Spotify Technology (SPOT) 24 Oct 232023 Q3 Earnings call transcript

Good morning, and welcome to Spotify's Third Quarter 2023 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Bryan Goldberg, Head of Investor Relations. Thank you. ahead. go Please

welcome Call. and Third XXXX Quarter Thanks, to Conference Earnings operator, Spotify's

Joining into find our Slido, going on QX most Earnings from and at Daniel Vogel, be can participants code e-mail happy us will in questions today #Spotify questions. your Ek, S-L-I-D-O.com and we'll 'XX. We'll Questions and add Analysts some vote they can investor with your we'll to the can have Slido, answer Paul for submitted the If directly our start questions don't CEO; access the ask slido.com, opening relevant. then relations and comments you by Daniel you and question. all be reason, afterwards, ir@spotify.com be to to can CFO. Paul and using

we Before the let cover quickly begin, safe harbor. me

certain assumptions be factors company. of including During results and expectations discussed are making Securities deck or call, differ call, our statements and the risks to on could Commission. performance shareholder These forward-looking and this future filings materially in about in of the uncertainties. because and estimates that with subject statements, Exchange Actual are current the on today's we'll projections based

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that, Daniel. with And turn it I'll to over

laid and clearly for It you our business we stellar Investor deck. truly it's that really Spotify, super for the to making one hope pleased had at XXXX Hey, at everyone, that opportunity the line, and is joining we're so and a the shareholder us. our a was progress against great Day. at how right. thank out I that goals time illustrates I'm much All you exciting performing. quarter review you've Bottom

more our us that MAU XXXX. for put users big we reaching end puts largest XX the the well of hit years Spain, the was year, to on the ahead quarter to of QX and net live number forecasting global active Finland, this reaching ever been went ride. by Norway, way end more million into Sweden look see X as that And another addition. second and users billion monthly a wild at our we're also than ago to And XXX in to you'll month, than Spotify U.K. It's France, this the context, milestone, year,

strength Next, thinking We million from just beat our let's to in thought XX but year, track XX do be. growth. significant which we're deliver to subscriber actually is on turn the a full million, of for we we subscriber walked we adds XXXX would net the where over into would

this gain additions net fact, since second be going subs In will in the biggest full public. year

and our our price previously especially This offering, momentum across I'm so as more these weather that as this really I exceeding pleased to report how wondered right went than hope, expectations. prices you was we'd markets. we'd timing of some increases, modestly even raise to know in XX you of well our as shared, the ever-expanding put the when felt in content effect because our is product And QX. in context that increases of went the we it into confidence we significant

consumer through our marketing with experience. to to with user value Spotify to is and of deliver exceptional the ever-improving globally. an All we operational on creator continues essence model deliver this new our The reduced value sustained of our unparalleled achieve to efficiencies, a testament this costs. business growth managed And focus to base is

into value. And few the then weeks verticals groundbreaking subscribers to nicely This books segues for a deliver audio and through ecosystem of our now coupled more expanding ago. offering announced is with even that new course, premium every we this,

flexibility for the churn, audio still us And discover. super initial of impact not our business. into to more category content them this it's further are of from numbers, our in growth too value And U.K. engagement signs expansion the reduced which early and as we gives our books our this, and only bring enhances Australia also course, format will proposition. in more while the see subscribers positive So charts the will but drive to incredibly it

They're weeks memoirs, can't loving catalog. In gravitate breadth these what wait premium subs X fantasy. when XX% towards there see markets to to of launch, we of the over launch since X and and fiction, already to soon. sci-fi U.S. in listened the are titles I flocking the subscribers first have And

of flows up underlying In for of margin, the to over of it Q&A. business, more will fundamentals and including, this to the course, terms down all of I'll it Bryan Paul detail, and how to then open gross turn revenue provide

