Spotify Technology (SPOT) reported first-quarter financial results on Tuesday that beat expectations on both the top and bottom line. The audio giant also made a profit as it continues to implement its recent “efficiency” strategy.
Over the past year, Spotify has committed to several rounds of layoffs, in addition to price increases and other initiatives aimed at driving revenue growth and improving margins. The company said it would be more intentional about future investments after spending billions to enter the crowded podcast market.
The audio giant reported an operating profit of 168 million euros ($179 million), compared to a loss of 156 million euros for the same period a year earlier. This figure is lower than the company’s forecast of 180 million euros because payroll costs were higher than expected, “due to share price appreciation during the quarter”, according to Spotify.
It also led to a solid second-quarter operating profit of 250 million euros, well above Wall Street consensus expectations. Revenue forecasts for the second quarter were also higher than estimates: 3.8 billion euros versus 3.76 billion euros expected.
In addition to more deliberate spending, Spotify is reportedly raising prices again after increasing the cost of some subscription plans last summer.
According to Bloomberg, Spotify plans to raise prices by about $1 to $2 per month in five markets, including the United Kingdom, Australia and Pakistan. The changes are expected to come in late April, with U.S. prices rising “later this year.” The report also states that Spotify is considering introducing a cheaper option that does not include audiobooks.
The stock rose more than 9% in premarket trading Tuesday following the results.
The streaming service reported net income of 197 million euros ($210 million), or earnings of 0.97 euros per share. This was higher than the expectations of analysts who expected earnings per share of 0.65 euros. This is also a loss of 225 million euros compared to the previous year, or a loss of 1.16 euros per share.
Gross margins were stronger than expected at 27.6%, beating the company’s forecast of 26.4%. The streamer said it expects its margins to reach 28.1% in the second quarter, driven primarily by year-over-year improvements in music and podcasting.
Spotify has previously said it expects this metric to be between 30% and 35% over the long term, as part of plans to further grow its podcasting and advertising businesses.
Revenue, meanwhile, amounted to 3.64 billion euros ($3.88 billion), 20% more than in the first quarter of 2023 and above Wall Street expectations of 3.61 billion euros.
User figures
Total monthly active users (MAUs) fell short of the company’s estimates of 618 million to reach 615 million in the quarter, but that still represents a 19% improvement over last year’s total . The streaming service projects second-quarter MAUs to be 631 million.
Premium subscribers met Wall Street expectations of 239 million, a 14% year-over-year jump. Spotify expects the number of subscribers to increase to 245 million in the second quarter.
Free cash flow, another key indicator for investors, amounted to 207 million euros over the quarter, compared to 57 million euros a year earlier.
Average revenue per user, or ARPU, for Premium subscriptions increased by 7% to €4.55 (or 5% year-over-year, excluding unfavorable currency effects). emerging markets, the company said.
Profit commitment
Overall, analysts were bullish on Spotify after the audio giant pledged to improve its profitability from 2023 based on gross margin and operating profit .
Spotify stock has surged more than 100% in the past year and is up 43% year to date.
Spotify has spent $1 billion to enter the podcast market over the past four years with blue-chip deals and studio acquisitions worth more than $400 million.
These expenses significantly reduced gross margins and weighed heavily on profitability. In response, Spotify has committed to several rounds of layoffs – three in 2023 alone.
Spotify CFO Paul Vogel resigned from his position on March 31. He will be replaced by Christian Luiga, previously with the Swedish aerospace and defense company Saab. Luiga will take over in the third quarter, the company said.
In addition to layoffs and price increases, Spotify also changed its royalty structure, made audiobooks free for paying subscribers, and locked new deals with popular podcasters like Joe Rogan and Alexandra Cooper of “Call Her Daddy.”
The new deals come as Spotify further revamps its podcast strategy to focus more on distribution rather than exclusivity.
The audio giant announced that Rogan’s podcast, the most popular on the platform, will be available on additional services like Apple Podcasts (AAPL), Amazon Music (AMZN) and YouTube (GOOGL) for the first time in years. years. Spotify will handle distribution and ad sales while working to maximize revenue. Rogan will benefit from a guaranteed minimum rate and a reduction in advertising revenue.
Cooper’s “Call Her Daddy” deal will have a similar structure, with the podcast now available on all major audio platforms after more than two years as a Spotify exclusive. The company will retain exclusive rights to the video portion of the podcast.
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here.
Read the latest financial and business news from Yahoo Finance
News Source : finance.yahoo.com
Gn bussni
