Spotify has released its financial results for the fourth fiscal quarter of 2018 and for artists who claim they should be paid more, well the figures back up their arguments.
For the first time in the Spotify’s history, operating income, net income, and free cash flow were all positive.
Premium subscribers reached 96 million, up 36% year-over-year.
Monthly active users (MAUs) grew to 209 million, up 27% over the previous year quarter. Spotify had expected 206 million. The company attributed the growth to improved retention rates and strong growth in Latin America and other emerging markets.
During Q4 2018, the streaming music giant expanded to 78 countries from 65. This increase came from its launch in the 13 countries in the Middle East and North Africa (MENA) region.
Engagement also grew across both the ad-supported and premium tiers. Consumers listened to over 15 billion hours of content.
Breaking down the financial metrics, total Q4 revenue reached €1.5 billion ($1.7 billion), up 30%.
Premium revenue also grew 30% to €1.3 billion ($1.5 billion).
Due to Family Plan and Student Plan subscribers, as well as growth in emerging markets, average revenue per user (ARPU) fell 7%. According to Spotify, Lifetime Value per Subscriber (LTV), a previously unused metric, has remained constant year-over-year. This also offset the sharp decline in ARPU.
Ad-supported revenue rose 34% to €175 million ($199 million). This beat out the 30% year-over-year ad-supported revenue growth in Q3 2018. Revenue from North America grew 41%. Both audio and video ads also grew over 40%.
The company added growth in its programmatic and self-serve (Ad Studio) channels, outpacing the growth of Direct advertising. Combined, both grew around 60% over the previous year quarter.
Together, they accounted for around 25% of Spotify’s ad sales revenue. Over 2,000 advertisers used Ad Studio in Q4 2018 to run campaigns.
Gross margin stood at 26.7%, above the company’s guidance range of 24-26%.
Premium gross margin rose to 27.3%, up from 26.1% in Q3. Ad-supported gross margin also grew to 22.1%, up from 18.6% in Q3.
The company added its ad-supported gross margin remains strong in its top five markets, and very weak in its other 73 markets, including MENA.
In addition, over 300,000 artists now use Spotify for Artists. More than 1,000 global music publishers have requested access to the beta version of Spotify Publishing Analytics.
Breaking down operating expenses and income, Spotify posted operating expenses of €305 million ($347 million), down 17% over the previous year quarter. This resulted in the company’s first ever quarterly operating profit, reaching €94 million ($107 million).
The company also generated €150 million ($171 million) in net cash flow from operating activities. Free cash flow also grew 12% to €84 million ($95.6 million).
Spotify ended the quarter with €1.8 billion ($2.1 billion) in cash and cash equivalents, restricted cash, and short term investments.
Betting big on podcasts.
In addition, Spotify has confirmed two strategic acquisitions to accelerate growth in podcasting.
The streaming music giant has completely acquired Gimlet Media and Anchor. Financial terms of the deals remain undisclosed.