beat analysts’ estimates of an EPS of $0.33 on $391.1 million in revenue, per MarketWatch.

Subs: The movie-rental company topped the 10 million subscriber mark in early February; it ended the quarter with just over 10.3 million subscribers, up 25 percent from year-over-year, and up 10 percent sequentially. Netflix (NSDQ: NFLX) paid $25.79 to acquire every new subscriber; down 12 percent year-over-year, and down slightly sequentially.

More highlights after the jump.

Churn: Up slightly to 4.2 percent for the quarter, compared to 3.9 percent in Q108.

Free cash flow: Up $15.1 million, nearly two times the $4.8 million worth of free cash in Q108, but down significantly from $51 million the previous quarter.

Improved outlook: Netflix kept its Q2 outlook unchanged, but raised its year-end revenue forecast. The company expects to generate between $1.63 billion and $1.67 billion in revenue this year (up from its previous forecast of $1.58 billion to $1.63 billion). It also expects more subscribers: 11.2 million to 11.8 million customers in 2009 (it had only forecast 10.6 million to 11.3 million).

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