Netflix profits, revenues rise as US subs disappoint in Q3 | Major Businesses | Business
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With the industry looking on eagle eyed as to whether the SVOD leader would bounce back from its generally accepted disappointing second quarter that had some talking about secular decline, Netflix has partially answered the critics with a Q3 seeing revenues rising substantially year-on-year and operating incomes doubling.
NetflixUK 5Nov2018
For the quarter ended 30 September 2019, the subscription video-on-demand firm posted overall revenues of $5.2 billion, up 31% over the prior year while operating income doubled on an annual basis to $1.0 billion. Q3 19 average streaming paid memberships and ARPU grew 22% and 9% year over year, respectively. Excluding a $137 millioni annual  impact from F/X, consolidated revenue growth was 35%, while streaming ARPU growth was 12%. The company had an operating margin of 18.7% (up 670 bps year over year) which was said Netflix above guidance due to timing of content and marketing spend, which will be more weighted to Q4’19.

Driving the growth was an overall total of 6.8 million paid net additions which while 700,000 above the figure reached in Q3 2018 , a rise of 12% and a record for a third quarter, was 200,000 under that expected. Growth was virtually all international.

In the US, paid net adds totalled 500,000, 300,000 fewer than forecast, and year to date there have been a total of 2.1 million paid net additions in 2019 compared with 4.1 million  at the same stage a year ago. It was a much brighter picture for international business  where net adds exceeded expectation totalling 6.3 million for the quarter, a 23% increase year-on- year ago quarter  and above guidance forecast.

The company conceded that it had been affected by US price increase earlier in 2019 which it said had seen retention has not yet fully returned on a sustained basis to pre-price-change levels, thus leading to slower US membership growth. It noted that on a member base of more than 60 million, very small movements in churn can have a meaningful impact on paid net adds. However, US ARPU increased 16.5% year over year in Q3.

Looking forward, Netflix expects Q4 consolidated revenue to increase 30% year over year with 9% streaming ARPU growth. It forecasting 7.6 million global paid net add, compared with 8.8 million a year ago with 600,000 in the US and 7.0 million for the international segment. This implies full year 2019 paid net adds of 26.7 million, down from 28.6 million in the 2018 fiscal year.

Looking as to what could drive additions, the company said that it had less precision in its ability to forecast the impact of its Q4 content slate, which consists of several new big IP launches, the minor elevated churn in response to some price changes, and new forthcoming competition.