Yesterday, Spotify, a Swedish streaming music service provider, released the company’s third-quarter 2022 financial report. According to the financial report, Spotify’s third-quarter revenue was 3.036 billion euros. This exceeds the company’s previous forecast of 3.000 billion euros. The current value is an increase of 21% relative to 2.501 billion euros in the same period last year. It is also a 6% increase relative to the previous quarter’s 2.864 billion euros. The net loss attributable to shareholders of the parent company was 166 million euros. Also, the net profit attributable to shareholders of the parent company of 2 million euros in the same period last year.
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The company’s diluted loss per share attributable to shareholders of the parent company was EUR 0.99, compared to the diluted loss per share attributable to shareholders of the parent company in the same period last year was 0.41 euro. Spotify’s third-quarter revenue tops Wall Street analysts’ expectations. However, it missed analysts’ estimates on a diluted loss per share, sending its shares down more than 5 per cent in after-hours trading.
Financial results:
Spotify’s third-quarter revenue of 3.036 billion euros exceeds the company’s previous forecast of 3.000 billion euros. This is an increase of 21% relative to 2.501 billion euros in the same period last year. It is also a 6% increase from 2.864 billion euros in the previous quarter. The results slightly beat analysts’ expectations. Analysts on average had expected Spotify’s third-quarter revenue to reach 3.02 billion euros. This is according to data from financial market data and infrastructure provider, Refinitiv.
By business unit, Spotify’s third-quarter revenue from paid services was 2.651 billion euros. This is an increase of 22% relative to 2.178 billion euros in the same period last year. It is also a 6% increase compared to 2.504 billion euros in the previous quarter. In advertising sponsorship, revenues were EUR 385 million. This is an increase of 19 per cent compared to 323 million euros in the same period last year. With respect to the previous quarter (360 million euros), this is a 7% increase.
Spotify’s third-quarter cost of revenue was 2.286 billion euros, compared with 1.833 billion euros in the same period last year. The company’s third-quarter gross profit was 750 million euros, compared with 668 million euros a year earlier. Spotify’s third-quarter gross margin was 24.7%, compared with 26.7% in the same period last year and 24.6% in the previous quarter.
Operating expenses
Spotify’s operating expenses in the third quarter were 978 million euros, compared with 593 million euros in the same period last year. Among them, research and development expenditures were 386 million euros. In the same period last year, it had 208 million euros. Its sales and marketing expenses were 432 million euros. This is higher than the 280 million euros in the same period last year. For its general and administrative expenses, it hit 160 million euros. This is higher than the 105 million euros in the same period last year.
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Spotify posted an operating loss of 228 million euros in the third quarter. A year earlier, the company had an operating profit of 75 million euros a year. It also had an operating loss of 194 million euros in the previous quarter. Spotify’s operating loss rate in the third quarter was 7.5%. In the same period last year, it had an operating margin of 3.0%. It also had an operating loss rate of 6.8% in the previous quarter.
Spotify’s third-quarter net loss attributable to parent company shareholders was 166 million euros. In the same period of last year, the net profit attributable to parent company shareholders is 2 million euros.
Spotify’s basic loss per share attributable to parent shareholders was 0.86 euros in the third quarter. In the same period of last year, the basic earnings per share attributable to parent shareholders is 0.01 euros. The diluted loss per share attributable to parent shareholders was 0.99 euros. In the same period last year, the diluted loss per share attributable to shareholders is 0.41 euros. Analysts on average had expected Spotify to report a loss of 0.85 euros per share in the third quarter.
Spotify cash flow
Spotify’s net cash flow from operating activities in the third quarter was 40 million euros. This is an increase of 1 million euros relative to the 39 million euros of the previous quarter. In the same period last year, it had 123 million euros. Spotify’s free cash flow in the third quarter was 35 million euros. This is a slight decline relative to its 37 million euros of last quarter. In the previous year, it had 99 million euros.
At the end of the third quarter, Spotify had 3.7 billion euros in cash, cash equivalents, restricted cash and short-term investments. This is slightly higher than the 3.3 billion euros at the end of the third quarter of fiscal 2021.
Operational Indicators:
Spotify’s MAU (monthly active users) in the third quarter was 456 million. This is an increase of 20% from 381 million in the same period last year. It is also a 5% increase from 433 million in the previous quarter. Spotify had 195 million paying subscribers in the third quarter. This is up 13 per cent from 172 million a year earlier. It is also 4 per cent from 188 million in the previous quarter. Spotify’s third-quarter ad-supported MAU was 273 million. This is up 24% from 220 million in the same period last year. It is also a 7% increase from 256 million in the previous quarter.
Performance Outlook:
For the fourth quarter of fiscal 2022, Spotify has the following outlook:
The total number of monthly active users (MAU) should reach 479 million. This means that the net new MAU in the fourth quarter is about 23 million. The total number of paying users should reach 202 million. This means that the number of net new paying users in the fourth quarter is about 7 million.
The forecast shows that Spotify’s revenue will hit 3.2 billion euros. The outlook assumes a favourable impact of exchange rate movements on year-over-year revenue growth of approximately 800 basis points. The gross profit margin will reach 24.5% according to analysts. However, the operating losses should hit 300 million euros. This includes the negative impact of exchange rate changes on operating expenses of around 95 million euros.