Business Description
Netflix, Inc. is a global entertainment company that provides streaming services to customers in over 190 countries. The company offers a wide variety of TV series, films, and games across multiple genres and languages, allowing members to watch content anytime, anywhere. Netflix focuses on delivering compelling content through both licensed agreements and original productions to attract and retain its growing membership base.
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Streaming Services - Offers a subscription-based platform for on-demand streaming of TV series, films, and games. Members can access content across various devices and enjoy features like pausing and resuming playback at their convenience.
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DVD-by-Mail (Discontinued) - Previously provided physical DVDs to customers through a mail-based rental service. This segment was discontinued in September 2023 after years of declining contribution to the business.
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Q3 2024 Summary
What went wrong
- Heavy Investment in New Initiatives with Delayed Revenue Impact: Netflix is investing significantly in new ventures such as games, live events, and advertising, but these initiatives take time to become material contributors to revenue. For example, ads revenue is "roughly doubling revenue each year, but it's off a small base" and will only become significant "over the next several years" , .
- Slowing Engagement Growth: Total hours watched on Netflix were up only roughly 1% in the first half of the year compared to the same period last year, indicating a potential slowdown in user engagement growth .
- Competitive Pressures and Market Saturation: In Netflix's biggest countries, their share of viewership is still less than 10% of TV time, and the company faces competition from traditional TV bundles and platforms like YouTube , . Additionally, competitors are using bundles to find growth, which could challenge Netflix's market position .
Key Metrics
Revenue by Segment - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Domestic Streaming | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
International Streaming | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Domestic DVD | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Streaming Revenues | 8,130 | 8,158 | 8,519.3 | 8,832.7 | 33,640 | 9,370.44 | 9,559.31 | 9,824.7 | ||||||||||||||||||||||||||||||||||||||||||||||
DVD Revenues | 31.5 | 29 | 22.4 | 0.1 | 83 | 0 | 0 | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 8,161.5 | 8,187 | 8,541.7 | 8,832.8 | 33,723 | 9,370.44 | 9,559.31 | 9,824.7 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
United States and Canada | 3,608.645 | 3,599.448 | 3,735.13 | 3,930.78 | 14,874 | 4,224.32 | 4,295.56 | 4,322.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Europe, Middle East, and Africa | 2,517.641 | 2,562.170 | 2,693.15 | 2,783.04 | 10,556 | 2,958.19 | 3,007.77 | 3,133.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Latin America | 1,070.192 | 1,077.435 | 1,142.81 | 1,155.56 | 4,446 | 1,165.01 | 1,204.15 | 1,240.9 | ||||||||||||||||||||||||||||||||||||||||||||||
Asia-Pacific | 933.523 | 919.273 | 948.22 | 962.98 | 3,764 | 1,022.92 | 1,051.83 | 1,127.9 | ||||||||||||||||||||||||||||||||||||||||||||||
DVD Revenues (U.S. only) | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Domestic Streaming | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
International Streaming | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- United States and Canada | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Europe, Middle East, and Africa | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Latin America | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Asia-Pacific | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Domestic DVD | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 8,161.503 | 8,187.301 | 8,541.67 | 8,832.53 | 33,723 | 9,370.44 | 9,559.31 | 9,824.7 | ||||||||||||||||||||||||||||||||||||||||||||||
KPIs - Metric (Unit) | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
Paid Net Membership Additions (Millions) | 1.75 | 5.9 | 8.76 | 13.12 | - | 9.33 | 8.05 | 5.07 | ||||||||||||||||||||||||||||||||||||||||||||||
Paid Memberships (Millions) | 232.50 | 238.39 | 247.153 | 260.28 | - | 269.60 | 277.65 | 282.72 | ||||||||||||||||||||||||||||||||||||||||||||||
Average Monthly Revenue per Membership (USD) | 11.70 | 11.55 | 11.70 | 11.64 | - | 11.79 | 11.65 | 11.69 |
Executive Team
Questions to Ask Management
- Given that your share of viewership in your biggest countries is still less than 10% of TV time, what specific strategies are you implementing to significantly increase this share, and how do you plan to manage the risk of overextending with initiatives like ads, games, and live events?
- You mentioned no changes to your capital allocation policy despite recent tactical moves like upsizing your revolver to $3 billion and raising $1.8 billion of investment-grade debt. Can you elaborate on how these actions align with your priorities of profitable growth and balance sheet flexibility, and under what circumstances might you consider altering your capital allocation, such as initiating a dividend or increasing share repurchases?
- The first half of this year saw a lumpier content lineup due to the work stoppage impacting both series and films, particularly in UCAN. How confident are you that your content slate will fully recover by 2025, and what measures are you taking to mitigate any potential lingering effects on content delivery and subscriber engagement?
- With the expansion of your advertising-supported tier, you've noted significant progress in membership growth but acknowledge substantial work ahead to improve monetization and advertiser capabilities. What are the major challenges you face in scaling your ad business, and how do you plan to address them to ensure it becomes a significant revenue contributor in the coming years?
- As competitors leverage bundled offerings to drive growth, how do you assess the risk of consumers gravitating towards these bundles over standalone services like yours, and what strategies are you employing to maintain competitiveness and prevent potential subscriber churn in light of this industry trend?
Past Guidance
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2025
- Guidance:
- Revenue Growth: Expected to deliver 15% revenue growth in 2025 .
- Operating Margin Improvement: Anticipates a 6 percentage point improvement in operating margin .
- Revenue: Expects $43 billion to $44 billion in revenue for 2025, representing about 11% to 13% growth from 2024 .
- Membership Growth: Majority of growth expected from membership growth .
- Average Revenue per Membership (ARM): Growth expected from plan evolution, pricing, and ads revenue .
- Ads Revenue: Expected to roughly double year-over-year in 2025 .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Operating Income Margin: Targeting a 26% full-year operating income margin .
- Total Expenses: Expects total expenses north of $28 billion for the year .
- Revenue Growth: Reported 17% revenue growth for the quarter .
- Margin Improvement: Anticipates 5 percentage points of margin improvement for the year .
- Ads Business: Scaling ads business with significant impact expected over a multiyear trajectory .
- Ads Member Base: On track to achieve critical-scale goals for all ads countries by 2025 .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024 and FY 2025
- Guidance:
- Revenue Growth: Guiding for healthy double-digit revenue growth for 2024 .
- Operating Income Margin: Targeting an operating income margin of 25% for 2024 .
- Free Cash Flow: Plans to continue growing free cash flow .
- Annual Revenue Guidance: Adding new annual guidance on revenue range .
- Subscriber Reporting: Shifting focus to other metrics like revenue, operating income, etc. .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Revenue Growth: Expects healthy double-digit FX-neutral revenue growth for 2024 .
- Member Growth: Continued member growth anticipated .
- Ads Business: Some contribution expected from scaling ads business .
- Pricing Strategy: No change to pricing philosophy .
- Operating Margin: Focused on improving revenue and operating margin .
Competitors
Competitors mentioned in the company's latest 10K filing.
- Traditional providers of entertainment video, including broadcasters and cable network operators .
- Internet-based e-commerce or entertainment video providers .
- Streaming entertainment providers, including those that provide pirated content .
- Video gaming providers .
- User-generated content platforms .