6-K
Spotify Technology S.A. (SPOT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2024
Commission File Number: 001-38438
Spotify Technology S.A.
(Translation of registrant’s name into English)
33 Boulevard Prince Henri
L-1724 Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
INFORMATION CONTAINED IN THIS REPORT ON FORM 6-K
Letter to Shareholders
On November 12, 2024, Spotify Technology S.A. released its results for the quarter ended September 30, 2024 by posting its Q3 2024 Update (“Update”) on its website at investors.spotify.com. A copy of the Update is furnished herewith as Exhibit 99.1 to this Report on Form 6-K.
EXHIBIT INDEX
| Exhibit No. | Description |
|---|---|
| 99.1 | Q3 2024 Update dated November 12, 2024 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Spotify Technology S.A. | ||
|---|---|---|
| Date: November 12, 2024 | By: | /s/ Christian Luiga |
| Name: | Christian Luiga | |
| Title: | Chief Financial Officer |
Exhibit 99.1
Q3 2024 Update November 12th, 2024
Table of Contents Key Highlights Financial Summary MAUs & Subscribers Product & Platform Outlook Financial Statements Executive Summary p.03 p.04 p.06 p.13 p.16 p.19 p.22
Executive Summary USER & FINANCIAL SUMMARY Q3 2023 Q2 2024 Q3 2024 Y/Y Q/Q USERS (M) Total Monthly Active Users ("MAUs") 574 626 640 11% 2% Premium Subscribers 226 246 252 12% 2% Ad-Supported MAUs 361 393 402 11% 2% FINANCIALS (€M) Premium 2,910 3,351 3,516 21% 5% Ad-Supported 447 456 472 6% 4% Total Revenue 3,357 3,807 3,988 19% 5% Gross Profit 885 1,112 1,240 40% 12% Gross Margin 26.4% 29.2% 31.1% -- -- Operating Income 32 266 454 -- -- Operating Margin 1.0% 7.0% 11.4% -- -- Net Cash Flows From Operating Activities 211 492 715 -- -- Free Cash Flow* 216 490 711 -- -- * Constant Currency adjusted measures and Free Cash Flow are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information. The business delivered strong Q3 results, as all of our KPIs met or exceeded guidance and profitability reached record levels. MAU net additions ticked up to 14 million, surpassing guidance by 1 million. Subscriber net additions of 6 million were also ahead by 1 million. Despite greater than anticipated headwinds from unfavorable currency movements, Revenue was in-line and grew 21% Y/Y on a constant currency* basis. Gross Margin of 31.1% was ahead of guidance and up 473 bps Y/Y, while Operating Income of €454 million was better due to Gross Margin strength and lower personnel related and marketing costs. Operating Income was affected by €54 million in Social Charges, which were €39 million above forecast due to share price appreciation during the quarter. Q3 Free Cash Flow* reached €711 million, bringing year-to-date Free Cash Flow generation to €1.4 billion. Overall, we are very pleased with our performance heading into year-end and view the business as well positioned to sustainably grow towards the long-term goals outlined at our 2022 Investor Day.
* Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information. Double digit Y/Y growth in MAUs and Subscribers Launched AI DJ to Spanish- speaking music fans in 18 markets Expanded AI Playlist in Beta to the United States, Canada, Ireland and New Zealand (6 markets in total) Rolled-out comments for podcasts, bringing interactivity to the industry In October, expanded music video availability to 85 additional markets (97 markets in total); incorporated over 200,000 audiobook titles into our Premium offering in France, Belgium, the Netherlands and Luxembourg (10 markets in total) Key Highlights Strong Revenue growth with record high profitability Total Revenue grew 19% Y/Y to €4.0 billion; on a constant currency* basis, Total Revenue grew 21% Y/Y On a constant currency basis, Premium ARPU grew 11% Y/Y (146 bps of acceleration vs. Q2’24) Gross Margin finished at a record high of 31.1% (up 473 bps Y/Y) Operating Income finished at a record high of €454 million (an 11.4% margin), solidly positioning the company to deliver its first full year of Operating Income profitability Expanded user experiences and engagement globally MAUs grew 11% Y/Y to 640 million, reflecting Y/Y and Q/Q growth across all regions Premium Subscribers grew 12% Y/Y to 252 million, reflecting Y/Y and Q/Q growth across all regions
Results Q3 2024 Actuals Guidance Total Revenue (€B) In-Line €4.0 €4.0 Gross Margin Above 31.1% 30.2% Operating Income (€M)* Above €454 €405 Key Highlights: Actuals vs. Guidance Users Results Q3 2024 Actuals Guidance Monthly Active Users (M) Above 640 639 Premium Subscribers (M) Above 252 251 Financials *Includes €54 million of Social Charge accruals which were €39 million higher than forecast / guidance driven by share price appreciation during the quarter.
