The first quarter is typically slow relative to other quarters even though year-over-year growth could be substantial. So, it’s no surprise that Spotify’s revenue actually dropped 1% from €2.17 in the fourth quarter of 2020 to €2.15 billion in the first quarter of 2020.
Spotify and many other streaming services fared well during the pandemic as people spent more time at home and could not attend concerts or visit movie theaters. Subscriber growth did not stall in 2020, although Spotify’s free service was hit by companies’ sudden and sharp pull-back of advertising spending.
First-quarter subscriber growth of 3 million, from the fourth quarter of 2020, was the lowest quarterly growth rate (in number of subscribers) since the third quarter of 2017 and well below the 8 million, 6 million and 11 million subscribers added in the second, third and fourth quarters of 2020. But 3 million subscribers were at the high end of Spotify’s guidance of 155 million to 158 million.
One sign of weakness in Spotify’s earnings results was a lowering of guidance for 2021 monthly active users by 5 million -- from 407 million to 427 million to 402 million to 422 million -- given a lower-than-expected MAU count in the first quarter. Investors reacted by dropping Spotify’s share price 11.2% on Wednesday morning from Tuesday’s closing price. But Vogel downplayed the change by emphasizing -- as he did in the fourth quarter earnings call -- that the company believes 2021 has more uncertainty that normal.
Ek said during the earnings call that Latin America and Southeast Asia “showed some softening” of MAUs and noted “aspects of our business” reflect that “the world is in various stages of recovering from the pandemic.”
Financial metrics (Q1 2021 vs. Q1 2020)
- Revenue: €2.15 billion up 16.2% from €1.85 billion
- Gross margin: 25.5% vs. 25.5%
- Operating profit (loss): €14 million vs -€17 million
- Free cash flow: €41 million vs -€21 million
- Subscribers: 158 million up 21% from 130 million
- Ad-supported listeners: 208 million up 27% from 163 million
- Total listeners: 356 million up 24% from 286 million
Q2 and 2021 guidance
- Q2 2021 Revenue: €366 billion to €373 billion
- Q2 2021 Subscribers: 162 million to 166 million
- 2021 Revenue: €9.11 billion to €9.51 billion
- 2021 Subscribers: 172 million to 184 million
- Market capitalization on April 28, 2021: $55.9 billion
- One-year increase in Spotify’s share price: 109.6%
- One-year increase in New York Stock Exchange value: 43.8%
Key quotes from the earnings call
- Ek on the opportunity of the audio market: “We believe we have at least 5-to-7x growth left in the businesses we are in today -- music, podcasting, and paid audio -- and we intend to win in those businesses.”
- Ek on the potential of live audio: “I think it really just comes down to creating compelling content. As an example, you may have an artist that has an upcoming album and you as the fan may be able to experience that earlier than other consumers can. Or you can have an artist explain the thinking around writing a certain song was.”
- Vogel on price increases in 40 markets: “I think we feel good about what we’ve accomplished so far in terms of price increases when you look at gross additions and churn we see very minimal impact on either one of those metrics.”
Key events in Q1 2021
- Launched in over 80 news markets — including South Korea — and rolled out 36 new languages on mobile
- Acquired Betty Labs, maker of live audio app Locker Room
- Launched redesigned desktop app and web player
Notable events in Q2 2021
- Spotify’s Anchor podcast app gives podcast creators the option to offer subscriber-only podcasts.
- The launch of Car Thing, a standalone piece of hardware for listening to Spotify in the car
- A new Facebook app for listening to Spotify from within the Facebook app on iOS and Android.