Spotify Technology S.A. (NYSE:SPOT) today reported financial
results for the second fiscal quarter of 2020 ending June 30,
2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200729005266/en/
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Dear Shareholders,
Our business performed well in Q2 and continues to operate at a
high level despite the continuing uncertainty surrounding the
COVID-19 pandemic. Excluding the impact of social charges related
to the increase in our share price during Q2, all of our key
metrics would have finished at or ahead of our expectations. Our
liquidity position and Free Cash Flow remain strong, and we are
encouraged with the underlying trends of the business.
MONTHLY ACTIVE USERS (“MAUs”)
Total MAUs grew 29% Y/Y to 299 million, which is at the top of
our guidance range.
Growth in North America exceeded our expectations, accelerating
more than 200 bps this quarter relative to growth in Q2 last year.
We saw retention continue to improve in Q2. This is on top of the
gains we saw in North America throughout 2019. India also
outperformed our forecast this quarter thanks to strong performance
from marketing campaigns in the region. Latin America and Rest of
World continue to see the fastest growth, with those regions
growing 33% and 58% Y/Y, respectively.
Early in the quarter, we observed some COVID related softness in
several countries across our emerging regions. Parts of Latin
America and Rest of World saw slower than expected growth in April
and May as we saw lower intake, an increase in churn, and increases
in payment failures from our Premium users. Encouragingly, things
rebounded significantly in June as we saw increased reactivations
and a step down in churn. While we finished below forecast in
aggregate across these regions, our strength in North America and
other areas more than offset the slow start to the quarter.
Additionally, we believe the improved momentum we saw in the back
half of the quarter has continued into Q3 and we expect to hit our
full year targets.
We noted last quarter that we began to see a modest impact on
consumption hour trends driven by COVID. As of June 30, global
consumption hours have recovered to pre-COVID levels. All regions
have fully recovered with the exception of Latin America which is
approximately 6% below peak levels prior to the global health
crisis. Regions where the spread of COVID-19 appears to be slowing,
including APAC and EU, have led the recovery in consumption.
Consumption trends by platform are beginning to normalize as well;
in-car listening at the end of the quarter was less than 10% below
pre-COVID levels having recovered from a 50% decline at the trough
in April.
PREMIUM SUBSCRIBERS
At the end of Q2’20 we had 138 million Premium Subscribers
globally, up 27% Y/Y, which is at the top end of our guidance.
Family Plan continues to be a significant driver of our
outperformance. This quarter we expanded the availability of both
Family Plan and our new Duo offering to new geographies. Following
our launch in Russia and 12 surrounding markets on July 15th (post
Q2), these multi-user plans are now available in 90+ territories
globally. We saw strong subscriber growth across all regions in the
quarter and finished ahead of our expectations.
Despite the ongoing uncertainty around COVID-19, we had our
largest ever bi-annual campaign with strong gross additions in both
the ‘3 months on us’ intro offer for new users, as well as the
win-back offer for returning customers. Other promotions and
partnerships of note this quarter included the expansion of our
Microsoft Xbox Game Pass relationship, and the launch of our TV app
on Comcast’s X1 set-top box. Following the success of last year’s
Xbox Game Pass holiday offer, we expanded the Microsoft partnership
by making Spotify Premium available as a Perk for Xbox Game Pass
Ultimate customers in seven markets: the US, UK, France, Brazil,
Mexico, Australia, and Germany. Separately, the introduction of our
TV app on Comcast’s proprietary X1 set-top box marked the first
integration with a pay-TV provider in the US, demonstrating
continued progress against our ubiquity strategy.
Churn improved approximately 46 bps Y/Y, but ticked up
approximately 8 bps sequentially. Our Y/Y churn improvement
continues to be driven by the adoption of our higher retention
offerings like Family & Student in addition to the overall
maturity of our total subscriber base. Due to a shift in our trial
offering cadence this year, we did see a bit more seasonality in
churn in Q2 relative to years past. Our 3 Month Free trial offer
was available until mid to late February in Q1, which meant more
subscribers than usual saw an end to their promotional offering in
Q2. This led to a slight increase in churn Q/Q. However, this was
expected and was in line with the forecast.