I'd and thanks, us. to more Daniel, touch color joining and outlook. the performance broader our like bit the and Thanks, of a for business Great. the on everyone, then quarter add upon

a outperformed and be we million historical MAU X XXX continued growth XXX is net trend to above very strong added subscriber and Both forecast. million, million and well QX at quarter. to grew XX MAU million. subscribers by finishing our

quarter. we during the front, year-on-year XX% grew the X.X On billion revenue to

versus FX-neutral prior advertising accelerated XX% points accelerated results. result, XXX the pricing basis early growth and our Importantly, and the of effects reflecting was new quarter's the

of XX margin. Gross favorability by above primarily due margin was Turning to in to gross business. guidance points our music basis XX.X%

due XX well mainly marketing our better personnel combined lower with When million operating profit Moving lower-than-expected of costs spend. as to achieved gross operating an profit, we expenses. than EUR quarter. the the as to our efficiency point was Growth We is last Investor towards this of and and related to see in for at you in business believe start forecast summer. focus on targets the progress the an benefits profitability laid speed we as Day out to our the important we and on delivering quarter inflection

positive was flow in million QX. cash free XXX EUR Finally,

Looking million QX. of XXX subscribers, from ahead quarter, EUR million This fourth million million increase has of forecasting over increase year, above to adding XXX is million XX MAU of us QX MAU an we X-year trend and are the about an million the trend. our adding for nearly subscribers historical for all is above XX the XX% XXXX, XX% and X which XXX which historical

largest with in impact exclude the should subscribers additions the finish of you actually and the Russia. if second for XXXX highest history, for MAUs net company the but largest

in profit XX EUR of forecasting billion We an are operating total XX.X% million. also and revenue, gross approximately EUR of X.X margin a

Turning to revenue.

XXX given euro the growth the relative the strengthening basis We dollar. are headwind to forecasting of to a point

Excluding in versus of increases X.X this our delivered growth be expectation XX% billion, constant the for closer This XX% year-on-year currency effect, QX. will in our acceleration currency-neutral announced quarter we aided growth price to the revenue is benefit we QX. by to full accelerating EUR a reflecting

pleased In are how sum, into we tracking we're very with year-end.

While business. it's on do I meaningful path the out too confident in and for are guidance profitability early towards progress to expect we XXXX, want our delivering give on goals that another our to point year of

I'll Bryan that, things for And to with Q&A. over hand

the you We're question their today preference 'XX. questions vote questions, the Paul. is with in if efficiency. do out cost our and and to in marketing, to the you questions. first successful in order you've now respect queue at going cost see Earnings on Thanks, to for from opportunity? And they slido.com, please got up go reading business going is feel be appear QX across Thornton Daniel how podcasts. Or on efficiencies side? Matt you've Paul, #Spotify Again, to personnel the been people come Do state the wringing steady more

I myself I'll the remind much year, to very growth then that modus everyone, a operandi of as And been leverage the line that of being to we quarter's here Yes, with as we this great we out And focus start, set but results. our rest X but That's needing business really translate to and throughout Spotify into the forward. starting is team is the and this and we're really One and great focus experience and consumer that delivery investors. nicely become Paul you're to proved thing But see remarks, on parts efficiencies. out fill it can in Yes. I year. for part we which But coming management play, focused, the a state providing And this this talked business maybe think top of about the and into that level see said the product also to allows Paul going walked new side. that some the what is great the to just into on in. to starting having is prove opening experience. is are always, creator is here. my

constantly is of bring and and constantly new we make looking at And of team myself rest how Paul out we're ways more can finding the efficiencies business. the to management the improvements.

So but the so for to operandi. improvements more going far. just us We've should our seen I'm because improvements, pleased forward look you some modus progress with to continue expect that's

an would QX on but Obviously, we happen be profit expectations very you pleased for what quarter, I X in initial forward. add, that never see And that and we've good hit respect moving a to consistently the success just Yes. we're of inflection guidance profitability our point trajectory, profit some obviously are to in with operating And as the we're operating know well. in QX an and can different with will any black in of the now feel we business.

Great.

Justin Patterson, and business restructuring began year the going Next you to greater related the efficiency. of come velocity. question question units product Daniel, on is from with a efficiency goal

towards how efficient head see puts while more and do of audiobooks innovation? scaling? next the driving be And think we takes areas we you Paul, As XXXX, expense, to should about where

Yes.

the response, a across mentioned And think, example. very in last maybe I to focus, one As base. highlight my it's I much just

company are the product and on as has at on everyone teams technology the efficiency, focus is deliverables. their this working at tasked own it, everyone So

for engineers able finding that. side patterns compute to doing up on our utilization instance, doing side save we're end expenses as that are from there infrastructure on and where, constantly we So better are the they're we that, ways finding

as bottom-up up improving that it's not just that's that up looking of where top-down much initiatives seeing And is one as numbers. initiatives a the are on cost lot then And to example streaming this we're adding having. that the delivery for we're we're ending

and long on great also get the we opportunities focused Spotify gives also out work our We numbers top because efficiency spend goal deliver saw think were very able in on this focused now line the less clearly as teams Paul that doing. we're with that as everyone that's myself in marketing and spend. great the is team I better comfort power to it But the but of there's You that and there it.