FINANCIAL SUMMARY
Financial Summary * Free Cash Flow and Constant Currency adjusted measures (FXN) are non-IFRS measures. See “Use of Non-IFRS Measures” and “Reconciliation of IFRS to Non-IFRS Results” for additional information. USER, FINANCIAL & LIQUIDITY SUMMARY Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Y/Y Y/Y FXN* USERS (M) Total Monthly Active Users ("MAUs") 574 602 615 626 640 11% -- Premium Subscribers 226 236 239 246 252 12% -- Ad-Supported MAUs 361 379 388 393 402 11% -- FINANCIALS (€M) Premium 2,910 3,170 3,247 3,351 3,516 21% 24% Ad-Supported 447 501 389 456 472 6% 7% Total Revenue 3,357 3,671 3,636 3,807 3,988 19% 21% Gross Profit 885 980 1,004 1,112 1,240 40% 43% Gross Margin 26.4% 26.7% 27.6% 29.2% 31.1% -- -- Total Operating Expenses 853 1,055 836 846 786 -8% -6% Operating (Loss)/Income 32 (75) 168 266 454 -- -- Operating Margin 1.0% (2.0%) 4.6% 7.0% 11.4% -- -- FREE CASH FLOW & LIQUIDITY (€M, unless otherwise denoted) Net Cash Flows From Operating Activities 211 397 211 492 715 -- -- Free Cash Flow* 216 396 207 490 711 -- -- Cash & Cash Equivalents, Restricted Cash & Short Term Investments (€B) 3.8 4.3 4.7 5.4 6.1 -- --
Revenue Profitability Free Cash Flow & Liquidity Gross Margin was 31.1% in Q3, up 473 bps Y/Y reflecting: Premium gains driven by music and audiobooks; and Ad-Supported gains driven by music and podcasts Other Costs of Revenue favorability benefited both the Premium and Ad-Supported segments Operating Income was €454 million in Q3 and reflected: Lower personnel and related costs and lower marketing spend, partially offset by €54 million in Social Charges At the end of Q3, our workforce consisted of 7,242 full-time employees** globally Revenue of €3,988 million grew 19% Y/Y in Q3 (or 21% Y/Y constant currency*), reflecting: Premium Revenue growth of 21% Y/Y (or 24% Y/Y constant currency*), driven by subscriber gains and ARPU increases; and Ad-Supported Revenue growth of 6% Y/Y (or 7% Y/Y constant currency*) Unfavorable currency movements affected Total Revenue Y/Y growth by ~270 bps vs. guidance for ~100 bps Free Cash Flow* was €711 million in Q3. Our liquidity and balance sheet remained strong, with €6.1 billion in cash and cash equivalents, restricted cash and short term investments. Financial Summary * Constant Currency adjusted measures and Free Cash Flow are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information. ** Includes employees impacted by workforce reductions that remained on garden leave.
Revenue Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information. ARPU means Premium Average Revenue per User. Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter. Improved Premium growth led by ARPU acceleration Premium Revenue grew 21% Y/Y to €3,516 million (or 24% Y/Y constant currency*), reflecting subscriber growth of 12% Y/Y and a Premium ARPU increase of 9% Y/Y to €4.71 (or up 11% Y/Y constant currency* vs. 10% Y/Y in Q2’24). Excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix. Advertising growth in challenging brand environment Ad-Supported Revenue grew 6% Y/Y (or 7% Y/Y constant currency*), reflecting Y/Y growth across all regions. Music advertising was driven by growth in impressions sold, partially offset by softness in pricing. Podcasting advertising was driven by growth in impressions sold, partially offset by softness in pricing. The Spotify Audience Network saw high single digit Q/Q growth in participating publishers.
Premium Gross Margin was 33.5% in Q3, up 436 bps Y/Y. The Y/Y trend was driven by favorability in music, audiobooks and Other Cost of Revenue. Gross Margin Driven by broad-based favorability across Premium and Ad-Supported segments Gross Margin finished at 31.1% in Q3, up 473 bps Y/Y. The Y/Y trend was driven by improvements in our Premium and Ad-Supported segments. Ad-Supported Gross Margin was 13.1% in Q3, up 486 bps Y/Y. The Y/Y trend was driven by favorability in music, podcasts and Other Cost of Revenue.
