So, I think the big thing that I just want to highlight again is we mentioned, as Paul said before, that 2022 would be an investment year. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. Our next question is going to come from Michael Morris on advertising. And three, do you still expect the consolidated gross margin to reach 30% within five years? I think we had said at the Investor Day that we expected Marketplace to grow at least 30% in 2022. I have no business relationship with any company whose stock is mentioned in this article. Average annual salary was $55,001 and median Year-over-year churn, though, was pretty consistent with where it was at this point last year. And in the meantime, please check out our webcast for the record for more details about the quarter. Bulls point to Spotify's demonstrated track record of growing MAUs and premium subscribers, rave customer reviews (4.8/5 on the App Store from 23.6m reviews), excellent brand recognition, industry-leading churn rates, strong balance sheet, and a visionary CEO (Daniel Ek) who some have argued single-handedly rescued the music industry from potential extinction. 90 318d, Administratorem danych osobowych zbieranych za porednictwem sklepu internetowego jest Sprzedawca (Jubilerka Pola Chrobot). We've got time for one to two more questions. What are some of the puts and takes here? If you have an ad-blocker enabled you may be blocked from proceeding. So, what does that mean future? We haven't given a timeline on that. WebPaul Vogel. It's roughly 600 employees that were affected. Now what you're probably asking underneath all of that is that it's been a drag on the gross margin side. The join flow is better, giving users the choice on payment methods and how they want to work with us and purchase from us. We're going to go to the next one from Benjamin Black on margins. So, it was pretty broad-based. 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. To that end, Spotify continues to invest in its advertising business. And by all accounts, it was extremely successful, if not more successful than we even thought. A 12-month program focused on applying the tools of modern data science, optimization and machine learning to solve real-world business problems. I would say, first thing is I think you can expect to see a meaningful improvement in the operating loss in '23 relative to '22. Not the Paul Vogel you were looking for? And the other change is that unlike in the early areas of streaming, we're seeing a notable increase in local repertoire. I would just add in terms of just the subs outperformance in Q4, it was pretty broad-based. Zachcamy do zapoznania si z polityk przed wyraeniem zgody. However, such a slowdown in ad-supported revenue is not isolated to Spotify but is rather a function of weakening In 2021, we said that 2022 would be an investment year, and it was. We outperformance of EUR 3 million. Spotify User Growth (Spotify Q3 2022 Shareholder Deck). So generally, our approach when we're early in a market is to try to grow the number of participants on the platform. And during 2023, you'll see a lot of new things roll out in the audio book category from Spotify. We're now in an even stronger competitive position, and I'm confident in our future prospects. 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. [Operator Instructions]. So that's going to be a net positive as more and more of the revenue starts shifting to those categories. Read our Ideas Made to Matter. Total Q3 revenue was 3.04b, which was up 6% QoQ and 21% YoY, but in FX neutral terms, total revenue only grew 12% YoY, Spotify's slowest rate of revenue growth in several years. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. But more importantly, for our share owners, I fully expect that they will continue to pay dividends in the months and years to come. However, to be clear, this doesn't mean we're changing our strategy. A special opportunity for partner and affiliate schools only. All right. And some of them, not surprisingly, haven't worked out. And given the timing within quarters, we may see free cash flow turn negative in Q4, but we still expect to be free cash flow-positive for the year and moving forward. BIUTERIA, KOLCZYKI rcznie robione, NOWOCI, BIUTERIA, NASZYJNIKI rcznie robione, NOWOCI, BIUTERIA, NOWOCI, PIERCIONKI rcznie robione. And then as the market matures, then obviously, it will shift more so that most of the revenue growth comes from price increases. This concludes today's conference call. 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. She requested a leave of absence from the mayors office from January to June to focus on the Legislative session. And I'm going to turn it now back over to Daniel for some closing remarks. So far, the bears appear to be winning. And while it's too early to provide any guidance with respect to 2023, we do expect our profitability rates to improve relative to 2022 as we grow revenue, lap certain investments and deploy capital more efficiently. That's kind of what I can say. Since then, the Swedish company has watched its number of subscribers tick past 400 million as it expands into podcasting, live audio, and audio books. In this article, I present my thoughts on Spotify's latest Q3 2022 results. 