If you have an ad-blocker enabled you may be blocked from proceeding. And with that, I'll hand things back to Bryan for Q&A. website and also furnished today on Form 6-K. of our investments in the platform over the past few years. leadership position, Spotify as an investment has attracted significant scepticism from investors. So, we outperformed that EUR 200 million. Concerningly, Spotify's CFO Paul Vogel expects the slowdown in ad-supported revenue to continue next quarter: On the advertising front, we are seeing some modest improvement from where we were a month or two ago, but the macro environment still has a reasonable amount of uncertainty. Spotifys journey to finding a successful model is applicable for digital companies today that are trying to grow their customer base through subscriptions. Yes. You mentioned in the deck an expectation for meaningful improvement in operating income in fiscal '23 and beyond. Spotifys new hire for Chief Financial Officer comes The main bear case for Spotify has always been that they will never be able to expand gross margins to reach their long-term goal of 40% recently outlined in their 2022 investor day. So, we don't go through all of them. As such, Ek remains confident that revenue attributed to podcasts and audiobooks should have materially gross margins at scale than music-related revenue: And as we've said before, this heavy investment that we've done on the podcasting side is going to reverse in 2023 as it starts moderating. - Spotify CFO Paul Vogel, Q3 2022 Earnings Call. Next question comes from Mario Lu on operating income. When Netflix was growing, people used to say, Well, how big can this company be? Vogel said. Non-degree programs for senior executives and high-potential managers. A joint program for mid-career professionals that integrates engineering and systems thinking. So inevitably, you should expect our hurdle rate for new investments to be higher. How are you thinking about sales and marketing spend for 2023 following the ramp in spend over the past two years? But I think the most important thing to perhaps note is that much like platforms and media, one of the most interesting changes that's been happening is obviously, that people's music taste is becoming more personalized. NASZYJNIKI ASTRA Z KAMIENIAMI URODZENIOWYMI - TERAZ -15% , Mokave totake rcznie robiona biuteria. And as I mentioned in my opening remarks, -- some of these things we expected to take longer on seeing the benefits, but we're seeing them already in 2022, and I think that's a real positive news for the years to come. For throughout the existence of Spotify, we have always heard of competitors, and it was always the sort of big scary wolf, whether it was Apple or Amazon in the past, et cetera. Yes. While we no longer give full year guidance, full year 2023, we see strong growth for both users and subs. We're also forecasting EUR 3.1 billion in total revenue, a gross margin of roughly 25%, excluding severance charges and an operating loss of EUR 194 million with the latter reflecting EUR 35 million to EUR 45 million in severance charges within our operating expenses. Users can either pay for the streaming service and listen ad-free or choose to sign up for a free subscription and listen to ads. We had a plan and a focus at the beginning of the year to really invest, particularly in some of our newer markets to grow there and make sure that we have the foothold that we wanted to have. And therefore, the more likely it is to lead to positive business results for us long term. This 20-month MBA program equips experienced executives to enhance their impact on their organizations and the world. So, what costs are driving Spotify's declining operating margins? A non-degree, customizable program for mid-career professionals. Excellent user growth that beat guidance, strong headline revenue growth (with some weakness under the surface for their ad business when considering currency fluctuations), but plateauing gross margins and widening operating losses. Editor's note: This story has been updated to include quotes from Daniel Ek and Paul Vogel. And I know some investors don't believe that we're serious about it, but hopefully, my remarks today shows that we are really, really focused on driving efficiency going forward. We will continue to work to build the platform of the future, and that will take investment in new opportunities that we outlined like podcasts and audio books. All right. He reminded analysts Spotify decided to proactively reduce its hiring growth rate by 25% in the third quarter, which Billboard reported on June 15. One of those strategies would be to grow the number of people that we can attract to join our platform. We finished the quarter with 205 million subscribers, 3 million ahead of guidance, thanks to broad-based strength across several regions, particularly Latin America. Moving to operating expenses. Paul Vogel then revealed precisely how not yet profitable podcasting was. However, again, the primary reason why we did this reorg was to drive speed and drive more efficiency. [Operator Instructions] And our first question today is going to come from Matt Thornton on subscribers and pricing. There's the company that waits until it gets things perfect the first time and then it tries to launch something that's perfect. Melvin Carters Cabinet is most