Q4 2024 Update Spotify Feb 4
Q4 2024 Update Spotify Feb 4
The Q4 2024 update showcases significant year-over-year growth, with notable increases in monthly active users and premium subscribers. This assessment highlights major financial accomplishments, including a record-breaking revenue of $4.2 billion and a free cash flow of $877 million. Key insights into user engagements, successful campaigns, and improving profitability position the company for ongoing success in 2025.
Q4 2024 Update Spotify Feb 4
@Blockchainboss17 hours ago
Q4 2024 Update
February 4th, 2025
- â MAUs grew 12% Y/Y to 675 million, reflecting Y/Y and Q/Q growth across all regions; net additions of 35 million marked the largest Q4 in our history
- â Premium Subscribers grew 11% Y/Y to 263 million, reflecting Y/Y and Q/Q growth across all regions; net additions of 11 million matched Q4'19's record performance
- â Total Revenue grew 16% Y/Y to â¬4.2 billion; on a constant currency* basis, Total Revenue grew 17% Y/Y
- â Gross Margin finished at a record high of 32.2% (up 555 bps Y/Y)
- â Operating Income finished at a record high of â¬477 million (an 11.2% margin), driving Spotify's first full year of Operating Income to â¬1.4 billion
- â Free Cash Flow* finished at record high â¬877 million, bringing full year 2024 Free Cash Flow generation to â¬2.3 billion
- â 10th annual Wrapped campaign delivered double-digit Y/Y growth in user engagement across 184 markets
- â Unveiled Uninterrupted Video Podcasts for Premium Subscribers in select markets, giving fans a new way to experience video podcasts
- â Evolved Spotify for Podcasters into Spotify for Creators and introduced Spotify Partner Program to create new monetization opportunities for creators
- â Paid out a record $10 billion in royalties to the music industry in 2024
- â Premium Revenue growth of 17% Y/Y (or 19% Y/Y constant currency*), driven by subscriber gains and ARPU increases; and
- â Ad-Supported Revenue growth of 7% Y/Y (or 6% Y/Y constant currency*)
- â Unfavorable currency movements slowed Total Revenue Y/Y growth by ~160 bps vs. guidance for ~350 bps
- â Premium gains driven by audiobooks and music; and
- â Ad-Supported gains driven by music and podcasts (partially offset by real estate impairment activity); and
- â Other Costs of Revenue favorability, which benefited both the Premium and Ad-Supported segments
- â Lower personnel and related costs and lower marketing spend, partially offset by
- â â¬96 million in Social Charges
- * Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter.
- â Y/Y and Q/Q growth across all regions, led by Rest of World and Latin America
- â Strong holiday and Wrapped Campaigns
- â Shifts in competitor dynamics in select developing markets
- â Y/Y and Q/Q growth across all regions, with outperformance led by Rest of World
- â Strong holiday and Wrapped Campaigns
- â Shifts in competitor dynamics in select developing markets
Executive Summary
We ended 2024 with strong Q4 performance, as nearly all of our KPIs exceeded guidance and profitability reached record levels. MAU net additions of 35 million marked the largest Q4 in our history and exceeded guidance by 10 million. Subscriber net additions of 11 million also significantly outperformed, surpassing guidance by 3 million. Revenue was ahead of plan due to favorable currency movements and underlying strength in the business. Gross Margin of 32.2% was above guidance and up 555 bps Y/Y. Operating Income of â¬477 million was slightly below our guidance as Gross Profit strength and lower personnel and related and marketing costs were more than offset by â¬96 million in Social Charges. Social Charges were â¬80 million above forecast due to share price appreciation during the quarter. Free Cash Flow* reached â¬877 million in Q4, bringing full year 2024 Free Cash Flow generation to â¬2.3 billion.
Looking into 2025, we view the business as well positioned to deliver another year of continued growth and improving margins as we reinvest to support our long-term potential.
Key Highlights
Record net additions drive double digit Y/Y growth in MAUs and Subscribers
Continued top-line strength drives first full year of Operating Income profitability
Largest ever Wrapped, expanding video experience and record music payouts
Key Highlights: Actuals vs. Guidance
FINANCIAL
SUMMARY
Financial Summary
Financial Summary
Revenue
Profitability
Free Cash Flow & Liquidity
Revenue of â¬4,242 million grew 16% Y/Y in Q4 (or 17% Y/Y constant currency*), reflecting:
Gross Margin was 32.2% in Q4, up 555 bps Y/Y reflecting:
Operating Income was â¬477 million in Q4 and reflected:
At the end of Q4, our workforce consisted of 7,261 full-time employees globally
Free Cash Flow* was â¬877 million in Q4. Our liquidity and balance sheet remained strong, with â¬7.5 billion in cash and cash equivalents, restricted cash and short term investments.
Revenue
Premium growth driven by Subscriber and ARPU gains
Premium Revenue grew 17% Y/Y to â¬3,705 million (or 19% Y/Y constant currency*), reflecting subscriber growth of 11% Y/Y and a Premium ARPU increase of 5% Y/Y to â¬4.85 (or up 7% Y/Y constant currency*). Excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix.
