NETFLIX Earningcall Transcript Of Q2 of 2024

Spencer Adam Neumann -- Chief Financial Officer

Yeah, sure. Thanks, Doug, and thanks, Spencer. We had -- we're pleased with our performance in
Q2. There were strong performance across the board, good momentum across the business,
strong revenue growth, member growth, and profit growth.

In terms of that member growth and churn, I'd say the kind of outside -- outsized paid net ads in
the quarter was primarily driven by a stronger acquisition, a little stronger than we expected, but
also very healthy, continued healthy retention in the quarter. And that's across all regions. In
terms of growth, generally, there's probably kind of three key factors that drove member growth.
First, strong performance of our content slate, the wide variety of titles that delivered across
genres and regions.

And I'm sure we'll talk more about that. There was some positive impact from page sharing that
continues. As we've said on recent calls, it's tougher and tougher to tease that out. We're clearly
seeing healthy organic growth in the business, but we're also continuing to get better and better
at translating improvements in our service into business value, including getting better and
better at converting unpaid accounts.

And on -- at least on the paid member front, we're also probably benefiting from that attractive
entry point in terms of price point and feature set for our ads plan. So, you put all that together
and it was a nice quarter for subscriber growth, but even more importantly, a nice quarter in
terms of driving healthy revenue growth and healthy profit growth, so 17% reported revenue
growth and margins that were up 5 percentage points year over year.

Spencer Wang -- Vice President, Finance, Investor Relations, and Corporate Development

Thanks, Spence. Doug also has a follow-up question on the results. We noted -- or Netflix noted
that India was our No. 2 and No.

3 country in terms of paid net ads and percent revenue growth in the second quarter. Do you feel
like you're hitting more of an inflection point in that market? Or is that more about a very
specific, successful content slate in Q2?

Spencer Adam Neumann -- Chief Financial Officer

Do you want to take it or --

Theodore A. Sarandos -- Co-Chief Executive Officer

Yeah. Well, look, I think India's growth is a story that we see around the world playing out very
similarly. So, you look at the content, the product market fit is what drives our ability to attract
members and retain members and monetize with them as well. So, I feel like what's going on in
the quarter has been this ongoing build.

We had this great show, "Heeramandi." Sanjay Leela Bhansali, SLB, is one of the most celebrated
filmmakers in India, and he took on this incredibly ambitious series and brought it to the screen
on Netflix, directed every episode, and it's our biggest drama series to date in India. So, on top of
that, our original films and our licensed films, those films in the pay TV window, they're
immediately following theatrical, continue to thrill our members. So, we pick them well, we
program well, we improve the product market fit. We improve engagement, we grow our
members, we grow our revenue.

It's the same formula, I think, everywhere else everywhere we go. And there's certainly plenty of
room to grow in India as long as we keep thrilling our audiences there.

Spencer Wang -- Vice President, Finance, Investor Relations, and Corporate Development

Thank you. Ted. Our next question on the results relate to operating margin. And the question
comes from Jessica Reif Ehrlich of Bank of America.

For Spence, how should we think about the pace of margin expansion going forward and the
drivers of the margin outperformance this year.

Spencer Adam Neumann -- Chief Financial Officer

Thanks, Jessica. Well, you know, when we think about margin expansion, we're obviously
pleased with how it's trending so far. You know, our focus -- kind of stepping back, our focus is
to sustain healthy revenue growth and grow margins each year. You know, so we feel good
about what we've been delivering.

As you see in the letter, we're now targeting 26% full year operating income margin. That's up
from our prior guide of 25%, and it's up 5 percentage points year over year, assuming we kind of
land there. But the amount of annual margin expansion, as we look forward, it could bounce
around each year. We've talked about this -- in recent quarters.

It could bounce around because of foreign exchange in a year where that moves or other
business considerations. But we're committed to grow margins each year. And we see a lot of
room to continue to grow profit margin, absolute profit dollars, and do that over an extended
period of time for years to come.

Spencer Wang -- Vice President, Finance, Investor Relations, and Corporate Development

Thank you, Spence. Our next question comes from Steven Cahall from Wells Fargo, and it's
regarding free cashflow. So, the question is, "Netflix has raised their full year revenue and margin
outlook but did not change their free cash flow forecast of approximately $6 billion. Is this just a
pull-forward in cash content spend, or is there anything else that is impacting your free cash
flow guidance?"

Spencer Adam Neumann -- Chief Financial Officer

I'll tell you, though, nothing else impacting it. We -- you know, as we noted, as you noted, we
continue to expect approximately 6 billion of free cashflow for the year. There's always some
uncertainty in terms of timing of things like content spend, sometimes timing of taxes. So, that
kind of keeps us right now holding at approximately 6 billion.

But no other read through beyond that.

Spencer Wang -- Vice President, Finance, Investor Relations, and Corporate Development

Thank you, Spence. We have our quarterly question on page sharing next from John Hodulik of
UBS, which I'll direct to Greg. The question is, "Do you still have upside from the paid sharing
initiative? And have you moved forward on mobile paid sharing? And if so, how big of an
opportunity is this?"

Gregory K. Peters -- Co-Chief Executive Officer

Yeah, Spence already gave some commentary on this quarter's performance. I'll talk about it
sort of more from a long-term perspective. As we said for a couple quarters now, we're at the
point where we really operationalize paid sharing. So, it's just a standard part of our product
experience.

And we think about the improvements there. And to be clear, we do see still some significant
areas for improvement there. But we see those as part of all the opportunities essentially we
have to improve the product experience. So, we're constantly prioritizing all those opportunities
based on what we think is the expected value.

And just to give you a sense of, you know, how wide that is, even things that we've been working
on for over a decade, like our signup flows or the user experience that a consumer has when
they want to sign up for Netflix, we have found multiple improvements just over the last couple
of quarters in those flows, which have delivered material incremental revenue wins. So, we're
going to continue to look at all these opportunities. We're going to improve things for members
and for the business. We'll iterate, we'll improve them.

And we think of this as just a constantly improving value translation mechanism. So, we want to
take all the value that's created by Bella's teams in film and series. We've got more live events,
games. And we want to translate that more effectively into revenue so we can continue to invest
and keep that flywheel spinning.

And if we can keep improving that value translation mechanism each quarter and keep
improving the entertainment offering that it operates on top of, those two things compound and
drive the business. It'll drive the business to the rest of the year. It'll drive through '25 and
beyond. And that really allows us to more effectively get more of those 500 million-plus and
growing smart TV households around the world that aren't currently members to sign up.

And it also drives our other levers of growth, like plan optimization, extra member, ads, revenues,
and pricing into more value. So, I just -- I think about this as more of the, you know, constant
work we are doing to improve for decades to come.

Spencer Wang -- Vice President, Finance, Investor Relations, and Corporate Development

Thank you, Greg. I'll now move us along to a series of questions about advertising. And we'll
start first with Barton Crockett of Rosenblatt, and I'll point this question to Spence. You say that
advertising is not a "primary" driver revenue growth yet.