Spotify Technology today reported financial results for the second fiscal quarter of 2019 ending June 30, 2019.
The company said that the streaming service added 15 million new listeners last quarter, including eight million paid subscribers.
Spotify ended June 2019 with 232 million listeners, up 29% year-on-year from the 180 million it had a year ago, and up 7% quarter-on-quarter from the 217 million it had at the end of March this year.
Spotify said it now has 108 million premium subscribers, up 30% from a year earlier. Revenue from premium subscribers, which account for nearly 90% of its overall revenue, rose to 1.50 billion euros ($1.67 billion) in the quarter.
The company reported total revenue of €1.67 billion in the second quarter of 2019, up by 31% from the €1.27 billion it posted in Q2 2018. Within that, premium (subscription) revenues grew by 31% to €1.5 billion, while ad-supported revenues grew by 34% to €165 million.
The company reported a net loss of 76 million euros compared with 394 million euros a year earlier.
Spotify said that Q2 “outperformed our expectations”, with its revenues growing more than two-and-a-half times faster than its growth in operating expenses.
“Outperformance was broad based, with most of our geographic regions growing faster than our expectations. Timing of certain global music releases yielded some incremental benefit, as did our launch on PlayStation consoles across the Middle East and Latin America. Of note, two markets that have been long tied to physical music distribution, Germany and Japan, both hit milestones during Q2, performing materially better than forecast. Additionally, our newest market India performed well and in line with expectations. However, the most significant source of upside has been improvement in long-term retention due to our continued product innovation, particularly evident in our emerging geographies.”
For the Ad-Supported business, Direct revenues outperformed the company’s forecast primarily due to strength in the US. The audio was the fastest-growing product for the third consecutive quarter, up 38% Y/Y, and Asia remained the fastest-growing region.
Operating expenses of €437 million in Q2 increased 4% Y/Y (12% Y/Y excluding the costs associated with the Direct Listing in Q2 2018). Operating Losses totaled €3 million yielding an Operating Margin of (0.2%), an improvement of 690 bps Y/Y (450 bps excluding the costs associated with the Direct Listing in Q2 2018).
On November 5, 2018, Spotify announced a program to repurchase up to $1.0 billion of its publicly traded shares. During Q2, the Company repurchased 1,372,896 shares at a total cost of $186.9 million and an average cost of $136.14 per share. In total, the Company has repurchased 3,079,576 shares at a total cost of $412.4 million and an average cost of $133.82 per share.
Tens of millions of users are now streaming podcast content on a monthly basis, and more are discovering new forms of audio content each day. Company’s podcast audience grew more than 50% Q/Q and has nearly doubled since the start of the year.
During the Investor Day last year, Spotify mentioned that the number of top tier artists (those representing the vast majority of streams) grew almost 30% in two years, from 16,000 artists to 22,000 at the time of the presentation. Today, that unit has grown another 36% to more than 30,000. This figure signifies accelerating growth in discovery and is a leading indicator of success in our mission to enable more than 1 million artists to live off their work. Spotify now has more than 400,000 creators and their teams using Spotify for Artists, one of their marketplace tools.
Looking ahead, Spotify predicted that it will have 110 million to 114 million paid subscribers by the end of September and that its monthly active users will increase to between 240 million and 245 million. By the end of the year, it expects to cross the milestone of a quarter of a billion monthly listeners.
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