Reuters
- Spotify stock surged as much as 19% on Monday after the streaming company posted an unexpected third-quarter profit.
- The third-quarter operating profit was only the company's second in history, and was driven by better-than-expected user growth and surging podcast interest.
- The company also beat estimates for quarterly revenue and earnings per share.
- Spotify announced CFO Barry McCarthy will retire in January and be replaced by head of financial planning and analysis Paul Vogel.
- Watch Spotify trade live here.
Spotify jumped as much as 19% in early Monday trading after posting a surprise third-quarter profit.
Better-than-expected user growth and surging podcast interest drove the earnings beat, with operating profit surpassing even the highest analyst estimate. The company has posted a quarterly profit only once before, and analysts expected an operating loss in the third-quarter.
The streaming service saw 248 million monthly active users in the three-month period, landing above analyst estimates and growing 30% from the year-ago period. Growth in Latin America - Spotify's third-largest region by MAUs - accelerated for the second consecutive quarter. User additions in India outperformed the company's forecast by 30% in the third quarter.
The company's move into the podcast sector has boosted user engagement and helped push more upgrades from free accounts, Spotify said. The company added 22 original podcast programs in the third quarter.
"We made the strategic bet that music and podcasts are additive and that users would enjoy having podcast as part of their Spotify experience," CEO Daniel Ek said on a call with analysts. "We're seeing evidence that this step is paying off with signs of increased engagements and higher conversion rates from free to paid."
Here are the key figures (Spotify reports figures in euros):
Revenue: 1.73 billion euros, versus the 1.72 billion euro estimate
Adjusted earnings per share: 0.36 euros, versus the -0.182 euro estimate
Operating profit: 54 million euros, versus the -23.5 million euro estimate
Monthly active users: 248 million, versus the 243.4 million estimate
Spotify touted its growth metrics against competitors in the streaming sector. The company said it's adding twice as many subscribers per month as Apple, and achieves double the monthly engagement. Spotify also adds more users than Amazon despite the latter company's user base skewing to its ad-supported service, the third-quarter earnings report said.
The company announced that its chief financial officer, Barry McCarthy, will retire on January 15 and be replaced by head of financial planning and analysis Paul Vogel. McCarthy helped lead Spotify's 2018 direct listing, and will join the company's board of directors pending shareholder approval.
"I can't thank Barry enough for all that he has helped us accomplish, and I'm looking forward to working with him on the board and with Paul in his new capacity as CFO," Ek said.
Spotify traded at $141.82 per share at 10:45 a.m. ET, up roughly 22% year-to-date. The Monday spike sent shares to their highest point since late July.
The company has 18 "buy" ratings, 10 "hold" ratings, and two "sell" ratings from analysts, with a consensus price target of $161.46, according to Bloomberg data.
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