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. I'll take this and feel free to chime in, Paul. However, we'll need to wait until next quarter for concrete guidance on margins. Now that said, of course, we're always looking at how we can make that better. And that adds several benefits to Spotify. So, we're encouraged because we think fundamentally that audio books has a massive opportunity and that there are very few consumers that are currently participating in the ecosystem. We feel really good about some of the acquisitions we've made, obviously, at the high-level megaphone, but chartable and pod sites and our ability to improve measurement and attribution across all of advertising. Thanks, Paul. And the management changes really had nothing to do with the change of strategy in podcasting. This was 10 million ahead of guidance, up 33 million quarter-over-quarter and the largest Q4 net additions in our history. Okay. Some of them have been working greatly, and you should expect us to double down on those. How are you thinking about sales and marketing spend for 2023 following the ramp in spend over the past two years? Entering text into the input field will update the search result below. Spotify has struggled to gain traction in the public markets, falling 44% from their IPO price in April 2018 and 66% in 2022 alone. We think it's going to reduce friction and improve conversion over time. We're going to continue to see Marketplace growth, which will help our music gross margin. spotify. Although around 85m of this operating loss was due to currency fluctuations, it is worth noting that in the prior corresponding period (Q3 2021), Spotify generated an operating profit of 75m (3.0% operating margin). And again, we feel that product has a lot of momentum behind it as well and expect good things in 2023 as well. So first off, we have great relationships with all of our music partners and are in constant dialogues with them about their performance and our performance in all the markets around the world. All right. Overall, Q4 guidance implies more of the same for Spotify. Spotifys new hire for Chief Financial Officer comes We look at all the trends, and we try and understand how big these things could go. Noting continued growth in the smartphone market, Vogel said it was reasonable to assume that streaming will continue to grow as well. Still early days in terms of how it's impacted at this point. Do you believe this is happening on your platform? And of course, the better the engaging experience, we make the more likely they are to stay. And I'll let Paul fill in on more of the specific details. CEO Daniel Ek and CFO Paul Vogel Break Down Q2 Earnings in Latest Episode of Spotify: For the Record. And then, Paul, maybe you can chime in on the detailed questions. So, I'd say, look, at a high level, we've said this repeatedly for a while, any time you're seeing accelerating growth in MAU, that always tends to be very good for our business and lead to subscribers over time. Given many of the adjustments we made at the start of 2023, including our decision to reduce our workforce by 6%, we see our operating expenses growing slower with a material improvement in our operating loss compared with 2022. There was outperformance in pretty much every region. Joining us today will be Daniel Ek, our CEO; and Paul Vogel, our CFO. Hunting for a portfolio of 15-20 disruptive growth companies that can generate 15%+ IRRs over the next decade. I think there's -- look, there's a number of factors that are going to -- that improve gross margin. WebIn a equity funding round in 2015, Spotify was valued at $8.5 billion. So, no specific guidance, but yes, there was a big ramp in 2022. Spotify has 400 million users, and its goal is to get to a billion. When Netflix was growing, people used to say, Well, how big can this company be? Vogel said. 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Wed, Jul 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. Next quarter is unlikely to change anything material about the "stock story" for Spotify, but I'll be closely watching management's guidance for 2023 margins. The major player in podcasting had been doing it for 20 years and was considered the sort of unassailable leader. Today, the book market is worth $140 billion with audiobooks just a small fraction of that, he noted. Now it's perhaps YouTube and TikTok, et cetera. Please disable your ad-blocker and refresh. And the second strategy would be to increase the revenue per user that we already have on the platform. And then from there on, there will be opportunities for us to play as well. And what are the reasons, if any, Spot would not take price? So that's still the plan. 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. 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. If you have an ad-blocker enabled you may be blocked from proceeding. He is Tworzymy klasyczne projekty zezota ioryginalne wzory zmateriaw alternatywnych. I am not receiving compensation for it (other than from Seeking Alpha). And we've seen that time and time again that this close partnership generates material benefits for both companies over time. And obviously, the big sort of counter to that would be does it mean that you can sustain yourself or is it more one-hit wonders? Please disable your ad-blocker and refresh. Large increases in both research and development (R&D) and sales and marketing (S&M) costs over the past four quarters. Our three biggest competitors [are] Apple, Google, Amazon, Vogel said. It exceeded those expectations pretty nicely. Our revenue