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Spotify Q3 2018 Earnings Metrics on Track But Investors Not Convinced

Mark Mulligan
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The 20,000 Foot View:  Spotify’s            2018 earnings once again showed continued solid progress across most of its performance metrics, with strong progress in many areas. However, weakening investor confidence across US tech stocks as a whole, coupled perhaps unrealistic investor expectations saw Spotify’s share price fall again.

Key Findings

  • Spotify reported            subscribers in            2018, up            on            which is in line with                       million forecast made at the            of 2018
  • Inactive subscribers            up by one million to            five million – the first            since            2017
  • Ad supported            active users (MAUs) returned to            in            2018, adding five million            – the same increase that            registered one year previously 
  • A pattern            seasonal cyclicity is emerging for            ad supported business
  • Subscriber growth            largely the same across all            but ad supported grew strongly            Latin America – up           
  • Gross margin                       2018 fell slightly from the            quarter to reach            reflecting the            six monthly cycle of promotional           
  • Premium revenue            by            during            2018 to reach            a faster rate than the            which subscribers increased during the            period, with a gross margin                      
  • Ad supported            still just            of total revenue                       adding just            million of revenue,            to            million for premium revenue
  • Spotify ARPU            down in            2018 across three            measures: premium, rights holder and            profit
  • Churning out            from            promotional trials drove ARPU            in           
  • Quarterly subscriber            was down to            the second            quarter of decline, down            each            year-on-year
  • Factoring in            Spotify added nine million subscribers            total, which means that it            five million, one more than            retained
  • Delivering good,            growth is good enough for            music industry, but not good            for investors

Companies and brands mentioned in this report: Spotify