Netflix (NFLX) 17 Oct 242024 Q3 Earnings call transcript

Company Profile

Participants

Spencer Wang	executive
Theodore Sarandos	executive
Gregory Peters	executive
Spencer Neumann	executive

Call transcript

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Spencer Wang

Good afternoon, and welcome to the Netflix Q3 2024 Earnings Interview. I'm Spencer Wang, VP of Finance, IR and Corporate Development.

Joining me today are Co-CEOs, Ted Sarandos and Greg Peters; and CFO, Spence Neumann.

As a reminder, we will be making forward-looking statements, and actual results may vary.

We will now take questions submitted by the analyst community, and we'll begin with questions about our Q4 results and our outlook.

Spencer Wang

from of comes Sachs. question first Eric Goldman Sheridan The to priorities your and evolved Can XX frame investment in months? for past they you please have key XXXX how beyond? the XX And

Theodore Sarandos

Spencer. Thanks a lot,

with business. had we the delivered start good growth, plan. that to We looking feeling a We're Let's really XXXX. about on reaccelerate plan and into

You can see that financials. in our XXXX

proxy margin growth for improvement people they deliver to percentage X expect as when and our happiness XX% view member revenue best engagement, because watch and stick of We which around we operating points more, longer.

They about place Netflix So talk that's And on acquisition. subscription. which they retention. higher their value more Netflix, drives a

a first about XXXX. year, hours day, per of per maintained X is viewing on per owner through up quarters healthy This household we've of the engagement, X member engagement very and

This. QX if from events we now, from the great U.K., got Story, Couple, The we're U.S., big up. Lyle also you and some hits: live about slate finished QX Wants coming titles really from have Brazil, we're where look from the Menendez Perfect So amazing some big Korea, our Monsters: And with from it's because sitting And Erik really excited at with Germany. we filled Nobody

look And a on strong. we've we been than original has into that when making build more forward we that core build beyond, decade. And success. So now become success. XXXX to want to and on We plan the programming very for

best the team a creative are of talent have people around the We who world.

of XX over create and countries model million people world. stories than all more us more culture allows XXX operating to a have an than We and thrill audiences the in that

I as to step look slate, this members. greater even another XXXX push ambitious for that our our So make us towards at

programming. the and scale the steady of cadence that and the showcases investment and ambition really it we've made reflects the So

Johnson, shows Games, of Things, So got biggest on shows: the looking Squid our new even new Knives from Frankenstein, and Gilmore. Out Happy a del Ryan of you've of Murphy, Shonda from Wednesday, Toro's Stranger new into Guillermo Ryan XXXX, return Rhimes top seasons film

where So be where we could sit we're excited right and heading. we more now not about

Gregory Peters

Just on well constantly every trying decades. the our We last service. improve us of that aspect the focused been us served you offering. I then core mentioned to always series decades top on It come. too. that, for improving it and serve our our And question And expect bringing hope well mean jumping we've for quite mindset X.X will to film priorities, priority is -- to really and

to Ted on seen just think double what on down I on was our and progress front plan. we've really saying, that good

you've that increasingly titles things hit like Japan. but seeing Ted from the steady mentioned drumbeat got world. a the I of bunch, countries a of most the around One is

You've got Korea.

Thailand. got You've

You've that investment making communities, got compelling capability India. that they creative decade-plus sure again, in to there with and the a their stories working those tell represents, way. in This local storytellers have

So more we exciting that's that. expect see to super of and

about excited tested subscribers experience. our the up, We're there, around world. we're it Also we've so a improving excited polishing version new we're intuitive TV progress bring the product of We more homepage. our to to that that the seen and

got that's River Christmas. coming IPs. We're got We've a based games. The Netflix coming. on initiatives excited levers like a initiatives that we got that Our for Valley and will on and set games got games Game based are years. Monument We've seeds, Ultimatum. got of We've offering and classics X entertainment Virgin Squid out. like incremental coming investments planting strengthen the priorities growth storied about second these We've us in about game new We our help believe expand be

in all coming the access of We as to plan December. got here into growing members And that expanding is of We've and principal also January, effective the give and John more the got advertising Mulaney Tyson-Paul lower-priced fight, members-to-be in great also NFL to a more entertainment. XX way goal We're then WWE live. more. weeks we're and

you it's these new build a noting, down of worth we large initiatives significant where the fairly know it great but have core growing a And hustling that we these as move path getting. point possible. lot takes we approach time of seeds. already to that It some as that we're think see of to and the we're is business. And I ads takes a to work, can they're path, the sort how quickly benefits of given example

roughly revenue off it's We're year, each doubling base. but a small

a become and the the areas that tremendous you that we're That's drive stay if contributor future. over that that revenue ahead and billion today. opportunity we only in spend you upside to just capturing X% consumer countries think this about of step X% several starts improvement it But back and focused us, on of in next we over operate, So to roughly to of material years. can continuous if $XXX

