First results strike the wrong note

Spotify shares skid as inaugural results undermine Wall Street hype

Spotify reported revenues of $1.37 billion for the most recent quarter and narrowed its losses. For the first quarter, Spotify operating loss fell to 41 millions euros, which is equal to nearly $49 million. It sold 17.2% of those shares during Spotify's first 24 hours of trading - generating around $260 million - and unloaded around 32% more before Friday.

Spotify's first earnings report as a public company hit the wrong note for investors. The last time Spotify disclosed subscription figures, it disclosed that its active user base totaled 159 million users of which 71 million were paying subscribers.

Spotify had projected it would end its first quarter with 73 million to 76 million subscribers in a disclosure made a week before its stock debuted on the New York Stock Exchange in early April.

Average revenue per user (ARPU) was €4.72 in Q1, down 14 percent YOY - something Spotify blames on growth of Family and Student plans, as well as the shift in market mix with growth in relatively lower ARPU regions, such as Latin America, and launches in new markets.

The gross margin improved to 24.9 percent from 24.5 percent in Q4 and 11.7 percent in Q1 2017.




Spotify said that it had reached 75 million paying subscribers, with another 99 million monthly users on its free, advertising-supported tier. Excluding currency effects, Spotify expects revenue growth of 20 percent to 38 percent. The gains announced Wednesday enabled Spotify to maintain a large lead over Apple's music-streaming service, which has about 40 million.

According to Spotify's earnings outlook, it is also expected that by the end of the next quarter the premium subscribers will touch the point somewhere between 79 and 83 million.

The revenue was broadly in line with the 1.10 billion euros to 1.15 billion euros the company had forecast but just short of the 1.143 billion euro consensus estimate among 13 analysts.

Spotify boasts several partnerships, including one with Hulu where existing subscribers can get both services for $12.99 per month.

France's Vivendi, the owner of Universal Music Group, the world's biggest music label, said recently it is mulling a stock market listing of its wholly owned music unit.

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