Netflix earnings: subscriptions jump as it transitions to streaming company

Summary:Netflix added more than a million subscribers last quarter - and nearly 2 million - as the company continues to morph from a DVD-rental company to "a streaming company that also offers DVD-by-mail."

Netflix added more than a million subscribers last quarter - and nearly 2 million - as the company continues to morph from a DVD-rental company to "a streaming company that also offers DVD-by-mail," company CEO Reed Hasting said. (Statement)

What that translates to is a third quarter net income if $38 million, a 26 percent jump from the year-ago quarter, or 70 cents per share, up 35 percent from last year. Revenue was $553.2 million, a 31 percent increase over the year-ago quarter. Wall Street had been expecting Netflix to report earnings of 71 cents per share on sales of $549.7 million

Gross Margin was 37.7 percent, up from 34.9 percent a year ago. Shares of Netflix were on the rise in after-hours trading, after closing up slightly at $153.13 in regular trading. In a statement, Hastings said:

Q3 represents our fourth consecutive quarter of more than one million net subscriber additions.  This growth is clearly driven by the strength of our streaming offering. In fact, by every measure, we are now primarily a streaming company that also offers DVD-by-mail. At the same time, the introduction of our streaming offering in Canada in late September has provided us with very encouraging signs regarding the potential for the Netflix service internationally.

The company reported 16.9 million total subscribers, a 52 percent gain from a year ago and a 13 percent jump from the previous quarter. Of those, 94 percent were paid paid subscribers, a decline from the 98 percent paid subscribers at the end of the year-ago quarter. Churn was down from 4.4 percent last year to 3.8 percent.

The company noted that the percentage of subscribers who watched instantly more than 15 minutes of content was up to 66 percent - up from 41 percent a year and 61 percent in the previous quarter. In the fourth quarter, the company said the majority of subscribers will watch more content streamed than they will over DVD.

Speaking of the fourth quarter, the company said its revenue will be between $586 million to $598 million and earnings will be 59 cents to 74 cents. For the full year, revenue will be $2.15 billion to $2.16 billion and earnings of $2.68 to $2.83 per share. The company expects to close the fiscal year with 19 million to 19.7 million subscribers.

Topics: Tech Industry

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