Netflix’s Earnings Show That It’s Slowly Taking Over the World
Netflix (NASDAQ:NFLX) closed the regular session up 6.44 percent at $354.99 per share and are trading higher 19.13 percent in pre-market trading after reporting third-quarter financial results that came in ahead of expectations. The Internet television network reported that revenues increased 22.2 percent to $1.1 billion, consistent with the mean analyst estimate. Earnings of 52 cents per share, up from 13 cents a year ago, beat the mean analyst estimate of 49 cents per share.
Netflix reported that total members increased to 40.28 million in the third quarter, up from 30 million in the year-ago period. Most of these members (31.09 million, or about 77 percent) are in the United States, but international subscriptions grew faster, with 1.44 million net additions in the third quarter, compared to 1.29 million domestically.
Domestically, Netflix says that increased membership is due to “the growing strength of our content offering, aided by the great press coverage and social buzz generated by Orange is the New Black and our Emmy nominations, and the softer comp in Q3 2012 from the impact of the summer Olympics.” Internationally, membership expansion was attributed to service rollouts in the Nordics and the Netherlands, and free trials in Latin America.
Netflix claimed 38.01 million paying subscribers at the end of the third quarter, up from 27.49 a year ago, a gain of about 38 percent. Contribution margins at Netflix domestic remained strong at 23.7 percent, while international contribution margins remained weak at -40.6 percent, slightly worse than in the second quarter. Total operating income was flat at 57 percent, with profits in the domestic segment offsetting losses in the international segment.
Looking ahead, Netflix has some strong forecasts for the fourth quarter. The firm is reporting net income of 37 million, up from 32 million in the third-quarter, and earnings per share of 60 cents, up from 13 cents in the year-ago period. Netflix is forecasting that contribution margins at the international segment will increase to -30 percent, and that losses will shrink to 65 billion. International is expected to add 1.31 million members. Netflix is expecting 2.01 million domestic net additions, and a contribution margin of 23.2 percent.