NETFLIX, Inc. (NASDAQ:NFLX) will become the latest in a growing list of companies to use its website as its primary channel for financial disclosure when it publishes its fourth-quarter results later this month.
In an announcement yesterday, the $9.8 billion market-cap company said it will use the so-called “advisory release model” to publish its next earnings report. And it indicated that it will use its corporate website in future to disclose new material information and comply with its Regulation FD obligations.
The widely followed company, which provides an Internet subscription service for movies and TV shows, said that rather than distribute the full text of its earnings release via a paid PR wire service, it will issue an alert at 4:05 pm ET on January 26 containing a link to the full results on the company’s investor relations website http://ir.netflix.com/. It will also file the information with the SEC at the same time.
Fairer access, lower costs, better usability
A growing number of companies now use the advisory release model for their earnings releases. They include Marathon Oil (NYSE: MRO), Expedia Inc. (NASDAQ: EXPE), Tellabs Inc. (NASDAQ:TLAB), BGC Partners (NASDAQ:BGCP), SVB Financial Group (NASDAQ: SIVB), Investors Real Estate Trust (NASDAQ:IRET), and Steinway Musical Instruments, Inc. (NYSE:LVB).
The advisory release approach offers several benefits to companies, including lower costs for PR wire services, which typically bill companies by the word, and fairer access to the information. PR wire distribution is not simultaneous with some investors receiving the news ahead of others.
Better usability for investors is another advantage of advisory releases because companies can make sure the information is presented as they intended. Often when investors receive earnings releases via PR wire service partners, relevant links are stripped from the content and formatting of headings and tables is lost.
Driving investors to the company’s website also enables IR departments to use web analytics software to more accurately measure investor interest in their news, as well as better understand what information investors are most interested in. This can help companies to improve their communications going forward.
Stepping stone to full web disclosure
Although the advisory release process has always been compliant under the SEC’s Regulation FD, it was not until 2008 when the commission adopted new guidance for the use of company websites and blogs for disclosure that companies and their legal counsel became comfortable using the approach.
The advisory release model differs from the full website disclosure approach that the SEC approved in its website guidance. Companies like Google Inc. (NASDAQ: GOOG), Microsoft Corp. (NASDAQ: MSFT) and IDT Corporation (NYSE: IDT) use the full web disclosure process for their scheduled disclosures.
These companies provide advance notice of their earnings release plans in news releases, but do not issue any information via a PR wire service on the day of their scheduled announcements. Added compliance certainty is achieved by providing the information to the SEC’s EDGAR database in a Form 8-K prior to discussing the information with analysts and investors.
The advisory release approach is seen as a precursor to full web-based disclosure, with companies relying on their 8-K filings to the SEC for compliance, and simultaneously pushing the information out via their own push technologies, such as email alerts, web feeds and social media status updates to either distribute the information or alert investors to its availability on their websites.
Intends to use website for Reg FD
In its announcement, Los Gatos California-based Netflix indicated that it “intends to use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD,” adding that investors should monitor the IR section of its website “in addition to following press releases, SEC filings and public conference calls and webcasts.”
Netflix’s IR website is hosted by NASDAQ OMX subsidiary Shareholder.com, which offers a web disclosure service that enables companies to simultaneously submit an 8-K containing information they post to their websites or distribute via GlobeNewswire, which is also owned by the exchange.
Netflix CEO Reed Hastings, 50, recently made headlines when he become the first company executive to respond via a blog post on the popular Seeking Alpha website to an investor who is shorting his company’s stock.
The company also follows a novel approach with its earnings conference call in that it hosts a live Q&A session with questions submitted via email.
With its most recent moves, Netflix joins a small but significant group of companies that are exploring new ways of disseminating their financial information as a response to the growing popularity of web news channels and social media services.
Netflix’s full announcement follows:
LOS GATOS, Calif., Jan. 12, 2011 /PRNewswire/ — Netflix, Inc. (Nasdaq: NFLX) today announced it will post its fourth-quarter 2010 financial results and business outlook on its investor relations website at http://ir.netflix.com on Wednesday, January 26, 2011, at approximately 1:05 p.m. Pacific Time. At that time the company will issue a brief advisory release via newswire containing a link to the fourth-quarter 2010 financial results and letter to shareholders on its website.
Netflix management will host a live Q&A session at 3:00 p.m. Pacific Time to discuss the Company’s financial results and business outlook, with questions submitted via email. Please email your questions to firstname.lastname@example.org. The company will read the questions aloud on the call and respond to as many questions as possible.
A live webcast and the replay of the earnings Q&A session can be accessed on the investor relations section of the Netflix website at http://ir.netflix.com. For those without access to the Internet, a replay of the call will be available from 6:00 p.m. Pacific Time on January 26, 2011 through midnight on January 31, 2011. To listen to the replay, call (706) 645-9291, conference ID 35021133.
The Company will not distribute its full financial results via a newswire, as it has in the past. This information will be made available at our website at the above-referenced link and within the 8-k filing we will make concurrently with our advisory release. Please note that Netflix intends to use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the Netflix website in the “Investor Relations” sections. Accordingly, investors should monitor such portions of the Netflix website, in addition to following press releases, SEC filings and public conference calls and webcasts.
About Netflix, Inc.
With more than 16 million members in the United States and Canada, Netflix, Inc. [Nasdaq: NFLX] is the world’s leading Internet subscription service for enjoying movies and TV shows. For $7.99 a month, Netflix members can instantly watch unlimited movies and TV episodes streaming over the Internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are Microsoft’s Xbox 360, Nintendo’s Wii and Sony’s PS3 consoles; an array of Blu-ray disc players, Internet-connected TVs, home theater systems, digital video recorders and Internet video players; Apple’s iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 200 devices that stream from Netflix are available in the U.S. and a growing number are available in Canada. For more information, visit www.netflix.com.
SOURCE Netflix, Inc.