FINANCIAL METRICS
Revenue
Total revenue of €1,889 million grew 13% Y/Y in Q2. Consolidated
revenue was roughly in line with expectations. Premium revenue grew
17% Y/Y to €1,758 million (up 19% excluding the impact of FX
rates), and performed in line with our forecast. We recognized a
reduction to revenue of €14 million due to a change in prior period
estimates that accounted for an additional 1% headwind.
Ad-Supported revenue fell 21% Y/Y as a result of COVID-19, but was
slightly above our expectations. The quarter started off
particularly slow but improved steadily with momentum in June
overcoming the weakness early on.
Within Premium, average revenue per user (“ARPU”) of €4.41 in Q2
was down 9% Y/Y (down 7% excluding the impact from FX rates). The
reduction in revenue resulting from the change in prior period
estimates mentioned above accounted for another 1% drag. Product
mix was the dominant driver accounting for most of this
decline.
While Ad-Supported revenue of €131 million was down both Y/Y and
sequentially, we outperformed our forecast. Last quarter we noted a
marked deceleration in sales brought on by the global health crisis
where the last 3 weeks in March were down more than 20% relative to
our forecast. Performance continued to lag our expectations through
April and May, but we significantly outperformed expectations in
the month of June. QTD through May, Ad-Supported revenues were down
25% Y/Y, but performance in the month of June showed significant
improvement and was only down 12% Y/Y. Our Direct and Programmatic
channels were hit particularly hard, both declining double digits
Y/Y. Conversely, both our Ad Studio and Podcast channels saw double
digit growth and exceeded our forecast. Within Ad Studio (our
self-service offering) we successfully rolled out video as a new
product and expanded the platform out of beta into 22 markets as of
June.
We continue to see positive growth in our Streaming Ad Insertion
(“SAI”) technology, which will be more widely available to US
advertisers this summer. Our latest podcast advertising innovation
involves In-App Offers powered by SAI, which resurfaces offers to
podcast listeners with a visual reminder, allowing listeners to
redeem offers in-app when the time is right for them.
Overall, podcast advertising outperformed in the quarter with
momentum continuing into July. Additionally, we announced a $20
million advertising partnership with Omnicom Media Group which we
believe is the largest global, strategic podcast advertising
partnership to-date.
Gross Margin
Gross Margin finished at 25.4% in Q2 which both exceeded our
expectations and finished above the high end of our guidance range.
Gross Margin in the quarter was impacted by several “one-time”
adjustments that when netted out, did benefit GM by 50 bps. Without
these adjustments, GM would have finished modestly ahead of our
expectations and at the higher end of guidance. We recognized
efficiencies in Other CoR as streaming delivery costs were slightly
more favorable relative to forecast. We do continue to invest in
content and our spend this quarter was modestly higher than plan
and had a slightly higher drag on GM than forecast.
Premium Gross Margin was 28.1% in Q2, down slightly from 28.3%
in Q1, and up 60 bps Y/Y. Ad-Supported Gross Margin was (11.9)% in
Q2, down from (6.6)% in Q1 and down 2,478 bps Y/Y. As a reminder,
we now account for all content costs related to podcast investment
in the Ad-Supported business.
Operating Expenses / Income (Loss)
Operating expenses totaled €646 million in Q2, an increase of
48% from Q2’19 and well above forecast. Core operating expenses
grew slightly less than expected as certain marketing expenditures
have been pushed to later in the year. Reported operating expense
was significantly higher than forecast as a result of the accrual
of higher than expected social charges related to the strong gains
in our stock price during the quarter. Social Charges came in €126
million higher than planned. Roughly 62% of the variance in Social
Charges pertained to the R&D function, while 23% of the
variance was in S&M and the remainder in G&A. Excluding the
higher than planned social charges, Operating Loss would have
finished better than forecast as a result of both outperformance in
Gross Profit and lower than planned operating expenses.
