Spotify Technology (SPOT) announced its first-quarter financial results on Tuesday, with both revenue and bottom line exceeding expectations. The audio giant is also profitable as it continues to implement its recent “efficiency” strategy.
Over the past year, Spotify has undertaken multiple rounds of job cuts, along with price increases and other initiatives, to drive revenue growth and improve profit margins. The company said it will be more intentional about future investments after spending billions of dollars to enter the crowded podcast market.
The audio giant reported an operating profit of 168 million euros ($179 million), compared to an operating loss of 156 million euros in the same period last year. Spotify said the amount was lower than the company’s stated €180 million because the social charge was higher than expected “due to share price appreciation during the quarter.”
Additionally, operating profit for the second quarter was a strong 250 million euros, significantly exceeding Wall Street consensus expectations. His second-quarter revenue outlook also exceeded expectations, coming in at 3.8 billion euros versus his 3.76 billion euros.
In addition to more planned spending, Spotify is reportedly raising prices again after increasing the cost of certain subscription plans last summer.
according to bloomberg, Spotify plans to raise prices by around $1 to $2 per month in five markets, including the UK, Australia, and Pakistan. The changes will take place at the end of April, with U.S. prices expected to rise “later this year.” The report also said Spotify plans to introduce a cheaper option that does not include audiobooks.
The company’s stock price rose more than 9% in premarket trading on Tuesday following the results.
The streaming service reported net income of 197 million euros ($210 million) and earnings per share of 0.97 euros. This exceeded analysts’ expectations for earnings of 0.65 euros per share. It also compares to a loss of 225 million euros, or a loss of 1.16 euros per share, in the same period last year.
Gross profit margin exceeded expectations at 27.6%, beating the company’s forecast of 26.4%. The streamer said second-quarter profit margins he expects to reach 28.1%, primarily due to year-over-year improvements in music and podcasting.
Spotify previously said it expected this metric to grow between 30% and 35% in the long term as it plans to further expand its podcasting and advertising businesses.
Meanwhile, revenue totaled 3.64 billion euros ($3.88 billion), up 20% compared to the first quarter of 2023 and beating Wall Street expectations of 3.61 billion euros.
Number of users
Total monthly active users (MAUs) reached 615 million in the quarter, lower than the company’s estimate of 618 million, but still an improvement of 19% compared to the year-ago total. The streaming service expects his MAUs to be at his 631 million in the second quarter.
Premium subscribers reached Wall Street’s expectations of 239 million, a 14% year-over-year increase. Spotify expects its subscriber count to rise to 245 million in the second quarter.
Free cash flow, another important indicator for investors, amounted to 207 million euros in the quarter, compared to 57 million euros in the same period last year.
Average revenue per user (ARPU) for premium subscriptions increased by 7% to €4.55 (5% year-on-year excluding foreign exchange headwinds). ARPU was driven by benefits from price increases, partially offset by domestic discount offers and lower prices. It is an emerging market market, the company said.
profit pledge
Analysts are generally bullish on Spotify after the audio giant pledged to improve profitability on a gross and operating profit basis starting in 2023.
Spotify stock has risen more than 100% over the past year and is up 43% year-to-date.
Spotify has spent $1 billion entering the podcast market over the past four years; Flashy A-list sale and a studio acquisition worth over $400 million.
This expense significantly reduced gross profit and put significant pressure on profitability. In response, Spotify has committed to several rounds of layoffs. 3 in 2023 alone.
Spotify CFO Paul Vogel resigned on March 31st. replaced Written by Christian Ruiga, Previously, he worked for Swedish aerospace and defense company Saab.. The company said Luiga will take over in the third quarter.
In addition to layoffs and price increases, Spotify also changed its royalty structure. Audiobooks are free to paid subscribersand trapped new We feature popular podcasters like Joe Rogan and Alexandra Cooper of “Call Her Daddy.”
The new deal comes as Spotify further revamps its podcast strategy to focus on distribution over exclusivity.
The audio giant announced that the platform’s most popular Rogan podcast will also be available on additional services, including Apple Podcasts (AAPL), Amazon Music (AMZN), and YouTube (GOOGL), for the first time in years. Spotify will be in charge of distribution and advertising sales, and will strive to maximize revenue. Logan will receive a guaranteed lowest price and a cut of advertising revenue.
Cooper’s “Call Her Daddy” deal will be structured similarly to the podcast, which is now available on all major audio platforms after more than two years as a Spotify exclusive. The company will maintain exclusive rights to the video portion of the podcast.
alexandra canal I’m a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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