Spotify’s financials rise up the charts

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Music streaming service Spotify, has announced that its fourth-quarter results were ahead of company guidance, delivering positive operating income, net income and free-cash-flow for the first time. Fourth quarter revenues rose 30% to €1.5bn, with operating profit of €94m.

Monthly active users (MAUs) were ahead of guidance at 207m, as customer retention came in ahead of company forecasts. The shares were broadly flat in early trading following this announcement.

Founder and CEO of Spotify said: “I’m proud of what we’ve accomplished, but what I didn’t know when we launched to consumers in 2008 was that audio — not just music — would be the future of Spotify.

“With more than 200 million users around the globe, Spotify is already one of the world’s most-used apps, but we see an opportunity apart from where we sit today. An opportunity that will allow us to reach beyond music to engage users in entirely new ways.

“We are building a platform that provides a meaningful opportunity for creators, excites and engages our users, and builds an even more robust business model for Spotify in an industry we believe will become significantly larger when you add Internet-level monetisation to it.”

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown commented: “Although there are some one-off’s flattering the numbers this quarter, today still represents an important milestone. Spotify’s core business and geographies are looking increasingly comfortable, and while expansion into another 13 countries and development of advertising and artist tools is holding back the bottom line, it’s not a long term problem.

“With €1.8bn of cash on the balance sheet Spotify has the firepower to make the investments and acquisitions needed to grow the business. The move into podcasts makes sense, it’s been a rapidly developing part of the audio market of late. However, the group clearly has some grand ambitions – with as much as half a billion dollars allocated to M&A this year. It wouldn’t be a total surprise to see audiobooks featuring on the shopping list somewhere as it looks to do battle with Amazon’s Audible.

“Overall we like Spotify. It’s got increasingly direct access to content producers, relatively low and flexible costs and a roll-out story that should help it leverage the benefits of scale. Just days after HMV was rescued from its second administration in a decade, Spotify’s results are a reminder of why turning that business around is going to be challenge.”

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