Operating Expenses declined 8% Y/Y in Q3. Y/Y currency movements contributed ~200 bps of the Operating Expense decline, while Y/Y changes in Social Charge movements elevated Y/Y expense growth by ~800 bps. The remaining 14% Y/Y decline in Operating Expenses reflected a decrease in personnel and related costs and lower marketing spend. As a reminder, Social Charges are payroll taxes associated with employee salaries and benefits in select countries where we operate. Since a portion of these taxes is tied to the intrinsic value of share-based compensation awards, movements in our stock price can lead to fluctuations in the taxes we accrue. This resulted in Social Charges related to share-based compensation of €54 million in the current period, €53 million of which were in Operating Expenses. Prior year period Operating Expenses included €1 million in Social Charges. Operating Expenses Y/Y declines driven by increased focus on efficiency Constant Currency adjusted measures are non-IFRS measures. See "Use of Non-IFRS Measures" and "Reconciliation of IFRS to Non-IFRS Results" for additional information. Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter.
Free Cash Flow Record performance aids balance sheet strength Free Cash Flow was €711 million in Q3, a record high as a result of higher Net Income adjusted for non-cash items and favorability in net working capital. Capital expenditures rose $3 million Y/Y to €4 million. While the magnitude of Free Cash Flow can fluctuate from quarter to quarter based on seasonality and timing, we have averaged €494 million of positive Free Cash Flow on a trailing 12 month basis for the past three years. In Q3, trailing 12 month Free Cash Flow expanded to €1.8 billion. On a cumulative basis, we have generated €3.4 billion of Free Cash Flow since the beginning of 2016, supporting our strong balance sheet and €6.1 billion in cash and cash equivalents, restricted cash and short term investments balance. * Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter. Cume represents cumulative performance since the beginning of 2016.
MAUS & SUBSCRIBERS
Total MAUs grew 11% Y/Y to 640 million, up from 626 million last quarter and 1 million above our guidance. Quarterly performance reflected: Q/Q and Y/Y growth across all regions, led by Rest of World and Latin America Continued recalibration of our marketing activities Monthly Active Users (MAUs)
Our Premium Subscribers grew 12% Y/Y to 252 million, up from 246 million last quarter and 1 million above guidance. Quarterly performance reflected: Q/Q and Y/Y growth across all regions, with outperformance led by Europe and Latin America Continued strong promotional campaign performance due to top-of-funnel health Premium Subscribers
PRODUCT & PLATFORM
Expanding Music Features and Personalization Launched Music Videos in Beta in 85 new markets (97 markets in total), giving Premium Subscribers across the globe the chance to dive into the visual worlds of top artists. After launching in select markets last quarter, expanded AI Playlist in Beta to the United States, Canada, Ireland and New Zealand, enabling Premium Subscribers to create playlists by typing in their own prompts. Expanded AI DJ to Spanish-speaking music fans in 18 markets and expanded Daylist to 14 new languages, opening access to some of our new personalization features to more fans globally.
Growing User Experiences Rolled out comments for podcasts, bringing interactivity into the podcast industry, enabling podcast creators to better connect with and grow their audiences. Launched first-of-its-kind vodcast series “Countdown to” with Jelly Roll and mgk. This series offers fans an intimate, behind-the-scenes look at upcoming album releases, giving exclusive insights as the countdown to launch approaches. Celebrated our first anniversary of Audiobooks in Premium and expanded this offering into non-English speaking countries including France, Belgium, the Netherlands, and Luxembourg with access to 200,000+ titles.
