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Chanelle Glugla
LOS GATOS, Calif., June 14, 2012 /PRNewswire/ -- Netflix Inc. (NASDAQ: NFLX) announced today Bill Holmes is being promoted to a new role as Chief Business Development Officer of the world's leading Internet subscription service for enjoying movies and TV programs.
"Bill has helped make Netflix the killer app for the world's leading electronics companies," said Netflix Chief Executive Officer Reed Hastings. "In doing so, Netflix is now available on millions of devices and in over 25 million households in more than 50 countries."
Prior to Netflix, Holmes was Vice President Business Development & Strategy at DivX Inc., where he led the company's partnerships and joint marketing efforts with global consumer electronic brands and launched the successful "DivX Certified" program for digital TVs, smart phones, digital cameras and DVD players. Holmes was previously Senior Director, Product development for Digital Entertainment Solutions, Hollywood, where he directed the company's digital media infrastructure, providing encoding, content management and networked media distribution for major entertainment studios. Holmes holds a BA in English from Trinity University.
About NetflixWith more than 25 million streaming members in the United States, Canada, Latin America, the United Kingdom and Ireland, Netflix, Inc. (NASDAQ: NFLX) is the world's leading internet subscription service for enjoying movies and TV programs. For about US$7.99 a month, Netflix members can instantly watch movies and TV programs streamed over the internet to PCs, Macs and TVs. Among the large and expanding base of devices streaming from Netflix are the Microsoft Xbox 360, Nintendo Wii and Sony PS3 consoles; an array of Blu-ray disc players, internet-connected TVs, home theatre systems, digital video recorders and internet video players; Apple iPhone, iPad and iPod touch, as well as Apple TV and Google TV. In all, more than 800 devices that stream from Netflix are available. For additional information, visit www.netflix.com. Follow Netflix on Facebook and Twitter.
Randolph, who helped lay the groundwork for the estimated $230 billion service that has altered how the world experiences media, discussed innovation and the early days of Netflix at a Sept. 29 livestreamed event hosted by the University of Missouri System for young people interested in starting their own companies.
Friend and former colleague Bill Turpin, MU associate vice chancellor of economic development and CEO of the Missouri Innovation Center, invited Randolph to share his wisdom with the goal of inspiring students and educating them about what it takes to be an innovator.
The leadership team at Netflix knew that it was only a matter of time before the infrastructure was built that would allow viewers to stream or download movies, so they made a business decision to focus on bringing great stories to people, regardless of how the stories were delivered.
In 1981, Randolph graduated from Hamilton College in New York, where he started two clubs, founded a magazine and even produced a play. He told students that they would gain invaluable entrepreneurial skills by taking advantage of campus leadership opportunities and resources.
During his career, which spans four decades, Randolph has founded or co-founded six other successful startups, mentored hundreds of early-stage entrepreneurs and invested in dozens of successful tech ventures. He lives in Santa Cruz, California, speaks all over the world and is an avid surfer.
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.
Welcome to the Netflix Q2 2024 earnings interview. I'm Spencer Wang, VP of finance, IR, and corporate development. Joining me today are co-CEOs, Ted Sarandos and Greg Peters; and CFO, Spence Neumann. As a reminder, we'll be making forward-looking statements, and actual results may vary.
Well, now take questions from the sell-side community that have been submitted and will begin with a set of questions on our Q2 results and our forecast. So, the first question on our results come from Doug Anmuth of JPMorgan. So, Spence, Doug asks, "Can you provide some color on how churn is trending and, perhaps, share some color on what drove revenue growth in the quarter?"
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.
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?
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.
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.
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?"
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.
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?"
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.
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