Spotify has announced that its business has either met or exceeded forecast for all major metrics, despite the global uncertainty from the global coronavirus (COVID-19) pandemic in Q1 of 2020. The digital music service's business remains healthy with over €1.8bn in liquidity, and anticipates that it will be free cash flow positive for the rest of the year, generating more cash than is used. Despite some changes in listening patterns, Spotify is encouraged with the trends it is seeing, and remains optimistic about the business' underlying growth fundamentals. The company reported that it achieved a 22% Y-o-Y growth in total revenues, reporting €1,848m, in the first quarter (Q1) of the current year. Consolidated revenue was roughly in line with expectations, with premium revenue slightly outperforming expectations, growing 23% Y-O-Y to €1,700m. Ad-Supported revenues grew 17% Y-O-Y, but fell short of expectations due to the impacts of the coronavirus pandemic, particularly in the last three weeks of the quarter. For the Premium business, average revenue per user (ARPU) of €4.42 in Q1 of 2020, was down 6% Y-O-Y. A significant portion of this decline was driven by the continuation of longer free trials rolling over from Q4 of 2019, and additional intake during Q1. Ad-Supported revenues of €148m fell short of the forecast. Gross Margin finished at 25.5% in Q1, which both exceeded the company's expectations and finished at the high end of their guidance range. "We did see some delays in our content production and release schedule, some of which was related to COVID-19. It's likely that we will continue to see lower overall production relative to our original plan and expect lower levels in Q2 than our original forecast," the report read. Meanwhile, the premium Gross Margin was 28.3% in Q1 of 2020, up from 27.4% in Q4 of 2019, and up 220 bps Y-O-Y. The AdSupported Gross Margin was 6.6% in Q1 of 2020, down from 11.6% in Q4 in 2019, and down 1,550 bps Y-O-Y. Operating expenses totalled €489m in Q1 of 2020, an increase of 16% from Q1 of 2019, and although significant, it remained but short of the company's plan. The report highlighted that total number of monthly active users (MAUs) grew 31% Y-O-Y to 286 million, in line with the company's forecast and expectations. The Q1 of 2020 was the third consecutive quarter Y-o-Y growth above 30%. Moreover, Premium Subscribers globally reached 130 million Premium Subscribers by the end of Q1 of 2020, up 31% Y-O-Y and ahead of forecast. Roughly, 70% of churned users returned to Spotify within 45 days of leaving, which includes returning through either Premium or Ad-Supported experience.
