Q3 2019 Earnings Call

Good afternoon, and welcome to the Netflix Q3, 2019 earnings interview I'm Spencer Wang VP of IR corporate development, joining me today, our CEO Reed Hastings CFO spends Newman Chief content Officer, Ted Sarandos, and Chief product Officer, Greg Peters. Our interview with this quarter is Mike Morris from Guggenheim As a reminder, we'll be making forward looking statements and actual results may have.

With that let me turn it over to Mike for its first question.

Thank you Spencer good afternoon, let's start by talking about both member trends and the outlook that you just provided for for members in the fourth quarter, starting with a third quarter can you speak a bit about some of the key drivers that you're results came in relatively in line with your guidance talk about the gross that dynamic and the churn dynamic there relative to what you were expecting coming into the.

Quarter was relatively in line. It was the most accurate member forecast we've had in year.

Spencer over to you.

Spencer spend so I'll.

We'll go out of sensors on the call I'd first say Michael Yes. It was it was.

A really strong quarter I mean, not just around subscribers through on our overall business performance that was record revenues for Q3 record operating profit of nearly $1 billion of operating profit and record paid net adds for the quarter.

We delivered on the subscriber front.

The ahead of where we expected outside of the us in the U.S., we were a little bit short.

To your question, which are that we're talking very very small numbers here, but we did see some elevated churn in the quarter that we had seen some smell updated churn following our price increases in the us and that that ticked up and sustained.

Through the quarter.

Longer than than than it had in the past, but these are really small changes that we're talking about like a 10th of a percentage point in churn.

And that's why at the same time these price increases are hugely.

Revenue positive for us as you saw in the quarter and so we took the bulk of that revenue and reinvested back into service integrate content integrate product experience for our members to continue to deliver on that value proposition and and continue to grow our business.

Okay, one of them back to the topic, a churn, but before we do I just want to ask about the fourth quarter outlook on the last call. We spoke about potentially seeing a record year of but net subscriber net member additions in 2019, the guy does not imply that at this point. So can you talk a bit about perhaps what change and I think the big question and invest.

There is mines as well 2018 represent a peak year for member adds or can you get back to two to growing on top of that level again.

Sure I'll take that one again too so.

In terms of our guide for the year.

Yes. It is it is down a bit from from our previous forecast and really what we're just trying to do there to be prudent about there's there's a number of moving parts in Q4 and variables that are just difficult to forecast and.

Whether its first just.

The ability to be precise about a forecast around our content slate that has so much new IP in Q4 in big film a big film IP that Weve never had a quarter with so much big film launch so when it becomes launching a quarter combine that with some that elevated churn that we saw in Q3 in.

The potential for that to continuing into Q4, and then lastly, there are there is obviously.

The new competitors launching in near term and we try to factor that is well inevitably there's probably going be some some curiosity and some trial of of those competitive service offerings. So when we put all that together.

Again, we adjusted our forecast slightly it's still nearly 27 million paid net ads for the year, a tremendously strong year end and Furthermore, it's it is our long term outlook is unchanged in terms of the long term opportunity for the business. We're just trying to be prudent about our Q4 forecast and Mike.

With ryrie here in the U.S. we.

We did 5 million net ads and this year, if we're on forecasted to be about 2.6, so the gaps almost entirely in the U.S. and that's really on the back to the price increase there's a little more sensitivity, we're starting to see the little tough to that what we have to do is just really focus on the service quality.

Make us must have I mean, we're incredibly low price compared to cable, we're winning more and more viewing. So we think we have a lot of written there, but this year thats whats hit us and we'll just.

Stay focused on just providing amazing value to our members in the U.S. and I think that gives us a real shot at that continuing to grow net long term net ads.

Annual basis, but we'll do me a little cautious on that guidance and feel that way through here.

And on that elevated churn just to kind of wrap on this.

What type of subscribers are you seeing.

Churn more often does it tend to be really that hit driven nature run particular programming does it happen to be sort of the last subscriber in is less sticky what are you seeing that Mike 110th of a percent is 1000 people. So you really can't tell on the margin.

Think of it is much more big picture, which is.

