Netflix reported better-than-expected customer growth in the third quarter, adding 370,000 US customers and 3.2 million international ones, a slowdown from previous quarters but higher than its forecast of 2 million more for international. Netflix customers taking up sVoD services went to 47.5 million in the US and to 39.25 million international. Revenues for the quarter jumped 36 percent from the year before to USD 2.158 billion. Revenue improved in the US to USD 1.064 billion from 1.304 billion. International revenue rose to USD 853 million from 517 million, making up 40 percent of total revenues.
The contribution profit advanced to USD 407 million from 277 million, with the profit margin reaching 18.8 procent from 17.5 percent. Profit contribution on the home market lifted to USD 475 million, with a margin of 36.4 percent, from 344 million and a margin of 32.4 percent.
Netflix’s investments in its international growth are still higher than the growth itself, with profit loss here at USD 69 million, accompanied by a negative margin of 8 percent. The year before, the contribution profit margin was still at 19.5 percent. For the fourth quarter, Netflix is forecasting another negative margin, at 7.9 percent, on a contribution profit loss of USD 75 million. The company plans in the coming quarter to invest more in local international content and so expects a higher profit loss at international, going to USD 75 million. Netflix said its Originals did well in the past quarter, with the second season of Narcos and new series Stranger Things.
EBITDA meanwhile went up to USD 164 million, from 123 million the year earlier. The operational profit reached USD 106 million, jumping against the company’s USD 64 million guidance. The net profit went higher to USD 52 million from 22 million.
The number of Netflix customers grew by 3.57 million in the quarter to 86.74 million. The number includes 83.28 million paying customers. In the past two quarters, the company added only 530,000 subscribers. Growth was also slower at internationaal, recorded at 4 million in Q4 2015, 4.51 million in Q1, 1.52 million in Q2 and now 3.2 million in Q3. For the year-to-date, the company added 12 million subscribers, unchanged from the year before.
For the fourth quarter, the company is guiding for revenues of USD 2.344 billion and a contribution profit margin unchanged at 18.8 percent margin, on a contribution profit of USD 440 million. The number of customers is expected to hit 91.94 million, up by 5.2 million. The number will include 1.45 million net additions in the US and 3.75 million ones for international, boosted by new operations in Spain, Portugal and Italy. The company expects a moderate year-on-year decline in net adds. Netflix said it expects to break-even for international this year and then start generating global profits in 2017 and beyond, by marching up operating margins steadily for many years.
The company has a strong presence in 130 countries, except for China, where it says it will license content to existing service providers, instead of operating its own service, citing a difficult regulatory environment. Netflix said it still has long term plans for China and hopes to launch a service there eventually.
