Spotify Technology S.A. (NYSE:SPOT) today reported financial
results for the first fiscal quarter of 2020 ending March 31,
2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200429005216/en/
(Graphic: Business Wire)
Dear Shareholders,
Despite the global uncertainty around COVID-19 in Q1, our
business met or exceeded our forecast for all major metrics. For Q2
and the remainder of the year, our outlook for most of our key
performance indicators has remained unchanged with the exception of
revenue where a slowdown in advertising and significant changes in
currency rates are having an impact. Our business remains very
healthy with more than €1.8 billion in liquidity and we expect to
be free cash flow positive for the year. Overall, despite some
changes in listening patterns, we are encouraged with the trends we
are seeing, and continue to be optimistic about the underlying
growth fundamentals of the business.
COVID-19 IMPACT
While we are pleased with how our business has performed so far,
our thoughts and attention are most focused on the health and
well-being of our employees, the greater creative community and
society at large. We are in unprecedented times and, like most, we
are trying to navigate this uncertainty as best we can. We are
fortunate that as a business we are able to operate with very
little disruption and our hope is that providing music,
information, and an escape for many can provide some joy and
comfort.
Operationally, we are now in week 7 of our entire employee base
working remotely. The team has universally risen to this new
temporary reality, and it’s been inspiring to watch everyone
support each other virtually. From a performance standpoint, we are
encouraged and haven’t seen any falloff in overall employee
productivity despite the current work from home situation.
Our hiring was also in line with expectations in the quarter.
That being said, we have taken steps to slow hiring for the
remaining three quarters of 2020 and have reduced open headcount by
roughly 30% from prior growth expectations. We will continue to
grow, and believe we are in a great position to invest in product
and innovation. We also recognize it may be more challenging to
effectively recruit and onboard given the inherent uncertainty
moving forward.
Changing Consumer Engagement
Beginning in late February, we saw some impact to our business.
While MAUs and Subs remained in line with our forecast and held
steady, in hard hit markets like Italy and Spain, we saw a notable
decline in Daily Active Users and consumption. But over the last
few weeks, we’ve seen listening start to rebound, and in many
markets, consumption has meaningfully recovered.
In this environment, we are seeing an evolution of Spotify’s
relationship with its consumers. For example, when we saw
consumption starting to decline we would have assumed that MAUs and
Paid Subscribers would be negatively impacted, but that wasn’t the
case. In fact, both new and reactivated MAUs grew substantially
even during lockdown periods in major markets. Additionally,
despite some of the consumption changes, the ratio of Daily Active
Users relative to Monthly Active Users was strong in the quarter.
We did see a bit of a decline over the last few weeks of March;
however, the average DAU/MAU ratio for the quarter was higher than
in Q1 of 2019.
Not surprisingly, we have seen usage in Car, Wearable, and Web
platforms drop (double digits in some instances). However, the
audience through TV and Game Consoles has grown materially, in
excess of 50% over the same time period. In fact, for Ad-Supported
MAU in the US, game consoles have been a top 2 or 3 platform in
terms of consumption for the better part of the month, and
connected device usage generally is up more than 40% among
Ad-Supported users globally.
It’s clear from our data that morning routines have changed
significantly. Every day now looks like the weekend. This trend was
seen more significantly in Podcasts than in Music, likely due to
the fact that Car and Commute use cases have changed quite
dramatically. However, listening time around activities like
cooking, doing chores, family time, and relaxing at home have each
been up double digits over the past few weeks. Audio has also taken
on a greater role in managing the stress and anxiety many are
feeling in today’s unprecedented environment. Two in five consumers
we surveyed in the US said they were listening to music to manage
stress more than they typically do, which explains the recent rise
we’ve seen in searches for “chill” and “instrumental”. We’ve also
seen an uptick in consumption of podcasts related to wellness and
meditation over the last few weeks.
The past few months have only strengthened our belief in the
Freemium model. As mentioned, we have seen strong growth in users,
both new and returning. Historically, over 60% of our Premium users
start as Ad-Supported users, so continuing to grow the top of the
funnel is very healthy for our ecosystem. We also know that roughly
70% of churned users are back with Spotify within 45 days of
leaving, which includes coming back through either our Premium or
Ad-Supported experience. While our sincere hope is for some sense
of “normalcy” to return to people’s lives as quickly as possible,
we do believe our model is uniquely positioned to not just weather
this storm, but to come out the other side even stronger.