then And respect take let a Yes. the me the question, side of a kind of with back to step for audiobook second.

of If gross you expected the at we see what year improve from quarter year. we Obviously, knowing to of XXXX, margins the do have sequentially benefit said start the planning throughout we're every we XXXX. of look the that to

initiatives to And play, and going the come the of price so audio we're the books. increases we in launch knew all both

And that's so that, glad we that actually all would had to see we're able that played sequential the commentary and realize you in were that what expected to XXXX. we into realize growth. And

will margin operating income books look cash but in there's there's the probably our audio gross nothing side. our gross income margin our on and well. some improvement as continued as trends just it XXXX, the progress progress a our Obviously, important, see are investment into As we to improvement business a when free flow that in launch on or side you the on to about side expect operating continued progress derail comes the the our trends

cash business. did the feel well So noticed, We EUR as free hopefully, free about QX. positive the flow million everyone cash good flow of trajectory in we XXX in

will the so very end, XXXX we of encouraged is with forecast indications think we're optimistic how and with kind be. respect we're XXXX very to early And to where of

right. All

how the hikes? did from subscribers. Is that price ad-supported subs premium this first-ever And subscriber question hike? shift is our loss? this And American from And future free inform does due Greenfield tier? to Rich churn North to price the on churn your Next

Yes.

subs lose first the not North part question, did America. So of your actually we in

based rounded with think the you've number, is that's as number a I that a got quarter quarter X here up well what's going prior So on number -- a coming on numbers, So rounded. rounded that's both is number are current right? your a math percentage as

with So North in actually subscribers we grew in America expectations. line

broad-based to was Actually, across the pretty all perspective performed well a it board. of our from subscriber and regions relative expectations,

North America. in not any was there. So lose It quarter actually we did subscribers a good

through IR it's can reach out works. that's the kind And for team and so rounding. please that if anyone, of to just walk I think after And we unclear, how

the about And to his opening, then as with how feel in increase, went respect that Daniel we mentioned price down. really good

about -- in on. focused really to have elevates you any the the a that One two, you're anything components when X We that way. be churn. And price think intake then there's going always gross anything increase, is impacts

on around. which And in then outperformed line as is the of one was just about churn right even subs. And that with that the had on raised prices so And what was material, past was when talked we go great reasons guess never this intake to overall we we've side, importantly, and I similar gross it we expectations. why in the outperformed churn was the been

then price led in right increase even the gross the is and intake expected, outperformance. from churn to line better expectations than with So which

right. All

question from create what Spotify Justin turn, lot voice for pilot. engagement the of on AI affecting of AI. these for products you creating does and type you creators? opportunities with Daniel, In monetization Patterson Could Spotify? translation about DJ this listener a how view made opportunities through AI has Another and progress talk

Yes.

create I that the through way even the it content. way amazing value. that AI think about is increasing with we think that of more service compelling AI creating tools is, is the engagement by already primary and mentioning, augment leveraging look at course, we you're -- And about the primary or to certainly,

would personalized example cultural all which radio, context, behavior providing that X DJ, you're the companion music a is provides an that coming you. on -- of things context amazing for, hearing but some AI great radio around So mimics now that for through the be through of the context job you doing a DJ in love that's and

that do. can to think thing impossible humans. a can things. nicely by do at personalize things. that would I can AI scales It contextualize scale It this It provide what can be

And likely then about you able we service start fundamentally on it love. a it serve the because is have seeing better the -- Spotify, on we generally part, because if that we're the is AI to content translation consumers voice more one meaningful the more up the something engagement think that

consumers. AI so thing voice the And for and translation is both amazing, creators

this at to many generally many able for lot in have be less for aren't For content with consumers, is currently them able content, non-English ability an language they to go to especially And more they a their to content consume. all. other creators, penetrate through geographies that

great exactly of so And what and is win is creators the for is something thing where things at that's It's look say Spotify this you've consumers. for great Spotify, great heard me usually this but one we for for that. and is before, those this

better very focused on nicely. growth. MAUs our all growth improving more we're more that means greater the us ratio did the value And just time that then, price then these of constantly engagement. and eventually, that's success. for coming value leads is with by then And prices engagement consumers. see like And better into value what think does And growing should can churn. for way line means we also reduce subscriber about past revenue of with that itself that, ratio which what And primary course, to create produce year adding consumers. then allows you with to we greater raise great the think into this we greater And segueing top to quarter course, you more initiatives, I and it more And engagement growth,

improving be there. this focused AI And kind and the so of we're proposition, value and enabler creator really on which real starts consumer can with but a things, it of trifecta it's