It's always a question of how much value we have how did the consumers deal it.

In moving up.

In the U.S. from about $12 to about 13.

We see a little bit of it.

And then what we had to do it just give it a pause.

Really focus on the value.

If you think about it we haven't had many big movies in the past and movies are very valuable people are used to paying for a lot of that and the slate that tetanus team have this quarter and for next year is way better than any movie slate we've ever had so theres. Some doesn't Greg room problem is in there too. So we just have to.

Focused other members and I think it will shake out very well.

Okay. Thank you and so let's talk about competition expense brought brought the topic up so so I'm not introducing it.

It's been a hot topic, but Tom.

Read you spoke in the UK a couple of weeks ago, you made a comment.

Saying it would be a whole new world starting in November I think a lot of people lot of investors just read the quote they didnt necessarily see the interview for context, and so I love. It if you could provide some context given that that is a bit different from your comments from a couple of quarters ago, where you felt that perhaps these new services wouldn't necessarily be material to the outlook.

You know from when we began in streaming Hulu and you tube and Amazon Prime back in 2007 2008.

We're all in the market all four of US a bid competing heavily including with linear TV.

For the last 12 years.

So.

Fundamentally there's not a big change here. It is interesting that we see both Apple at Disney launching basically in the same week after 12 years of.

Not being in the market.

And I was being a little playful with Hulu world in the sense of the drama that's coming.

But fundamentally it's more of the same and disneys could it be a great competitor.

Apples, just beginning but they'll probably has some great chose to but again all of us are competing with linear TV and we're all relatively small to linear TV. So just like in the letter we put about the multiple cable networks over the last 30 years, not really competing with each other fundamentally but competing with broadcast.

I think it's the same kind of dynamic here.

I think I think I got the subtlety of the braved the whole world 11 reference what else did you ever everyone else ticket.

The lateral.

And Ted lunch had talked a little about the movie slate and how it's it's different you know if theres a whole new world, It's really about our movie slate more than anything else, 100% I think you've got just in the fourth quarter alone you're talking about films that are at a range from.

Massive scale action film from Michael Bay, Onesix underground to Oscar hopefuls like the Irishman marriage during two pubs, Eddie Murphy's return and dolomite.

So these are big theatrically ambitious type films that you'll be able to watch on Netflix included in your subs option. It really is a fundamental change in the economics of how people enjoy films. So we're really excited about and that's our first time we've seen the.

The scale in this volume of films in one quarter. So we're really excited about it.

Before we dig into some content questions, but more do you want to talk about pricing a little bit and the pricing power in the U.S. market. So presser Gregor for spent.

Two things number one.

Do you think that the lower price point for some of these new.

These new services will negatively impact your ability to raise your price in the future and maybe more broadly can you talk about equilibrium price for the service we would love for you to give us a price point I know thats unlikely, but as you just think about.

You can be a great value with a number of different price points, but how do you think about where that that sort of shakes out I.

I think that pricing of our competitors, we don't feel as a real significant factor in determining where what we can charge for our service again that the services in the content are highly differentiated. So one is not something you're going to choose to do just for for us, but I would say our job and then what we think about pricing for a long term perspective is continue.

To take you know their revenue that we have their subscribers give us every month judiciously and smartly invested into increasing variety and diversity of content, where we really wanted the best in class across every single genre and if we do that and we were successful in making those investments smartly, we'll be able to continue to deliver more about.

Well you to our members and that really will enable us to from time to time ask for a more revenue. So that we can continue that virtuous cycle going.

And so I don't know if you if you can speak anymore about it but but is there is there a place where whether its relative to a pay TV subscription in a certain market or relative to other streaming services that you think.

Set some sort of bound around where you can where pricing could ultimately go to that I think you can look at a couple of external once you know in terms of ptv packages that might be relevant we don't really look at it that way, we're looking at more sort of incrementally and let our subscribers sort of tell us as we add more value along where that you know that right price should be it's a rare really more focused on listening.

Subscribers and sort of walking that path with them.

Okay and one other question on pricing for Greg.

