Spotify Technology S A : Third Quarter 2024 Shareholder Deck

Published: 2024-11-12 17:42:19 ET SPOT

Q3 2024 Update

November 12th, 2024

Table of Contents

Executive Summary

p.03

Key Highlights

p.04

Financial Summary

p.06

MAUs & Subscribers

p.13

Product & Platform

p.16

Outlookp.19

Financial Statements

p.22

Executive Summary

The business delivered strong Q3 results, as all of our KPIs met or exceeded guidance and profitability reached record levels. MAU net additions ticked up to 14 million, surpassing guidance by 1 million. Subscriber net additions of 6 million were also ahead by 1 million. Despite greater than anticipated headwinds from unfavorable currency movements, Revenue was in-line and grew 21% Y/Y on a constant currency* basis. Gross Margin of 31.1% was ahead of guidance and up 473 bps Y/Y, while Operating Income of €454 million was better due to Gross Margin strength and lower personnel related and marketing costs. Operating Income was affected by €54 million in Social Charges, which were €39 million above forecast due to share price appreciation during the quarter. Q3 Free Cash Flow* reached €711 million, bringing year-to-date Free Cash Flow generation to €1.4 billion.

Overall, we are very pleased with our performance heading into year-end and view the business as well positioned to sustainably grow towards the long-term goals outlined at our 2022 Investor Day.

USER & FINANCIAL SUMMARY

Q3 2023

Q2 2024

Q3 2024

Y/Y

Q/Q

USERS (M)

Total Monthly Active Users ("MAUs")

574

626

640

11%

Premium Subscribers

226

246

252

12%

Ad-Supported MAUs

361

393

402

11%

FINANCIALS (€M)

Premium

2,910

3,351

3,516

21%

Ad-Supported

447

456

472

Total Revenue

3,357

3,807

3,988

19%

Gross Profit

885

1,112

1,240

40%

12%

Gross Margin

26.4%

29.2%

31.1%

Operating Income

266

454

Operating Margin

1.0%

7.0%

11.4%

Net Cash Flows From Operating Activities

211

492

715

Free Cash Flow*

216

490

711

* Constant Currency adjusted measures and Free Cash Flow are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information.

Key Highlights

Double digit Y/Y growth in MAUs and Subscribers

Strong Revenue growth with record high profitability

Expanded user experiences and engagement globally

* Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information.

Key Highlights: Actuals vs. Guidance

Users

Financials

Results

Monthly Active Users (M)

Above

Premium Subscribers (M)

Above

Results

Total Revenue (€B)

In-Line

Gross Margin

Above

Q3 2024 Actuals

Guidance

640

639

252

251

Q3 2024 Actuals

Guidance

€4.0

31.1%

30.2%

Operating Income (€M)*

Above

€454

€405

*Includes €54 million of Social Charge accruals which were €39 million higher than forecast / guidance driven by share price appreciation during the quarter.

FINANCIAL

SUMMARY

Financial Summary

USER, FINANCIAL & LIQUIDITY SUMMARY

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

Y/Y

Y/Y FXN*

USERS (M)

Total Monthly Active Users ("MAUs")

574

602

615

626

640

11%

Premium Subscribers

226

236

239

246

252

12%

Ad-Supported MAUs

361

379

388

393

402

11%

FINANCIALS (€M)

Premium

2,910

3,170

3,247

3,351

3,516

21%

24%

Ad-Supported

447

501

389

456

472

Total Revenue

3,357

3,671

3,636

3,807

3,988

19%

21%

Gross Profit

885

980

1,004

1,112

1,240

40%

43%

Gross Margin

26.4%

26.7%

27.6%

29.2%

31.1%

Total Operating Expenses

853

1,055

836

846

786

-8%

-6%

Operating (Loss)/Income

(75)

168

266

454

Operating Margin

1.0%

(2.0%)

4.6%

7.0%

11.4%

FREE CASH FLOW & LIQUIDITY (€M, unless otherwise denoted)

Net Cash Flows From Operating Activities

211

397

211

492

715

Free Cash Flow*

216

396

207

490

711

Cash & Cash Equivalents, Restricted Cash & Short Term Investments (€B)

3.8

4.3

4.7

5.4

6.1

* Free Cash Flow and Constant Currency adjusted measures (FXN) are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information.

Financial Summary

Revenue

Profitability

Free Cash Flow & Liquidity

Revenue of €3,988 million grew 19% Y/Y in Q3 (or 21% Y/Y constant currency*), reflecting:

Gross Margin was 31.1% in Q3, up 473 bps Y/Y reflecting:

Operating Income was €454 million in Q3 and reflected:

At the end of Q3, our workforce consisted of 7,242 full-time employees** globally

Free Cash Flow* was €711 million in Q3. Our liquidity and balance sheet remained strong, with €6.1 billion in cash and cash equivalents, restricted cash and short term investments.

Revenue

Improved Premium growth led by ARPU acceleration

Premium Revenue grew 21% Y/Y to €3,516 million (or 24% Y/Y constant currency*), reflecting subscriber growth of 12% Y/Y and a Premium ARPU increase of 9% Y/Y to €4.71 (or up 11% Y/Y constant currency* vs. 10% Y/Y in Q2'24). Excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix.

Advertising growth in challenging brand environment

Ad-SupportedRevenue grew 6% Y/Y (or 7% Y/Y constant currency*), reflecting Y/Y growth across all regions. Music advertising was driven by growth in impressions sold, partially offset by softness in pricing.

Podcasting advertising was driven by growth in impressions sold, partially offset by softness in pricing. The Spotify Audience Network saw high single digit Q/Q growth in participating publishers.

Gross Margin

Driven by broad-based favorability across Premium and Ad-Supported segments

Gross Margin finished at 31.1% in Q3, up 473 bps Y/Y. The Y/Y trend was driven by improvements in our Premium and Ad-Supported segments.

Premium Gross Margin was 33.5% in Q3, up 436 bps Y/Y. The Y/Y trend was driven by favorability in music, audiobooks and Other Cost of Revenue.

Ad-Supported Gross Margin was 13.1% in Q3, up 486 bps Y/Y. The Y/Y trend was driven by favorability in music, podcasts and Other Cost of Revenue.

Disclaimer

Spotify Technology SA published this content on November 12, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 12, 2024 at 22:27:11.514.