At the end of Q2, our workforce consisted of 6,049 FTEs
globally.
Social Charges
As a reminder, social costs are payroll taxes associated with
employee salaries and benefits, including share-based compensation
that we are subject to in various countries in which we operate.
When the fair market value of our ordinary shares increases on a
quarter-to-quarter basis, the accrued expense for social costs will
increase, and when the fair market value of ordinary shares falls,
the accrued expense will become a reduction in social costs
expense, all other things being equal, including the number of
vested stock options and exercise price remaining constant.
Additionally, approximately 31% of our employees are in Sweden.
With respect to our employees in Sweden, we are required to pay a
31.42% tax to the Swedish government on the profit an employee
realizes on the exercise of our stock options or the vesting of our
restricted stock units.
Our guidance on the impact of social charges on operating
expenses is based on our share price at the end of each quarter. At
the Q2 close, our stock price was $258.19. As an example, in Q2 a
10% increase or decrease in FMV compared to the quarter-end price
would have an approximate +/- €25M impact on Social Charges. We
don’t forecast stock price changes in our guidance so upward or
downward movements will impact our reported operating expenses
relative to our guidance.
Product and Platform
We continue to accelerate product innovation in order to enrich
the consumer experience and serve the right content from the more
than 60 million unique tracks and more than 1.5 million podcasts on
our platform. Through experimentation, we aim to scale features
that will lead to improved intake, retention, conversion, and thus
higher LTV. For example, we rolled out lyrics this quarter in 26
countries across Southeast Asia, Latin America, and India covering
more than 100 million of our users.
We continue to make improvements to our join flow and onboarding
experience and have seen a demonstrable improvement to both short
term and long term retention as a result. Once on the platform, we
constantly add or improve features such as our recent announcement
that we have removed the cap on the number of tracks a user can
download, now offering the ability to save an unlimited number of
songs, albums and podcasts to their collection of favorites (up
from a max of 10,000 tracks previously).
With COVID-19 protective measures still in place, we launched a
Listening Together microsite that visualizes when two Spotify
listeners start to play the same song at the exact same time -
which happens on average 30,000 times every second on Spotify. A
further enhancement to the user experience, Spotify launched a
Group Session feature that allows up to five Premium users to share
control over the music being played. Group Session participants can
control what’s playing in real-time as well as contribute to a
collaborative playlist for the group. Another product feature we’re
experimenting with is Canvas, which turns formerly static song
pages into engaging video-art showcases with 8 second visual loops.
Spotify users and artists can now share Canvas artwork to Instagram
stories, a feature that is unique to the Spotify platform and
sharing experience.
Ubiquity remains a core strategy, and we continue to find ways
for consumers to seamlessly connect with our platform. This quarter
we expanded our Spotify Free offering through Amazon Alexa devices
beyond the US, Australia and New Zealand. Amazon Alexa devices will
now support Spotify Free in Austria, Brazil, Canada, France,
Germany, Ireland, Italy, Japan, Mexico, Spain and the UK.
Additionally, we are also excited to be launching Spotify (Free and
Premium) on Alexa in India.
Content
Last week we announced a multi-year global license agreement
with the world's largest music company, Universal Music Group
(UMG), that further aligns the companies’ efforts to foster
groundbreaking new features providing value for artists and great
experiences for music fans. With this new agreement, the companies
advance their industry-leading partnership, reflecting a shared
commitment to music’s continued growth, deeper music discovery
experiences and collaboration on new, state-of-the-art marketing
campaigns across Spotify’s platform.
During Q2, we announced a multi-year exclusive licensing deal
with The Joe Rogan Experience, which will debut on Spotify in
September 2020 and become exclusive on the platform later this
year. Additionally, we announced a multi-year partnership with
Warner Bros. and DC to produce and distribute an original slate of
narrative scripted podcasts exclusively on Spotify. We are excited
about these partnerships and look forward to creating an unrivaled
content experience for Spotify listeners.
