4 Key Quotes From Netflix Inc.'s Third-Quarter Earnings Call
With higher-than-expected subscriber and revenue growth in its third quarter, Netflix (NASDAQ: NFLX) shareholders have some new reasons to be happy with the company's strong growth story. But the quarter's key metrics from its earnings release represent only one side of the story. Management commentary from Netflix's third-quarter conference call gave investors a more nuanced look at Netflix's overall business and its prospects.
Here four of the most insightful quotes from Netflix's third-quarter earnings call (via an S&P Global Market Intelligence transcript).
How Netflix thinks of acquisitions
Netflix surprised investors in August when it made its first-ever acquisition of comic book publisher Millarworld. The acquisition may have raised some eyebrows, leading investors to question whether Netflix is opening up to a different growth strategy.
In its third-quarter conference call with analysts, management clarified its stance on acquisitions.
In other words, Netflix's slant toward organic growth remains. But management does seem more open to making acquisitions that align directly with the company's current business.
Netflix's biggest catalyst
Don't look to the latest season of House of Cards, Narcos, or Stranger Things, when trying to put your finger on Netflix's most important growth driver. While blockbuster original content undoubtedly plays a crucial role in Netflix's overall growth trends, management is adamant that its biggest catalyst is simply the secular trend of internet television.
How Netflix approaches price increases
Netflix made headlines earlier this month when the company confirmed it plans to increase prices on some of its plans in the U.S. Management provided investors with some context for the price increase in its third-quarter conference call, noting that the company only raises prices when it believes consumers will be convinced that new prices still offer "great value" relative to the company's growing slate of content.
Beginning in November, the monthly price of Netflix's standard service will increase from $9.99 to $10.99. And the monthly price of Netflix's premium tier will increase from $11.99 to $13.99.
Looking to 2018
When asked whether management is expecting a strong first half of 2018 even as competition ramps up, Netflix chief content officer Ted Sarandos responded, "Yes, definitely."
Sarandos cited three key drivers beyond the ongoing adoption of internet television that should drive growth: the company's increased efforts in debuting big-budget original movies directly on Netflix, a growing slate of local language original production, and its "steady drumbeat of new original series...."
While Sarandos admitted that competition is increasing in internet television, he said Netflix is "really happy" with its results in this more competitive landscape.
Overall, the conference call reiterated the strong results in its earnings release. Netflix is firing on all cylinders.
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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.