MONTHLY ACTIVE USERS (“MAUs”)
Total MAUs grew 31% Y/Y to 286 million, in line with our
forecast and expectations.
Q1 2020 was the third consecutive quarter of year on year growth
above 30%. In all four of our regions, MAU grew faster in Q1 2020
than it did Q1 2019. Growth in North America accelerated for the
2nd straight quarter led by outperformance in the US, as did growth
in our largest region, Europe. Our Latin America and Rest of World
regions continue to see the fastest growth, with those segments
growing 36% and 65% Y/Y, respectively.
Of note, we are beginning to see growth in reactivations
following stay-at-home orders being implemented globally. While it
is too early to tell what the lasting impact will be from this
emerging trend, we will be tracking this over the coming months as
the global health emergency evolves. Overall, the funnel remains
strong, with both activated and reactivated MAUs growing
substantially even during the COVID-related lockdown periods in
major markets. Retention continues to see significant increases Y/Y
particularly on the Ad-Supported tier with retention percentages up
hundreds of basis points at key milestones in a users’ first 6
months. We remain confident based on our operating history that
strong MAU trends are a leading indicator for future subscriber and
financial growth.
PREMIUM SUBSCRIBERS
At the end of Q1’20 we had 130 million Premium Subscribers
globally, up 31% Y/Y and ahead of our forecast. Family Plan was a
significant driver of our outperformance once again. Spotify Kids (our stand-alone beta app designed
for children three and older) launched in eight more markets during
Q1 - Australia and the UK in February, Mexico, Brazil, and
Argentina in mid-March, and most recently the US, Canada, and
France toward the end of the quarter. Additionally, we expanded the
pilot of our Duo offering, Premium plans for two people, into three
more geographies this quarter: Canada, France, and Japan. The Duo
plan is now available in 23 markets total following strong results
from rollouts in Denmark, Ireland, Poland, and Latin America last
year.
Churn improved more than 70 bps Y/Y, but ticked up approximately
10 bps sequentially. Given the high promotional activity related to
our holiday campaign in the fourth quarter, the first quarter
typically sees more seasonal churn and the quarter was in line with
expectations. We did see some minor impact from the effects of
COVID-19 (modest increase in cancellations and payment failures) at
the very end of the quarter, but it had little impact on reported
churn and trends have been steadily improving. Approximately 1 in 6
respondents to our exit survey in the US cited COVID-related
reasons for cancelling their accounts. Encouragingly, more than 80%
of those respondents indicated that they are extremely likely or
likely to renew once the economic situation improves.
FINANCIAL METRICS
Revenue
Total revenue of €1,848 million grew 22% Y/Y in Q1. Consolidated
revenue was roughly in line with expectations. Premium revenue grew
23% Y/Y to €1,700 million, and slightly outperformed our
expectations. Ad-Supported revenues grew 17% Y/Y, but fell short of
expectations as a result of impacts from COVID-19, particularly the
last three weeks of the quarter.
For the Premium business, average revenue per user (“ARPU”) of
€4.42 in Q1 was down 6% Y/Y (down 7% excluding the impact from FX
rates). A significant portion of this decline was driven by the
continuation of longer free trials rolling over from Q4 and
additional intake during Q1. Excluding the impact of Trials &
Campaigns, ARPU would have declined 4% Y/Y as a result of continued
mix shifts in product and geography.
Ad-Supported revenues of €148 million fell short of our
forecast. Prior to the global health crisis, we were in a strong
position to hit or exceed our Q1 target. Revenues were pacing ahead
of forecast as a number of initiatives implemented toward the end
of 2019 seemed to be bearing fruit faster than anticipated.
However, in March we saw deceleration across all sales channels as
previously booked business was cancelled or paused, and
Programmatic buyers pulled back spend. Ad-Supported Revenue in the
last 3 weeks of the quarter was more than 20% below forecasted
levels as a result.