diverse in St. And obviously, social could be a meaningful driver of creating an even stickier and more engaging experience. And so, it's been uncertain. Thanks, Paul. And I'll let Paul fill in on more of the specific details. Inventive. So, it was broad-based globally. And there wasn't really any specific area. Last quarter, you alluded to a potential win-win with respect to the conversations you're having with the labels around price increases. Our three biggest competitors [are] Apple, Google, Amazon, Vogel said. You need to give people a reason to come to your service when the default service is going to be the easier option, all things being equal., Spotify, for example, recently launched a feature that allows users to see the lyrics to the songs theyre listening to. We'll start with opening comments from Daniel and Paul and afterwards, we'll be happy to answer your questions. So, we'll get some of the leverage on top of that investment in 2023, along with higher revenue growth and more gross profit dollars. In Q3, Spotify reported an operating loss of 228m (vs. guidance for an operating loss of 218m), representing a negative 7.5% operating margin. However, bears will be licking their lips at guidance for gross margins to further decline to 24.5% and for operating losses to widen to negative 300m, largely due to the same factors as in Q3 (slowdown in ad-supported revenue, heavy product investments, and currency fluctuations). We've got another question from Rich Greenfield on podcasting. And that will be a big improvement from prior org setups. Paul Vogel is new to the role of Spotify CFO, but not to Spotifyor to the relationship between finance and the tech/media industry. The mission of the MIT Sloan School of Management is to develop principled, innovative leaders who improve the world and to generate ideas that advance management practice. And what are the reasons, if any, Spot would not take price? And then you need to balance that, obviously, with having the ability to have sustainable artist careers on the back of that, too. Now that said, of course, we're always looking at how we can make that better. But before it was rolled out, Spotify studied in which geographic markets it made the most sense to launch because what goes in North America and Europe can be different from Latin America and the rest of the world., Vogel said the lyrics feature was tested in multiple markets around the world to find out how important to users it was. Questions the company asked: Did it boost engagement? Read our Ideas Made to Matter. And we also then announced that 2023 would be a year where you see the reversal of some of those trends. Spotify has 400 million users, and its goal is to get to a billion. We're definitely seeing people take up the offering but we're nowhere done from where we want to be and where we believe the category can be doing. But I would mostly say that most of what we're seeing is quite encouraging because of all the response that we're seeing from artists around the world and their ability to grow their audience. I think we've talked about a lot of them. Spotify is the largest global audio streaming platform with 456m MAUs. How would you think about 2023 net adds for MAUs and premium subscribers relative to your performance in '22? Analyst at a VC fund and Masters/PhD student in Clinical Psychology based out of Sydney, Australia. Next question from Doug Anmuth, users and subscriber growth in '23. In this article, I present my thoughts on Spotify's latest Q3 2022 results. Indeed, Spotify trades at comfortably their lowest EV/LTM revenue multiple (1.1x) since their IPO, reflecting investor scepticism around their business model. So, I think as you're looking at our strategy now, you shouldn't draw any two big conclusions that we are -- that's our full intent of what we want to do in the category. A full-time MBA program for mid-career leaders eager to dedicate one year of discovery for a lifetime of impact. There are 15 older and 11 younger executives at Spotify Technology S.A. And during 2023, you'll see a lot of new things roll out in the audio book category from Spotify. And so, we're excited about user choice building. And I think you're seeing a little bit of both happening in the music industry at present moment. We've got time for one to two more questions. shareholder interests. Spotify has struggled to gain traction in the public markets, falling 44% from their IPO price in April 2018 and 66% in 2022 alone. However, such a slowdown in ad-supported revenue is not isolated to Spotify but is rather a function of weakening macroeconomic conditions. Spotify, in a recent British regulatory filing, appointed Paul Vogel as a director, in anticipation of him replacing Barry McCarthy as the companys CFO early next year. All right. So, in Q4, we outperformed our expectations. Importantly, Spotify Our user and subscriber numbers continue to climb, showing the value of our investments in the platform over the past few years. For the last four years, hes The 6% was actual employees. Well, I mean, again, we have what I think is a pretty decent music discovery already, which works pretty well. And the second strategy would be to increase the revenue per user that we already have on the platform. Through intellectual rigor and experiential learning, this full-time, two-year MBA program