Spotify reported better-than-expected results for the third quarter. Total monthly active users grew 30 percent year-on-year to 248 million, ahead of its guidance of 240-245 million, and the company raised its forecast for the year-end total to 255-270 million, an increase of 5 million from its previous range.
The number of premium, paid subscribers increased 31 percent to 113 million, with Spotify citing strength in both its family and student plans. By region, user growth accelerated in Latin America, remained strong in southeast Asia and exceeded expectations in India.
Spotify said it was also seeing a positive response to product innovations and growing take-up of its podcast offering. Compared to its main rival Apple, the publicly available data shows it's adding roughly twice as many subscribers per month and monthly engagement is roughly 2x as high, while churn is at half the rate. It's also adding more users on an absolute basis than Amazon, which has more ad-supported than paid users, Spotify claims.
Revenues also exceeded expectations, with growth of 28 percent to EUR 1.73 billion. For the Premium business, average revenue per user of EUR 4.67 was down 3 percent excluding currency effects. With operating costs increasing a slower 11 percent, operating profit improved to EUR 54 million, also better than expected. Free cash flow was positive for an eighth consecutive quarter, at EUR 48 million.
For the fourth quarter, Spotify maintained its forecast for total premium subscribers of 120-125 million. Revenues are estimated at EUR 1.74-1.94 billion, while the operating result will turn to a projected loss of EUR 31-131 million, in line with its forecast three months ago.
New CFO
Spotify also announced that its CFO Barry McCarthy will retire from 15 January 2020. He will be replaced by Paul Vogel, the current VP of FP&A, Treasury and Investor Relations, who has worked with McCarthy for three years. McCarthy is expected to be re-appointed to the Spotify board of directors, a role he held prior to joining the company as CFO.