Despite the weakness in the final 3 weeks of the quarter,
revenue from our Direct and Ad Studio channels finished ahead of
forecast given pacing in the preceding months. However, revenues
from Programmatic were hit particularly hard, finishing the quarter
short of expectations. We have revised our 2020 forecast for
Ad-Supported revenue significantly from our pre-COVID estimates
given the current levels of uncertainty surrounding the global
health crisis. More information can be found in our ‘Q2 & 2020
Outlook’ section below.
There were a number of positives in the quarter. Most notably,
we successfully rolled out Dynamic Ad Breaks (DAB) in our Top 10
markets, and announced the beta test of a new ad product for
Podcasts at CES, Streaming Ad Insertion (SAI). Since the end of the quarter, we have
expanded the reach of DAB and it has now been launched
globally.
Gross Margin
Gross Margin finished as 25.5% in Q1 which both exceeded our
expectations and finished at the high end of our guidance range.
The largest driver of outperformance stemmed from the core royalty
component due to product mix, offset somewhat by one-time
reductions. We also saw a benefit from non-royalty cost of revenue,
most notably streaming delivery costs. We did see some delays in
our content production and release schedule, some of which was
related to COVID-19. It’s likely that we will continue to see lower
overall production relative to our original plan and expect lower
levels in Q2 than our original forecast.
On April 1, we announced a renewed global licensing partnership
with Warner Music Group. The expanded deal covers countries where
we currently operate, as well as certain additional markets. We are
pleased with the outcome, and as stated previously, do not believe
the new deal will materially impact music economics. We look
forward to working together with Warner to grow the music industry
over the long term.
Premium Gross Margin was 28.3% in Q1, up from 27.4% in Q4, and
up 220 bps Y/Y. Ad-Supported Gross Margin was (6.6)% in Q1, down
from 11.6% in Q4 and down 1,550 bps Y/Y. We continue to believe
that our investments in podcasts will benefit the platform as a
whole, and see an overall benefit to both usage, engagement, and
retention across both Ad-Supported and Premium. With that in mind,
to improve consistency in the segment classification between
podcast advertising revenues and costs of podcast content,
effective January 1, 2020, all costs of podcast content were wholly
recognized in the Ad-Supported segment rather than allocating
certain podcast costs between segments. The segment Gross Margins
above reflect this change, and prior period results have been
revised to conform with the current period’s classification. There
is no impact to consolidated Gross Margin. The change in
classification for podcasts had roughly a 600 bp impact on
Ad-Supported Gross Margin. There were additional unusual items that
negatively impacted the Ad-Supported Gross Margin by 500 bps in the
quarter.
Operating Expenses / Income (Loss)
Operating expenses totaled €489 million in Q1, an increase of
16% from 1Q’19 but short of our plan. The cost of Share Based
Compensation, both from the social charges as a result of share
price movements and lower than expected grants of new equity, was
the largest driver of the variance to forecast this quarter. Social
charges, in particular, came in €24 million lower than plan and
overall equity expense was €36 million less than expected. We also
experienced positive variance from COVID-19-related forces; travel
was down significantly this quarter, and certain areas of spend
like events and campaigns were postponed to a later period or
cancelled.
To that end, as mentioned above, we have decided to slow the
pace of hiring for the remainder of the year until we have better
visibility into the economic impact of COVID-19. We will continue
to focus our investments in areas of strategic importance, and
remain committed to our long-term targets for hiring in Research
& Development. Additionally, we are committed to retaining all
existing employees, but are mindful about the absolute level of
hiring until we have more clarity on the global economic picture
and the length of our work from home status. At the end of Q1, our
workforce consisted of 5,779 FTEs globally.
Content
We continue to be excited by the growth trajectory and adoption
of podcast content globally. While the current environment has
shifted listening patterns temporarily, nothing we have seen
changes our long-term view of the potential for Podcasts. Today,
19% of our Total MAUs engage with podcast content, up from 16% in
Q4 2019, and consumption continues to grow at triple digit rates
Y/Y.