Spencer Wang

Thank you, Greg. Ted and

organic Ehrlich take Our Netflix America. Jessica algorithm, can and the growth, growth on comes about provide of on you revenue pieces Reif outlook ARM At Spence, next we a increases some that the of our color think can high Bank advertising? moving maybe forward from membership question level, one. you when between please

Spencer Neumann

that Jessica. Sure. one, I'll try

about as focus of a look as you that guide and Ted components over through I'll for priorities our at are of really growth indicator. bit or that our that walk But that that and investment drives that talked if a proxy an just Greg XXXX engine mix those growth the evolving equation. really, kind time, So

based of roughly think over $X FX incremental end QX. expect That And net year strong $XX ARM growth. solid adds to to billion it of next to about we $XX the impact we of landing billion year. represents XXXX XX% deliver as rates billion adds expected on where billion revenue $X of combination year, about It's the this next our -- of at expected growth. majority membership-driven paid of of and year's from kind So be to expect revenue next plus that's to XX% from The membership a net of year full growth. growth

driver hundreds We millions aren't great And and not evolution in actions plan we've about, just in a households of pricing, off slate demand. will a to and our growing taking that be but growth. our into contributor converting still 'XX thanks Greg consumer and have the primary opportunity, that a of we year improvements 'XX. to grow continued building of our revenue, and a talked this members, more as ads meaningful yet we'll growth combination ARM's been have

double-digit multiple outlook. across and drivers healthy revenue So balanced more strong overall, growth,

Spencer Wang

and Building Patterson a around appears going KeyBanc, how Spence. moderating Justin from that about you, given on question thinking environment, Thank forward? what margins the puts competitive at you operating to takes are be

Spencer Neumann

it Sure, take I'll again.

as over our 'XX. said in delivering the about great letter, So we we term. in plenty margins And feel we what the to see room long increase of we're

expect X we approach We percentage and unchanged. our to a more mentioned, is believe grow. be to build increasing lasting up we stronger Ted business margin points, We margins as as gradually and by

things each will like service to it We and do our than by and costs bounce year. see 'XX to growth but owners. consistent slower operating And increase moves amount the while a like The our investing bit we'll approach. that, with based growing margin that our guide trade-offs in set each on a strategic year, targets, in what of you we like opportunities margin making that given around aim revenue and and is year, prioritizing improve FX

our we our big value and So in target, margin to exceeded 'XX, investing expansion our we're actively more which a coming strengthen of want to and off members year be grow sure business. such to deliver

the expanding you things and into core offering, and ads new further heard discovery, games. So and our improving film product areas like from investing about and just TV Ted, Greg in live

grow with So we 'XX to room strikes for this absolute profit kind of dollars years planning margin of for many, balance margin many the and our come. lots think to right

Spencer Wang

you, Thank Spence.

a and please of in on on Cowen. discuss Ted, that early from Blackledge think net I pickup QX Spence of team have LatAm drove John on drivers could QX provide the further loss dynamics that specific Perhaps worth slight tag QX? We LatAm in the this TD on one. color question the you our member and Could you in touching is results

Spencer Neumann

you I Ted. can off, like. Sure, start if

Spencer Wang

Yes, sure.

Spencer Neumann

QX growth, was line much underlying basis. the That's our up LatAm to is currency trends Overall, business top X%, significant 'XX more relative North it's we've XX% reported of growth got X% Year-to-date, in healthy. which our revenue, year-over-year. primary headwinds are Okay. up for and kind in with 'XX. Star XXXX a in on line of

the growth much at level to local relative year So 'XX a accelerated in is ago. actually,

dampens always changes news -- rebound the in memberships And day, lasted in already nicely specifically, membership are decrease near-term some early fourth of the slight nice saw have LatAm quarter more quarter But bigger down. our growing to would been if quarter. net growth. On a so price markets, up due X fun the is the was LatAm which QX far primarily in some member QX. we're adds seeing of good recent you instead fact, the in fourth

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Theodore Sarandos

around book new Páramo, his be things slate say Prieto large most we time making is Senna in called hit Brazil, excited Mexico us really A to from world, -- Latin which an Years don't Pedro upcoming. is Hundred I'd in we're The is got debut be Rodrigo this the that's but on quarter in obviously They've Brazil. it's those film that No, directorial about epic for to a going being incredible for really Solitude we in loved adapted. America ends. Mexico in QX importantly, think just from is Colombia. which of a thing going

output underlying creative to we're we're really climate, in with with also business And thrilled America. alluded thrilled here, the So Spence Latin too. the as

