Q2 2021 Netflix Inc Earnings Call
Wrong with you. People are in corporate development. Joining me today are Co Co Reed Hastings. Kocijancic content officer type Sorrento's cos you project officer Greg, Peters and CFO Spencer Neumann or anything. During this quarter is nitin Gupta from Fidelity. Has a reminder will be making forward-looking statements and actual results May Vary. Let's turn it over to nidhi. Now, for her first question.
Thank you, sponsor. Great to be with you all. Again this quarter, lots of exciting stuff to talk about. So let's dive in, just starting with the quarter, nice to see net adds coming in a little bit better. Off your expectations, help us understand what contributed to that.
Sure, I can take that, another others can jump in, but I saw the the quarter kind of played out pretty much as expected. So, we delivered 1 point 5 million paid, net adds relative to a guide of a million. In fact, what we're seeing is what we've sort of been talking about for the last couple of quarters and that there's still a bit of choppiness to our growth. You know. We we had the kind of big pull forward in 2020 of subscribers also had to push and in production of some of our kind of key returning, titles and big tentpole new releases until the the, the latter part of the year but overall the businesses is performing. Well, our churn is actually down relative to the more comparable to year ago. In 2019 Q2 nineteen before coded are viewing. And we talked about in the letter our engagement is up nearly 20% over over that. But we still feel a little bit of that Dragged In terms of our acquisition growth as we're pull as we're kind of working through what we hope is candy for Bill. Enos we're dead.
We see on the acquisition side as markets reopen, it does, does slow things down a little bit.
Yeah and it just says it's a nice steady progression in terms of getting our COVID-19 delayed slate back up to our Forum members little by little. We're still very heavily back waited for this year but there's a nice steady progress in the content and the quality of the content and the excitement around the programming that came out in this press quarter, which we saw across the board in our films with army of the dead, and fatherhood and our series, both local language and, and English language for the world like loop on and who killed Sara and even our animated projects, like Mitchell's versus a machine. Was a nice hit this quarter, so we think nice thoughts, but reminder that we're still pretty back waited in that, in that slight.
What are you seeing in the business over the last month or so. And some of your markets have really started to open up what kind of in your guidance for that. And also, the Olympics, you know, balance the fact that you have a lot more content coming in the second half. Well, the the Q3 guide is actually kind of reflects a lot of what we've seen in Q2 frankly. So, uh, as I mentioned, the, the underlying business metrics are really healthy. The 1 thing we do see with COVID-19 is we don't see the big spikes that we saw in terms of Engagement, or acquisition or, or, or ensuring that we saw in the very early days, depend emack, but on the office in acquisition is impacted. So, for example, in Q2, when things tightened up a little bit in Brazil or India, we we did see some increase in acquisition and similar the as markets reopened particularly in part in most of the media and the ucan region that did have a bit of a a headwind on acquisition. And that's, that's reflected basically in our queue age.
Guide as well. So similar business.
Fundamentals. You know, the hopefully kind of starting to move a little bit further away from those marquetry openings, which is why you do, see some, some incremental growth. So a better seasonal. As well as moving a big far away from those those marquetry openings, but not a big fundamental change and then hopefully into a even more re acceleration as we get to the end of the year, as we really get into the, the kind of Heart of our home of our kind of, you know, kind of strong release schedule as well. As, you know, Peak seasonality.
I think a big question on investors, Minds is just how do you feel about your ability to get back to pre COVID-19 levels of net adds as we get into 2022? Yeah, yeah. Well, you know and others to chime in but but you know what's what's? I just want to kind of emphasize even with the Q3 guide. And then into Q4, you know, when you when if we deliver on our Q3, we talked about in the letter that's that will be the the the growth pattern in our business is over long term is over. The long Trends is remarkably consistent and steady. So, you know, we'll have them if we deliver on our guide. It means we'll have added $54, million, new members over that 2 year period or on average twenty 7 million a year which is right in line with our past few years of growth in 2 thousand eighteen and nineteen. So. So we remain on that growth trajectory and and again once we get into Q4, what we would expect is as we get through hopefully that tail end of the COVID-19.
Happiness, we get into that strong strength of slate. We get to a kind of a high seasonal. For us. We'd expect to end the year on a much more kind of normalized growth trajectory, but, but, you know, we kind of have to have to get there.