In Q1, we launched 78 Originals & Exclusives (“O&E”)
podcasts globally and completed the acquisition of The Ringer,
rounding out our total number of studio operations to four: Gimlet,
Parcast, The Ringer, and Spotify Studios. Some notable launches
include Mom’s Basement, a show about
the culture and personalities of gaming hosted by Faze Banks and
Kemstar of the popular eSports group FaZe Clan; Made in Medellin, an original podcast about the
life and music of J. Balvin which earned more than 295 million
media impressions across the US, Spain, Colombia, Argentina, Chile,
and Mexico; and Le Nuage, a
“fact-based” thriller that became the #1 podcast in France the week
it launched.
There are now more than 1 million podcasts available on our
platform, and more than 60% of them are powered by Anchor, which we
acquired a year ago. In Q1 specifically, Anchor-powered shows
accounted for more than 70% of new podcasts launched on our
service.
Overall supply of new podcast content was impacted slightly by
COVID-19, largely driven by double-digit declines in episodes of
our Catalog shows, while there was little-to-no change in output
from Spotify Originals and Exclusives. Across the top 1,000 Catalog
shows, we observed a stable number of shows publishing new
episodes, but approximately a 20% decline in the number of episodes
published by these shows vs. pre-COVID. Our portfolio of O&E
was more resilient to the impact of COVID-19, as nearly all our
show teams shifted to producing podcasts while working from home,
which allowed us to publish a stable supply of new episodes.
Fest & Flauschig, one of our
biggest podcasts in Germany, adapted to working from home by adding
a number of new episodes each week to keep fans company during the
lockdown. Gimlet also expanded their coverage on Science Vs and The
Journal to focus on COVID-19, which resulted in substantial
growth in audience and consumption time for each title.
COVID-19 has impacted the creator community significantly, and
we are doing our best to support the community in these trying
times. In response to the global pandemic, we shifted our
priorities in March to introduce a music relief project using a
multi-faceted approach: 1) a program to match donations received by
organizations that support artists and creators in need, and 2)
artist-selected fundraising destinations recommended to their
fans.
On March 25, 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.
On April 22, we also followed up by launching Artist Fundraising
pick, allowing artists to highlight donations to support themselves
or our music relief project. On the first day we saw more than
27,000 artists enable this feature on their profile page and there
are approximately 50,000 currently using the feature.
Two-Sided Marketplace
We continue to drive execution and innovation to further our
goal of building a diversified digital services platform enabling
creator teams to connect, create, and grow their audiences on our
service. Sponsored Recommendations continue to perform; Premium opt
out rates are extraordinarily low, while click through rates and
conversion rates have remained strong and continue to over index
click through rates on comparable digital platforms. Of note, the
team from Republic booked a Sponsored Recommendation campaign to
promote The Weeknd’s new album, After Hours, which saw the highest
click through rate of a campaign on our platform to date. It was
the largest album debut of the year so far, and the album reached
#1 following this promotional period. We continue to believe that
growth from these and other products in our Marketplace strategy
will exceed 50% for the full year.
Free Cash Flow
Last quarter we called attention to the impact of timing shifts
in certain payments to licensors. This shift in working capital
inflated Free Cash Flow in Q4 and was anticipated to reverse this
quarter as payments were made. Total Free Cash Flow was €(21)
million in Q1 as a result. While this was the first operating cash
outflow we’ve had in the past 9 quarters, the cash burn was
actually less than we had anticipated. Offsetting some of the
unfavorable movements in working capital was lower spend on
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 Q1,
we had €1.8 billion in cash and cash equivalents, restricted cash,
and short term investments on our Balance Sheet, and no
indebtedness2.
Q2 & 2020 OUTLOOK
These forward-looking statements reflect Spotify’s expectations
as of April 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.
