NFLX Netflix beats by $0.03, reports revs in-line; guides Q4 EPS above consensus (354.99 +21.49)
Reports Q3 (Sep) earnings of $0.52 per share, $0.03 better than the Capital IQ Consensus Estimate of $0.49; revenues rose 22.2% year/year to $1.11 bln vs the $1.1 bln consensus. Co issues upside guidance for Q4, sees EPS of $0.47-0.73, excluding non-recurring items, vs. $0.44 Capital IQ Consensus Estimate.
Q3 Metric Performance vs Guidance
Domestic Streaming
Total Subscriptions: 31.09 mln, Guidance 30.5-31.3 mln
Revenue: $701 mln, Guidance $693-701 mln
Contribution Profit: $166 mln, Guidance $161-171 mln
International Streaming
Total Subscriptions: 9.19 mln, Guidance 8.3-9.0 mln.
Revenue: $183 mln, Guidance $170-184 mln
Contribtution Profit (Loss): ($74 mln), Guidance ($86 mln)-($70 mln)
Global
Net Income (Loss): $32 mln, Guidance $18-24
EPS: $0.52 , Guidance $0.30-0.56
Netflix Q4 Guidance
Domestic Streaming
Total Subscriptions: Guidance 32.7-33.5 mln
Revenue: Guidance $731-741 mln
Contribution Profit: Guidance $165-177 mln
International Streaming
Total Subscriptions: Guidance 10.1-10.9 mln.
Revenue: Guidance $210-224 mln
Contribution Profit (Loss): Guidance ($73 mln)-($57 mln).
Domestic DVD
Contribution Profit: Guidance $96-110 mln
Global
Net Income (Loss): Guidance $29-45 mln
EPS: Guidance $0.47-0.73
Notable Commentary
"We expect Q4 net additions to be approximately equal to Q4 of the prior year and to expand our contribution margin about 400 basis points year over year to about 23%, assuming the midpoint of our guidance. This means that sequentially our target contribution margin is slightly down Q3 to Q4. As a reminder, we shifted our contribution margin target a few months ago from "100 basis points of quarterly sequential improvement" to "400 basis points Q over prior year Q" so we are right on target with our articulated margin growth strategy".
"International net additions were way up from the prior year at 1.4 million new members, driven by our expansion to the Nordics and the Netherlands since last Q3, as well as growth in our existing markets from our steadily improving service, content and marketing. In addition, there was a surge in low quality free trials in September in Latin America that temporarily boosted the total member number. The paid net adds remain a reliable indicator of progress".
"Sequentially, we expect international total member net adds in Q4 to be flat to down (1.4 million in Q3 to 1.3 million) as we work through the low-quality Latin America free trials from Q3, but paid net adds in Q4 are forecasted to rise (1.1 million in Q3 to 1.3 million)".
"In 2014, we expect to double our investment in original content (though still representing less than 10% of our overall global content expense)".
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