All right.

look Another material a anything all UI, and expect question example, the AI on faster the about DJ incremental from than key XXXX? Matt grow of else? What audiobooks in drivers Thornton Do new growth Is core you full we What of are drivers. global a as can needle For growth merch ticketing XXXX? move to marketplace the into business? rollout at or yet?

can I'll then Maybe chime and start, Yes. in. Paul

comes had I things for have. good we on think, And the to we've growth. in growth I about set plenty offer So that's, really left about the XXXX, just nicely able And core delivering we it to should and the it be has back expectation, think feel the core. delivering now that into of when course, see we against to to investors can is XXXX, the all XXXX. that segueing And already see of hopefully,

scale on more business seeing advertising drive hand, efficiencies. our So more there, will which one

of on We're marketplace. to and offering there, we're products all the on which is on that very relative side, more results meaning heading artists us more other too mentioned better and people a business and great encountering, the investing is and with marketing which, nicely testament marketplace keep and to -- labels the teams are more better spend for You side, course, there. seeing will more artists

the It on the out. side, in UI. being pointing right you're product rolled then new And out fully is

we're So language great with already, AI out that. English -- many been more one. to but DJ, rolled results that's the it's seeing countries

have a that to good a value keep a will of produce again through even clip. low price, value ability, to price the we allow mean to So response, you expect local allows engagement. more mentioned line as business. previous growth DJ more I the more of for should AI But we and in proposition a we'll definitely for for my if the grow either to engagement, at that which better great at or even versions course, That ratio top faster flexibility prices see allows raise for

of business expect. produce. XXXX there you to the that's And what will should core So in be for opportunities plenty

all yet not merch But them. to long excited are give. about fronts, investor any we're don't about of great more term, expectation. for has too, other will they But progress be I on but material delivering have want on are We it's core, ticketing these making drivers, which so and plenty the that to and and they XXXX,

would just And the then point. XXXX. perspective Yes. advertising quarters growth we'll have improved I business mentioned, And from increase a throughout Obviously, side Daniel's Daniel impacting revenue X has price real to on quickly add XXXX. almost as the full of

So could a to continue as in advertising be we're XXXX hoping that driver well.

which well. side, as mention, the forgot the about asked by to I audiobook on way, you

So yes, be early of early results still launch. to development focus but it the as be we it days, well, markets. do It's is XXXX think will audiobooks bring the to in more will course. early helpful primary -- product in And out

Great.

Justin It Another from now is increases. Patterson. was also audiobooks. This is Spotify value innovation delivering pricing. one inclusion the recent more product churn like a of lot minimal from through price on subscription seems and question

So the dynamics, changing given your a how versus towards what in we've past? these pricing is approach observed lever as

I raise talked stool. that one mention, and X one -- adding Well, the that prices forward. quarter And leg did there's is think to are about prior this when was this a we going to we paths before were we

everyone the again, low our and put keeping kind relatively grows market We the top by drivers. of back market the grow and line to context. grows that So and revenue. We bring in grow of can had plenty growth price

engagement of increases. increases have price price of again, really a We through about the of we there. we our more used which did. the to what then even up further have grow great learned until I point, hadn't and And feel extent, course, advertising. lever That's third another good to lever, we increase business. way the is to can, We grow course, that

the part the tools expect So growing appropriate the use keep think see arsenal I that it's can we should of business. now when us And dynamics. to of to we definitely you deploy

to have when that to get consumers. delivering to thing, with increase why get primary are choose is the that level top primary the more keep you're in price ratio line and balance. an the right can then, again, set That focused value to we on But flexibility thing just And value. the amazing on value to investors, we're seeing we of then providing we the is course, growth to because amazing are to prices we you value, way amazing

we confident So definitely and forward, a we've feel really this what in going given have lot learned price opportunities increase. we more

All right.

the is gross going Benjamin Next on from margin. to question come Black

You've at sequentially the XXXX, of given look hold margin should guided progression improving price all true? When to a profitability to increases for similar gross margins XXXX. improving and podcasts, we gross forward

Yes.

