Spencer Wang: Great. I’m going to move this over to a few questions around capital allocation. The first is from Brian Pitz of BMO Capital Markets. Basically, the question for Spence is, can you help us frame your M&A views over the next 12 months? Is there the possibility for mobile gaming, aqua-hire or what other sorts of M&A activity would Netflix be interested in?
Spencer Neumann: Well, thanks, Brian. We’re not going to speculate on kind of potential M&A activity. But as you know, our historical bias is to build and not buy. We try to be very responsible in terms of our capital allocation philosophy. We hold a modest amount of debt. We’re currently holding $10 billion to $15 billion of gross debt. We fully fund our business and new initiatives. You see that in terms of our investment into ads, into live, into games, while still growing the business. And we’ll look at selective accelerators to that organic growth. We have done that. But we’re not interested in some of the big linear assets that may or may not be available. We also noticed that – noted that in the letter. And so I think that’s how you should kind of think about our out there to go after.
Spencer Wang: And staying with you, Spence, another question on the capital allocation. This one coming from Alan Gould of Loop Capital. We know your general rule of thumb is to have cash equal to two months of revenue. How big of a factor is the current stock price and your buyback activity and some of your debt begins maturing over the next few years? What do you believe is the optimal leverage ratio to maximize shareholder value?
Spencer Neumann: Yes, sure. So I’m glad you asked because I missed the last piece of our capital allocation philosophy, which is to hold about two months of revenue in the form of cash on the balance sheet and then to return the excess cash to shareholders over time. We’ve done that in the form of buyback. And so with a little over kind of $7 billion of cash on the balance sheet at the end of the year. And with, as you say, the kind of the – our expectation for strong cash flow build in the year, roughly $6 billion is what we’re projecting at current FX rates for 2024. You can expect that we’ll continue to return excess cash to shareholders through the buyback. We don’t try to time the kind of stock price. So we really are caught in more in a, call it, more of a price averaging sort of approach and that we buy back over time as we have excess cash.
And then in terms of optimal leverage ratio, look, we are fortunate to you have continued to strengthen our balance sheet. We had a recent upgrade from Moody’s in Q4. We continue to grow into that investment-grade balance sheet. But we we’re pretty intentionally underleveraged, frankly. We think the optimal – without getting overly specific, we think – essentially, as I said, our capital allocation strategy has served us well and that philosophy served us well over the past handful of years. And we think that flexibility in the balance sheet also serves us well to adapt to a quite dynamic industry.
Spencer Wang: Great. I think we’ll wrap up with one final question. It’s actually one question we’ve gotten from several different analysts. And in the spirit of WWE, probably a good one for Ted and Greg to tag team on. The question is, what are your key 2024 priorities? Maybe, Greg, first to you?
Greg Peters: Sure. I think you’ve heard us express this multiple times this call. But we just – we see so much potential and so much opportunity ahead of us in our core business. We got hundreds of millions of qualified households out there that are still yet to sign up for Netflix. I can’t believe it, but they’re there, and we’ve got to win them over. There’s many hours, like billions of hours of TV time that we are not currently winning. Growing along those two dimensions, more households and more moments of truth. We call them more entertainment value delivered is the key priority for us. We want to improve our entertainment offering to do that. That means delivering more stories that our members love. Films, series, games, now live events.
That’s the key to that success. And then on top of that, we’re focusing on improving how we translate all that additional entertainment value into revenue and improved operating margin. It means growing our ads business. It means growing general plans and pricing optimization. That’s the major area of work there. So that’s where we’re going to be focused on for 2024, and we’re super excited to do it. So with that, I’m – I’ll tag team to my partner, co-CEO.
Ted Sarandos: We’ll do that instead of a sleeper hold. Look, I think everything you said is 100%, Greg, and I think it all is built on the foundation of movies and TV Series and games that people love, can’t live without, talk about, can’t wait to get back to post about that drives the conversation, that drives this love for programming and entertainment. So we’re to start with that with next week. Griselda, brand new show from the makers of Narcos starting Sofia Vergara, that’s insane. It’s so good. Following the success of One Piece, we’ve got a brand-new Avatar, The Last Airbender coming for fans. We’ve got The Three-Body Problem based on one of the top-selling science fiction books of all time from the creators of Game of Thrones.
We have a new show from the U.K., from Guy Ritchie called The Gentleman that’s insanely fun. And we’re back with returning seasons of Bridgerton of Emily in Paris of Diplomat of Squid Game. And on top of that, great movies, like the second part of Rebel Moon coming up, Damsel with Millie Bobby Brown, Jennifer Lopez’s new film, Atlas, Hitman which drove everybody crazy at Sundance last night. And Eddie Murphy and Beverly Hills Cop 4 from Axle Foley and so much more. It’s just – it’s so fun and this is a never-ending mission to continue to improve this for our members and make sure that we’re bringing them all the joy that we can. I want to thank all the teams at Netflix, who have made that possible in 2023 and will in 2024. So I’m very excited, and I’ll throw it back to you, Spencer.
Spencer Wang: Awesome. Thank you so much, Ted. Thank you, Greg. Thank you, Spence, for entering the questions from analysts. I also want to thank our audience for tuning into our first ever live streamed video format. We look forward to your feedback and in the spirit of continuous improvement and Netflix on everything, we look forward to getting better at this over time. So thank you all again, and we’ll see you next quarter.
Greg Peters: Thank you, everybody.