Neither you can decompose the long-term risk in the 2 things..1 is does internet streaming slow down and that seems pretty unlikely. I'm streaming has been amazingly consistent prolific. As you get new competition in, you get validation, more reasons to get a smart TV or unlimited Broadband. So I think we're at least the next several years, that grow story of streaming is a whole is very intact, and then you got the secular competition story does HBO or Disney or other entry have a differential impact compared to the past. And we're not seeing that in the detail that we have for country. You know, cuz they're launched in some countries and not in others. Um, that gives us Comfort not seeing that in the total viewing like the Nielsen measures. And so we think mostly all of streaming is a gross story competing from linear TV and that, that will be true.
Until say streaming is fifty sixty, seventy percent of doing, you know, and then there's going to be shake out and we want to be prepared and leaving that, but again, the next step of your screen is still in the early stages. That's super helpful. Read that actually answered my next question. So maybe just shifting gears to either. Do some focus in the market, certainly an additional sources of revenue that you might have in the future. But before we get to that help us understand what makes Netflix's Core Business. A great investment for shareholders over the next, you know, 5 plus years. What kind of the the growth free cash flow, Capital return algorithm, that gets you excited that you think we should be focused on.
You got the answer.
Well, I was going to throw it to 1 of you first if you like, so that's okay. You want to go that investors get is being a secular internet down as much as Amazon was strong, the 2005 and 2008. All of us, collectively underestimated, the impact of what the internet could do. And this is the internet applied to Enterprise and consumer entertainment around the world that gives enormous Market. It has great potential, you know, for us and potentially our competitors offers so that big things is, is again, what gets you excited and when we're growing Revenue by, you know, 19%, it's not that hard to grow theater basis points to marja, you know, as the revenue goes close, it'll get a little bit tougher, but we'll continue to lean into that and so I would say, you know, it's fundamentally a story of particular birth.
Annual growth management team committed to Growing profits and cash, flows, and then returning those cash flows through Buy Backs, which spends got a big start on this quarter. So what were you expecting? You know, I just you hit on on all the key points I would just add that it's, it's still early days and pretty much every market around the world. I mean, if, if you go over all in any of, you know, we're roughly, 20% penetrated in in Broadband homes. And we talked on the last call that there's 8 hundred to 9 hundred million either Broadband or a TV households, around the world outside of China. And as we continue to improve or service and the accessibility of our service. We don't see why we can't be in all or most of those homes over time if we're doing our job. And then, if you look at the range from, you know, an Apec region, where we're only roughly 10 per-cent, penetrated wage clearly early days to are, you know, arguably, I guess more tenured markets. At least like in you can we're even there with the the metrics we put in the earnings letter stream.
And, and read alluded to this is is only about 26%, according to Nielsen of of viewing consumption. So the 60% plus is still linear consumption. And then within streaming, we're only 7 a.m. We're only at 7% share of of, of, of total T. So we're only 7% of that 26%. So there's, there's big Tailwinds there, in terms of that overall, trend from linear to streaming entertainment and then that plays out in the financials. So again, our, our profit margins over the last 5 years. Have grown 5 acts are absolute profit dollars have grown twenty acts as the business office is scaled from about a hundred million to $2 billion of operating income per quarter over the past 5 years. And so that will continue to scale. We think in a healthy way because the nature of our business office as well, it's creating content from anywhere to everywhere in this very large addressable Market with these big profit pools. So we you know, we have a long Runway of growth profitability, a New Jersey.
Turn the value to shareholders.
And I think we think about how slow the business fundamentally changes and how quickly streaming has changed the entire Market Place in terms of the way consumers, watch you go back to about only 8 to 10 years ago, and no 1 was looking to the internet or 2 streaming for the highest quality content. And today, the most watched the most talked about. The most award-winning television is all coming out on streaming services off. And but spends this point, you've got this enormous addressable audience, we're only in a fraction of them and we're only getting a small percentage of their total viewing. So it's still, it's still an enormous prize and we're still in the best position to run after it as we've kind of expanded. What Netflix is to members which is not just a show, you might like, but it's the shows you like instead of films you love
Yeah, thanks for letting us a picture of a sock.
