Spotify (NYSE: SPOT) finished the quarter with 170 million Monthly Active Users (“MAU”) and 75 million Premium Subscribers, up 30% and 45%, respectively, Y/Y.

Total Revenue was €1,139 million growing 26% Y/Y, and 37% Y/Y after adjusting for the negative impact from changes in foreign exchange rates1.

Gross Margin was 24.9% in Q1, above the high end of our guidance range of 23-24%. Excluding adjustments to prior period estimates primarily related to changes in rights holder liabilities booked in the quarter, we would have finished at the high end of our stated range. These adjustments accounted for approximately 124 basis points of Gross Margin in Q1.

Our Operating Loss was €41 million or approximately 4% of Total Revenue. This was also better than our guidance for the quarter, but was largely due to the flow through from the Gross Profit outperformance mentioned above. Operating expenses were in line with our expectations. Net cash flows from operating activities were €84 million, and Free Cash Flow was €74 million1.

OUTLOOK

These forward-looking statements reflect Spotify’s expectations as of May 2, 2018 and are subject to substantial uncertainty. For the second quarter, we are expecting:

• Total Monthly Active Users (“MAU”): 175-180 million, up 28-32% Y/Y
• Total Premium Subscribers: 79-83 million, up 34-41% Y/Y
• Total Revenue: €1.1-€1.3 billion, up 10-29% Y/Y. This includes a negative impact of approximately €95 million from foreign exchange rates; excluding this impact, up 20-38% Y/Y
• Gross Margin: 24-26%
• Operating loss: €60-€140 million. This includes expenses related to the direct listing of €30-€35 million

Our expectations for the Full Year 2018 are unchanged. They are:

• Total Monthly Active Users (“MAU”): 198-208 million, up 26-32% Y/Y
• Total Premium Subscribers: 92-96 million, up 30-36% Y/Y
• Total Revenue: €4.9-€5.3 billion, up 20-30% Y/Y. This includes a negative impact of approximately €280 million from foreign exchange rates; excluding this impact, up 26-37% Y/Y
• Gross Margin: 23-25%
• Operating loss: €230-€330 million

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