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Netflix Inc.’s current ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. Netflix Inc.’s quick ratio improved from 2017 to 2018 and from 2018 to 2019.

Netflix Inc. Financial Ratios 2018 & 2019:

Current Ratio 2018:  1.49

Current Ratio 2019:  0.90

Quick Ratio 2018:  0.67

Quick Ratio 2019:  0.87

The industry is heavily reliant on consumers’ access to the internet and internet-connected devices. While broadband internet availability is approaching saturation, mobile internet devices have exploded in popularity, supporting industry growth. IBISWorld expects the number of mobile internet connections in the United States to increase an annualized 4.3% to 336.9 million over the five years to 2020.

Industry Financial Ratios 2018 & 2019:

Current Ratio          1.4      1.0                             

Quick Ratio              1.1      0.9                             

Over the past five years up to 2020, Netflix’s industry-specific revenue is expected to grow at an annualized rate of 24.6% to $12.6 billion, with operating income expected to increase to $2.2 billion in 2020. Netflix’s strong financial performance the company has added new subscribers worldwide over the past five years, while also raising subscription service fees and offering different tiers of service.

2018

8281.5    34.6      841.7       90.7

2019

10051.0       21.4       1298.6        54.3

2020

12557.1       24.9        2197.5        69.2

As of September 30, 2019, the company had $19.1 billion of obligations comprised of $4.9 billion included in “Current content liabilities” and $3.4 billion of “Non-current content liabilities” on the consolidated balance sheets and $10.8 billion of obligations that are not reflected on the consolidated balance sheets as they did not yet meet the criteria for asset recognition.  That $10.8 billion is a contingent liability — a cost that may come due in the future depending on certain circumstances, or may not.

Netflix Inc.’s current liabilities increased from 2017 to 2018 and from 2018 to 2019. Netflix Inc.’s non-current liabilities increased from 2017 to 2018 and from 2018 to 2019. Netflix Inc.’s total liabilities increased from 2017 to 2018 and from 2018 to 2019.  Netflix says those contingent liabilities are $10.8 billion, by definition the costs are estimable — but since they are only in the footnotes, that also means those costs are not yet probable.  The pace isn’t quite as torrid as liabilities reported on the balance sheet, but liabilities have still more than doubled. That’s a lot of potential obligations lingering out there, not yet come to pass. If subscriber growth keeps charging along and Netflix can get away with more price hikes, that might just mean enough revenue to reboot investor interest in the stock. The contingent liabilities does not change my assessment of the company.