Harry Potter at Home came to Spotify, an exclusive rendering of
the Sorcerer’s Stone as read by notable actors, including Daniel
Radcliffe, Eddie Redmayne, and Whoopi Goldberg. This content
release marks the first multi-market promotional campaign for an
audio-story on Spotify. Harry Potter at Home quickly became our #1
O&E show on the platform.
Today, 21% of our Total MAUs engage with podcast content, up
from 19% of MAUs in Q1 2020, and consumption continues to grow at
triple digit rates Y/Y. We see strong MAU growth in podcast content
across all regions for Spotify. Overall supply of new podcast
content recovered in Q2 after a slight impact related to COVID-19
in the previous quarter. There have been a healthy number of
releases for Catalog, as well as Spotify Originals within the
quarter. We launched 110 podcast playlists across 6 markets
(including 49 new O&E podcasts outside the US) on a variety of
themes and topics to continue to drive podcast discovery for users.
Currently, Spotify’s podcast catalog has over 1.5 million shows,
50% of which launched in 2020. Our acquisition of Anchor last year
has helped accelerate content growth on the platform with
approximately three quarters of new podcast releases being powered
by Anchor. Spotify announced an additional 9 exclusives like Do You
See What I See and Rapot to our Creator Accelerator Program in
Indonesia, launched our first original podcast, Search Engine Sex,
in Australia, and released our first exclusive, XRey, in Spain.
As COVID-19 has impacted the creator community and the way in
which users interact with Spotify, we created user experiences that
allow listeners to adapt to the current environment. Spotify
launched an “At Home Music & Podcast Entertainment” hub, which
has had over 20M unique visitors. Additionally, we created a
“COVID-19 Guide” podcast hub to serve as a resource to those
wanting to engage and understand more about COVID-19 related
information and topics. As we mentioned last quarter, we launched
the Spotify COVID-19 Music Relief project, through which we have
partnered with organizations that offer financial relief to those
in the music and creator community around the world. We pledged to
match dollar-for-dollar public donations made to these
organizations, up to a total Spotify contribution of $10 million.
We also launched Artist Fundraising Pick (a feature that enables
artists to raise money to support themselves, their bands, their
crews and charitable organizations) in April, and to date have seen
more than 91,000 artists take advantage.
Two-Sided Marketplace
We continue to build out our marketplace offering of tools and
services. As stated above, we recently announced a multi-year deal
with Universal Music Group and together, we look forward to
accelerating our progress in building new tools and offerings that
will make a difference for artists around the world. This is one
more step in our goal to enable a million creators to live off
their work.
The number of artists and their teams utilizing our Spotify for
Artists tools on a monthly basis has grown to more than 690,000,
growth of 68% Y/Y, and these creators are finding ways to unlock
new channels for discovery. Growth in the number of artists making
up our top tier (those accounting for the top 10% of streams) is
accelerating; that cohort now stands at over 43,000 artists, up 43%
from 30,000 one year ago. Our product and platform are driving
discovery, diversifying taste, and helping up-and-coming artists
reach new audiences. Gone are the days of Top 40, it’s now the Top
43,000. We continue to add new features to our suite of Marketplace
products to better serve the needs of these creators and their
teams. We also expanded our Sponsored Recommendation functionality
to Canada this quarter, and look forward to launching in further
markets soon. We also began piloting new targeting features in the
Sponsored Recommendation product that allow for more flexibility to
suit the unique needs of marketers. Conversion remains high, and
the number of artists taking advantage of these features grew more
than 37% Q/Q.
Free Cash Flow
Total Free Cash Flow was €27 million in Q2, a €23 million
decrease Y/Y principally related to an increase in net loss
adjusted for non-cash items, partially offset by favorable working
capital movements and lower cash outflow for PP&E related to
office build-outs. We maintain positive working capital dynamics
overall and continue to expect that we will deliver positive Free
Cash Flow for the year.