Advertising growth in challenging brand environment
Ad-Supported Revenue grew 7% Y/Y (or 6% Y/Y constant currency*), reflecting Y/Y growth across all regions. Both Music and Podcast advertising was driven by growth in impressions sold, partially offset by softness in pricing. Our automated sales channels were the largest contributors to overall advertising growth.
* Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information.
ARPU means Premium Average Revenue per User.
* Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter.
Gross Margin
Driven by continued improvement across Premium and Ad-Supported segments
Gross Margin finished at 32.2% in Q4, up 555 bps Y/Y. The Y/Y trend was driven by improvements in our Premium and Ad-Supported segments.
Premium Gross Margin was 34.7% in Q4, up 565 bps Y/Y. The Y/Y trend was driven by favorability from audiobooks, music and Other Costs of Revenue.
Ad-Supported Gross Margin
Ad-Supported Gross Margin was 15.1% in Q4, up 351 bps Y/Y. The Y/Y trend was driven by favorability from music, Other Cost of Revenue and podcasts, partially offset by real estate impairment activity.
Operating Expenses
Y/Y declines led by efficiency initiatives
Operating Expenses declined 16% Y/Y in Q4. Currency movements and changes in Social Charge movements elevated Y/Y Operating Expense growth by ~200 bps and ~700 bps, respectively, while the lapping of prior year efficiency charges contributed ~1,300 bps of Operating Expense decline. Absent these items, the remaining 11% Y/Y decline in Operating Expenses was driven primarily by a decrease in personnel and related costs and lower marketing spend.
As a reminder, Social Charges are payroll taxes associated with employee salaries and benefits in select countries where we operate. Since a portion of these taxes is tied to the intrinsic value of share-based compensation awards, movements in our stock price can lead to fluctuations in the taxes we accrue. This resulted in Social Charges related to share-based compensation of â¬96 million in the current period. Prior year period Operating Expenses included â¬33 million in Social Charges.
* Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information.
Free Cash Flow
Record performance aids balance sheet strength
Free Cash Flow* was â¬877 million in Q4, a record high as a result of higher Net Income adjusted for non-cash items and a positive contribution from net working capital. Capital expenditures rose â¬5 million Y/Y to â¬6 million.
While the magnitude of Free Cash Flow can fluctuate from quarter to quarter based on seasonality and timing, we have averaged â¬661 million of positive Free Cash Flow on a trailing 12 month basis for the past three years. In Q4, trailing 12 month Free Cash Flow expanded to â¬2.3 billion. On a cumulative basis, we have generated â¬4.3 billion of Free Cash Flow since the beginning of 2016, supporting our strong balance sheet and â¬7.5 billion in cash and cash equivalents, restricted cash and short term investments balance.
Cumulative Free Cash Flow Generation Since 2016
MAUS
& SUBSCRIBERS
Monthly Active Users (MAUs)
Total MAUs grew 12% Y/Y to 675 million, up from 640 million last quarter and 10 million above our guidance. Quarterly performance reflected:
Premium Subscribers
Our Premium Subscribers grew 11% Y/Y to 263 million, up from 252 million last quarter and 3 million above guidance. Quarterly performance reflected:
PRODUCT
& PLATFORM
10th Annual Wrapped Campaign
Celebrated our biggest Spotify Wrapped campaign ever , which delivered record-high user engagement (+10% Y/Y) across 184 markets and 53 languages. The 2024 campaign included personalized data stories and playlists, a custom AI DJ Wrapped experience, Artist and Podcaster Clips and editorial playlists and insights.
Delivering a Best-In-Class Video Experience
A Decade of Getting the World to Value Music
In 2024, Spotify alone paid out a record $10 billion in royalties to the music industry -totaling nearly $60 billion since our founding.
OUTLOOK
Outlook for Q1'25
The following forward-looking statements reflect Spotify's expectations for Q1 2025 as of February 4, 2025 and are subject to substantial uncertainty.
Webcast Information
We will host a live question and answer session starting at 8:00 a.m. ET today on investors.spotify.com. The session will be led by Daniel Ek, our Co-Founder and Chief Executive Officer, and Christian Luiga, our Chief Financial Officer. Questions can be submitted by going to slido.com and using the code #SpotifyEarningsQ424. Participants also may join using the listen-only conference line by registering through the following site: https://registrations.events/direct/Q4I5705088
We use investors.spotify.com and newsroom.spotify.com websites as well as other social media listed in the 'Resources - Social Media' tab of our Investors website to disclose material company information.
