Though it says it "remains very healthy," the streaming leader forecasts lower ad revenue during the COVID-19 pandemic.
LONDON – Spotify's business "remains very healthy" despite the global uncertainty caused by the COVID-19 pandemic, the streaming giant reported in its first quarter financial results.
In the three months ending March 31, Spotify grew its user base to 130 million paid subscribers and 286 total monthly active users. Total revenue in the first quarter was €1.85 billion ($1.99 billion in current dollars), up 22% on the same period the previous year.
Of that revenue tally, the vast majority came from subscriber income, which grew 23% to €1.7 billion ($1.8 billion), slightly outperforming the company’s expectations.
Ad-supported revenues grew 17% year-on-year to €148 million, but fell short of Spotify’s forecasts as a result of disruption caused by the global health crisis, particularly in the final three weeks of March.
Spotify said that prior to COVID-19, it was in a strong position to exceed its targets for the quarter. "However, in March we saw deceleration across all sales channels as previously booked business was cancelled or paused, and Programmatic buyers pulled back spend," said the company.
Ad-supported revenues in the final three weeks of the quarter were down more than 20% forecasted levels. Spotify said it has revised its year-end forecasts for ad-supported revenue as a result.
Spotify's average revenue per user (ARPU) was down 6% y/y to €4.42 ($4.72) due to the continuation of longer free trials rolling over from the fourth quarter of 2019. Spotify said ARPU dropped 4% excluding the impact of free trials.
Operating losses for the quarter totaled €17 million ($18 million), compared to €77 million ($83 million) in Q4 2019.
Looking ahead, Spotify said its outlook for the second quarter and remainder of the year has remained unchanged "with the exception of revenue where a slowdown in advertising and significant changes in currency rates are having an impact."
It said that the business has more than €1.8 billion ($1.9 billion) in liquidity and expects to be free cash flow positive for the year.