Couple of different dynamics, especially outside the us where you have different price points you tested a mobile only plan a lower price plan in India could you talk a little bit about perhaps the variety of test and pricing plans that you have in the marketplace right now and any differentiation you can give us between more mature markets that with some stable pricing test anything like that.

So we can to get a view going forward.

Sure just to talk a little bit about where we are in India. I mean again, we think about revenues the guiding principle for as we do these different tests and trying to figure out what is the right a set of plans that have the right benefits. The right features that are delivered the right price for the subscribers in any given market and I think what we're exploring is as we are.

Operating in markets that have very very different conditions very different levels of affluence and other forms of entertainment competition et cetera, what is the REIT structure for us and so we've been very very happy with the mobile plan, it's actually performing better than we tested well look at testing that in other markets June because we think there other markets, which.

Similar conditions that make it likely that that's going to be successful for us is there for there as well, but I also think we're going to look at other.

Other plan structures other future value benefits, where we might see different market conditions, they'll work, there and I won't get into sort of leaning into those we'll see them as we rollout more respond to them based on what our consumers in those markets. Our members to be in those markets are telling us is working or not.

Okay, I want to come back to competition, but this I'm talking about competition for content, Ted you teed up a bit of some of the things you are enthusiastic about going forward.

Read you did make the comment again in the UK that someday the crown would look like a bargain perhaps another sound bite that was picked up a perhaps you could provide some context around that maybe generally how do you. How do you think about the investment that you want to make and and programming from very high level is it an overall budget is at a cost per subscriber to certain level. How do you think about that I would say.

I think thing about this moment in entertainment history is that the scope and scale and ambition of television is beginning to rival that of feature film, which is an incredible win for consumers and so when we were talking about the crown you're talking about relative to the to the joy and the hours of watching the ground will look like a bargain and that these things on big scope and scale and.

Our we're pretty uniquely positioned where the 15 billion dollar content budget to be able to deliver on that scope and scale.

At the same time for film and television so that incredible that slate diners rattled off to you.

It's happening at the same time that we have returning seasons of into the Effing World. The Crown loft in space you all incredibly popular shows Casa de La Floresta, Mexico Baby from Italy, all back for at returning seasons, breaking brand New series like the winter DAYBREAK.

All the all at the same time being able to deliver on what we think is an incredible value proposition yours. So you're asking earlier about price, it's really price relative to value and if you're spending more and more time watching TV shows in films on Netflix you're realizing an incredible value and I think that's really how the consumer experiences.

As much as you can ballpark at a show five years ago, producing that same show today.

Sort of 50% were expenses 30, it's really hard when because of the range is huge and sometimes the big breakthrough is not the one that turned out to be that we know that came into it that competitively, but on a very competitive show, there's probably been 30%.

Price escalation from this time last year.

In one year in one year.

That's a lot, but definitely content pricing is rising but when we are fortunate to have the largest membership.

One of the biggest revenues in the biggest content budgets and so that's within that we're able to still be very competitive to that shows that you point out. Its 70 lead few shows that are that competitive that would see that kind of escalation just in any environment Weve injected a few new buyers you're going to set you're going to get that dynamic on a highly competitive show.

The only thing I'd add also just to reinforce now we look at a lot of things. We don't we don't Chase everything and we also lose on opportunities right. So so we're exercising discipline every all on the way with every single tail. We're assessing every title individually and we're one is as Ted said with the size of Khan.

And budget.

We'll take big swings and we can we can make some mistakes because we don't have caused any kind of single title content concentration, but we are because of that discipline. We're we're continuing to march towards increasing profit margins improving our cash flow trajectory over time. So this is with discipline and business. This discipline.

While we are going after these big swings.

And my guess the risk of.

Hitting a too hard to diversification point, just sort of mathematically investors can do the math on what 100 million dot $100 million sort of project relative to a $15 billion cash continent budget for $10 billion budget means it's incredibly diverse right. So we don't have any sort of concentration risk.

Get considering considering I'm aspects of it the idea that.

The rumor $100 million that hasn't cards invest from going into the whether that would seem to earth shattering less than seven years ago today. It represents about 1% of our our content budget.

But today that was the target [laughter].

