🔔 The Strong Dollar Earnings Massacre

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 $NFLX on the impact of the strong Dollar:

"Based on our YTD actuals and Q4 guidance, we estimate that this appreciation since January 1, 2022 will negatively impact our full year 2022 revenue and operating income by ~$1B and $0.8B, respectively" pic.twitter.com/jdWaJUNzfT— The Transcript (@TheTranscript_) October 18, 2022 

Operating income is a company's profit after deducting operating expenses such as wages, depreciation, and cost of goods sold

Our FX exposure is growing as we expand internationally. We do not use hedging derivatives. Rather, when favorable, we engage in natural hedging, in which our spending for international markets are paid in local currency to match the revenue collected from our members. We also adjust prices from time to time to mitigate the negative effects of FX.

However, our FX exposure, which is disclosed in our 10-Q and 10-K filings, will rise as we move increasingly towards global licensing, where content costs are more likely to be dollar denominated.

In setting financial guidance, we use the prevailing FX rates at that time. For example, in April, when we provide guidance for Q2, we use the FX rates at that time in April. We also slowly adjust pricing over time to mitigate forex moves over the longer term.

However, when currency movements are rapid, they may affect our near term operating margin. We’ll tend to outperform our near term operating margin targets on dollar weakness and underperform on dollar strength.

Investors sometimes brush off warnings based on foreign-exchange fluctuations, with some market watchers arguing it’s often an excuse for poor performance or only an issue on paper. That isn’t the view of Wolfgang Koester, senior strategist at treasury management software provider Kyriba Corp.

He estimates that by the end of the third quarter a group of 1,200 large companies in the US and Europe will have lost more than $60 billion in sales to foreign-currency fluctuations since January. The firms could end up taking on average a 6-cent hit to earnings per share, up from the usual 2 cents to 4 cents.

“It’s not an accounting issue,” Koester said. “If you sell something and for that you get less in your currency — in dollars, which is where your investors are — you have less money.”

“In March, when corona hit, markets were very nervous, and the small currency SEK plummeted compared to the EUR and USD. We would have lost maybe 10% in the exchange rate, but because we had hedging contracts in place, we managed to avoid the loss,”

Under the strategy, Newgen calculates the amount of each currency it will likely need in the future. For the three months to come, it hedges 75% of those payments; for three to six months out, 50%; and for six to nine months out, 25%. As the months pass, new hedging contracts are continuously added.

 Yep. Think the understanding and accountability comes into it too.

If nobody else understands what exec’s doing or why and it just registers as an expense, then there’s a risk that exec is seen to be costing company money, impacts job security.

Also, what David said 👇 https://t.co/wkKiicZN7c— Tim (@VolaTim) July 18, 2022