Crazy. Give you a platform know. I mean, you make a good point, you know, you've created a consumer product with global appeal? And as you said, if you do your job, there's no reason. You shouldn't be in every internet household over time at the same time, you know, not all subs are created equal, and I think there's a lot of debate in the market as to, how long can you continue to grow Revenue double-digit without some of these lower arpu Market? You know, really starting to kick in I'm in terms of kind of meaningful Revenue contribution and even this quarter two-thirds of your net adds came from Asia packages. Do you know what time
Gregg, do you want to take it a little bit too in terms of just some of the growth in that those regions and our pricing? Yeah and I I would say we're, you know, working hard to think about how do we find, you know, this wage wide range of price points. That speaks to, you know, a feature set and consumer needs in more affluent markets and we're really, you know, trying to find, you know, um, ways to add more value there. While we are also thinking about the, the sort of populations that you're talking about and making sure that we're increasing the accessibility of the service and really, you know, the ability to participate in and and Thrive Georgia from the stories that were telling to, uh, you know, more and more parts of the world population that don't have as much means to pay. And of course, you know, the trick there is to find, you know, the right feature-set. Uh, offers that allow us to sort of broaden that range without cannibalizing, you know, the other layers and we're really take this, um, you know, sort of iterative approach where we try different, you know, solutions to age.
Sort of puzzle and then measure them based on this, what's the net revenue that we're seeing? And so, you know, very much what we're trying to do is um you know as we bring in lower price plan offering that sort of you know decrease average revenue per member. Also think about that from the calculus of expanding, you know, the funnel in a way that delivers total net positive Avenue and we're definitely seeing that and the mobile plan launches that we did in, you know, 78 countries. This quarter are an example of us, you know, trying to make incremental progress against that puzzle and brought in that region.
That's very helpful.
How is competition particularly as the competition consolidate affecting, just you're thinking on longer-term, pricing power around the world.
I think, you know, ultimately, we are competing already with, you know, tons of forms of places that consumers can spend their hard-earned money on entertainment and mostly what we are looking at is, you know, in the specific calculus of how do we deliver more value? How do we provide a wider range of incredible stories? A high-quality in a city of of content that appeals to those consumers and appeals to more and more consumers around the world. And if we do a good job there, then ultimately, then we have the ability to go back and occasionally, ask some of those members to pay a little bit more to keep that virtuous cycle going. And so I would say on the the demand side maybe, I'll let Ted speak to the supply side. If you will in a second, but on the demand side, really, it's just that's a very narrow focus on. Are we doing a good job at adding value and continuing to deliver more to our members?
Yeah. And I think in General Dynamics of consolidation is, you know, you see it across all these companies. Basically had Consolidated themselves into bundles on cable for years, and I do think all the access to these are all the same players we've been competing with from the beginning, just through different channels. So I think in general that that does that doesn't change in terms of what the offering is and in terms of access to that offering you know Netflix because of the size of our distribution platform, in our ability to connect creators with a big audience it's always been a a big help in terms of learning content to to our platform.
And Nanny. Certainly Disney buying Fox helps, Disney become more of a general entertainment service rather than just a kids and family package, No Time Warner Discovery if that goes through that helps some but it's not as significant, I would say, as, um, dizzy Fox and then, for the remaining 3 months, he how they combine, or don't combine or cooperate, it's unclear. But again, day-to-day we just focus on that content choosing and conversation, how do we improve the service members? And like Greg said, there's so much competition from, you know, Instagram and tiktok and sports and the Olympics, and everything else that back to the Nielsen data for the US, there's plenty of room to grow, you know, without taking it away from the other streamers.
I have to look at all of these. When do those consolidations. When are they 1 + 1? Equals 3 or 1 + 1 equals 4 versus which most of them tend to be which is 1.1 equals 2.
Yeah, no. That that makes a lot of sense. Switching, gears to you fence, you know, the last couple of quarters have shown us just how much profit potential is in this life. You know, going back to traditional TV networks, the most profitable Network. Did, you know? 40% plus even margins at Peak and they didn't have the scale and bring what you have? So what are kind of the puts and takes? Uh, you look at your long-term margin potential against that 40% plus history that we've seen
Well.