Q2 2020 Guidance:
- Total MAUs: 289-299 million
- Total Premium Subscribers: 133-138 million
- Total Revenue: €1.75-€1.95 billion
- Assumes approximately 300 bps headwind to growth Y/Y due to
movements in foreign exchange rates
- Gross Margin: 23.3-25.3%
- Operating Profit/Loss: €(45)-€(95) million
- Includes expected charitable contributions of roughly €(9)
million
We are reiterating Full Year 2020 Guidance with the exception of
Revenue:
- Total MAUs: 328-348 million
- Total Premium Subscribers: 143-153 million
- Total Revenue: Reduced to €7.65-€8.05 billion from
€8.08-€8.48 billion
- The two biggest drivers of the reduction in revenue guidance
relate to changes in foreign exchange rates and changes in our
advertising expectations related to COVID-19. F/X is the largest
impact accounting for almost half of the change
- Gross Margin: 23.2-25.2%
- Operating Profit/Loss: €(150)-€(250) million
EARNINGS QUESTION & ANSWER SESSION
The Company 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:
Participant Toll Free Dial-In Number: (844) 343-9039
Participant International Dial-In Number: +1 (647) 689-5130
Conference ID: 9549846
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. 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
March 31,
2020
December 31,
2019
March 31,
2019
Revenue
1,848
1,855
1,511
Cost of revenue
1,376
1,381
1,138
Gross profit
472
474
373
Research and development
162
173
155
Sales and marketing
231
276
172
General and administrative
96
102
93
489
551
420
Operating loss
(17
)
(77
)
(47
)
Finance income
70
7
34
Finance costs
(12
)
(103
)
(156
)
Finance income/(costs) - net
58
(96
)
(122
)
Income/(loss) before tax
41
(173
)
(169
)
Income tax expense/(benefit)
40
36
(27
)
Net income/(loss) attributable to
owners of the parent
1
(209
)
(142
)
Earnings/(loss) per share attributable
to owners of the parent
Basic
0.00
(1.14
)
(0.79
)
Diluted
(0.20
)
(1.14
)
(0.79
)
Weighted-average ordinary shares
outstanding
Basic
185,046,324
182,942,528
180,613,539
Diluted
185,632,113
182,942,528
180,613,539
Condensed consolidated statement of
financial position
(Unaudited)
(in € millions)
March 31,
2020
December 31,
2019
Assets
Non-current assets
Lease right-of-use assets
491
489
Property and equipment
291
291
Goodwill
627
478
Intangible assets
87
58
Long term investments
1,312
1,497
Restricted cash and other non-current
assets
69
69
Deferred tax assets
6
9
2,883
2,891
Current assets
Trade and other receivables
363
402
Income tax receivable
3
4
Short term investments
733
692
Cash and cash equivalents
951
1,065
Other current assets
93
68
2,143
2,231
Total assets
5,026
5,122
Equity and liabilities
Equity
Share capital
—
—
Other paid in capital
4,079
4,192
Treasury shares
(180
)
(370
)
Other reserves
822
924
Accumulated deficit
(2,708
)
(2,709
)
Equity attributable to owners of the
parent
2,013
2,037
Non-current liabilities
Lease liabilities
624
622
Accrued expenses and other liabilities
46
20
Provisions
2
2
Deferred tax liabilities
2
2
674
646
Current liabilities
Trade and other payables
547
549
Income tax payable
8
9
Deferred revenue
317
319
Accrued expenses and other liabilities
1,389
1,438
Provisions
12
13
Derivative liabilities
66
111
2,339
2,439
Total liabilities
3,013
3,085
Total equity and liabilities
5,026
5,122
Interim condensed consolidated
statement of cash flows
(Unaudited)
(in € millions)
Three months ended
March 31,
2020
December 31,
2019
March 31,
2019
Operating activities
Net income/(loss)
1
(209
)
(142
)
Adjustments to reconcile net income/(loss)
to net cash flows
Depreciation of property and equipment and
lease right-of-use assets
21
20
17
Amortization of intangible assets
5
4
4
Share-based payments expense
37
28
26
Finance income
(70
)
(7
)
(34
)
Finance costs
12
103
156
Income tax expense/(benefit)
40
36
(27
)
Other
4
14
8
Changes in working capital:
Decrease/(increase) in trade receivables
and other assets
22
(14
)
35
