Spotify reports earnings but moderates the outlook for new users
Spotify reports earnings but moderates the outlook for new users
reported its first profit in the last quarter, thanks to its investment in the Chinese music transmission service Tencent Music Entertainment Group, but it lowered its subscriber growth guide for the current quarter.
The shares of the Stockholm company fell 8.9% to $ 136.31 on Thursday morning in New York.
The company, which expects to recover a loss this quarter, reported 87 million subscribers after adding four million net during the quarter ended September 30. Supported version - to 191 million. The results were at the top end of the company's guide.
Spotify moderated the high end of its subscriber growth perspective for the December quarter, forecasting that the number of subscribers will reach 93 million to 96 million and active users will reach 199 million to 206 million. Previously, it had guided up to 97 million subscribers and up to 207 million active users.
Spotify also cut its gross margin expectations by 50 basis points for the current quarter as a result of its new partnership with
Alphabet
From Inc.
Google. On Wednesday, the company said it will offer free smart speakers from Google Home Mini to holders of family plan master accounts in the US. UU For the Christmas season.
In a conference call with investors, Spotify executives said that this and other partnerships, including the integration of the service with Samsung smartphones announced during the quarter, represent a "significant opportunity for growth," but said it is too early to report on progress
Chief Executive Daniel Ek said that one of the key strategies of the company is to work with as many partners as possible. "The goal of Spotify is to be a first-class user experience on all those devices," he said.
During the quarter, the company released updates to its Spotify for Artists analysis platform. A feature, in beta version in the USA. UU., Allows some independent artists to upload their music directly to the service. The playlist submission feature also allows artists and labels to send unpublished music to the Spotify editorial team to be included in playlists that can direct many more listeners to an artist's songs.
"We do not consider our strategy to be in opposition to any of our partners," said Mr. Ek. "It's quite substantial to bring new artists to the masses, if we can reduce the cost for that, we should see many more successful artists and labels."
The company said there are now 250,000 monthly users of Spotify for artists. That's key because the company continues to promote its "two-sided market," where the company would eventually charge artists and stamps for additional services.
"The main focus for us is our strategy, which is around the bilateral market and that is what we are working with all our partners," said Mr. Ek.
He said improvements in gross margin will continue, and renegotiations with labels will be a function of "many more" agreements, since Spotify can offer more services.
In general, for the period, Spotify made a profit of € 43 million ($ 48.7 million), or € 0.23 per share, compared to its loss of € 278 million, or € 1.84 per share, in the quarter from the previous year.
The change to earnings was due to a 125 million euro tax benefit related to a change in the value of its investment in Tencent's Chinese music, Spotify said. The two companies announced a stake exchange in December 2017; Tencent music submitted to go public In early October of this year.
Spotify previously warned that such a benefit would be a "single, non-recurring event" and expects to return to a net loss in the subsequent quarters.
Analysts polled by Thomson Reuters expected a loss of 0.36 euros per share.
The company has reported net losses every year since its launch in 2008, and has said it is prioritizing growth over earnings as it works to maintain its position in the music streaming market.
Revenues increased 31% to 1.35 billion euros, at the top end of the company's guidance, and just above analysts' expectations.
The free cash flow, a measure of the cash that a company generates and that many investors consider as a performance representation, was 33 million euros in the quarter, compared to 18 million euros in the previous quarter and 89 million euros past year.
The growth in family and student plans continued to boost subscriptions and weighed the average income per user, which fell by 6% to € 4.73.
The company supported its revenue guide for the quarter from € 1.35 billion to € 1.55 billion.
Write to Anne Steele in Anne.Steele@wsj.com
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