In addition to the positive Free Cash Flow dynamics, we maintain
a strong liquidity position and are confident in the financial
position of the business as we look at the current and future
uncertainty surrounding the global health crisis. At the end of Q2,
we had €1.8 billion in cash and cash equivalents, restricted cash,
and short term investments on our Balance Sheet, and no
indebtedness2.
Q3 & Q4 2020 OUTLOOK
These forward-looking statements reflect Spotify’s expectations
as of July 29, 2020 and are subject to substantial uncertainty. The
estimates below utilize the same methodology we’ve used in prior
quarters with respect to our guidance and the potential range of
outcomes. Given the extraordinary operating circumstances we
currently face with respect to the impact of COVID-19 there is a
greater likelihood of variances within those ranges than typical
quarters.
Q3 2020 Guidance:
- Total MAUs: 312-317 million
- Total Premium Subscribers: 140-144 million
- Total Revenue: €1.85-€2.05 billion
- Assumes approximately 260 bps headwind to growth Y/Y due to
movements in foreign exchange rates
- Gross Margin: 23.1-25.1%
- Operating Profit/Loss: €(70)-€(150) million
Q4 2020 Guidance:
- Total MAUs: 328-348 million
- Total Premium Subscribers: 146-153 million
- Total Revenue: €2.05-€2.25 billion
- Assumes approximately 360 bps headwind to growth Y/Y due to
movements in foreign exchange rates
- Gross Margin: 23.7-25.7%
- Operating Profit/Loss: €(45)-€(145) million
EARNINGS QUESTION & ANSWER SESSION
We will host a live question and answer session starting at 8
a.m. ET today on investors.spotify.com. Daniel Ek, our Founder and
CEO, and Paul Vogel, our Chief Financial Officer, will be on hand
to answer questions submitted through slido.com using the event
code #SpotifyEarnings. Participants also may join using the
listen-only conference line by registering through the following
site:
Direct Event Registration Portal:
http://www.directeventreg.com/registration/event/2944914
We use investors.spotify.com and newsroom.spotify.com websites
as well as other social media listed in the “Resources – Social
Media” tab of our Investors website to disclose material company
information.
Use of Non-IFRS Measures
To supplement our interim condensed consolidated financial
statements, which are prepared and presented in accordance with
IFRS, we use the following non-IFRS financial measures: Revenue
excluding foreign exchange effect, Premium revenue excluding
foreign exchange effect, Ad-Supported revenue excluding foreign
exchange effect, and Free Cash Flow. Management believes that
Revenue excluding foreign exchange effect, Premium revenue
excluding foreign exchange effect and Ad-Supported revenue
excluding foreign exchange effect are useful to investors because
they present measures that facilitate comparison to our historical
performance.
However, Revenue excluding foreign exchange effect, Premium
revenue excluding foreign exchange effect and Ad-Supported revenue
excluding foreign exchange effect should be considered in addition
to, not as a substitute for or superior to, Revenue, Premium
revenue, Ad-Supported revenue or other financial measures prepared
in accordance with IFRS. Management believes that Free Cash Flow is
useful to investors because it presents a measure that approximates
the amount of cash generated that is available to repay debt
obligations, to make investments, and for certain other activities
that exclude certain infrequently occurring and/or non-cash
items.
However, Free Cash Flow should be considered in addition to, not
as a substitute for or superior to, net cash flows (used in)/from
operating activities or other financial measures prepared in
accordance with IFRS. For more information on these non-IFRS
financial measures, please see “Reconciliation of IFRS to Non-IFRS
Results” table.
Forward Looking Statements
This shareholder letter contains estimates and forward-looking
statements. All statements other than statements of historical fact
are forward-looking statements. The words “may,” “might,” “will,”
“could,” “would,” “should,” “expect,” “plan,” “anticipate,”
“intend,” “seek,” “believe,” “estimate,” “predict,” “potential,”
“continue,” “contemplate,” “possible,” and similar words are
intended to identify estimates and forward-looking statements.