podcasting the become side, So a it is a actually margins, that's in couple the drag breakeven I'd and gross to been for we to on how talked profit. our gross expect yes, the of here. we've that's seen we business, things additive One then say and podcasting first, something improvements about soon reach and on

XXXX. So with gross we're continue helpful to there, on as incremental track music there terms of side that on the and margins Same podcasting in well. side the should into be

obviously good anytime think margins launch specific you next in about give really But gross on earlier, investment you of progression the have some said side the again, When we there's call. We'll feel a more into audiobooks it, new I about as earnings continuing nice XXXX. business. guidance to a

only when QX you in about do tend versus The to is some sequentials, seasonality have we QX. think thing

the margins made hitting significant at perspective. date. really already But be progress XXXX, material all quarters to about Some expecting gross to advertising we it Investor the we the the Day talked others. are from about slower advertising, and years, an to it's we Obviously, targets more good improved in one we've than tends and of feel be

All right.

in to by from XXXX? of what and is about adoption the impact Can margin Anmuth should audiobooks? the structure fourth subscribers? and into the you in question Next How gives you think economics gross audiobooks. we on cost Doug And confidence talk quarter the about

Yes.

of And there's again new see you'll up I the whenever continue some to guess that couple times to adoption XXXX, kind on I we and obviously, progress a what gross going a as is, on made always margin be to are I'll side margins launch margins nice into maybe of gross expect out confidence we've you gross some but the said, -- QX. operating in side start, I'll Daniel that product, there's And now, just see has to to costs said the QX subscribers. I which read So be here. XXXX. thoughts profit expect do the we and of up

past have mentioned, for we good feel we But first early about be because couple the the days, believe launched great really it's now. open business think in we we've up a great business the becomes in. for business, but of the to it's a is authors I a seen much going product. a side, the same bigger, global that Daniel part authors And going to business be And is and the great we're on just which It's more audiobook what when enter as weeks is we've to consumers. bigger month to benefit podcasting we think the And will of going markets Spotify to more consumers. in business

in in and mentioned feel Yes. this my to winter I again, we And great, a planning investors, just U.K. the well. as launch reminder adoption coming to And opening as the we U.S. Australia. in with remarks, are as

So It's early you're days. it expand And with is see already initial audiobooks. launch, going this to definitely positive. us

experience adding we doing. experience point And out the sort that add. proposition it just important more things you then the and improving for consumers make the verticals great the a earlier alike. part that natural value step But we're a -- it finding trying we're this creators with most they're by Spotify and every of think we're in about consistently are is the seeing. thing of then about step changes that the made that value to loving now consumers And and these what experience, encouraged they're And when and adding speaks really

Okay.

from efficiency. Rich question Next Greenfield on marketing

cutting You and XXXX? revenue you and you understand help it's this dynamic accelerated spend. enabled whether user us believe marketing sustainable what's growth Can while into

was here Spotify. make really marvelous Again, a it on would team at And I were what it. on kind they we of we objective focus some mix, set talked teams, as is focuses testament more We from that the when on doing. the of were tend the I something and to the a it focusing We happening Rich, lot when to that marketing Yes, this Paul for other efficiency about. achieve performance things. started initiatives pulling back started

possible down of We learning marketing to with we expense. now But few were rate great seen going. would very and keep the positive is seeing quarters. Initially, increasing it and this was pace And marketing able trend whether even others. learnings, the sign on a at play up top started to out And be are we've a lower accelerating kind skeptical for holding I doubling that line of simply into that seems our a recent very a think the case we team I that that is at going across XXXX. and

right. All

to acceleration? overall of And Advertising mid-teens driving towards XX% of advertising. Another accelerated to couple quarters. advertising period past in that growth revenues you to drive feeling are low about from how XX% the Rich on XX% to time ability currency Greenfield one from constant today? compared the What's

Yes.

on and the podcasting currency. So nice side saw a on side constant acceleration the quarter both just the music

