Spotify -6.9% as debut earnings point to losses; 75M paid subs

Jeannie Matthews
May 3, 2018

Shares in Spotify have tumbled 11% [in extended trade] after the newly listed company posted its first quarterly earnings report which came below investors' expectations.

Before the retreat, Spotify was valued at $30 billion, even though the Swedish company has never turned a profit. Facebook, Twitter and Snapchat were all deemed not good enough and had to prove themselves to Wall Street in the quarters that followed. Spotify reported a net loss of €169 million (about $201.8 million) for the quarter - barely reducing its losses from €173 million a year prior. Revenue climbed 26 percent to 1.139 billion euros.

"Results and guidance are pretty much exactly in line with expectations, but the stock reaction clearly suggests investors were hoping for a little more".

At the closing bell and before the slide in share price, Sweden-based Spotify sported a $30.3 billion market cap, which dwarfs that of USA -based Pandora, with a market cap of $1.4 billion.

Average revenue per user in the first quarter fell to 4.72 euros, down from around 6.84 euros towards the end of 2015.

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Q1 gross margins notched 24.9%. The technology giant said in March that it had 38 million subscribers on its service, which does not have an equivalent free tier. The disparity may owe to the company's popular family plans, which help Spotify increase its user base but bring in less revenue per subscriber. Net cash flows from operating activities were €84 million and free cash flow was €74 million.

The company noted it finished the quarter with 170 million Monthly Active Users (MAU) and 75 million Premium Subscribers, up 30% and 45%, respectively, Y/Y.

Spotify has been growing at a steady pace as it has been gaining more subscribers over time.

Spotify boasts several partnerships, including one with Hulu where existing subscribers can get both services for $12.99 per month.

And while the music streaming pioneer's total user base reached 170 million, less than half were paid subscribers.

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