The I'm definitely not going to provide long-term guidance relative to the 40%. So well, I appreciate it but it's it's nice to know that those kind of those comparables are out there. Are those benchmarks are out there to them. And but as we talked about before, what's, well, we love is that our business has a very scaleable model. And so, with most important for us is to grow healthy. And by that mean, being able to wage aggressive, Lee, strategically invest in the growth of our business while increasing our prophet. And that's what talked about before. We have been doing pretty well so far and will continue to feel our way along. So Thursday, we have been growing at 3 percentage points per year for over any few year. And is Reed said that's something that's been reasonably. I wouldn't say easy, but accomplishes will for sure when we're growing in that 20% or so Revenue growth per year now obviously, that that can't last forever in terms of 3 percentage points a year. But we Thursday
We have a long Runway of growth, we have some things that work to our advantage, in terms of the global nature of our platform, the ability to create stories anywhere and it said that they travel well, not just in their office, but across countries and markets around the world. So that's a nice model for us. We have a revenue model and subscription that also scales. Well in kind of established a larger and smaller and not markets and that's great as well and then it's going to depend a bit on as the as the business involves competitive Dynamics relative cost of content, of course, those things on the margin impact Mark, but a lot of Healthy Growth out of us.
And read, you know, the the 3 hundred basis points of margin per year has instilled, you know, good amount of discipline on the business, you know, probably ranging heads content business, but a little bit on the margin. But why is why is that for the, the right Cadence, going forward and I know what's an average. But if we look back in 5 years and, you know, the average was lower than that. It has been because of new businesses, you found to invest in or competitive forces or something else.
I don't think there was a ton of magic in the 3 hundred basis points if we had decided on 2 hundred or 4 hundred, you know, we'd be marginally different today but I think in the long-term we get to the same place. Um so you know it's a guess that sets up a framework for how think about that allocation into faster growth that has incredible driving, you know, and providing you know, what Profit Stream for investors. So we're comfortable on that balance and the big prize is keeping the 20%. So, you know, most of our time is like, okay, how do we get the the revenue growth going? How do we, you know, have the content that you just can't ignore, everybody's talking about, you know, and that's what, that's what fuels those big sergeants and you know, the more we do the more we're learning. So we're making a ton of progress, you know, show-by-show film Birth.
Films of how.
How to really push the consumer satisfaction, so that's very promising. That's work that you'll see showing up next year and Beyond,
Great read, maybe just staying on you for a minute on the last earnings. Call, you talked about, you know, video streaming being sort of the main process school and took over time potentially smaller supporting profit pools. You know, over the last few months you've made, some key hires in gaming and podcasting. You've launched an online wage or um, I believe you've expanded your deal with Shonda Rhimes to include live entertainment. Can you just talk us through which of these sort of adjacent business areas actually has the potential to be a meaningful profit pool in the future?
Well, I would say none of them that is, they're not designed to be because, but I'll draw a distinction, there's things that are consumers, love it in our service, so Shonda Rhimes future work, we're very confident video game, you know, we're pushing on that and that will be part of our service. Um, so unscripted, get all those things. So think about is making the core service better, so lots of investment but not a separate process school. It's enhancing you know the big service that we have found. There's a number of supporting elements, consumer products, various shopping at the title Brands to get our conversations up around each of the titles off, the Netflix service becomes must have so they're not a profit pool of any material size on their own but they are helping. The reason we're doing them is to help the subscription service, dog.
And be more important in people's lives. So I would say, really where a one-product company with a bunch of supporting elements that help that product even incredible satisfaction for consumers and a monetizing engine for Investments.
Great, that's helpful. Just to follow up on gaming, Greg, I'll take it to you, you know, very exciting to see a key higher in gaming. Last week, there was some more details in the shareholder letter as well, but just, you know, bigger picture, how will you achieve the things that matter? Most to Gamers, you know, whether it's great content, ease of play with a net worth of Gamers to play with what are sort of the unique assets that Netflix Netflix brings to the table and why will people be excited to play games on Netflix? Well, sort of picking up, where we'd left off. We really see this as an extension of the core entertainment offering that we've been focused on, you know, for the last twenty years, right? So, just as we've continuously expected, the the nature of our offering by adding new genres, unscripted film, local language, programming, animation on. And on, we think we have an opportunity to add gains to that offering and dead.
Ever more entertainment value to our members?
