Spotify reports a profit but tempers Outlook for new subscribers

The company, which hopes to return to a loss this quarter, said 87 million subscribers after adding four million net during the quarter ended September 30. This has increased the total number of Spotify monthly users, which includes supported version listeners – at 191 million. The results were in the high end of the company's goals.

Spotify has moderated the top of its growth prospects in the number of subscribers for the December quarter, forecasting a subscriber number of 93 million to 96 million and a number of active users of 199 million to 206 million. Previously, he had guided up to 97 million subscribers and up to 207 million active users.

Spotify also reduced its gross margin forecast by 50 basis points for the current quarter, as a result of its new partnership with

Alphabet
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Google. On Wednesday, the company announced that it would offer free Google Home Mini smart speakers to major family plan account holders in the US for the holiday season.

In a teleconference with investors, Spotify executives said other partnerships, including the inclusion of the Samsung smartphone service announced during the quarter, represented a "significant growth opportunity," adding that it was too early to report progress.

CEO Daniel Ek said one of society's key strategies is to work with as many partners as possible. "The goal of Spotify is to be a first rate user experience on all these devices," he said.

During the quarter, the company updated its Spotify for Artists analytics platform. A feature, in beta in the United States, allows some independent artists to upload their music directly to the service. A playlist submission feature also allows artists and labels to submit unpublished music to the Spotify editorial team for inclusion in playlists to direct more listeners to an artist's songs .

"We do not consider our strategy to be against one of our partners," said Ek. "It's quite important to bring a new artist to the general public. If we can reduce costs, we should see many more artists and labels succeed. "

The company said there were now 250,000 monthly Spotify for Artists users. This is essential as the company continues to praise its "two-sided market", in which it would eventually charge artists and labels for additional services.

"Our main goal is our strategy, which is built around a two-sided market and that's where we work with all our partners," said Ek.

He added that gross margin improvements would follow and renegotiations with labels would depend on "a lot more" operations, with Spotify being able to offer more services.

In total, Spotify made a profit of 43 million euros (48.7 million dollars), or 0.23 euros per share, against a loss of 278 million euros, or 1.84 euros per share in the same quarter of the previous year.

This transfer to profits is explained by a tax benefit of 125 million euros related to a change in the value of its investment in the Chinese company Tencent Music, said Spotify. Both companies announced a share exchange in December 2017; Tencent Music has requested to go public in early October of this year.

Spotify previously warned that such a profit would be a "non-recurring and non-recurring event" and should return to a net loss in the coming quarters.

Analysts surveyed by Thomson Reuters expected a loss of 0.36 euro per share.

The company has reported net losses every year since its launch in 2008 and has indicated that it favors growth for profit, as it strives to maintain its position in the streaming music market.

Turnover rose 31% to 1.35 billion euros, which is higher than the company's forecasts and is just above analysts' expectations.

Free cash flow – a measure of cash generated by a company considered by many investors as a performance indicator – stood at € 33 million for the quarter, compared to $ 18 million euros in the previous quarter and 89 million euros a year ago.

Growth in family and student projects continued to generate subscriptions and weighed on average revenue per user, which fell 6% to € 4.73.

The company confirmed its revenue forecast for the quarter ranging from 1.35 to 1.55 billion euros.

Write to Anne Steele at [email protected]