So doing improving doing both of the automation We're good across job and board. side of tools the music selling the a a podcasting. the And across world. selling. We're of it improving was good honestly, or job we're

we've having think the helpful, in ecosystem in talked which is I past. really, about both So before them really of the

a we XX%. the of so of necessarily for. It's been a to don't give in update any not lot target really you And shoot driving growth. terms that's have I

side But I how or the feel the the on trends, more. believe we've that we we throughout year. good if grow, said in in over could about they've advertising think become past what time is XX% advertising the it QX of acceleration and the continues improved kind to

medium-term Audiobooks this bridge for this is Benjamin think charges. the to additional tiers overage for your do of offering? payments about discrete from But be monetization hitting with you there gross audiobooks. on monetization highlighted And access? Black those margins Okay. how What's offering Will XX%-plus via Day, targets? audiobooks. at you Investor

can Paul in. maybe and I'll chime Yes, start,

I So it's what days the early encouraged we're side, very audiobook and but with we're think, seeing. first foremost, on

is right turn, included is in talked It that, about. this premium in So and in the a that benefits, us offering. getting you're the that members obviously, are our of gives that one we flexibility as business more

a for a is the month. available Just reminder, however, consumers hours as XX offering

the hit hours or that XX a base that is top consumers hit For to month, of up. subscribers base that that there ability

probably already and already upgrade consumers and very heavily there's wouldn't for is are payments where really listeners the already ways the discrete heavy imagined some audiobooks being upgrading base that doing day But consumers consumers small. today in So ability we're we can seeing X. obviously, have where

it the And for us be our because -- ability but that we for think think it's course, a course, value, a what consumers But more that and think and flexibility creates will expand we real to subscription is being term. us I our value consumer that where more which, the business, format impossible is of it's that of leads market part part loves business. the of of exists, audiobooks. will gives also, say of the us So long it

between XX% You talked well audiobooks the talk we and about about? as want to the bridge

Yes.

audiobooks to window a gross think -- really that I a We I to of to talk long a new more when until trajectory. the But I there's be go material obviously into we'll about you Spotify of which getting there's from see going couple it And is going we said launch margin saying, being forward. an not additive to product. it's back don't work line And our specifics would anything not bottom yes, it's kind think impact now. I've a So always of think what moving that's monetization we're to how is now, XXXX investment a think have perspective. times we right

right. All

Doug from should Anmuth question improve How Next think podcast are the profitability? podcast achieving about on And timing going podcasting. structure biggest opportunities we for to margin cost forward? what the gross

Yes.

the me let part first. So take second

continuing things. to as as we a the business. of can possibly look is about, think efficient has a just us, most it's I Daniel really and One talked be number for So to try we're

to going it invest going how can be that's where to thinking strategic. areas mean makes investing be we mean we about sense more think can so And it's strategic to in and we

year side, business we podcasting it And made seen us parts rightsize sense. of already thought the the of so on this you've sort where

continue efficiencies smarter that's to of where grow get continue also but the that budget and also through we to to moving we're we we'll spend being forward, think of But lots podcasting invest, and continue it. about going on top advertising to

we're track. So on like we feel

be podcasting gave time in and podcasting. we sort We're should on think we X- breakeven breakeven a gross about term. good Day should drag the in pretty in pretty having with short pretty a pretty that to that to really get soon drag at to that's trajectory minimal ago podcasting trends from We positive line actually right I big a of something line. year the the X-year to gone a time the feel line to of something profit to Investor

fixed added more too. cost has variable so just, unlike, proponent Yes. music has of of and biggest been base fixed has But the basis an cost a a say, podcasting variable And Doug, cost business, structure, structure. far as the the maybe a reminder, which more

obviously, if base helps take cost fixed other the you us that helps there is down thing So but scale. structure, more what the

you advertising seeing margins bring that, if dollars gross improving. start across in So you'll more

back So we spending, also podcasting, true. both on We've have too. of things of the been revenues some on been those reining have but the increased

Okay.

operating Benjamin question on expenses. Black Next from

expense how growth. also, operating decisions and thinking fourth headcount made reductions more some this obviously up headcount the You When tighten pace be And to to year. we room about expenses? is forward hard should quarter and there of looking on XXXX,

Yes.

going next do that quarter. not to on yet. any We'll the XXXX I'm give guidance So

is possibly a we really, as as which efficient as kind already, business, said want reiterate what to of a I'll as be and do So can. we company we what is

to And so we sort of product, some become that's the is something thing, the best-in-class way best-in-class changes that is onetime we about we not nature. a in a onetime business. and as We've business made we're -- This talked running a not we want believe well. have we're in XXXX, the of

continue can whether and business or we efficiently how XXXX run And effectively as it's as to we so or about we'll possibly 'XX, look the 'XX can.