(Decrease)/increase in trade and other
liabilities
(63
)
222
155
(Decrease)/increase in deferred
revenue
(4
)
15
13
(Decrease)/increase in provisions
(1
)
1
—
Interest paid on lease liabilities
(15
)
(12
)
(4
)
Interest received
3
2
4
Income tax paid
(1
)
—
(2
)
Net cash flows (used in)/from operating
activities
(9
)
203
209
Investing activities
Business combinations, net of cash
acquired
(137
)
—
(288
)
Purchases of property and equipment
(12
)
(32
)
(37
)
Purchases of short term investments
(498
)
(231
)
(104
)
Sales and maturities of short term
investments
477
165
383
Change in restricted cash
—
(2
)
1
Other
(14
)
(5
)
(4
)
Net cash flows used in investing
activities
(184
)
(105
)
(49
)
Financing activities
Payments of lease liabilities
(4
)
(4
)
(5
)
Lease incentives received
7
—
—
Repurchases of ordinary shares
—
(30
)
(126
)
Proceeds from exercise of share
options
77
71
33
Proceeds from the exercise of warrants
—
74
—
Other
(3
)
(2
)
—
Net cash flows from/(used in) financing
activities
77
109
(98
)
Net (decrease)/increase in cash and
cash equivalents
(116
)
207
62
Cash and cash equivalents at beginning of
the period
1,065
877
891
Net exchange gains/(losses) on cash and
cash equivalents
2
(19
)
13
Cash and cash equivalents at period
end
951
1,065
966
Calculation of basic and diluted
earnings/(loss) per share
(Unaudited)
(in € millions, except share and per share
data)
Three months ended
March 31,
2020
December 31,
2019
March 31,
2019
Basic earnings/(loss) per share
Net income/(loss) attributable to owners
of the parent
1
(209
)
(142
)
Share used in computation:
Weighted-average ordinary shares
outstanding
185,046,324
182,942,528
180,613,539
Basic earnings/(loss) per share
attributable to owners of the parent
0.00
(1.14
)
(0.79
)
Diluted loss per share
Net income/(loss) attributable to owners
of the parent
1
(209
)
(142
)
Fair value gains on dilutive warrants
(38
)
—
—
Net loss used in the computation of
diluted loss per share
(37
)
(209
)
(142
)
Shares used in computation:
Weighted-average ordinary shares
outstanding
185,046,324
182,942,528
180,613,539
Warrants
585,789
—
—
Diluted weighted-average ordinary
shares
185,632,113
182,942,528
180,613,539
Diluted loss per share attributable to
owners of the parent
(0.20
)
(1.14
)
(0.79
)
Reconciliation of IFRS to Non-IFRS
Results
(Unaudited)
(in € millions, except percentages)
Three months ended
March 31,
2020
March 31,
2019
IFRS revenue
1,848
1,511
Foreign exchange effect on 2020 revenue
using 2019 rates
(11
)
Revenue excluding foreign exchange
effect
1,837
IFRS revenue year-over-year change %
22
%
Revenue excluding foreign exchange effect
year-over-year change %
22
%
IFRS Premium revenue
1,700
1,385
Foreign exchange effect on 2020 Premium
revenue using 2019 rates
(8
)
Premium revenue excluding foreign exchange
effect
1,692
IFRS Premium revenue year-over-year change
%
23
%
Premium revenue excluding foreign exchange
effect year-over-year change %
22
%
IFRS Ad-Supported revenue
148
126
Foreign exchange effect on 2020
Ad-Supported revenue using 2019 rates
(3
)
Ad-Supported revenue excluding foreign
exchange effect
145
IFRS Ad-Supported revenue year-over-year
change %
17
%
Ad-Supported revenue excluding foreign
exchange effect year-over-year change %
15
%
Free Cash Flow
(Unaudited)
(in € millions)
Three months ended
March 31,
2020
December 31,
2019
March 31,
2019
Net cash flows (used in)/from operating
activities
(9
)
203
209
Capital expenditures
(12
)
(32
)
(37
)
Change in restricted cash
—
(2
)
1
Free Cash Flow
(21
)
169
173
1 Free Cash Flow is a non-IFRS measure. See “Use of Non-IFRS
Measures” and “Reconciliation of IFRS to Non-IFRS Results” for
additional information. 2 As of March 31, 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/20200429005216/en/
Investor Relations: Michael Urciuoli ir@spotify.com
Public Relations: Dustee Jenkins press@spotify.com
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