Through that. And similar to what you've seen in that trajectory when we've added a new genre, that's what we expect will happen with games. So this is going to be, you know, it's a multi-year effort wearing to start relatively small will learn will grow where we focus. Our investment based on what we see is working and we'll just continuously improve based on what our members are telling us is working. But I'm really excited about a bunch of different ways that I think that we can provide an offering here, you know, uh, that is differentiated from what's out there, and the, the first of those is really about the IP that we create. You know, we are in the business of making these amazing worlds and great storylines and Incredible characters. And we know the fans of those stories want to go deeper, they want to engage further, they actually want to direct a little bit where their energy goes and um, what's great about interactive is, you know, first of all, you can provide, you know, you suck.
Versus to just provide really you know significant amount of time that people can engage in an Explorer. They can also provide a little bit of intentionality where do they want to explore? What characters, what parts of the world? But parts of the timeline. So there's just a lot of exciting things that I think we can do in that space. We also feel that our subscription model yields, some opportunities to focus on a seven-game experiences that are currently underserved by that sort of dominant, monetization models and games. We don't have to think about ads. We don't have to think about in-game purchases or other monetization. We don't think about per title purchases, really, we can do what we've been doing on the movie and serious side, which is just paper laser focused on delivering the most entertaining game experiences that we can't. So, we're finding that many game developers. Really liked that concept, and that focus. And this idea of being able to put all of their Creative Energy wage,
You need to just great gameplay and not having to worry about, you know, those other considerations that they have typically had to trade off with just making compelling games. So those are some of the core things that were were excited about. I think, you know, that can make this, um, you know, effort for us special even in the in the world of games.
Thank you, that's, that's super helpful. You know, I've always known this management team to take an incremental approach on these things. While also having well-informed thesis on a long-term and how things will play out. So if you can articulate it, what is sort of your long-term thesis? I'm gaining, and as, you know, starting with mobile and sort of a month content, vertical strategy is that sort of a starting point or is that an ending point and he's you see yourself as a platform over time. Do you see gamer? You know, coming to the people you can play. What is sort of the, the long-term thesis of what this could evolve into. Yeah, I'll just, I'll take it from the platform angle first and sort of may be widened that view, but you know, we think mobile is a great platform for games. Clearly, it's very mature, it's got, you know, great enabling technology tool for the and the vast majority of our members have wage.
Phones that are capable of.
Gameplay experiences. So it's our checks, all of those boxes. And so it'll be a primary focus for us to deliver those experiences. But ultimately, we see all of the devices that we currently serve as candidates for some kind of game experience. We've actually, you know, been delivering lighter-weight, interactive experiences on TV's and TV connected devices for some time. And, you know, you can call them games, you can call them interactive experiences with, obviously, they all exist on a spectrum and we're going to keep innovating in that space and we feel like there's a rich opportunity to continue to deliver and Advance the technical capability to, you know, improve the quality of game experiences we can deliver the range of devices and then you know, we we want them to be very sort of experimental and and try a lot of things in this phase. A lot of what we have to do right now is just focus on learning and you mentioned that sort of incremental list approach. A lot of this is really trying to maximize learning philosophy.
What we would say. So we're going to try a bunch of different games through a variety of different mechanisms to see, you know, what's really working um for our members part of that will be you know, games that extreme and uh r i p. We think that's a really rich rich space. So that's very much part of our long-term thesis but also we'll do things where we try Standalone games. We feel like you know Altima this. The success of this initiative is about great games fundamentally and those can come from a variety of different sources, maybe someday. We'll see a a game that that spawns a film or, or C rep. That would be a an amazing place to get to. And really see the rich interplay between these sort of different forms of entertainment will also do licensing cuz we, you know, just we've done it in that sort of other genre expansion. It's a great way to increase the volume of the offering that we have at the start to learn more quickly. And then, you know, as our internal production, sort of scales wage
Focus the energy on what we're learning in that regard. So broadly, we think, um, as you said, you know, there's a big big prize here and our jobs really to sort of be very focused. And deliberate about 5, we're going after the maximizes, their learning value, iterates, that continuous Improvement approach. And, you know, we feel that that's yielded really big, um, results for us as we follow that sort of technique and all the kind of genre expansions we've done around the service and is, it is a financial success of this over time? Should we think about that as hire? Or who bought the Netflix service or? Is there a standalone? So financial success here you think over a very long period of time if you're successful you know. I'm not going to guess it to, you know, very, very long term. But we're really thinking about this is a core part of our subscription offering and so, we measure it very much like we do around the success of, you know, adding incremental movies or adding incremental series, which is
that ultimately, you know,
Those are about like being, you know, compelling to members having them engage, uh, and talk about it. Having that be part of the social conversation, that's out there. We see those benefits in retention. Obviously, if we're delivering value there, then member stay with us longer. Um, we see those values and acquisition as well. Um, because when there's a, you know, if there's a great game, that's lots of people are talking about to their friends, their colleagues, their family. They do, you know, a source of acquisition for us as well.