Spencer Wang

that How you about a Great. tier Can on from of And Cahall begin to a we think ability please XXXX? how discuss improvements levers a free? questions What monetize terms versus to we'll market? I'll after of to kind Fargo. should attaining the advertising advertising, in in your Wells of are question engagement ad advertising series tracking is about of Steve more U.S. now ad and your growth to will move you to inventory? contributor move CPMs primary -- the us with a

Gregory Peters

that say be therefore inventory. each been the the advertisers #X we priority the is monetization on. is we and capabilities membership And our important our would Okay. was #X all There's to we ads to to X get and most we attractiveness our about tier scale part Priority a can't advertisers. we so when grow to we've think them improve that if carrying top-level business. there. market ad have all have to for big sufficient can of relevant in I priorities lot take see We'll

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Our ads as was XX% plan base That's quarters membership probably over of X well. really significant growth quarter-over-quarter. up

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Theodore Sarandos

Greg on the Obviously, follow making are for progress. second? I Could teams great a up just

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the part stories that gathering to close do that all people be to of. equation. same are That's people be part So are people events what is about, that advertisers of the they want the the want to to exact are watching, stories talking

a So to, that buzz, doing why a or Nobody excited when advertisers to fandom, we're want that be close what have that's we Perfect This Wants Couple, about here. that's what I'm and

Gregory Peters

Yes, into next the broader stepping putting that's the advertising. right. context, back X or And and XX and digital I that goal to just think years is of over of sort best our combine

So is we know things from TV targeting, relevance this the personalization, all that the of that best advertising. with

So this and is films format. viewers an those against culture-defining and engaged creative got highly We've shows mentioned. that elevated Ted positioned

ads market. really where than still that's scaling already at revenue That's the audience CPMs the opportunity end positioned. the close ability ad monetization monetize high got to healthy ads a that growth we in that see North We our good so momentum and to want and And trajectory. faster CTV while the it, Star. growth And be of won't premium gap. primary we of we're inventory on a that be revenue that definitely because XXXX, see our We've in to driver

So small point a year's a that, XXX% But off U.S. expect commitments. base. as we're double in XXX% over that year-over-year, ads in seeing revenue this upfront, increase we for -- ads will albeit XXXX, our sales roughly confidence just

premium it's think ads video, noting like against also a model. I proven So that worth it's

be that our the so take of to revenue what potential support healthy able come. the and we to if that's sustaining in levers years of So are growth the growing about those us that seeing, growth ads size being opportunity, to trajectories excited makes profit we one

Spencer Wang

Greg. about ad parts. and X do Ted you, probably tech, Thank some We Great. have questions in

with garden? to important But like Desk how and DVXXX? demand. partnerships First, build see Trade secondly, Trade What building partnerships do your from term, Justin versus Trade The your are decided Patterson use at learnings has your KeyBanc. walled And Rich Desk Greenfield. initial from from Desk longer to you Netflix own

Gregory Peters

parts there. of couple A

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the So that's what gives map. of you a sense road

for learned? not more clients have on we More to more creates CPMs. demand that it's positive What I'd say pressure surprisingly mean buy. easier channels

what think, I to learning, expect learn. we're So you'd

to on seeing time. previously, ads we're As And this just how part we of question, mentioned this be last build revenue growth. a trajectory solid we going is trajectory that over

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Spencer Wang

it effects strikes? production slate retention? engagement here slate no you, move At given Hollywood impact in a to your XXXX Stanley, on more not few on And already, is and will I year's content Thank strikes Morgan shutdown with Swinburne point, did and will How back us and a be Ted. of of Ben UCAN to did States? Greg. last for engagement impact disproportionately and questions if the the you lingering from this what now a ultimately normalized

Theodore Sarandos

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Spencer Wang

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Theodore Sarandos

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Spencer Wang

without we possible which release? films it Greenfield, is, on to So cultural the the theatrical, Ted. perennial a Rich From pierce is question for theatrical zeitgeist over Ted. you, you, Thank have to

Theodore Sarandos

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Spencer Wang

planning to question from structure Thank talent you on content Last less to based is back you which Capital, you, upfront Alan Loop the Ted. of on and end will Gould the -- success? on more pay change are compensation

Theodore Sarandos

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Spencer Wang

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Gregory Peters

going Rich committee. our pricing to join to invite We're Sure.