just targets the out our margin laid hitting that about of translate that's forward. will hopefully, how into so we expectation moving at all Day. we think kind Investor the it And is And

one else? getting price on options curious labels, Is got out? tier on details Without from bundling Ben's negotiations to more to Okay. economics audiobooks here commitments, ad-supported flexibility by the hear like services it the looks with the better I'm another economics. marketplace introduce like It your music into win-win how the played or anything new related side, to

is around that's is, we trade trade general don't say as partners, is our like analogy rights with know, on It it's what ongoing in used you any But before, -- negotiations our with I a agreement we something of specifics year. I've much comment and Ben, every holders. being renegotiated. when pretty kind can the this renegotiate Yes. terms this constantly Well,

There host payment of things what cetera, things from are Spotify clearing small just things that new terms from including labels that like of it how labels, Spotify, the lyrics, things. want market works, lots whole a things lots of of up things like agreement, the et lots the wants in entries, are,

So of one a it's things, you're some not talking lot of It things about. that including is the different thing.

end on is the both repeat we the how said other those being has win-win of of that sort in is the why think too as lose. community investor this though, history What This to before, I again. win win. focuses Spotify will about this side it I one a a The not much goal it. is view of I've talk that but side I and things sides has happened

get doing as the it And So labels greatly. publishers so, grows, more economics with also better in scale. the we all business and helps

what are is the very forward. this much going so us both And expecting partners and

continued in symbiosis of doing music We are to the this much drive business. very the development

not We're by may example. question small about a And that We the of will more the great marketplace as of points. ask part how big you providing then we industry. assume on And big a that keep to for should sort trying talked well, is services improving. gross margin score then,

reiterate various they're to Just a the the in point. an channels Today, artist for label it all that doing. market expensive is to very

hard changes for very others Apple made tracking happen. through It's and that the to

through at that where directly Obviously, from can the the which, what's experience people it's very unparalleled we do to happening. platform, being discover consuming discover on an stream, all the way consumer a -- So then place people music, to that at the marketing attribute hard and experience. music drives being point to where Spotify unparalleled of course,

gross labels can back. we're is that of marketing why for obviously great That cost is excited well. gross share what earn at so our revenue way out That is about what our the projection. a music was where That XXXX, exactly help big we margin a that and pretty reduce played we said in in improved is margins as a and being way

win-lose So a is It rights us and it's not truly of holders. between the sort a scenario. win-win

Okay.

subscription is come question Next to going Mike ARPU. from Morris on

improved think Your in quarter? trend you to revenue currency negative implied of drag how or growth much X% What premium And mix? there negative fourth amount ARPU related was this do is normal X% in And quarter. is quarter on guidance? price constant drivers? market impact in much quarter detail how third product from your Can share more from the last a you positive

Yes.

you It's market We've larger on take continued when let's side. trends, to really look family have mix. on the slightly of at the product year-over-year. sort and been quarter-over-quarter share plans ARPU product just the a So

that's been -- been. small very of drag, it's So kind a a of product that's of sort the sort mix, where but it's which has

And impact bit QX. increase was QX. of then expect to see an flatten a from or so, to the reason or guide modest X% of hard to bigger to of there We'll to the to in sort X% the that's X% if little continue that's very impact on impact real where been -- but kind price out, ARPU. of increase in a going go It's that's much going

think you fact the you increase the then and if XX% that price revenue increase think of the about about our hit So price about base.

be We -- increase to expect QX positive mid-single-digits a the ARPU benefit. FX price neutral benefit to

Okay.

we marketplace. realized from Doug approximate growth year-on-year marketplace you current XXXX? on XX% question growth Another How in should Anmuth relative to think the about

Yes.

one done. the and It So of as I equation nicely. part said, think grown marketplace is has we've Daniel everything very

a be growth continues numbers, value side. of really about us it haven't but And it's We specific to more driver the just out big the ecosystem. on given for adding into margin

works Our if labels. for the marketplace it's working only

benefiting well. So like our we'll label partners if from Marketplace, feel benefit then as they're

the so case. And been that's

one margin's of it to expect be that's the been has definitely the the components case, We and helped it music improve.

