Spotify Q3 2024 $SPOT (+4,7 %)

Financial performance:

• Revenue: Total revenue in Q3 2024 amounted to €3,988 million, an increase of 19% year-on-year (Y/Y); at constant currency, growth was 21% Y/Y.
• Gross margin: A record 31.1% was achieved, which corresponds to an increase of 473 basis points Y/Y.
• Operating result: Operating profit rose to a record high of 454 million euros, corresponding to an operating margin of 11.4 %.

Balance sheet overview:

• Cash and cash equivalents: At the end of Q3 2024, the company held €6.1 billion in cash, restricted cash and short-term investments.
• Total assets: Total assets amounted to EUR 10,553 million as at September 30, 2024.

Details of the income statement:

• Revenue from premium services: Grew by 21% Y/Y due to the increase in subscriber numbers and ARPU (average revenue per user).
• Revenue from ad-financed services: Increased by 6% Y/Y.

Cash flow overview:

• Free cash flow: Reached €711 million in Q3 2024, contributing to a year-to-date figure of €1.4 billion.
• Net cash flow from operating activities: In the third quarter of 2024, this amounted to EUR 715 million.

Key figures and profitability metrics:

• Gross margin: 31.1% in the third quarter of 2024.
• Operating margin: 11.4% in the third quarter of 2024.

Segment information:

• Premium segment: Gross margin improved to 33.5 %, an increase of 436 basis points Y/Y.
• Advertising-financed segment: Gross margin increased to 13.1%, an increase of 486 basis points Y/Y.

Competitive position: The company expanded its AI-based DJ services into Spanish-speaking markets and increased the availability of music videos, further improving the user experience.

Outlook and management commentary: Management is confident that sustainable growth will be achieved and that the long-term goals formulated at the Investor Day 2022 are achievable.

Risks and opportunities:

• Currency fluctuations: Unfavorable currency movements impacted sales growth by approximately 270 basis points.

Summary of results:

Positives:

• Record gross and operating margins.
• Strong free cash flow generation.
• Double-digit growth in monthly active users (MAUs) and premium subscribers.
• Successful expansion of user experience and engagement strategies.
• Efficiency improvements that led to a decrease in operating expenses.

Negative aspects:

• Growth in advertising revenue lagged behind that of premium revenue.
• Revenue was impacted by unfavorable currency movements.
• Social security contributions in connection with share-based remuneration increased expenses.
• Ongoing challenges in the profitability of the advertising-financed segment.
• Potential risks from macroeconomic factors such as currency fluctuations.