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Spencer Wang

Thanks, Greg. Fishman From MoffettNathanson. Robert of

other both. non-ads the right the at plans You've but and tier non-ad you increased have services prices between have think while spread tiers? the for How do ad about ad been the kept the increasing streaming price same lower your prices on tier

Gregory Peters

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Spencer Wang

learnings plan going phasing Canada, you And about Greg. out forward? expectations He's JPMorgan. can U.S. across of Basic phase the Basic to of Thanks, Are markets any Anmuth France. ad and out other there? asking From Doug any of share sort the the there U.K., in

Gregory Peters

Yes.

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Spencer Wang

so quiet, are allocation. bit I'll flow now Spence, several a poised Will minimum net cash of possible level? maintain years. Swinburne to question the him Ben leverage the uses billions looks capital of been from you free has look Stanley a What Spence company Greg. Thanks, next to on generate the a tens capital? this over all in Morgan of ask

Spencer Neumann

off it. welcome get I was I Sure, because the it, Rich that was I'll just that. getting committee on into would but -- I pricing reflecting think quiet could so team actually was I get on the

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targets. clear, So in be minimum no to other leverage words,

Spencer Wang

Thank you, Spence.

AI Hodulik Is John question consumption a YouTube. TV foe? or user-generated UBS. you growing business? next via regarding see share threat to your comes of of from It's friend as Do the YouTube's Now content

Theodore Sarandos

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Gregory Peters

maybe the reiterate, to core I just message. Yes, think,

an fulfills for couple: that's Squid risk and consumers Netflix this Banks, that Outer both think we'll life. And TV can Black that movies and great about inherent I important also launch stories want Game, partners to of to different for but bringing Doves. you mentioned some a those share think in the who role these want quarter, the creators shows who if you titles

how Senna, would with model. are Years Solitude, YouTube's of projects. to big America, A imagine bets hard huge, mentioned be coming You from Hundred possible It's of creative those both ambitious kind Latin which

those and the model, certainly for consumers it's So environment, our the well our for margin we creators too. competitive feel storytelling, for best generating while that's which and absolutely true, a work focus while significant but premium ambitious also is operating storytellers, business,

Theodore Sarandos

quarter we or Netflix we like YouTube well, XX% of last watching on And as Yes. said the are really focused happens yet. on that not

to a we do. still of of -- got got we lot So work plenty

Spencer Wang

Greg. and Ted you, Thank

comes member streaming be be with from to or subscription question opportunity potentially We of a to inventory? Netflix live sports doesn't scaled and bundle one could bundle this it question, Morris Guggenheim. exchange advertising with complementary time need less or last Michael but services, His an a a for your like one is in and base, content of more other global industry-leading leverage offering have economics for services share streamer, with one there

Theodore Sarandos

Yes.

to sense kind what on this and to model at of creating games to lot more low bundles. But So I a of remarkably kind more them these now fairly in their and the media engagement, all comfortable find and scope get narrow companies. value And competitors a use a of some libraries one and the for look, the series we're our for that. limited businesses, in services replicate is kind of the seeing bundles and business models of It's package, it adding focused of given of on growth these legacy price makes media amazing films we're older place.

films. We have first-run

else and increasingly, to films, great competition football that the WWE. if TV, Roast next shows Tyson-Paul series original comedy and NFL great We year fight watched and stand-up most best don't most on unscripted things the animated of you the have events the go are buzziest a or and like live series anywhere Day from shows. shows or or over animated Brady the the you also of want all variety Christmas the have with and world And talked-about on

ability on are and really grow continue on our value consumers to reach we our ability to betting to So of this package.

Gregory Peters

right. Yes, viewership our is share I that TV And less countries our still in noting it's time. XX% that's even think than of of worth biggest

that at of Ted our share grow what to the continue there's slate, invest variety by look a we offering. improve said, doing to as huge our opportunity in and So more quality this

got I got lot that more a think a offering. We're expand it's building capabilities. members. hard plate building our live. value now. deliver building all also worth on lot that new We're We've right of work to games. Those They we've noting building We're ads.

of at I to bit capabilities. members, to take better And strongly keep every we based those building on So entertainment more that, we think day value focus we're we incredible delivering that. history little have new, believe anything focusing business. taking going our to want before an we're on a our let's if care just And that on on can be

let's stay focused there. So

Spencer Wang

Great. Greg and Spence, speaking your for Thank thank with on forward Thank call. Thanks call. quarter. you, the tuning quarterly your for analysts, and our for into Ted look you, again. listeners next all all questions, and we earnings answers you this And to we

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