So if I look at this dynamic then continue to increase the investment in content at the same time growing your subscribers where are we in terms of achieving scale on that investment. If we look at that content spend per subscriber do you expect the competition to continue to drive that up or are we getting to a point of equilibrium, where where you're starting to see the benefit of that.

At global penetration that you have I wouldn't probably wouldn't try to take a stab at predicting with or where it equilibrium and there's so much fluidity in them are but I think what you're seeing now there is a.

There is an absolute cap of course of but anyone can pay for any given project and it will get super competitive for a lot of them. So I'd say that we're investing forward and trying to win those moments of joy for our members and that's what's driving us.

Mike There's about 2 billion active users of Facebook 2 billion active users of you too. We're obviously a fraction of that and those numbers are continuing to grow.

Theres 6 billion active mobile phones in the world and Thats got to equilibrium.

Equilibrium is so far away from where we are today, it's not something that we think a lot about think about how do we grow.

Yes definitely in terms of member growth I thought you are talking back and content spend.

Sure.

So let's talk about Tom.

Creating franchises I've a question about that I think there's a lot of enthusiasm as you know for the Disney plus product coming out and I think that it rise a little bit on the success of the streaming marketplace. But also this concept that they have this tremendous.

Content Library, and IP library that they've built over many years Reed and Ted as you think about.

Think about that.

I know you've made an investment in children's content.

Over the course last quarter talk a little bit about franchises. The important for instance, or the importance of franchises and whether building franchise is something that that is your ambition.

I think established IP has a leg up with consumers they know what they're getting into there's a pre built in excitement makes the marketing a little easier.

But in general don't forget the power of Brac creation.

And then what is the valuable franchise, it's really the Brett the value of brand creation and can you scale off a bit in this past quarter, we made a movie called tall girl.

Oh, the what usually unknown cast.

Who in seven days grew their social media following into the millions on Netflix and that over 40 million people watch it so thats the ability to create a brand almost at a thin air which I think is every bit as valuable as drafting off of a bunch of other franchises waiting for them to burn out that being said, we're very excited about the opportunity to do it ourselves we see the value of branch.

I would like stranger things and Black mirror.

And so we're continuing to work to do that as well, but I'd think about it as not like and.

Franchises are better than non franchises.

Great stories are white matter and the way that they reach consumers really makes a difference.

Got a couple of original programs original piece of the content in markets outside the U.S. global pieces, but but focused in markets soccer games in India cause their propel in Spain, I'm thinking about in particular, which saw Google search activity lets say multiples or at least.

Doubling what their prior levels were so I'm curious your thought about how that piece of content does drive that enthusiasm to local market.

I think what that ties to really is I think the way we try to think about what the growth opportunity is so I'd love to hear why you think you get that big step up and maybe in terms of heading Greg together, how you work together to try to make that happen sure. You saw in the letter are how our investment in local language original series in film is continuing to grow.

Will add more than 100 seats seasons of new local language original shows and they're making huge impact in the market.

Yesterday, less floors, which will be back for a second season in Mexico has been a tremendous success.

What's been great too is a lot of these titles that are usually impactful in the country, where they are produced also tend to travel throughout the region, sometimes around the world.

So the capacity propelled the success of that show was basically in almost every non English speaking territory. It was a phenomenal success.

Do you see that coming up with.

New show called the wave from Germany, I would these stories can be very.

Pan regional but the way that they travel and the whether they make a big splash around the world is to be Super authentically local and really satisfying for the viewers starting in the home country and then expanding around the world and we've been were in our fourth year of producing local language originals at scale and.

Were very excited about that gives it to continue expand it and they can but the nice part is I think people enjoy.

A global film or global Global series every so often love to see themselves onscreen and they were able to deliver on both of those propositions for our members around the world.

And I'd just add to that I think it's super fun and exciting to be able to take one of these really authentic local stories and connected effectively with a broad regional or global audience. In many cases, we feel like would've never actually watch to show in that language or from that country before and the key to doing that first.

Well, it's obviously being available in all those countries and.

Easy to access way, but then it's connecting that show having it be localized in language with subtitles or dubbing whatever is appropriate for that market and then also.