develops leaders who make a difference in the world. WebPaul Vogel is Chief Financial Officer at Spotify Technology SA. Zachcamy do zapoznania si z polityk przed wyraeniem zgody. We've talked about podcasting that 2022 was going to be the peak year in terms of the drag that podcasting had on our gross margins. These charts show the average base salary (core compensation), as well as the average It is actually making real sort of material decision-making at the top. All right. So, I feel really good about that. But going forward, we will do it with an intense focus on efficiency, and that marks a pretty big shift in how we will act. So, I just wanted to add that context that, that's still very much on the top line for us that you should expect music to be meaningfully improving with things like Marketplace playing an important role. And what we've been going through has really been a multiyear approach that really culminated with what we presented to you, the community, at our Investor Day in June. Was it a mistake? We've grown from 100 million users to almost 400 million users over a six-year period of time, Vogel said. So, it's tough to really know. When Vogel joined Spotify in 2016, there were 1,500 employees. Spotify have hired their new Chief Financial Officer, plucking from their existing team someone they trust. However, a notable call out in the quarter was our eighth annual Wrapped campaign, which was a big contributor to our Q4 success, and we broke all sorts of records and reached several all-time highs with an increase of over 30% in user engagements. I think we had said at the Investor Day that we expected Marketplace to grow at least 30% in 2022. But I would just -- rather than perhaps giving any specifics here or preannounced things, I think that the most important thing I can do is kind of give a context in that there's two types of companies. And if anything, thanks to our position in users and subs, this should allow us to both increase revenue per user over time as well as improve our stickiness with consumers even more. I'm from Doug Anmuth on subscribers. Earn your masters degree in engineering and management. Turning to gross margin. Yes. It was broad-based by product. And that adds several benefits to Spotify. If you have an ad-blocker enabled you may be blocked from proceeding. So, there's a number of things that go on there. As Daniel said, we're going to be more efficient. Well, thank you, everyone, for joining the call. We're going to be more thoughtful about all of our spending into 2023. So, when we look at a market, there's generally two strategies we can do that. I think there's -- look, there's a number of factors that are going to -- that improve gross margin. Please go ahead, Mr. Goldberg. Spotify (NYSE:SPOT) is the largest global audio streaming platform with 456m monthly active users (MAUs) and 195m premium subscribers. WebIn a equity funding round in 2015, Spotify was valued at $8.5 billion. Gross margins continue to be the "Achilles' heel" for Spotify and came in at 24.7%, well below their internal guidance. Unfortunately for shareholders, Spotify missed gross margin expectations for Q3, reporting a gross margin of 24.7%, well below their internal guidance of 25.2%. Next question from Benjamin Black on Marketplace. Well, we've been making many investments. And obviously, I look forward to sharing more on Stream On, sort of wink-wink around all the updates that we're planning throughout the year as well that I think will mean a lot for both music and podcasting and beyond. Can you share detail on investments that have impacted Premium gross margin? And then we're going to holistically now look at the business rather than looking at things bit by bit. Gross margin of 25.3% was above guidance by 80 basis points due primarily to lower podcast content spend, along with broad-based favorability in our core music business led by strength in Marketplace. Still early days in terms of how it's impacted at this point. As Daniel mentioned, we are entering a new area with even more focus. And what do you see as the path forward with your music label partners on this topic? This remains consistent with the plan we outlined at Investor Day, but you should expect us to execute on it with even greater intensity given what I just said. It's time for Spotify management to begin to "walk the walk" rather than "talk the talk". And even within that, we had two months that outperformed and one month that underperformed. But luckily for us, it hasn't impacted our numbers at all. Mokave totake rcznie robiona biuteria lubna iZarczynowa. But our creators are trying to grow their audience on Spotify. Increased publishing rates and a one-off change in accruals. We had a great Q4 and ended 2022 strongly. I would now like to turn the call over to Bryan Goldberg, Head of Investor Relations. Thank you for your participation. Dane osobowe w sklepie internetowym przetwarzane s zgodnie z polityk prywatnoci. You're seeing a lot of Polish music being very impactful as well. [Operator Instructions] As a reminder, this conference call is being recorded. So, we're focused on having the best possible platform we can have for both consumers and creators and that remains true. So, for instance, in the last 12 months, we grew our users substantially, enhanced our capabilities, developed a better product and