Spotify CFO, direct SEO architect, retires
Barry McCarthy will retire as
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CFO early next year, leaving a post in which he oversaw the unusual direct quotation and guided the streaming giant through its first year and a half in the public market.
Paul Vogel, Head of Investor Relations, will take on the role of CFO in mid-January. The 46-year-old executive, who joined Spotify in 2016, has already taken on an expanded role within its finance team, including as head of treasury and financial planning and analysis.
Mr McCarthy, 66, has been the company’s No. 2 since 2015 and plans to join Spotify’s board pending shareholder approval. He was CFO at Netflix Inc. went public and is credited with helping turn it into a video streaming juggernaut.
Spotify’s move comes as it saw better-than-expected user growth in the third quarter and raised its outlook for the current quarter.
Shares of the Stockholm-based company rose 16% to $ 140.20 on Monday in New York.
As of September 30, Spotify had 248 million monthly active users, exceeding company expectations thanks to growth in developing regions including Latin America, Southeast Asia and India. Spotify said the number of premium subscribers, its most lucrative type of customer, was in the upper range of forecasts, at 113 million.
Users who come on board through Spotify’s ad-supported tier are less lucrative, but the free service serves as a funnel for its subscription business.
The monthly churn rate, or the number of users who terminate a subscription, has decreased compared to the third quarter of last year. Spotify has been experimenting with its product offerings, including Spotify Lite, a scaled-down version of its app for older or lower-end Android devices, to help reach and retain more customers.
Average revenue per user fell 1%, or 3% excluding currency effects, to € 4.67 ($ 5.17). The drop reflects the arrival of new subscribers via discounted plans through family and student accounts, and lower pricing power in international markets.
Spotify’s revenue from subscriptions jumped 29 percent to $ 1.56 billion. Advertising-financed revenue increased 20% to 170 million euros, below expectations.
The company has seen increased demand for podcast advertising as it expands this business through acquisitions and developing original content. It exceeded expectations for the last period, even though it still accounts for less than 10% of ad revenue.
Streamed podcast hours were up 39% from the second quarter. About 14% of monthly active users listened to podcasts, and the company said it is seeing more and more music listeners who also listen to podcasts move from ad-supported users to subscribers.
Mr. McCarthy is well regarded in financial and tech circles for his role in bringing Netflix to the stock market and transforming it from a DVD rental business to a streaming service. In an interview on Monday, he said he accomplished the three things he set out for Spotify: getting the company public, building a team to support it, and training a successor.
“I would never leave if the business was not in good shape,” said Mr. McCarthy. “He’s in excellent shape.
Spotify, which is run by co-founder Dan Ek, went public in April 2018 via direct listing, waiving the investment bank’s underwriters and choosing not to raise money for itself. The unusual process saved tens of millions of dollars in fees while still giving employees and early investors the opportunity to cash in.
Ahead of Monday’s rally, the stock had fallen 17% in the past 12 months and 22% in the past three months.
On a call with investors, Mr McCarthy drew parallels between how investors treated Spotify and how they reacted to Netflix before its streaming business grew.
“Streaming was to Netflix what podcasts are to Spotify,” he said, adding that both companies had increased their spending before talking about the benefits of that spending. “The benefits are pretty clear, and the streets will eventually figure it out. “
Spotify has taken steps to develop – and promote – its “two-sided market,” a strategy that envisions being able to charge artists and labels for data and services. In September, the company acquired SoundBetter, a music production service for artists and producers, and last week it introduced Sponsored Recommendations, a cost-per-click advertising product in which labels pay to promote new music to targeted listeners.
Mr McCarthy said the company is already reaping revenue and cost savings from these services and plans to reveal the details in the next quarter.
In total for the third quarter, Spotify posted a profit of 241 million euros, or 36 European cents per share, against 43 million euros, or 23 European cents per share, a year earlier. Revenue climbed 28% to € 1.73 billion, near the top of the range.
Free cash flow, a measure of cash generated by a business and an indicator that many investors see as a performance indicator, was positive for the eighth consecutive quarter at 48 million euros. This compares to 50 million euros in the second quarter and 33 million euros in the third period of 2018.
For the fourth quarter, the company raised its forecast of monthly active users to between 255 and 270 million. He backed up his forecast for premium subscribers of between 120 million and 125 million and a turnover of 1.74 billion euros to 1.94 billion euros.
Dow Jones & Co., publisher of The Wall Street Journal, has a content partnership with Gimlet Media, a unit of Spotify.
Write to Anne Steele at [email protected]
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