Our estimates and forward-looking statements are mainly based on
our current expectations and estimates of future events and trends,
which affect or may affect our businesses and operations. Although
we believe that these estimates and forward-looking statements are
based upon reasonable assumptions, they are subject to numerous
risks and uncertainties and are made in light of information
currently available to us. Many important factors may adversely
affect our results as indicated in forward-looking statements.
These factors include, but are not limited to: our ability to
attract prospective users and to retain existing users; competition
for users and user listening time; our dependence upon third-party
licenses for most of the content we stream; our lack of control
over the providers of our content and their effect on our access to
music and other content; our ability to comply with the many
complex license agreements to which we are a party; our ability to
accurately estimate the amounts payable under our license
agreements; the limitations on our operating flexibility due to the
minimum guarantees required under certain of our license
agreements; our ability to obtain accurate and comprehensive
information about music compositions in order to obtain necessary
licenses or perform obligations under our existing license
agreements; new copyright legislation that may increase the cost
and/or difficulty of music licensing; risks associated with our
international expansion, including difficulties obtaining rights to
stream content on favorable terms; our ability to generate
sufficient revenue to be profitable or to generate positive cash
flow on a sustained basis; our ability to expand our operations to
deliver content beyond music, including podcasts; potential
breaches of our security systems; assertions by third parties of
infringement or other violations by us of their intellectual
property rights; our ability to accurately estimate our user
metrics and other estimates; risks associated with manipulation of
stream counts and user accounts and unauthorized access to our
services; changes in legislation or governmental regulations
affecting us; risks relating to privacy and protection of user
data; our ability to maintain, protect, and enhance our brand;
ability to hire and retain key personnel; risks relating to the
acquisition, investment, and disposition of companies or
technologies; tax-related risks; the concentration of voting power
among our founders who have and will continue to have substantial
control over our business; risks related to our status as a foreign
private issuer; international, national or local economic, social
or political conditions; and risks associated with accounting
estimates, currency fluctuations and foreign exchange controls; and
the impact of the COVID-19 pandemic on our business and operations,
including any adverse impact on advertising revenue or subscriber
acquisition and retention.
A detailed discussion of these and other risks and uncertainties
that could cause actual results and events to differ materially
from our estimates and forward-looking statements is included in
our filings with the U.S. Securities and Exchange Commission
(“SEC”), including our Annual Report on Form 20-F filed with the
SEC on February 12, 2020, as updated in our Form 6-K filed with the
SEC on April 29, 2020 (containing the interim condensed
consolidated financial statements for the three months ended March
31, 2020). We undertake no obligation to update forward-looking
statements to reflect events or circumstances occurring after the
date of this shareholder letter.