Great, thank you. That's super helpful. Maybe Switching gears to another content vertical Sports which comes up a lot said, you know, you you haven't historically been keeps on buying Sports rights and you know, that may have been the right call given the cost of collation. We have the entire but you know, you have had a lot of success with sports related programming like the Michael Jackson documentary, the F1 series, you know? Do you do you see Netflix becoming sort of a key destination for sports-related Content over time and I'm even thinking, you know, news and Analysis, or is there a sort of a limit to what you can do, without the underlying rights? Look, I think we've if you pointed it out, but our success with the sports adjacent properties like like to have 1 drive to survive a debt View. And certainly the Michael Jordan. Those are all examples of think of the the platform and what it can do to build in Thursday.
As a mom, what is already viewed to be an enormous business? Uh-huh, drive to survive, expanded the audience for Formula 1 racing, pretty dramatically and both in live ticket sales and tear em and merchandise sales, all those things and I think that that could be applied as long as the storytelling is great. So what's good about this for us is that we could apply those same kind of creative Excellence 3 times because it's behind the sports, the drama that happens off-camera and fans. Not only deep fans are compelled to see more but also can bring new folks into the sport so we think it's pretty exciting. We think it's a dead continue to explore it. We have this incredible documentary on Naomi Osaka. That's I just came out this week. That's another example of this that can really brought in the fandom for the tennis world, particularly going into this exciting. Of the Olympics.
Outside of the big American Sports football and basketball. We have always seen a lot of the cost escalation are there more Niche sports or Sports and international markets where you feel like there might actually be a good Roi on owning the LIE there, right? I don't know that those Sports suffer from being under distributed. So I don't know that we would bring that much to them and I just to be clear reiterated this a lot. But I'm, I'm not saying well to Never Say Never on Sports. Just what is the best use of about 10 billion dollars? And I think that's what it's going to cost to invest meaningfully in Big League Sports and that that pricing is only gone up started saying that. So I believe that that's likely to hold. But again, I don't think it's because those other sports are Niche because they're under distributed and if we could bring a lot to them are fundamental product is off on demand and advertising free and sports tends to be live and packed with advertising. So there's not a lot of natural synergies in that way except for it happens on television, so off.
When it becomes the best use of that next tranche of investment, we definitely would be open to it.
Do you see any?
Merit and what Amazon is doing in sports. I I don't know know particularly what they're doing. I mean, I know what they're offensive Watcher, I know what they're doing, but I don't I'm not sure exactly what they're looking for. The same thing from a Content, spend that we are Switching gears. You you know, you wrote in your book about farming for Descendants name of the organization on strategic decisions, which I thought was a really interesting chapter of the book.
What would you say are some of the biggest debates inside Netflix today, as a relief strategy.
You know, I'm a little careful on that relative to competition cuz most of them about, you know, how do we Fox Disney, so to speak and, you know, the liver amazing of the same man, so that would be the list, but if we do it in, in hindsight, we talked about video games for 8 years, writing up the pros and cons with the timing of Entry, um, you know, that has properties like film that you can own the ID. Um, you're going to have these Long Branch offices and, you know, very positive for us and, you know, kind of industry structure wise if we can Master the skill set. And so really it came down to us thinking that the incremental money to fund games um made sense relative to our other content Investments. So that would be the kind of process that we go through Thursday.
Idol healthy way to look at it read might be, you know, in hindsight almost everything that we've done which, you know, has turned out. Well, also came with a very Hardy debate. With people, you know, very young. I'm good account opposing positions on why we should or shouldn't do it. And I'd say that's been true of every expansion. We've taken on many, we have a time for 2 last questions, please, great. I'll turn it to Capital allocation, you know, very exciting that we're on the cusp of achieving positive free cash flow. So a couple of questions on that first. What's the rationale for keeping that grossed at sort of a 10 to Fifteen billion dollar range while free cash flow grows over the next few years?