Use of Non-IFRS Measures
To supplement our financial information presented in accordance with IFRS, we use the following non-IFRS financial measures: Revenue excluding foreign exchange effect, Premium revenue excluding foreign exchange effect, Ad-Supported revenue excluding foreign exchange effect, gross profit excluding foreign exchange effect, Operating expense excluding foreign exchange effect, and Free Cash Flow. Management believes that Revenue excluding foreign exchange effect, Premium revenue excluding foreign exchange effect, Ad-Supported revenue excluding foreign exchange effect, gross profit excluding foreign exchange effect, and Operating expense excluding foreign exchange effect, are useful to investors because they present measures that facilitate comparison to our historical performance. However, these should be considered in addition to, not as a substitute for or superior to, Revenue, Premium revenue, Ad-Supported revenue, Gross Profit, Operating expense, or other financial measures prepared in accordance with IFRS. Management believes that Free Cash Flow is useful to investors because it presents a measure that approximates the amount of cash generated that is available to repay debt obligations, to make investments, and for certain other activities that exclude certain infrequently occurring and/or non-cash items. However, Free Cash Flow should be considered in addition to, not as a substitute for or superior to, net cash flows (used in)/from operating activities or other financial measures prepared in accordance with IFRS. For more information on these non-IFRS financial measures, please see 'Reconciliation of IFRS to Non-IFRS Results' section below.
Forward Looking Statements
This shareholder update contains estimates and forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The words 'may,' 'might,' 'will,' 'could,' 'would,' 'should,' 'expect,' 'plan,' 'anticipate,' 'intend,' 'seek,' 'believe,' 'estimate,' 'predict,' 'potential,' 'continue,' 'contemplate,' 'possible,' and similar words are intended to identify estimates and forward-looking statements. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties and are made in light of information currently available to us. Many important factors may adversely affect our results as indicated in forward-looking statements. These factors include, but are not limited to: our ability to attract prospective users, retain existing users, and monetize our products and services; competition for users, their time, and advertisers; risks associated with our international operations and our ability to manage our growth and the scope and complexity of our business; risks associated with our new products or services and our emphasis on long-term user engagement over short-term results; our ability to predict, recommend, and play content that our users enjoy; our ability to generate profit or positive cash flow on a sustained basis; our ability to convince advertisers of the benefits of our advertising offerings; our ability to forecast or optimize advertising inventory amid evolving industry trends in digital advertising; our ability to generate revenues from podcasts, audiobooks, and other non-music content; potential disputes or liabilities associated with content made available on our premium service and ad-supported service (collectively, the 'Service'); risks relating to acquisitions, investments, and divestitures; our dependence upon third-party licenses for most of the content we stream; our lack of control over third-party content providers who are concentrated and can unilaterally affect our access to content; our ability to comply with complex license agreements; our ability to accurately estimate royalty payments under our license agreements and relevant statutes; the limitations on our operating flexibility due to financial commitments required under certain of our license agreements; our ability to identify the compositions embodied in sound recordings and ownership thereof in order to obtain licenses or comply with existing license agreements; assertions by third parties of infringement or other violations by us of their intellectual property rights; our ability to protect our intellectual property; the dependence of streaming on operating systems, online platforms, hardware, networks, regulations, and standards that we do not control; our ability to maintain the integrity of our technology infrastructure and systems or the security of confidential information; undetected errors, misconfigurations, bugs, or vulnerabilities in our products and services; interruptions, delays, or discontinuations in service arising from our systems or systems of third parties; changes in laws or regulations affecting us; risks relating to privacy and data security, content moderation, and use of artificial intelligence; our ability to maintain, protect, and enhance our brand; risks associated with increased scrutiny of environmental, social, and governance matters; payment acceptance-related risks; our dependence on key personnel and ability to attract, retain, and motivate highly skilled employees; our ability to access additional capital to support strategic objectives; risks relating to currency exchange rate fluctuations and foreign exchange controls; the impact of economic, social, or political conditions, including inflation, changes in interest rates, geopolitical conflicts in Europe and the Middle East, and related market uncertainty; our ability to accurately estimate user metrics and other estimates; our ability to manage and remediate attempts to manipulate streams and attempts to gain or provide unauthorized access to certain features of our Service; risks related to our indebtedness, including risks related to our Exchangeable Notes; fluctuation of our operating results and fair market value of ordinary shares; tax-related risks; the concentration of voting power among our founders, which limits shareholders' ability to influence our governance and business; and risks related to our status as a foreign private issuer and a Luxembourg company. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from our estimates and forward-looking statements is included in our filings with the U.S. Securities and Exchange Commission ('SEC'), including our Annual Report on Form 20-F filed with the SEC on February 8, 2024, as updated by subsequent reports filed with the SEC. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this shareholder update.
Rounding
Certain monetary amounts, percentages, and other figures included in this update have been subject to rounding adjustments. The sum of individual metrics may not always equal total amounts indicated due to rounding.
FINANCIAL
STATEMENTS
Trending Charts
MAUs, Ad-Supported Users, Premium Subscribers & Revenue By Segment
Trending Charts
Gross Profit by Segment, Gross Margin by Segment & Free Cash Flow*
Consolidated statement of operations
(Unaudited) (in ⬠millions, except share and per share data)
Consolidated statement of financial position
(Unaudited) (in ⬠millions)