Okay.

impact is margin on audiobooks, to type much impact Again, required factors over Another audiobooks gross on the the drive gross guidance what have does margin? one accretive gross usage that time? quarter product are for be What how and the margin of from Morris. audiobooks Mike fourth to

Yes.

in So there impact QX. is a small

information on usage that I about as share that because, business we'll time, the be we more to expect As we the anytime I see over margins side. I new to there's It's gross to evolves over the time to thing them you as product, as and a said, going some launch talk QX said, investment factors XXXX nicely said, there. as on we in of as up well. to continue model drive -- same again QX hard and But sequentially improve sort

now, become great I how drive when think to to Spotify? one has we're product grow for continue They're part and Spotify that we And of it for does people higher. they right engagement. is another what know us, trying usage more with really engaged. How interact retain more this than

are People seen expectation with one it that will will spend just factor more the and is our And music we've of be on that. engaged. more help They're in who So audiobooks retain time lower service. all before higher. both podcasting. They churn, that use podcasting, more they

XXXX? of Morrissey more question Zach improvement in cost cost on revenue. a share in Is Can got color of the We've Okay. opportunity revenue? improvement other driving further on what's you from for other there

of and benefits. to tackling lot the of a started we time trying business that that's Yes. more become a blocking again, over I is just that some see mean, the to stuff efficient

delivery And so revenue, got got costs, within cost service, and cloud other cost got that fees. you've streaming you've of payment you've customer

So how and business. becoming efficient some scale, some with smarter about you run those your more of improve just those being with of improve

more to in ways for to look become areas. going we're more and those always optimize so And efficient and

do focus our gross that's and efficiency the do gross with is that's that yes, revenue to material, seen our other on of is, part to margins and But that the percentage Obviously, we cost making on it improvements and royalties sure different holders. overall it, has something all are just pay rights improving. of the again, year. largest greater focus has of we margins some you've been of throughout of our But improved

from to the to right. All ad AI-powered space, better in investing and and KPI for creative its that's AI performance? come one performance. Is Spotify tools seeing for question, going so, more time It improve to are are advertisers? Ripps generative products And generative in Maria seems And got advertiser across improvements leading improving AI. we've like tangible on if any you

Yes.

there with learning thing plenty things and single do speaking experimenting But teams we're could improving, we as machine for to biggest and to be with the think I products, generally more specifically, everything creative improve experimenting is targeting are we're So are our forth. AI enabling created. generative advertisers that the opportunities and of AI to to so from you're advertising speaking and of doing, course,

expand So moment. a for that on me let

as advertising you text about say, our on produce video in lives others, of it's obviously as see the other hard not as on segue end where ads, it this not relative produce platforms. you it a kind ad. a And think one what to nice to to, many as So if format easy is

an there's create really audio And think generative for opportunity so we apply advertisements enormous to for compelling us AI marketers. to

obviously a that audio few scale we're are when video that to quite big of because a in They available, one of that the offers And today, on it that's the great for already doing. quite marketeers comes creating there's ads that way plenty to and make is but platforms do. investment costly something we're audio ad expensive

there. bit hurdle So that's definitely a of advertisers getting on a

has only allow to course, cost down. scale of in but is, promise to you creative AI generative do But that unimaginable not that ways. what creative allows So to to that, come for the it

different creative of whatever translate can you languages. lots had So you

this. XX,XXX even individually You but can ads, X or of to instead created X,XXX you producing each hear X voice actor, have XXX,XXX to use that are can same or user or the that gets ads

that compelling better lots means And marketers course, there's will using lowers which perform lots of the AI. ads barrier for generative there's the also creating more for they to as possibilities opportunities of of side entry So marketers ad of on well.

going teams it. we're And to catalyst this set business experimenting our excited forward. with do that. real days, level the a ads how to about for So be really is definitely on think early and But can are we I it

further again, bring But more from it to days caution everyone, all all will this costs space increase and ecosystem. the the explosion and LAMA that to the the is down of in to quality to other tools across plenty early and Google's further, happen tools OpenAI are just things throughout happening

this in bring we see the ad ads, think it's opportunity bear just think to product than I but our bit that's a you course, will, not development ads generative way. a where I ecosystem the entire further is Spotify, that's into seeing audio little further. But generative in unique to video of a this big but driving future have something So

big playing excited XXXX part a then we're to and hopefully that being market beyond. So to relatively able about soon and in bring

Great. to today's Maria. going conclude session Q&A our Thanks, that's And on call.

And to hand closing the some so with over that, I'm going floor remarks. to Daniel back for

Bryan. you, thank Well, right. All

So in as and we're you good about the see, closing, can progress feeling results. very

XX taken on a are months we've that I actions over being are great both feel of product really And way confident the very a So well lots business. fruit. great our bearing of we last the and

us. dropping And to For free as The again feel podcast Record our for check out today. thank usual, later please joining you So

concludes be Okay. will and joining. earnings on Spotify call. app also And Thanks, everyone, A for available the replays. replay our under today's that call on Spotify website

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