Netflix Q3 Earnings Recap
Two weeks ago, Netflix provided a window into upcoming earnings with a pre-announcement to reset expectations for the reality of the current economy. Today, the official results debuted. New subscriber additions, as the company warned, were weak but net income was up thirty percent.
Reported net income was $20.4m or 33 cents a share for the third quarter, up from 15.7m (23c/share) for the same period last year. Revenues were in at $341m.
Analysts polled by Thomson Reuters had a consensus estimate of 31cents a share from revenue of $343m.
With the economy wielding its influence, as pre-warned, total subscribers for Q3 were 8.672m, below the company’s earlier estimates of 8.675 to 8.755m. Even so, year over year, total subscribers were up 23% (sequentially, the tally was up three percent from Q2).
Moving forward, new subscriber numbers for the fourth quarter are expected to remain under pressure. The company currently projects they’ll finish Q4 with 8.85 to 9.15m subscribers. That’s down below the range of 8.95 to 9.25m the company predicted just two weeks ago.
With effective cost management, the company seems to be doing a good job of keeping the impact of diminished subscriber growth to a minimum. For Q4, revenue is forecast in the range of $351m to $357m, down slightly from prior forecasts of $353m to $359m. Unchanged from prior guidance, GAAP net income remains estimated in the range of $18m to $23m, equivalent to $0.30 to $0.38 per diluted share.
For the entire year, the company expects ending subscribers in the range of 8.85m to 9.15m. Revenue is forecast in the range of $1.356b to $1.362b with EPS of $1.24 to $1.32 per diluted share.
Other key data, by the numbers:
•Gross Margin: for the third quarter of 2008 was 34.2 percent, compared to 33.9 percent for the third quarter of 2007 and 31.8 percent for the second quarter of 2008.
•Subscriber acquisition cost: for the third quarter of 2008 SAC was $32.21 per gross subscriber addition, compared to $37.89 for the same period of 2007 and $28.89 for the second quarter of 2008.
•Churn, or the rate of customer turnover, for the third quarter was 4.2 percent, compared to 4.2 percent for the third quarter of 2007 and for the second quarter of 2008.
•Free cash flow for the third quarter was $26.2 million, compared to $36.2 million in the third quarter of 2007 and $12.7 million for the second quarter of 2008. Cash provided by operating activities for the third quarter of 2008 was $73.2 million, compared to $77.7 million for the third quarter of 2007 and $78.1 million for the second quarter of 2008.
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More detailed press coverage on Netflix’ finances can be found at:
•Yahoo Finance
•Google Finance
•Marketwatch
