Music streaming leader Spotify on Wednesday reported a fourth-quarter operating loss, but said it grew its user base to 124 million paid subscribers and 271 total monthly active users at the close of 2019. It also revealed total revenue for 2019 was €6.764 billion ($7.44 billion in current dollars) — a 29% increase from the year prior — with a $186 million net loss overall.
Those user tallies compared with 113 million premium and 248 million MAUs at the end of September. It also represents 29% year-over-year growth for its premium tier — Spotify ended 2018 with 96 million paid users — and the company says it was the fastest they’ve ever added at least 10 million subs.
Ad-supported monthly active users now total 153 million, a bump of 9% on the quarter and 32% year over year. Those increases nearly mirror the changes for MAUs, which improved 9% for the quarter and 31% y/y.
Spotify’s average revenue per user (ARPU) was down 5% y/y to €4.65 euro ($5.12). However that’s only a small drop from the €4.67 per premium user the service averaged at the end of September. The company said a “significant portion of this [y/y] decline was driven by the extension of the free trial period across our entire product suite in the quarter.”
Total revenue for the quarter ended Dec. 31 was €1.855 billion ($2.04 billion), an increase of 24% y/y and 7% compared to last quarter. Of that revenue tally, the vast majority (€1.638 billion / $1.8 billion) came from premium subscribers, an increase of 24% y/y and 5% quarterly; ad-supported revenue totaled €217 million ($239 million), an increase of 23% y/y and 27% since Q3.
Operating expenses totaled €551 million ($606 million) in Q4, up 80% y/y, which the company said was “largely driven by higher than expected social charges resulting from an increase in our share price.” As a result, operating losses totaled €77 million ($84.8 million) for the quarter, down from a profit of €54 million ($59 million) for Q3 and €94 million a year ago — a milestone that marked the company’s first operating profit.
During the quarter, the company generated €203 million ($223 million) in net cash flows from operating activities, up 35% y/y, and €169 million ($186 million) in free cash flow, up 101% percent y/y. It is reporting €1.8 billion ($1.98 billion) in cash and cash equivalents, restricted cash, and short term investments, up from €1.6 billion ($1.76) the previous quarter.
Looking ahead, the company expects to add between 2-7 million premium subscribers in Q1 and possibly smaller operating losses. By the end of the year, Spotify hopes to have between 143-153 million paid users and somewhere in the ballpark of 328-348 million total MAUs.
Spotify also noted that it has seen sizable growth in the popularity of podcasts across the service. According to the company, more then 16% of its total MAUs are now engaged in listening to its 700,000 available podcasts, with consumption hours growing 200% y/y.
Coincided with the release of its financials, Spotify announced it had completed a deal to acquire The Ringer, the podcast business started by Bill Simmons. Terms of the deal for the four-year-old company were not disclosed, though Spotify said it expects to close it out in the first quarter. “With this acquisition, Spotify continues to deliver against its goal to become the world’s leading audio platform,” the company said. “We look forward to putting the full power of Spotify behind The Ringer as they drive our global sports strategy.”
On a conference call to discuss its quarterly earnings, CEO Daniel EK said, “I think we bought the next ESPN.”