Movie rentals and home entertainment of every kind are supposed to be great counter-cyclical plays, as consumers huddle in front of their TVs instead of venturing outside. So this warning from Netflix should be worrying: It says subscriber growth was lousy in August, although it bounced back a bit last month. That means it will still hit Q3 guidance, but it is knocking down Q4:
The company said it expects net income and EPS will be comfortably within its previous guidance, which was GAAP net income of $16 million to $21 million, and GAAP EPS of $0.26 to $0.34 per diluted share. Excluding the one-time $6.5 million credit given to subscribers related to the August service interruption, third-quarter revenue is also expected to be within the company’s previous guidance of $343 million to $348 million.
Netflix ended the third quarter with approximately 8.672 million subscribers, just below the low end of its previous guidance of 8.675 million to 8.875 million subscribers. Subscribers grew 23 per cent year-over-year from 7,028,000 total subscribers at the end of the third quarter of 2007 and 3 per cent sequentially from8,411,000 subscribers at the end of the second quarter of 2008.
“Net subscriber growth in July was in line with expectations but August was unusually weak”, said CFO Barry McCarthy. “In September, the business regained momentum with results slightly below original expectations, likely due to the economic climate.”
The company revised guidance for the fourth quarter as follows: • Ending subscribers of 8.95 million to 9.25 million, down from 9.1 million to 9.7 million • Revenue of $353 million to $359 million, down from $357 million to $367 million • GAAP net income of $18 million to $23 million, unchanged from prior guidance • GAAP EPS of $0.30 to $0.38, increased slightly from $0.29 to $0.37
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