Seeking Alpha

More on Netflix: margin growth solid, content expenses to be recognized faster

  • Q3 U.S. streaming margin was 23.7%, up 120 bps Q/Q and 450 bps Y/Y, and the division had a contribution profit of $166M (+10% Q/Q and +47% Y/Y). Netflix (NFLX) is guiding for a Q4 margin of 23.2%.
  • The international unit had a $74M contribution loss in Q3 vs. $66M in Q2 and $92M a year ago, and a $65M loss is expected in Q4. But Q3 net adds totaled 1.44M, beating guidance of 550K-1.25M and raising the size of the international sub base to 9.19M. 900K-1.7M net adds are expected in Q4.
  • Reed Hastings admits "low quality" free trial promotions in Latin America boosted Q3 international adds, and will pressure Q4 adds a bit.
  • The DVD sub base fell by 360K Q/Q to 7.15M after declining by 470K in Q2. The business had a $107M contribution profit vs. $109M in Q2.
  • Going forward, Netflix will amortize original content costs more quickly, due to the fact a large portion of viewing happens shortly after a show launches. Until now, shows were amortized on a straight-line basis over four years or the show's license period (whichever is shorter).
  • Free cash flow was $7M in Q3 vs. $13M in Q2 and -$20M a year ago. Netflix expects Q4 EPS of $0.47-$0.73, above a $0.46 consensus.
  • More on Netflix
Comments (8)
  • LYogi
    , contributor
    Comments (2361) | Send Message
    doesn't really sound all that good.
    21 Oct 2013, 07:17 PM Reply Like
  • scorpion.bullfrog
    , contributor
    Comments (92) | Send Message
    Seven MILLION in free cash flow and a market cap of twenty three BILLION!!! Am I reading this right?
    21 Oct 2013, 07:24 PM Reply Like
  • nguyenvanphuoc
    , contributor
    Comments (388) | Send Message
    Seven million, down from $20 million a year ago.


    Crazy is the new normal, maybe? Seems like deja vu all over again...
    21 Oct 2013, 07:40 PM Reply Like
  • alext1379
    , contributor
    Comments (709) | Send Message
    My thoughts exactly. Steve Jobs probably walked around with more cash in his wallet than Netflix had last quarter.
    21 Oct 2013, 08:45 PM Reply Like
  • momarch
    , contributor
    Comments (4) | Send Message
    it says negative 20 mil a year ago
    22 Oct 2013, 02:44 AM Reply Like
  • lpcongas99
    , contributor
    Comments (129) | Send Message
    ROFLMAO! should open over 400 tomorrow too
    21 Oct 2013, 07:30 PM Reply Like
  • Teodor Rasa
    , contributor
    Comments (223) | Send Message
    ahhhh irrational exuberance...
    22 Oct 2013, 08:28 AM Reply Like
  • andypochta1
    , contributor
    Comments (1216) | Send Message
    It is only valued at $10 Million per each employee, that is not crazy at all :)
    22 Oct 2013, 11:26 AM Reply Like
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