Training to users of members why they're going to want to watch this amazing heist series from Spain, and why that's going to be a totally compelling watched them based on the other kind of content that they are enjoying.

I think it's important to understand how broad your production is outside the U.S. So can you share any statistics on how many countries you're actually.

Producing for your first party production of content and what that sort of investment looks like in terms of of building them out there and in addition to strike a partnership with media said during the quarter.

On specific partnership you could perhaps detailing how that can benefit you.

Well weve entered into most of those markets with joint and joint venture or in coal production arrangements in the beginning and then take over.

Many productions in those countries as we grow as we get scale in those countries and we also continue to have great co production relationships with folks like media assets, even though our own studios producing local Italian content as well. So it's I'd say, we'd be released the original local language content and 17 countries today, we're going to go it's a 30.

And Thats, just going to keep growing around the world.

One other content question, you did make a high profile commitment to rights for Seinfeld.

Which is a little bit.

I don't want to say counter but but certainly different from the focus of allocating resources incrementally to originals can you talk about how big of a commitment is that for you maybe at least on a relative basis and why is that the right decision.

Well, we've seen in the past we've had a lot of questions about the value of volumes of catalog programming, meaning just having hours and hours of content that people don't watch.

But we have seen as a few titles in the history of television Seinfeld being one of them.

That continue to be can try incredibly relevant 30 years after came on television and get watched every night, it's a kind of a comfort view.

Comedy that travels around the world.

And Seinfeld is one of these very lead shows that.

Came available in that timeframe so.

We have friends till the end of the year then we'll have office for another year after that and then Seinfeld, a roll out to the world in 2021 on Netflix and we're incredibly enthusiastic about those shows but they're very very unique in the back catalogue of television ever created that people are still watching it 30 years after has produced.

I want to ask some questions about windowing and sort of creating community among your viewers and one of the questions that we get it is really about dropping an entire season at once versus having it spread out over a week at a time you've addressed this question before about it but I'd like to hear your more your current thoughts and I think.

The question is really beyond just why not do at every week, but why do with let's say all in entire season. Once maybe you could split a season into pieces.

Or the timing of a series for example, we were asked why stranger things couldn't have been before the end of the second quarter. Instead of just after the started on third quarter. So I'll give you a quick just personal anecdote I am a big fan of succession, ATRIO and I watch. It every Sunday night when it comes on just like everyone else and if I like that show a little bit.

Yes, I would probably burn out on it because I get aggravated every week waiting for the next episodic.

Much like so we're really what where you're trying to find the.

Fine tune the proposition to the customer of great storytelling, how and when they want to watch it and what we've seen in comparative because we haven't about 35 shows around the world that we released week over week, because its premiering in that territory and Netflix and we don't want to and we want to deliver on it as soon as it is as close to the broadcast Windows. We can so we'll wait and what we've seen.

In his in markets, where we really said all at once.

Versus one a week that we actually get more viewing and cumulatively more social media buzz more tweets more.

More activity on social media around these shows for the all at once model. So people are coming through at a different times are loving it more it's in a more concentrated experience for sure all that being said we are doing things like producing like you saw it with the ranch, where we are producing 10 episodes seasons.

With smaller gaps between season, so they're coming out six months apart rather than a year apart.

You are seeing were testing a interesting release pattern with rhythm and flow our music competition show that and basically we're trying to do is match not just the program exactly the way to watch, but how do you want to watch it and for a lot of people. It may not be all at once but it's hardly ever want to weak.

Do you see more opportunities for that whether its unscripted, where the type of program. It sounds like per se, but it doesn't lend itself to a little more pent up excitement do you see more opportunities to put resources behind that or is it opportunistic its origin as they were trying a lot of different thing we're trying business, but we're trying to do is make your favorite show whatever that is and for some people.

It's going to be a music competition, Joe and brother people to be Green I can have so we really are trying to make your favorite show whatever it isn't the best in class at all those things.

And and there might be something unique about the release rhythms of competition chosen more topical talk shows that lend themselves better too.

Frequency relates.

