=Netflix (NFLX) reported earnings on Mon 17 July 2017 (a/h)

Netflix misses by $0.01, reports revs in-line; guides Q3 EPS above consensus, revs above consensus:

• Reports Q2 (Jun) earnings of $0.15 per share, excluding non-recurring items, $0.01 worse than the Capital IQ Consensus of $0.16; revenues rose 32.3% year/year to $2.79 bln vs the $2.76 bln Capital IQ Consensus.
• See Full List of Key Metrics in 16:14 comment
• Co issues upside guidance for Q3, sees EPS of $0.32, excluding non-recurring items, vs. $0.22 Capital IQ Consensus Estimate; sees Q3 revs of $2969 vs. $2.88 bln Capital IQ Consensus Estimate.
• Key excerpts from Shareholders Letter
  • In Q2, we underestimated the popularity of our strong slate of content which led to higher-than-expected acquisition across all major territories. As a result, global net adds totaled a Q2-record 5.2 million (vs. forecast of 3.2m) and increased 5% sequentially, bucking historical seasonal patterns. For the first six months of 2017, net adds are up 21% year-on-year to 10.2m.
  • International contribution profit of -$13 million vs. -$69 million was better than our -$28 million forecast due primarily to higher-than-forecasted paid members.
  • We are making good progress with our international expansion as improving profitability in our earlier international markets helps fund significant investment in our newer territories. As a result, we expect positive international contribution profit for the full year 2017, at current F/X exchange rates. This would mark the first ever annual contribution profit from our international segment.
  • Through the first half of 2017, our operating margin was 7.1%, putting us on track for our full year target of 7%, which we plan on growing in 2018 and beyond.
  • On competition: It seems our growth just expands the market. The largely exclusive nature of each service's content means that we are not direct substitutes for each other, but rather complements.
  • We anticipate free cash flow of -$2.0 to -$2.5 billion for the full year 2017. With our content strategy paying off in strong member, revenue and profit growth, we think it's wise to continue to invest.
    • Briefing.com Note: Prior guidance was for $2 bln.