grew 18% year-on-year to approximately EUR 3.2 billion in the quarter. Spotifys revenue was lighter than what analysts had expected for its second quarter earnings report. However, Spotify management is confident that gross margins will improve in 2023 as the digital infrastructure to support their multi-product strategy becomes more established, reducing the need for further product investments. So, we don't go through all of them. A resident of Hamline-Midway, he is married to a Frogtown woman. Spotify offered certain US staffers between October 2020 and September 2022 annual base salaries ranging from $75,000 to $369,500 across about 180 different roles, according to the data. So, the answer is yes to 2022 being the peak drag from podcast. And in hindsight, I probably got a little carried away and overinvested relative to the uncertainty we saw shaping up in the market. And podcast, do you still expect podcast to reach breakeven within several years? We're seeing some encouraging signs. 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. And that will be a big improvement from prior org setups. And that's what we will expect going forward, too, as we're driving more benefits for all of our creative partners and Spotify. Total monthly active users grew to 489 million in Q4. Yes, the podcast reaching breakeven within several years. And then there's the company that releases something that it knows needs work and then rapidly improves from there. We'll be having more decision-making so that we can make decisions faster because that honestly is one of the biggest blocker at this point. So I'd say at a high level, we still remain very confident with the margin profile and margin guidance we gave at the Investor Day. Spotify recently began testing a Friend's tab on the bottom strip of the app. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. And when I look at the totality of what we've done, one thing that stands out to me, and it is that it's not always linear. As a result of the unpaid leave, her regular salary of $120,000 was reduced to $73,000 for 2019. But we feel pretty good about the improvements we made in the platform already. Demand for their platform remains strong across both premium and ad-supported users, but Spotify is yet to truly make the "business model of audio" stick and produce sustained gross margin expansion with consistent operating profitability. Admittedly, those were lowered expectations. And so, we feel good about that and where the tech is going, and then it's really going to somewhat depend on just how the macro rolls out over time. Our next question is going to come from Michael Morris on music economics. Sienkiewicza 82/84 If for some reason you don't have access to Slido, you can e-mail Investor Relations at ir@spotify.com, and we'll add in your question. When do you expect them to be released? I publish additional articles on my substack:https://jordanmartenstyn.substack.com/Feel free to reach out on Twitter to collaborate and discuss ideas! We're definitely the latter. Sometimes it is increasing our margin per user and sometimes it's all of the above. Spotifys own subscriber figures continue to climb. Continued investments to build out their podcast/audiobook digital infrastructure. Please. This was a weak quarter for Spotify's revenue growth, which was masked by significant currency tailwinds. If youre going up against those three, you better do something thats better, and not just a little bit better, but materially better. I think some of these trends are very powerful and very good, I think, for consumers with more choice and more artists making their way. Our view is, why shouldn't it be Spotify?" And you're right to point out that TikTok obviously, is a formidable competitor, I think, to any platform in the world today, no matter what field you're operating in. Importantly, Spotify 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. Again, as Daniel mentioned, we invested a lot in 2022. So, we do expect that Q1 will be the low point for gross margin, and we do expect for it to improve throughout the year, with hopefully a nice trajectory heading out of 2023. Analysts Disclosure: I/we have a beneficial long position in the shares of SPOT either through stock ownership, options, or other derivatives. Spotifys freemium model provides dual benefits to the company. Entering text into the input field will update the search result below. Overall, Spotify management expect margins to improve from 2023 onwards, which provides some comfort for investors. Do you expect any change to that conversion or to churn given the large MAU cohorts over the past couple of years? Please go ahead, Mr. Goldberg. 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. We're fully aware of what's going on globally. Is this happening to you frequently? 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. While I remain a committed long-term shareholder (and have continued to average down throughout 2022), my patience is beginning to wear thin. Paul Vogel is the Chief Financial Officer of Spotify. As CFO, he is responsible for overseeing the companys financial affairs. Spotify is the worlds most popular audio streaming subscription service with 433m users, including 188m subscribers, across 183 markets. We have the same notion around podcasting. Looking ahead, we are pleased with our momentum into 2023. So, we expect that to be pretty significant.