=Netflix (NFLX) reported earnings on Tue 16 Oct 2018 (a/h)

Netflix beats by $0.21, reports revs in-line with net subscriber adds above guidance; guides Q4 EPS below consensus, revs in-line but subs above estimates 

• Reports Q3 (Sep) earnings of $0.89 per share, $0.21 better than the S&P Capital IQ Consensus of $0.68; revenues rose 34.0% year/year to $4 bln vs the $3.99 bln S&P Capital IQ Consensus. Streaming revenue grew 36% year over year in Q3, as average paid membership increased 25% and ASP rose 8%
• Net subscriber adds 6.96M vs. 5M guidance; 1.09M in US vs. 650K guidance, 5.87M International vs. 4.35M guidance
• Operating margin expanded 500 bps year over year to 12%. This exceeded their forecast of 10.5% due to the timing of content and marketing spend, a portion of which moved into Q4.
• Co issues guidancefor Q4, sees EPS of $0.23 vs. $0.49 S&P Capital IQ Consensus; sees Q4 revs of $4.2 bln vs. $4.23 bln S&P Capital IQ Consensus. 
  • Sees Q4 sub adds 9.4M vs. ests near 7.5M; 1.8M in US and 7.6M internationally
  • still targeting operating margin to be at the lower end of the 10%-11% range for the full year 2018. This means that in Q4 we expect operating margin will dip to 5% from 7.5% in the year ago quarter.
  • anticipate that FCF will be closer to -$3 billion than to -$4 billion for the full year 2018.
  • We currently see next year's negative FCF as roughly flat with this year.
  • Starting with our earnings report in January 2019, we'll only guide to paid memberships; a year after that, in 2020, we'll cease reporting on end-of-quarter free trial count.