Interim condensed consolidated
statement of operations (Unaudited) (in € millions, except
share and per share data)
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Revenue
1,889
1,848
1,667
3,737
3,178
Cost of revenue
1,410
1,376
1,233
2,786
2,371
Gross profit
479
472
434
951
807
Research and development
267
162
151
429
306
Sales and marketing
248
231
200
479
372
General and administrative
131
96
86
227
179
646
489
437
1,135
857
Operating (loss)/income
(167
)
(17
)
(3
)
(184
)
(50
)
Finance income
6
70
8
76
42
Finance costs
(294
)
(12
)
(64
)
(306
)
(220
)
Finance income/(costs) - net
(288
)
58
(56
)
(230
)
(178
)
Loss before tax
(455
)
41
(59
)
(414
)
(228
)
Income tax (benefit)/expense
(99
)
40
17
(59
)
(10
)
Net (loss)/income attributable to
owners of the parent
(356
)
1
(76
)
(355
)
(218
)
(Loss)/Earnings per share attributable
to owners of the parent
Basic
(1.91
)
0.00
(0.42
)
(1.91
)
(1.21
)
Diluted
(1.91
)
(0.20
)
(0.42
)
(1.91
)
(1.21
)
Weighted-average ordinary shares
outstanding
Basic
186,552,877
185,046,324
180,409,115
185,799,600
180,510,763
Diluted
186,552,877
185,632,113
180,409,115
185,799,600
180,510,763
Condensed consolidated statement of
financial position (Unaudited) (in € millions)
June 30,
December 31,
2020
2019
Assets
Non-current assets
Lease right-of-use assets
476
489
Property and equipment
287
291
Goodwill
617
478
Intangible assets
86
58
Long term investments
1,725
1,497
Restricted cash and other non-current
assets
66
69
Deferred tax assets
13
9
3,270
2,891
Current assets
Trade and other receivables
361
402
Income tax receivable
4
4
Short term investments
636
692
Cash and cash equivalents
1,148
1,065
Other current assets
115
68
2,264
2,231
Total assets
5,534
5,122
Equity and liabilities
Equity
Share capital
—
—
Other paid in capital
4,175
4,192
Treasury shares
(175
)
(370
)
Other reserves
1,187
924
Accumulated deficit
(3,064
)
(2,709
)
Equity attributable to owners of the
parent
2,123
2,037
Non-current liabilities
Lease liabilities
612
622
Accrued expenses and other liabilities
37
20
Provisions
2
2
Deferred tax liabilities
1
2
652
646
Current liabilities
Trade and other payables
555
549
Income tax payable
4
9
Deferred revenue
349
319
Accrued expenses and other liabilities
1,527
1,438
Provisions
12
13
Derivative liabilities
312
111
2,759
2,439
Total liabilities
3,411
3,085
Total equity and liabilities
5,534
5,122
Interim condensed consolidated
statement of cash flows (Unaudited) (in € millions)
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Operating activities
Net (loss)/income
(356
)
1
(76
)
(355
)
(218
)
Adjustments to reconcile net (loss)/income
to net cash flows
Depreciation of property and equipment
and
lease right-of-use assets
23
21
17
44
34
Amortization of intangible assets
5
5
3
10
7
Share-based payments expense
50
37
37
87
63
Finance income
(6
)
(70
)
(8
)
(76
)
(42
)
Finance costs
294
12
64
306
220
Income tax (benefit)/expense
(99
)
40
17
(59
)
(10
)
Other
2
4
(10
)
6
(2
)
Changes in working capital:
(Increase)/decrease in trade
receivables
and other assets
(39
)
22
(50
)
(17
)
(15
)
Increase/(decrease) in trade and other
liabilities
151
(63
)
75
88
230
Increase/(decrease) in deferred
revenue
34
(4
)
19
30
32
(Decrease)/increase in provisions
—
(1
)
8
(1
)
8
Interest paid on lease liabilities
(15
)
(15
)
(9
)
(30
)
(13
)
Interest received
—
3
4
3
8
Income tax paid
(5
)
(1
)
(1
)
(6
)
(3
)
Net cash flows from/(used in) operating
activities
39
(9
)
90
30
299
Investing activities
Business combinations, net of cash
acquired
—
(137
)
(36
)
(137
)
(324
)
Purchases of property and equipment
(14
)
(12
)
(40
)
(26
)
(77
)
Purchases of short term investments
(145
)
(498
)
(298
)
(643
)
(402
)
Sales and maturities of short term
investments
242
477
370
719
753
Change in restricted cash
2
—
—
2
1
