Spotify's Q2 2019 shows continued growth for the company, with it inching ever closer to profitability.
Monthly Active Users
Monthly Active Users, which Spotify abbreviates as MAUs, experienced a strong 29% increase year-on-year to 232 million, outperforming the company's end of their 222-228 million MAU guidance range.
"Outperformance was broad based, with most of our geographic regions growing faster than our expectations," the company said in the report. "However, the most significant source of upside has been improvement in long-term retention due to our continued product innovation, particularly evident in our emerging geographies."
The widespread deployment of Spotify Lite, which is a less data-intensive version of the app, also helped push up MAUs.
36% of MAUs were in Europe, while the US was home to 28%. Latin America hosted 21% monthly active users, while the rest of the world comprised 15%.
While premium subscribers increased significantly, the final number fell short of Spotify's expectations, owing to "execution related [issues], rather than softness in the business."
"We finished Q2 with 108 million Premium Subscribers globally, up 31% Y/Y but below the midpoint of our guidance range of 107-110 million," Spotify said. "Intake from our bi-annual campaign was in line with our expectations, monthly churn declined both sequentially and Y/Y to a record low 4.6%, and our winback percentage on gross ads reaccelerated Q/Q."
Subscribers per region mirrored those of MAUs, with 40% in Europe, 30% in North America, 20% in Latin America, and 10% in the rest of the world.
"Total revenue was €1,667 million in Q2, representing growth of 31% Y/Y," the company said. "Premium revenue was €1,502 million ($1.839 billion) of the total and grew 31% Y/Y, ahead of our expectations. Ad-Supported revenue was €165 million ($182 million) and grew 34% Y/Y, a meaningful acceleration of growth from Q1."
Operating losses came in at $482 million in Q2, increasing 4% Y/Y. Meanwhile, the company's net loss this quarter came to $84 million, cutting the figure in half Q/Q.
Podcasts surging in popularity
Spotify noted that podcasts continue to be a major area of growth for the company.
"Tens of millions of users are now streaming podcast content on a monthly basis, and more are discovering new forms of audio content each day," Spotify said. "Our podcast audience grew more than 50% Q/Q and has nearly doubled since the start of the year. Our Content team continues to find and support engaging material across a wide range of genres and geographies."
Even regionally in the Middle East, podcasts are finding growing success. New research into the podcast market, the first of its kind in the Middle East, has revealed that there are 1.3 million regular podcast listeners in the UAE. That’s according to new statistics released this week by markettiers MENA.
Mike Fairburn, General Manager at Sony Music Entertainment Middle East, referenced the clear appetite and potential for the podcast scene to grow in the region as mobile connectivity and pricing, access and awareness of podcast stores, and engagement with the creative community opened up. Mike Fairburn went on to say ‘the opportunity will be around empowering and supporting creative talents to drive the industry forward through engaging, relevant and informative podcast formats.’
Q3 and Q4 2019 forecasts
As for Q3 and Q4 2019, Spotify has offered the following outlooks:
Q3 2019 Guidance:
● Total MAUs: 240-245 million
● Total Premium Subscribers: 110-114 million
● Total Revenue: $1.73-$1.95 billion
● Gross Margin: 23.2-25.2%
● Operating Profit/Loss: $2.2-$(86.1) million
Q4 2019 Guidance:
● Total MAUs: 250-265 million
● Total Premium Subscribers: 120-125 million
● Total Revenue: $1.92-$2.14 billion
● Gross Margin: 23.7-25.7%
● Operating Profit/Loss: $(34.2)-$(144.6) million