brought more content to creators and users around the world. Did factors like geography or a listeners age influence who used it? Again, as Daniel mentioned, we invested a lot in 2022. However, given Spotify's rapid ascent to become the global leader in audio content and Ek's high inside ownership, I'm inclined to back him to execute and reclaim Spotify from the depths of "stock market purgatory". Indeed, I see several similarities between the plight of Spotify and Meta Platforms, in that the sharp drops in share price and investor pessimism are largely self-inflicted as the founders continue to make heavy long-term investments, despite weakening macroeconomic conditions. So, we had kind of lowered expectations coming into Q4. Earn your MBA and SM in engineering with this transformative two-year program. So pretty consistent with what we've said in the past in terms of what the impacts were in 2022 and how that will change in '23 and beyond. But again, I think we believe we'll get the benefits of some of those moving forward into 2023, and you'll see the incremental investment slow and the benefits kind of hit in '23. The major player in podcasting had been doing it for 20 years and was considered the sort of unassailable leader. While Spotify's lack of consistent operating profitability is undeniably frustrating, I am not overly concerned for the following reasons: First, Spotify is in no danger of a capital raising with consistent positive free cash flow and a fortress balance sheet consisting of 3.7b cash, cash equivalents, and short-term investments. Free subscriptions populated with advertisements bring people through the door, while premium subscriptions bring in recurring revenue. Vogel, a University of Pennsylvania graduate, is a Wall Street veteran who started his financial career as an Please. While bears can criticise Spotify's lack of gross margin expansion since IPO, it is difficult to criticise their user growth or engagement, which has increased like clockwork each quarter. And we broke out the various verticals where you would see that music have been making steady improvements, but obviously, our podcasting business had been a drag to our gross margin profile. And as people's music taste becoming more personalized, you're seeing two things happening. Ad-supported MAUs increased by 24% YoY from 220m to 273m, driven primarily by strength in developing markets like Brazil and India. Another question from Benjamin Black on pricing. We did all of that testing for years before we said, Okay, its worth us to roll it out globally.. We feel good about the guidance for Q1 and how we're trending. And that is a big shift, but it is also what we said during the Investor Day in June. So, I think Q1 probably we expect more of the same. And some of them, not surprisingly, haven't worked out. And any specific areas of the business to call out that were impacted more so than others? Demand for podcasts is also increasing, with the number of MAUs engaging with podcasts growing by the "substantial double-digits" YoY. Related Articles After six decades of arts education, founder of St. Paul Spotifys foray into podcasting with its purchases of Gimlet and Anchor was a bit risky at the time but is now paying off, given that theres been so little innovation in podcasting, Vogel said. I think we've done pretty well. We think Q1 will be the low point in terms of gross margin for the year, with gross margin improving throughout 2023. Wed, Jul Fourth, Daniel Ek acknowledged in the Q3 earnings call that the hurdle rate for new investments would increase going forward, so we should expect to see spending moderate in 2023: But I also want to reiterate that we're keenly aware that this is an uncertain time and the cost of capital has increased. WebHi All, recently got an offer from Spotify for a senior program manager role based in London. Bears point to Spotify's lack of gross margin expansion since IPO due to high dependence on record labels like Universal Music Group (AMS:UMG), lack of consistent operating profitability, and a management team that cares little about representing shareholder interests. We think Q1 will be the low point in terms of gross margin for the year, with gross margin improving throughout 2023. So, by the end of the year, we had more than 100 million tracks on our platform and more than 5 million podcasts and more than 300,000 audio books being enjoyed by almost 0.5 billion listeners. While other entertainment streaming platforms like Netflix (NFLX) appear to be fast approaching peak subscriber saturation, Spotify's user growth has either remained flat or accelerated over the past few quarters. And that's a constant dialogue that we're having with our label partners. Essentially, Spotify is a lot more complex of a business than it was several years ago. I think you classified 2022 as an investment year. Sometimes that is keeping the price low and grow the number of users on the platform. So, nothing has really changed when we look at the space and what the potential is, and now we're just heads down focused on executing. You had expectations for approximately EUR 200 million in Marketplace revenue for 2022. Number of employees at City of St. Paul in year 2021 was 4,488. Is this an area of focus? By the numbers: Spotify said that 25% of its total monthly active users engaged with podcast