Yeah, there there's similar to our I guess our profit margin is not like a pure science to it but you know what, we viewed it as is we want to maintain some level, we leverage in the marketplace because we want that familiarity, excuse me, with the capital markets should, should we need access to Capital over time? So that's why we talked about that 10 to 15 billion of Leverage. But, you know, there again, there's not a, a perfect science who what's most important to us in terms of our Capital, allocation strategy again is to invest strategically in the business. So that, that is our first priority. That's what. Hopefully, your faith in terms of our investment into film and television extension into into video games, and hopefully other content categories over time in that kind of mission or objective to entertain the world. As we have excess cash, we will return it to shareholders occasionally. That's why we started to share repurchase program. We we purchased to have a billion shares in as soon as it's not, you know, that there's a fixed amount that we're going to suck.
Just a recorder that's really after we've satisfied, all of those other strategic objectives and then we'll, we'll kind of take it from there, but we have a 5 billion share repurchase, authorization. We will maintain something in the Capital Market.
But we significantly delivered, I think our our Leverage is down to about a 2 and 1/2 x, uh, you know, debt-to-ebitda which was, you know, a bit above 5x, not too long ago and Thursday and we think it's important to have a the flexibility in our balance sheet to invest into growth while being kind of prudent and responsible with our Capital allocation and not answer. Maybe you would would add to it. But we we we, we talked a lot about this topic. Yeah, I think you you nailed it since and just related to that. I mean your, your appetite for m&a, has historically been a pretty low. I'm wondering if that changes at all. If you explore gaming or, you know, perhaps other areas. Um, you know you and your core business you haven't seemed disinterested in some of the traditional IRA instead of been in the market. Like, for example, what are the characteristics that make a good acquisition for you will spawn? Spencer, runs that group for us all that Spencer answer and I can log
Thanks Spencer, and it's a good question. So, I guess, you know, a couple of things without speaking towards any specific opportunities, I would say, you know, as a company we look at many different ways to accelerate the growth in our business, including Emma day. So, you shouldn't assume, we look at many, many different things. And we've said in the past that we're open to contacts that can help accelerate, argh things like intellectual property that we can develop into the original series and and movies. Um, in addition film, and T libraries could be um, you know, interesting as well. We'll see on the gaming side that I said, we are mindful of a couple of things. First of all in our, our encumbrances um, for example, which you know, we have some of these content assets are heavily encumbered and limit our ability to use them on Netflix, them are of limited value to us. Since our top priority is to grow the corn Netflix business. Secondly, are opportunity costs and trade-offs. So as we evaluate m&a, we always think about Thursday.
If we bought company Acts or as a tax for, you know, why dollars um what's the alternative use of why dollars and which is best for the company. So hopefully that gives you a little bit of a framework for how we think about
Yeah, the key the kid is has to accelerate our strategy with low distraction cost and so we're pretty picky and it's got to be something that's in the right in the middle of the Strategic core of what we're doing wrong. I mean I guess was with that backdrop, I mean, is there any reason to think the majority of free cash flow? Would it be used for Buybacks in the future?
Well, we're getting ahead of ourselves a little bit, but it's, it's certainly something we've contemplated as why we have the the filing authorization. But you know, that'll be a. I kind of look at that as a high-class problem, where we've guided to cash flow, roughly break-even for this year. So let's get through this year and kind of look at our tracking. Next year, I'm excited for, you know, getting hopefully past this is nearly, you know, what will then be almost a two-year Global pandemic and a really kind of full contents late, and hopefully, a more normalized world. And then we can worry about what to do with our excess cash and problem to have faith, you go. Well, thank thank you so much for doing this again, with us. I just want to say, we we're really happy with the quarter. We're happy with the programming, or happy in this. Very complicated time. Both in the world and the business to be growing subscribers in Revenue. This is a big story mostly about how the world is in love with streaming. And when it comes to watching your favorite show, wage
So it's more likely to be happening on streaming than ever before and it's still just scratching the surface as to the potential for the business.
And while everybody else is trying to figure out how to unwind businesses and restructure businesses, and put together. Enormous populations of employees, we're focused on 3 things. I know we're speaking about a thousand plates but we're really focused on our 3 things which is our content are choosing and driving conversation around the world. And with that, we're really confident in our team to continue to drive that it's just to continue success to thank you.