Other
(7
)
(14
)
(3
)
(21
)
(7
)
Net cash flows from/(used in) investing
activities
78
(184
)
(7
)
(106
)
(56
)
Financing activities
Proceeds from exercise of share
options
101
77
20
178
53
Repurchases of ordinary shares
—
—
(157
)
—
(283
)
Payments of lease liabilities
(6
)
(4
)
(4
)
(10
)
(9
)
Lease incentives received
—
7
—
7
—
Other
(5
)
(3
)
—
(8
)
—
Net cash flows from/(used in) financing
activities
90
77
(141
)
167
(239
)
Net increase/(decrease) in cash and
cash equivalents
207
(116
)
(58
)
91
4
Cash and cash equivalents at beginning of
the period
951
1,065
966
1,065
891
Net exchange (losses)/gains on cash and
cash equivalents
(10
)
2
1
(8
)
14
Cash and cash equivalents at period
end
1,148
951
909
1,148
909
Calculation of basic and diluted
earnings/(loss) per share (Unaudited) (in € millions, except
share and per share data)
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Basic (loss)/earnings per share
Net (loss)/income attributable to owners
of the parent
(356
)
1
(76
)
(355
)
(218
)
Share used in computation:
Weighted-average ordinary shares
outstanding
186,552,877
185,046,324
180,409,115
185,799,600
180,510,763
Basic (loss)/earnings per share
attributable to owners of the parent
(1.91
)
0.00
(0.42
)
(1.91
)
(1.21
)
Diluted loss per share
Net (loss)/income attributable to owners
of the parent
(356
)
1
(76
)
(355
)
(218
)
Fair value gains on dilutive warrants
—
(38
)
—
—
—
Net loss used in the computation of
diluted loss per share
(356
)
(37
)
(76
)
(355
)
(218
)
Shares used in computation:
Weighted-average ordinary shares
outstanding
186,552,877
185,046,324
180,409,115
185,799,600
180,510,763
Warrants
—
585,789
—
—
—
Diluted weighted-average ordinary
shares
186,552,877
185,632,113
180,409,115
185,799,600
180,510,763
Diluted loss per share attributable to
owners of the parent
(1.91
)
(0.20
)
(0.42
)
(1.91
)
(1.21
)
Reconciliation of IFRS to Non-IFRS
Results (Unaudited) (in € millions, except percentages)
Three months ended
Six months ended
June 30,
June 30,
June 30,
June 30,
2020
2019
2020
2019
IFRS revenue
1,889
1,667
3,737
3,178
Foreign exchange effect on 2020 revenue
using 2019 rates
34
23
Revenue excluding foreign exchange
effect
1,923
3,760
IFRS revenue year-over-year change %
13
%
18
%
Revenue excluding foreign exchange effect
year-over-year change %
15
%
18
%
IFRS Premium revenue
1,758
1,502
3,458
2,887
Foreign exchange effect on 2020 Premium
revenue using 2019 rates
35
27
Premium revenue excluding foreign exchange
effect
1,793
3,485
IFRS Premium revenue year-over-year change
%
17
%
20
%
Premium revenue excluding foreign exchange
effect year-over-year change %
19
%
21
%
IFRS Ad-Supported revenue
131
165
279
291
Foreign exchange effect on 2020
Ad-Supported revenue using 2019 rates
(1
)
(4
)
Ad-Supported revenue excluding foreign
exchange effect
130
275
IFRS Ad-Supported revenue year-over-year
change %
(21
)%
(4
)%
Ad-Supported revenue excluding foreign
exchange effect year-over-year change %
(21
)%
(5
)%
Free Cash Flow (Unaudited) (in €
millions)
Three months ended
Six months ended
June 30,
March 31,
June 30,
June 30,
June 30,
2020
2020
2019
2020
2019
Net cash flows from/(used in) operating
activities
39
(9
)
90
30
299
Capital expenditures
(14
)
(12
)
(40
)
(26
)
(77
)
Change in restricted cash
2
—
—
2
1
Free Cash Flow
27
(21
)
50
6
223
1Free Cash Flow is a non-IFRS measure. See “Use of Non-IFRS
Measures” and “Reconciliation of IFRS to Non-IFRS Results” for
additional information. 2As of June 30, 2020, we have no material
outstanding indebtedness, other than lease liabilities recognized
under IFRS 16.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005266/en/
Investor Relations: Michael Urciuoli ir@spotify.com
Public Relations: Dustee Jenkins press@spotify.com
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