10-QPeriod: Q3 FY2023

NETFLIX INC Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 20, 2023For Securities:NFLX

Summary

Netflix's Q3 2023 results demonstrate robust growth, with total revenues increasing by 8% year-over-year to $8.54 billion. This growth was primarily driven by a significant 11% increase in global paid memberships, reaching over 247 million by the end of the period. The company also saw a strong improvement in its operating margin, which rose to 22% from 19% in the prior year's comparable quarter, indicating improved operational efficiency and cost management. While overall revenue per paying member saw a slight decrease globally, driven by regional growth and plan mix, certain regions like the U.S. and Canada showed an increase in average revenue per paying member year-to-date. The company generated substantial free cash flow of $1.89 billion in Q3, a significant increase from the prior year, showcasing its ability to convert operational performance into cash. Netflix also continued its commitment to returning capital to shareholders, with $3.545 billion in share repurchases during the first nine months and $10.9 billion remaining available under its authorization.

Financial Highlights

51 data points
Beta

Revenue

$8.54B

42.3% Gross Margin

Net Income

$1.68B

19.6% Net Margin

EPS (Diluted)

$0.37

Total Assets

$49.50B

Cash & Equivalents

$7.36B

Free Cash Flow

$1.89B

Financial Statements
Beta
Revenue$8.54B
Cost of Revenue$4.93B
Gross Profit$3.61B
R&D Expenses$657.16M
Operating Income$1.92B
Interest Expense$175.56M
Net Income$1.68B
EPS (Basic)$0.38
EPS (Diluted)$0.37
Shares Outstanding (Basic)4.42B
Shares Outstanding (Diluted)4.50B

Key Highlights

  • 1Total revenues for Q3 2023 reached $8.54 billion, an 8% increase year-over-year.
  • 2Global paid memberships grew by 11% year-over-year, ending the quarter at over 247 million.
  • 3Operating margin improved significantly to 22% from 19% in Q3 2022, demonstrating enhanced profitability.
  • 4Free cash flow saw a substantial increase of 300% year-over-year, reaching $1.89 billion in Q3.
  • 5The company repurchased approximately $3.55 billion of common stock in the first nine months of 2023, with $10.9 billion remaining on its authorization.
  • 6DVD revenues declined by 37% year-over-year as the company discontinued its DVD-by-mail service.

Frequently Asked Questions

Revenue growth was primarily driven by an 8% increase in total revenues to $8.54 billion, fueled by an 11% year-over-year increase in global paid memberships to over 247 million. This membership growth more than offset a slight 1% decrease in average monthly revenue per paying membership globally.

Profitability improved significantly, with the operating margin increasing to 22% from 19% in the prior year's quarter. This improvement was attributed to revenue growing at a faster rate than cost of revenues and reduced marketing and technology expenses.

Netflix demonstrated strong cash generation, with free cash flow increasing by 300% year-over-year to $1.89 billion in Q3. This was primarily due to a significant decrease in payments for content assets and an increase in revenues.

The company continues to focus on returning capital to shareholders through share repurchases. It repurchased $3.55 billion of stock in the first nine months of 2023 and has approximately $10.9 billion remaining under its authorization. It also anticipates limited future capital needs from the debt market.