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Spotify displayed growth last year but cautioned for loss in 2019

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Spotify has released its financial results for the fourth fiscal quarter of 2018.

The streaming giant reported a quarterly operating profit for the first time of €94 mn ($107 mn). For the first time in company history, operating income, net income, and free cash flow were all positive, Spotify wrote in a letter to its shareholders, less than one year after going public. But, the company also warned of a loss of €200 mn to €360 mn ($227 mn to $409 mn) in its 2019 forecast.

Spotify announced that it now had 207 mn active monthly users. The streamer reported 97 mn premium paid users at the end of 2018. That represented a growth in annual subscriber growth compared to 2017, when Spotify added 23 mn paying subs in a 12-month period. In Q4 alone, Spotify added 9 mn subscribers at an average of 3 mn per month. The firm finished Q3 2018 with 87 mn paying customers worldwide.

During Q4 Spotify expanded to 78 countries from 65 as they launched service in 13 countries in the Middle East and North Africa in mid-November.

The company is also predicting that its Monthly Active User count will land between 245 mn and 265 mn by the close of the year. As previously predicted, that MAU figure represented a bigger increase (+47 mn) than that seen in the calendar year of 2017, when Spotify’s active user count grew by 34 mn.

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Spotify forecasted to investors and analysts that its global subscriber count will reach between 117 mn and 127 mn by the end of 2019.

Premium revenue also grew 30% to €1.3 bn ($1.5 bn). Due to Family Plan and Student Plan subscribers, as well as growth in emerging markets, average revenue per user (ARPU) fell 7%. According to Spotify, Lifetime Value per Subscriber (LTV), a previously unused metric, has remained constant year-over-year. This also offset the sharp decline in ARPU.

Ad-supported revenue rose 34% to €175 mn ($199 mn). This beat out the 30% year-over-year ad-supported revenue growth in Q3 2018. Revenue from North America grew 41%. Both audio and video ads also grew over 40%.

In addition, Spotify has confirmed two strategic acquisitions to accelerate growth in podcasting. The streaming music giant has completely acquired Gimlet Media and Anchor.

For the first fiscal quarter of 2019, total monthly active users are predicted to reach between 215 mn to 220 mn (up 24-27% y/y). Premium subscribers may land between 97 to 100 mn (up 29-33% y/y). The gross margin may remain between 22.5-24.5%, while operating loss may reach between €50 mn to €120 mn ($57 mn to $137 mn), the company predicts.

 

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Abhishek Singh

Author: Abhishek Singh

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