LOS GATOS, Calif. – Global streamer Netflix continues its growth track, reporting in its Q3 results Monday that it is on track to earn more than US$11 million in revenue this year.
The company, which now boasts over 115 million worldwide customers, saw global streaming revenue in Q3 rise 33% year over year, driven by a 24% increase in average paid memberships. Operating income nearly doubled year-over-year to US$209 million. (All $ in USD.)
Thanks to its spending on original content (which company executives said yesterday will top $7 billion in 2018 alone while the press release notes Netflix has deals in its pipeline totaling $17 billion), the company’s free cash flow continues to languish deep in negative territory – which will be helped down the road with its recently announced price increases.
FCF in Q3 was negative-$465 million versus -$506 million last year and -$608 million in Q2’17. “There is no change to our expectation for FCF of -$2.0 to -$2.5 billion for the full year 2017,” reads the company’s press release. “Negative FCF, despite growing operating income, is due to growth of our content spend, original content in particular, where we pay for the titles before consumers enjoy the content, and the asset is amortized by estimated viewing over time. We anticipate financing our capital needs in the debt market as our after-tax cost of debt is lower than our cost of equity.”
As a comparison, in 2016, according to the CRTC’s most recent Communications Monitoring Report, the entire Canadian TV industry spent C$4.2 billion on all content, whether acquired from foreign sources, locally made drama, sports broadcasts or news.
Netflix added 5.3 million memberships globally in the third quarter, up 49% over Q3 last year, “as we continued to benefit from strong appetite for our original series and films, as well as the adoption of internet entertainment across the world,” says the release.
“With $17 billion in content commitments over the next several years and a growing library of owned content ($2.5 billion net book value at the end of the quarter), we remain quite comfortable with our ability to please our members around the world. We’ll spend $7-8 billion on content (on a P&L basis) in 2018,” it continues.
For the whole release, please click here.
