Here in Australia, it's sometimes hard to think of Netflix Inc (NASDAQ: NFLX) as anything other than something you might put on after work, or perhaps before 'chilling'. But Netflix is a company, and one that has just reported its results for the third quarter (1 July to 30 September) of the 2020 calendar year.
So how did this world-famous company perform?
Netflix reports Q3 earnings
Well, Netflix has come in with year-on-year revenue growth of 16%, rising from US$6.44 billion in Q320 to US$7.48 billion for Q3 CY2021. According to the company, this revenue growth was driven by a 9% increase in average paid streaming memberships. As well as a 7% rise in average revenue per membership (5% excluding foreign exchange impact).
Netflix's operating margin for the quarter was 23.5%, up from 20.4% in Q3 CY2020. Meanwhile, diluted earnings per share (EPS) came in at US$3.19 per share, up substantially from the previous year's US$1.74. However, free cash flow once again came in negative. The company reported a $106 million loss for free cash flow, down substantially from the positive $1.26 billion from Q3 CY2020.
Turning to subscriber growth, and Netflix has surprised to the upside. The company was estimating 3.5 million new subscribers for the quarter, but ended up receiving 4.38 million. That's up from Q3 CY2020's 2.2 million new subscribers, but way below the 8.51 million the company managed to add in the fourth quarter of 2020. Interestingly, the Asia Pacific region was the largest contributor to new membership growth, sending 2.2 million subscriptions Netflix's way.
Red light, green light
Netflix highlighted the contribution of the popular Squid Game series to last quarter's earnings. The company stated that Squid Game has become Netflix's "biggest show ever", with "142 million member households [watching] the title in its first four weeks." The show was Netflix's most watched program in 94 countries.
In terms of what the company is expecting in the current quarter, Netflix didn't exactly hold back. The streaming giant is anticipating its healthy growth numbers will continue, predicting subscriber growth of 8.5 million. It also estimates its free cash flow for the full 2021 year to be "approximately breakeven" and then "positive on an annual basis in 2022 and beyond".
Investors seemed unsure whether to give these results the red or green light. In after-hours trading on the US markets, Netflix shares spiked. They reached a new all-time high of US$650.20 before falling to US$630.51.
In normal trading, the company closed at US$693 a share early this morning (our time). At that Netflix share price, this company has a market capitalisation of US$282.82 billion.
