SPOT Spotify Technology SA

By Anne Steele 

Spotify Technology SA's shares took a hit after hours as its first earnings report as a publicly traded company met the company's own guidance but fell short of Wall Street expectations.

The report Wednesday was Spotify's first since going public last month. Shares in the Stockholm-based company fell 7.7% after hours in New York to $156.99.

Spotify added a net four million paid subscribers -- its most lucrative type of customer -- during the quarter, bringing the total to 75 million. Still, most of its users are on its free, ad-supported tier. Including those, the company said it now has 170 million monthly active users. Both results came at the high end of the company's forecast.

In the company's first earnings call, Chief Executive Daniel Ek batted away questions about competition heating up with Spotify's top rivals.

"We don't see any kind of meaningful impact of competition," he said in response to a question about Apple Inc.'s recent surge in subscription growth. "We don't think this is a winner-take-all market. Multiple services will exist in the market, and we're focused on growing that market."

He added that Spotify is more focused on meeting its own targets. "We're looking pretty good," he said.

As for Amazon.com Inc.'s voice-activated Echo speaker, with its Alexa virtual assistant, Mr. Ek called such technology an opportunity.

"Voice is growing, and Spotify is an application available both on Alexa speakers and Google Home," he said. "We view that as a long-term opportunity, not a threat."

It isn't unusual for tech companies to disappoint in their first earnings reports after going public. Facebook Inc., Twitter Inc. and, most recently, Snap Inc. all struggled to meet investor expectations initially.

Spotify, which has reported net losses every year since it launched in 2008, narrowed its first-quarter loss to EUR169 million ($202 million), or EUR1.01 a share, from EUR173 million, or EUR1.15, in the same period a year earlier. Analysts polled by Thomson Reuters were expecting a loss of 36 European cents.

Revenue grew 26% to EUR1.1 billion, in line with the company's and analysts' guidance.

The company has said it is prioritizing growth over profit -- a strategy executives believe will make the business more valuable long term. None of Spotify's streaming competitors has ever reported a profit.

Free cash flow -- a measure of the cash a company generates that many investors view as a good proxy for performance -- was EUR74 million in the quarter, up from EUR64 million a year earlier.

For the second quarter, Spotify said it expects monthly active users to reach 175 million to 180 million and to have 79 million to 83 million premium subscribers. The company forecast that revenue will be in a range of EUR1.1 billion to EUR1.3 billion.

Spotify backed its previously offered guidance for the year that revenue would increase by as much as 30% and premium subscribers would increase by as much as 36% year over year.

Last month, Spotify said it added more features for its popular free tier, which serves as a funnel to the subscription service that generates more of its revenue. The company is now offering on-demand listening to free users, who were previously able to listen to albums and playlists with their songs in a shuffled order.

During Wednesday's call, Mr. Ek said early customer feedback has been "really, really good."

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

May 02, 2018 19:32 ET (23:32 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.