Netflix (NFLX) Slips Following Q2 Results; Domestic Sub Adds Notably Slow
The company reported Q2 EPS of $0.49, $0.09 better than the analyst estimate of $0.40. Revenue came in at $1.07 billion versus $1.07 billion expected.
Domestic Streaming subs improved 0.63 million to 29.81 million with 28.62 million paid members. International saw a 0.61 million bump higher to 7.75 million total and 7.01 million paid members. Domestic DVD subs fell 0.47 million from the last quarter to 7.51 million.
Looking ahead, Netflix sees Q3 2013 EPS of $0.30 to $0.56, versus the consensus of $0.43. The company commented,
In Q3, our guidance midpoint implies 130 bps of further margin expansion as we continue to run above our target. For Q4, we anticipate stepping up content spending even more, getting us closer to our 400 bps per year target. We’ll keep targeting about 400 basis points of annual improvement into 2014 if we keep growing net additions at 2012/2013 levels.
On Originals, Netflix noted,
Based on the viewing trends we see with other similar television series, we are amortizing Originals on a straight-line basis over the shorter of 4 years or the license period1. We are in the early stages of Originals and continue to monitor whether the viewing pattern is enough higher in the first few months to have us amortize at a faster initial rate, and then to continue on a straight-line basis for the remainder of the amortization period. In terms of relative size, of the approximately $3 billion in content library net book value we are amortizing, currently around 5 percent is for Originals.
Netflix will be rolling out "profiles" in Q3, which will allow
different members or viewing tastes within their home, enabling us to provide a much more personalized experience for our members.