content in Q4, up from 22% in Q3 2020. Its limited literally to imagination and how big you think it could be., Read next:Digital transformation after the pandemic. Investors hoping for Spotify management to change their tact and adopt a strict focus on reducing cash burn and optimising operating profitability were left seriously disappointed by their Q4 guidance. So obviously, we don't give 2022 guidance anymore. And to meet this objective, we are also rethinking how we operate. And thanks, everyone, for joining. Is this happening to you frequently? We've got a follow-up question. Polityka prywatnoci zawiera pen informacj na temat przetwarzania danych przez administratora wraz z prawami przysugujcymi osobie, ktrej dane dotycz. We think those will sort of continue to moderate throughout the year, which will help -- partly help gross margin. Total monthly active users grew to 489 million in Q4. We -- so are looking closely at open headcount to see which of those we want to backfill and which of those we will also eliminate sort of, as we've mentioned a number of times as we try and be more efficient with deploying capital and employees moving forward. I would say, in general, I think we're just overall, very excited about the opportunity. And since we're not committed to rolling that out, I don't really have much of a sort of comment, but to say that overall, we're committed to creating the best audio experience for consumers and creators in the world. It is also so that from a competitive lens, when we've added this content, what we're seeing is that consumers are not just consuming music on the platform, but they're consuming music and podcast to a great extent. Do you expect the relative performance of podcasting and music growth to persist in 2023? But we see this often where we have some years where we over-index on MAU or we over index on subs, and it can change even throughout the year in terms of how we're trending. Admittedly, those were lowered expectations. But I feel, candidly, that -- we're in a better position competitively than we've been in many, many years. So, think about, for instance, how we're working with our label partners, think about how we're working with merchandise and other things, too. At this point, we don't see any reason why any of our historical trends would change. Travel the world to capture moments and beautiful photos. While the company has historically had better revenue growth and better margins on the premium side, Vogel said, at least 60% of subscribers have come on board to Spotify by signing up first for a free subscription. Our next question is going to come from Michael Morris on advertising. Vogel said that a mistake hes seen people make in the media space is using old paradigms to understand where businesses and markets are heading. What are some of the concessions you're looking for from the labels? Entering text into the input field will update the search result below. Click to share on Facebook (Opens in new window), Click to share on Reddit (Opens in new window), Click to share on Twitter (Opens in new window), Click to email a link to a friend (Opens in new window), Click to share on LinkedIn (Opens in new window), Click to share on Pinterest (Opens in new window), Click to share on Tumblr (Opens in new window), Submit to Stumbleupon (Opens in new window), Melvin Carters Cabinet is most diverse in St. Paul history. Netflix, which had never existed before, was often compared to HBO, which turned out to be an inaccurate comparison, Vogel said. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. spotify. ul. $73,192. All right. That's kind of what I can say. Please disable your ad-blocker and refresh. - Spotify CFO Paul Vogel, Q3 2022 Earnings Call. So, the answer is yes to 2022 being the peak drag from podcast. And again, we feel that product has a lot of momentum behind it as well and expect good things in 2023 as well. One of the big things we're seeing is users are asking us, help me find more great things to go watch. And the other change is that unlike in the early areas of streaming, we're seeing a notable increase in local repertoire. I/we have a beneficial long position in the shares of SPOT either through stock ownership, options, or other derivatives. So, what does that mean future? Spotify is known for its smart algorithms that create curated playlists for users based on what they already like to listen to. Thanks, Rich. Actual results could materially differ because of factors discussed on today's call, in our letter to shareholders and in filings with the Securities and Exchange Commission. Okay. This is for Daniel. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. That's been one of our -- things that we need to speed up when we look at sort of the internal feedback. Open. Paul Vogel, Spotfiy CFO, joins Closing Bell to discuss. And you can see that already today where there's lots of concerts from all the big vendors being available, and we'll add more and more of inventory. Despite the sharp 72% drop in Spotify's share price over the past 12 months, Ek remains committed to executing against his long-term vision for Spotify, despite short-term pressure from investors/analysts. And the usual way to do that is not to try to increase prices too early, but keep a competitive price that attracts the most amount of users onto the platform.