Yeah, you spoke about two quarters ago, we updated little bit last quarter, the topic of providing some more data or information both for producers talent as well as for individuals.

My first question is can we havent update on on where we are on that what you have provided and especially from the consumer perspective.

As well.

I think the goal was to help creates more that buys create converts nations how is that playing out one of the things you saw we have lots in the UK and we're looking to expand.

Presentation of the top 10, so that people can comes in Eplex and see the top 10, most popular things in different categories.

Once again, I think that one way that people choose content is by popularity not the only way and is not the only way we want people to but if they want to use that as a tool to help guide their decision, making we want to help them do that so publishing that top 10 that refreshes every 24 hours is.

One way that we're helping out on the consumer side, our producers we share viewing data with every week.

On the length of the launch weak and the ended the month. So there were incredibly transparent with our producers around the world.

And we're going to be increasingly doing things like we didnt earnings letter and give you viewer stats on the lot of our projects as we go.

Greg New jet anything about the top down I think it that you covered it well and just to make it clear I mean that top 10, that's a list that's available in the product. So you know to Ted's point those members, who really think that popularity is an important signaled for them on what to watch we'll have that available to them.

Great Greg I'd like to ask you a couple of questions on the technology the product side first maybe an update on partnerships.

We talked about a bit on last call I'd love to expand into us the paytv partnership seem to be a big part of the focus can you talk about whether that's become a bigger part of of the subscriber acquisition product to the steady state help us understand where we are in that process.

It's important I think to grounded in the partner based acquisition component. When you think about all the devices that we operate on and you're just being able to find and sign up that I said, that's a healthy chunk of our of our acquisition, but then when you get to the bundles, which I think often people think about partners equals bundles, that's a relatively small but it was a nice incremental.

Oh.

Acquisition channel for Us and so we'll seek to grow that we think there's a bunch of opportunities both in the United States with existing partners and expanding the number of bundles and sort of the bundle availability will also seek to extend that globally can be there's a tremendous number of opportunities globally to add those kind of partners and make it easier for members to sign up we.

We did a couple of this quarter or whether it's you know to now plus and Sky Italia with sort of new.

Partners were bundles, but we've also done things like Takeda DIY mobile operator in Japan, and be able just to expand our presence across their offering which makes it up again.

Easier place more attractive for more members to sign up so it's a it's a it's still small of relatively small fraction of our acquisition, but it's a nice good incremental weight access.

Member base number to be base, that's it's less technology for less earlier adopter and we can just make it super simple for them to sign up.

Okay. Another topic that we havent talked about a little while is that a password sharing or stealing or whatever you want to call. It as we get a more mature growth trajectory in the U.S. does that come back into being something important for you to address and how do you address it without.

Leading a certain portion of your user base, how do how you strike a balance there.

I think we continue to monitor it so we're looking at the situation then we'll see.

Consumer friendly ways to push on the edges that but I think we've got no big plans to announce at this point in time in terms of doing something differently there.

Okay, and suspense I'd like to ask a couple of questions on the financial side.

First around around margins and contribution margin in the past you spoken to a 40% domestic contribution margin target is that's something that you still view is achievable and maybe within that context, we talk about competition do we need to spend more say on the marketing side than you previously anticipated as you as you.

Gee, what you want to achieve on a subscriber side.

Well first on margins I guess.

So the good news is we did deliver over 40% contribution margin in the U.S. this quarter.

Since the last quarter that we're looking at the business in that way as we talked about in terms of change the way, we'll be reporting going forward I mean the.

We noted in the letter that will start reporting our revenues in our subscribers on a regional basis.

And then and then global operating margin Thats really because as we move to a world where were both licensing and producing more and more of your original programming on a global basis.

Segment margin is not really the way, we think about the business increasingly we think about managing to a global margin.

We are breaking out their regional reporting on the revenue and subscriber level because that level, we are directly driving our business.

Had a regional levels, we talked about this quarter, 90% of our growth is outside the U.S. and so we think about it more than just us versus international.

Frankly, we.

In terms of our.

Can you into to grow our margins again, we look at global basis.

We're driving.

Yes.

