3Q20 Brings Good Results to Spotify

Today Spotify released its 3Q20 report, which reflected high-level performance during this period. Highlights to point out are its monthly active users (MAU), which grew 29 percent to €320 million (US$372,745,600), giving the company the security to keep expanding its business to new markets. MAU rates grew 25 percent in North America, 22 percent in Latin America, 34 percent in Europe and 19 percent in the rest of the world, according to Spotify's 3Q20 report. 

Spotify's 3Q20 free cash flow experienced growth of 115 percent resulting in €103 million (US$120.2 million). Gross profit margin in the quarter was 24.8 percent, which was lower than in 2Q20 at 25.4 percent. Still, Spotify stated this quarter's results are better than expected. Total revenue grew 14 percent year-on-year, excluding exchange rate impacts. It also experienced an operating income loss of €40 million (US$ 46.8 million), according to the company’s report.

A new launch in Russia and 12 surrounding markets reported a precipitous rise in demand, resulting in useful information for future expansion plans, says the company. In relationship to Latin America, there was an improvement in new product offerings, flow and growth in premium users of 27 percent to 144 million year-on-year. According to Expansion, Spotify more than doubled the users of Apple Music due to its expansion plan to India and the Middle East implemented last year.

Spotify said part of the company's goal is to increase connections between creators and listeners to enhance the customer's engagement and retention. In 3Q20, the company enhanced the functionality of its lyrics complement and added Lyric Search. It also brought mixed media formats, such as a Daily Sports playlist that offers personalized recommendations to the user combined with sports commentary.

Spotify also reconstructed its podcast experience, giving users the chance to choose from trending podcasts. Finally, there is a new way for listeners to have a more meaningful experience called Video Podcast, which allow a deeper connection to the content, according to Spotify's report. For 4Q20, Spotify expects to reach €340-345 million MAU, 150-154 million premium subscribers, a total revenue of €2.00-€2.20 billion and an operating profit of : €(112)-€(32) million with a gross margin of 24.2-26.2%.