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Spotify Subscribers Crawl to 182M as Quarterly Revenue Grows 24%

The company says an exit from Russia factored into why it missed original forecasts for paid user growth.

Spotify added just 2 million premium subscribers in the first quarter of 2022 and wrapped up March with a total of 182 million paid users and 252 million ad-supported listeners, the company announced Wednesday morning in its latest earnings release. While that paid subscriber tally was a million under guidance, the company was quick to note that its wind-down in Russia, following its invasion of Ukraine, resulted in an “involuntary churn” of roughly 1.5 million subscribers there.

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The company also placed a caveat on the 422 million total monthly active users (MAUs) it is reporting for the quarter ended March 31. Spotify believes that outperformance was due to a service outage that led to several million users creating new accounts to get back in — and that excluding that event, MAUs would have been 419 million.

“When you exclude the impact of our withdrawal from Russia, we came in line or ahead on every metric,” said CEO Daniel Ek in an investor call on Wednesday morning, describing the results as a “testament of the consistency of our execution and clearly shows how compelling our offering remains… even in the face of uncertainty provoked by world events.”

Investors responded to the quarterly results with a flurry of activity. Spotify’s share price dropped below $100 for the first time in after hours trading, following Tuesday’s close at $110. Following Spotify’s earnings announcement, the stock opened on Wednesday at an all-time low $97 before rebounding to $105 — but then dropping to $98 as of 10:50 EDT. The company’s share price has dipped roughly 35% in the last month.

First-quarter revenue was 2.66 billion euros ($2.96 billion), in line with guidance, representing 24% growth year-over-year but a 1% dip from Q4’s 2.69 billion euros. The vast majority of Q1 revenue came from subscriber income, which grew 23% y/y to 2.38 billion euros ($2.65 billion). Ad-supported revenue grew 31% y/y to 282 million euros ($314 million), but represented a significant drop compared to last quarter when it was 394 million euros ($445 million).

The closely-watched average revenue per user (ARPU) metric for premium subscribers was up 6% y/y to 4.38 euros ($4.9), which the company chalks up to a price increase in 2021 and a “favorable product mix shift.”

Spotify’s 1% drop in total revenue compared to the fourth quarter is a carbon copy of last year’s Q1 dip and in line with first quarter trends.

Gross margin, the remainder after royalties and other content associated, was 25.2% of total revenue, in line with previous quarters. The company cited a “favorable revenue mix shift towards podcasts and growing marketplace activity, which was offset by increased non-music content spend, investments in music product enhancements” and other factors.

Spotify reported an operating loss of 6 million euros ($6.6 million), down from 7 million euros in Q4 and 14 million euros profit in Q1 2021. Operating expenses totaled 677 million euros ($754 million) for the quarter, slightly higher than expected due to higher costs in personnel. On that topic, Spotify increased its full time employee count from 7,690 to 8,230 since its last earnings period.

Spotify said that its business has more than 3.6 billion euros ($4 billion) in liquidity and that its free cash flow was 22 million euros ($24.5 million), a 19 million decrease y/y.

As for non-music content, Spotify highlighted a 400,000 net gain in podcasts across the platform, to 4 million, compared to the end of 2021. The company noted that the podcast share of overall consumption hours across Spotify reached “another all-time high,” though the actual percentage was not disclosed.

Spotify’s Financial Metrics (Q1 2022 vs. Q1 2021)

  • Revenue: 2.66 billion euros ($2.96 billion), up 24% year over year from 2.14 billion euros
  • Gross margin: 25.2%, down from 25.5%
  • Operating loss: 6 million euros, an improvement from a 7 million euros loss
  • Free cash flow: 22 million euros, down from 41 million euros

Listener Metrics (Q1 2022 vs. Q4 2021)

  • Paid subscribers: 182 million, up 1% from 180 million in Q4 2021
  • Ad-supported listeners: 252 million, up 7% from 236 million in Q4
  • Total monthly active users (MAUs): 422 million, up 4% from 406 million in Q4
  • Average revenue per subscriber: 4.38 euros, basically flat from Q4

Q2 2022 guidance

  • Revenue: 2.8 billion euros ($3.1 billion at current rate)
  • Paid subscribers: 187 million
  • MAUs: 428 million