We think scale and efficiencies and and and margin growth across the board our content investment, while it's growing its growing slower than our revenue growth and marketing.

We will will market as as we think appropriate and needed to grow our business. We had a very large increase in our marketing spend last year. So this year you're seeing.

Yes spend at similar levels to last year, and that's because we learned a lot we learned a lot along the way, we'll continue to test and learn.

So we we find new in different ways to reach our members everyday and so we'll continue to turn up there, but we're very conscious about continuing to drive up our our operating margins on that global basis at 300 basis points increase this year to 13% and we talked about in the letter.

Committing to 16% next year. So we'll continue to do that by driving efficiencies in the business while.

While doing the requisite marketing return members.

And we will piggyback off some of those fundamental trends you just mentioned to talk about free cash flow as well a little bit of a different dynamic with investment on the cash side, but you talk about progress toward.

Turning free cash flow positive can you give us insight on some of the levers there or how to think about you referenced that coming year, just maybe just highlight for us and really the progression off the 2020 levels what your expectations.

Yes sure.

Again, we're committed to starting in 2020 improve our negative free cash flow profile, we talked about this year that that we're expecting roughly negative three and a half billion of negative free cash flow again that is investment in future content to be delivered on our service. So we we are proud.

Profitable, we're increasingly profitable so thats why we see in 2020 as we continue to grow our profit margins continue to scale scalar business. It.

What you've seen this year, which is nearly 30% revenue growth and then increasing margins that ultimately translates into more.

More cash flow that can kick you converted into content investment and improving that profile. So and we've also been transitioning from licensed second run content into original programming that created some of that working capital pressure, but now the bulk of our content investment is original programming. So we've made it a long way.

Up that curve so the combination of our scale and our business model transition is well along.

And that's why you're going to start to see that free cash flow improvement proven next year and then beyond that we're not going to give specific projections will continue to scale.

Actually towards towards self funding, while we continue to kind of it.

Go after our strategic priorities.

Mike we have time for one or two last questions. Please.

I'm sure, we'll I'll I'll take a opportunity to finish for the question for each of you. So maybe get a little little bit of a five answer bonus here, but some.

I'm curious.

What.

Each of you if you Wouldnt mind sharing our most looking forward to as we get through the next quarter and and you come to your Nexstar earnings interview with the one thing that.

You're most excited about being able to talk about as we look out that maybe I'll start with you Spencer and will.

For for convenience for backward alphabetically by last name. So you guys can configure that up expenses.

Great I.

I guess for me maybe.

To your questions from investors on competition, but I think that's pretty unlikely.

I'll say, what I'm I guess really excited about in the coming quarters actually six underground.

Original film from Ted seem a big action film Junkie, So super excited about that.

I guess I'd come next.

Yes, I'm Super excited about about the Irishman actually can't wait to see that film and also.

Frankly, it will be nice to have some of some of these competitive launches in the rearview mirrors that we can continue to look forward and all the things that we're excited about in terms of this huge global opportunity.

Great good I'm going to Ted.

Look out what I'm most excited we've got to be able to we have to do exactly what we're doing right now which is we have to continue to make your favorite show and we need to continue delivering to seamlessly and none of that changes in the and upcoming and I think when I look at the quarter ahead. These guys are already mentioned Irishman and and.

And sorry, six underground, but I also think this incredible things in between there with things like like marriage store like the two pope's from friend up for not them or Alice.

And laundromat from Steven Soderbergh. These are the most iconic directors of our time, making their next film at Netflix we have a building full of animators who have made the best animation.

Over the last decade, making their next project Netflix.

I'm really excited to be able to come in and update you on those on the those two.

Over the next quarters.

And I'm pretty consistent with that I think the opportunity to be able to expose our members to the kind of films that we are producing right now that are being released on Netflix is such a compelling way is going to be super exciting and its superfund to sort of look back on that and see how that goes.

I look forward to blowing away the numbers that accuracy as good when we have only accuracy, we havent accuracy that it's super find that low way the numbers. So fingers crossed let's see every quarter. It's at the forecast is a 50 50 guest as you see for this year and outlets.

Yes.