After a terrible year, Netflix seems to be bounding back. Yesterday, the company announced its third-quarter financial report for the fiscal year 2022. Netflix adds 2.41 million subscribers in the third quarter. This is more than double Wall Street’s expectations. Much of the company’s growth comes from the Asia-Pacific region. This reverses a decline in subscriber numbers that sent Netflix shares up 14 per cent in after-hours trading on Tuesday. During normal trading, Netflix shares fell 1.73% to $240.86. Netflix shares have fallen nearly 60% this year. According to the financial report, the company’s third-quarter revenue is $7.926 billion. This is an increase of 5.9% relative to $7.483 billion in the same period last year. Netflix’s net profit was $1.398 billion.
Netflix to commence crack-down on password
The company also reveals that it will start crack-down on password sharing next year. It is trying to encourage people to create their own accounts. The company will also allow people to share their accounts to create sub-accounts to pay friends or family members for using their accounts.
Main achievement:
In Q3, Netflix’s net profit hit $1.398 billion, down 3.5% from $1.449 billion in the same period last year. Its earnings per share were $3.10, compared with $3.19 in the same period last year. This exceeds analysts’ previous expectations. According to Yahoo Finance, 31 analysts had expected Netflix’s third-quarter earnings per share to reach $2.13 on average. Netflix’s third-quarter revenue hit $7.926 billion, up 5.9% from $7.483 billion in the same period last year. This also beats analysts’ expectations. Yahoo Finance also claims that 31 analysts expect Netflix’s third-quarter revenue to reach $7.84 billion.
By geography, Netflix’s streaming service revenue from the U.S. and Canada markets in the third quarter was $3.602 billion, compared to $3.258 billion in the same period last year. Streaming services from the EMEA market revenue was $2.376 billion, compared to $2.432 billion in the same period last year. Revenue from Latin America was $1.024 billion, compared to $915 million in the same period last year. Revenue from the Asia Pacific was $889 million, compared with $834 million a year earlier.
Netflix’s operating profit in the third quarter hit $1.533 billion, compared with $1.755 billion in the same period last year. The company has an operating profit margin of 19.3%. This is lower than 23.5% in the same period last year. On a non-GAAP basis, Netflix’s third-quarter adjusted EBITDA (net income before interest, taxes, depreciation and amortization) was $1.770 billion. For the trailing 12 months ended September 30, 2022, Netflix’s adjusted EBITDA was $6.543 billion.
Net cash
Netflix’s net cash from operating activities in the third quarter hit $557 million. This is well higher than the net cash from operating activities of $82 million in the same period last year. Its free cash flow was $472 million, compared to the same period last year -$106 million. Netflix continues to expect full-year free cash flow in fiscal 2022 to be around $1 billion (plus or minus hundreds of millions of dollars). It also expects a substantial increase in free cash flow in fiscal 2023. This is assuming no further dollar exchange rate substantial appreciation.
Gizchina News of the week
Netflix’s third-quarter cost of revenue was $4.789 billion, compared with $4.207 billion in the same period last year. The company’s marketing expenses were $568 million, compared with $636 million in the same period last year. For technology and development expenses, it has $663 million, higher than $564 million in the same period last year. Its general and administrative expenses were $373 million, compared to $322 million in the same period last year.
User data
Netflix’s total global streaming service paying subscribers reached 223.09 million in the third quarter, up 4.5% from 213.56 million in the same period last year. By region, the number of paying subscribers for streaming services in the United States and Canada in the third quarter was 73.39 million, compared to 74.02 million in the same period last year. The number of paying subscribers for streaming services in the EMEA region was 73.53 million. It also has 39.94 million paying subscribers for streaming services in Latin America.
Netflix added 2.41 million new paying subscribers to its streaming service globally in the third quarter. According to StreetAccount, Wall Street analysts had expected on average that Netflix would add 1.09 million new paying subscribers.
By region, Netflix added 100,000 new paid subscribers in the U.S. and Canada in the third quarter. EMEA adds 570,000 new paying subscribers while Latin America adds 310,000 new paying users. However, in the Asia Pacific, the streaming services add 1.43 million new paying users.
From the perspective of revenue per user, Netflix’s average revenue per user from the United States and Canada in the third quarter was $16.37, an increase of 12% compared with $14.68 in the same period last year, excluding the impact of exchange rate changes. The average revenue per user from EMEA was $10.81, down 7% from $11.65 in the same period last year, and up 7% excluding currency effects. Latin America Average revenue per user was $8.58, an increase of 9% from $7.86 in the same period last year, or a 16% increase excluding the impact of currency changes. The average revenue per user from the Asia Pacific was $8.34, compared with $7.86 in the same period last year.
Performance Outlook
Netflix expects the company’s revenue to reach $7.776 billion in the fourth quarter of fiscal 2022, an increase of 0.9% from the same period last year, a performance outlook that missed analysts’ expectations. Its operating profit will reach $330 million, the net profit rate will reach 4.2% ($136 million). This outlook also fails to meet analysts’ expectations. The net increase in the number of paying users of global streaming services will reach 4.5 million.
Share price changes:
On the same day, Netflix shares fell $4.24 in regular trading on the Nasdaq stock market to close at $240.86, or 1.73%. In the subsequent after-hours trading as of 6:08 p.m. Eastern Time on Oct 18th, Netflix shares rose sharply by $33.38, or 13.86%, to $274.24. Over the past 52 weeks, Netflix’s highest price was $700.99 and its lowest price was $162.71.
