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Spotify Hits High End of Q3 Forecast for Subscribers, CFO Barry McCarthy to Exit

Spotify kept packing on millions of listeners and subscribers for the third quarter of 2019, with the company claiming it’s growing twice as fast as chief rival Apple.

The company also announced that CFO Barry McCarthy will retire from Spotify on Jan. 15, 2020, to be replaced by Paul Vogel, who is currently Spotify’s VP of financial planning and analysis, treasury and investor relations. Vogel is to be reappointed to the Spotify board, a role he held prior to joining the company as CFO.

McCarthy, who is a former CFO of Netflix, led Spotify through its public debut in March 2018 through its unusual direct listing on the Nasdaq.

For Q3, Spotify’s total monthly active users grew 30%, to 248 million, and paid subscribers were up 31%, to 113 million at the end of the period. Net subscriber growth “exceeded our expectations and was led by strong performance in both Family Plan and Student Plan” tiers, the company said in its earnings letter.

Spotify reported total revenue of $1.92 billion (€1.73 billion), in line with Wall Street expectations, which was up 28% year over year. The company posted earnings per diluted share of 36 cents, thanks to $251 million (€226 million) in finance income during the quarter.

Relative to Apple, “the publicly available data shows that we are adding roughly twice as many subscribers per month as they are,” Spotify said in the letter. Additionally, the company said it believes Spotify’s monthly engagement is roughly twice as high and our churn is at half the rate of Apple Music. “Elsewhere, our estimates imply that we continue to add more users on an absolute basis than Amazon,” Spotify said.

Spotify said its ad-supported business grew revenue 20% year-over-year to about $189 million (€170 million) — under its expectations. About 80% of the miss was related to “self-inflicted implementation and integration issues” Spotify experienced with the rollout of a new0order management software to replace Google’s Doubleclick Sales Manager, which was phase out in July. That resulted in a combination of lost orders and under delivery of other orders totaling about €9 million of “lost” revenue.

For Q4 2019, Spotify forecast total MAUs of 255 million-270 million; Premium subscribers to be 120 million-125 million; revenue to be $1.93 billion- $2.15 billion (€1.74 billion-€1.94 billion) and operating loss between $34 million-$145 million (€31 million and €131 million).

The company touted momentum for its podcast push, though it still remains a small piece of the business. About 14% of Spotify’s monthly users listen to podcasts, with the number of podcast hours streamed in Q3 up 39% sequentially — although the company admitted that’s off a small base. The majority of podcast listenership occurs in the U.S. but Spotify said usage is growing faster in several European countries. “Podcast engagement is clearly a growing global phenomenon,” the company told investors.

Spotify now offers more than 500,000 podcast titles, launching 22 original or exclusive titles in Q3 including Gimlet’s “The Clearing” and Parcast Studios’ “Natural Disasters,” “Medical Mysteries” and “Summer of ‘69.”

Also in the investor letter, Spotify noted that its stock currently is trading around 33% lower than Wall Street 12-month price targets when it went public in March 2018. Meanwhile, the company’s full-year 2019 guidance is above projections on all metrics. “Sometimes the stock price reflects the performance of the business and sometimes it doesn’t. But eventually, it always does,” the company said.

Source: Variety

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