Netflix misses by $0.03 (GAAP), reports revs in-line with higher than expected subs; guides Q4 above consensus (202.68 +3.19)
- Reports Q3 (Sep) earnings of $0.29 per share* (GAAP), $0.03 worse than the Capital IQ Consensus of $0.32; revenues rose 30.3% year/year to $2.98 bln vs the $2.97 bln Capital IQ Consensus.
- *including a pre-tax $51 mln non-cash loss from F/X remeasurement on a Euro bond (or $39 mln after tax based on a 24% tax rate). Higher than expected excess tax benefit from stock based compensation benefited our tax rate by $5 million vs. the forecast.
- Global streaming revenue in Q3 rose 33% year over year, driven by a 24% increase in average paid memberships and 7% growth in ASP
- Operating income nearly doubled year-over-year to $209 million with the Q3 global operating margin of 7.0%, putting co right on track to achieve full year target of 7%.
- We added a Q3-record 5.3 million memberships globally (up 49% year-over-year)
- Domestic streaming net adds 850K vs. 750K forecast; Intl streaming 4.5 mln vs. 3.65 mln forecast
- Co issues upside guidance for Q4, sees EPS of $0.41 vs. $0.34 Capital IQ Consensus Estimate; sees Q4 revs of $3.274 bln vs. $3.15 bln Capital IQ Consensus Estimate.
- For Q4, we forecast global net adds of 6.30m (1.25m in the US and 5.05m internationally) vs. 7.05m in the year ago quarter (which was our all-time high for quarterly net adds).
- We anticipate our Q4'17 US contribution margin will be 34.4% (a decline both year-on-year and sequentially) as we boost our marketing investment against a growing content slate. Reaffirms FY17 FCF $2.0-2.5 bln.
- "As we move into 2018, we aim to achieve steady improvement in international profitability and a growing operating margin as our success in many large markets helps fund investments throughout Asia and the rest of the world... We'll spend $7-8 billion on content (on a P&L basis) in 2018."