OUTLOOK
Outlook for Q4’24 The following forward-looking statements reflect Spotify’s expectations for Q4 2024 as of November 12, 2024 and are subject to substantial uncertainty. Total MAUs 665 million Implies the addition of approximately 25 million net new MAUs in the quarter Total Premium Subscribers 260 million Implies the addition of approximately 8 million net new subscribers in the quarter Total Revenue €4.1 billion Assumes approximately ~350 bps headwind to growth Y/Y due to foreign exchange rate movements; based on currency rates as of the Q3 close Gross Margin 31.8% Primarily driven by Y/Y favorability across Premium and Ad-Supported segments Operating Income €481 million Incorporates €16 million in Social Charges based on a Q3 close share price of $368.53
Webcast Information We will host a live question and answer session starting at 5:00 p.m. ET today on investors.spotify.com. Daniel Ek, our Founder and CEO, and Christian Luiga, our Chief Financial Officer, will be on hand to answer questions submitted through slido.com using the event code #SpotifyEarningsQ324. Participants also may join using the listen-only conference line by registering through the following site: https://registrations.events/direct/Q4I5705088 We use investors.spotify.com and newsroom.spotify.com websites as well as other social media listed in the “Resources – Social Media” tab of our Investors website to disclose material company information. Use of Non-IFRS Measures To supplement our financial information presented in accordance with IFRS, we use the following non-IFRS financial measures: Revenue excluding foreign exchange effect, Premium revenue excluding foreign exchange effect, Ad-Supported revenue excluding foreign exchange effect, gross profit excluding foreign exchange effect, Operating expense excluding foreign exchange effect, and Free Cash Flow. Management believes that Revenue excluding foreign exchange effect, Premium revenue excluding foreign exchange effect, Ad-Supported revenue excluding foreign exchange effect, gross profit excluding foreign exchange effect, and Operating expense excluding foreign exchange effect, are useful to investors because they present measures that facilitate comparison to our historical performance. However, these should be considered in addition to, not as a substitute for or superior to, Revenue, Premium revenue, Ad-Supported revenue, Gross Profit, Operating expense, or other financial measures prepared in accordance with IFRS. Management believes that Free Cash Flow is useful to investors because it presents a measure that approximates the amount of cash generated that is available to repay debt obligations, to make investments, and for certain other activities that exclude certain infrequently occurring and/or non-cash items. However, Free Cash Flow should be considered in addition to, not as a substitute for or superior to, net cash flows (used in)/from operating activities or other financial measures prepared in accordance with IFRS. For more information on these non-IFRS financial measures, please see “Reconciliation of IFRS to Non-IFRS Results” section below. Forward Looking Statements This shareholder update contains estimates and forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible,” and similar words are intended to identify estimates and forward-looking statements. Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties and are made in light of information currently available to us. Many important factors may adversely affect our results as indicated in forward-looking statements. These factors include, but are not limited to: our ability to attract prospective users, retain existing users, and monetize our products and services; competition for users, user listening time, and advertisers; risks associated with our international operations and our ability to manage our growth and the scope and complexity of our business; risks associated with our new products or services and our emphasis on long-term user engagement over short-term results; our ability to predict, recommend, and play content that our users enjoy; our ability to generate profit or positive cash flow on a sustained basis; our ability to convince advertisers of the benefits of our advertising offerings; our ability to forecast or optimize advertising inventory amid evolving industry trends in digital advertising; our ability to generate revenues from podcasts, audiobooks, and other non-music content; potential disputes or liabilities associated with content made available on our premium service and ad-supported service (collectively, the “Service”); risks relating to acquisitions, investments, and divestitures; our dependence upon third-party licenses for most of the content we stream; our lack of control over third-party content providers who are concentrated and can unilaterally affect our access to content; our ability to comply with complex license agreements; our ability to accurately estimate royalty payments under our license agreements and relevant statutes; the limitations on our operating flexibility due to financial commitments required under certain of our license agreements; our ability to identify the compositions embodied in sound recordings and ownership thereof in order to obtain licenses or comply with existing license agreements; assertions by third parties of infringement or other violations by us of their intellectual property rights; our ability to protect our intellectual property; the dependence of streaming on operating systems, online platforms, hardware, networks, regulations, and standards that we do not control; our ability to maintain the integrity of our technology infrastructure and systems or the security of confidential information; undetected errors, misconfigurations, bugs, or vulnerabilities in our products; interruptions, delays, or discontinuations in service arising from our systems or systems of third parties; changes in laws or regulations affecting us; risks relating to privacy and data security, content moderation, and use of artificial intelligence; our ability to maintain, protect, and enhance our brand; risks associated with increased scrutiny of environmental, social, and governance matters; payment acceptance-related risks; our dependence on key personnel and ability to attract, retain, and motivate highly skilled employees; our ability to access additional capital to support strategic objectives; risks relating to currency exchange rate fluctuations and foreign exchange controls; the impact of economic, social, or political conditions, including inflation, changes in interest rates, geopolitical conflicts in Europe and the Middle East, and related market uncertainty; our ability to accurately estimate user metrics and other estimates; our ability to manage and remediate attempts to manipulate streams and attempts to gain or provide unauthorized access to certain features of our Service; risks related to our indebtedness, including risks related to our Exchangeable Notes; fluctuation of our operating results and fair market value of ordinary shares; tax-related risks; the concentration of voting power among our founders, which limits shareholders’ ability to influence our governance and business; and risks related to our status as a foreign private issuer and a Luxembourg company. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from our estimates and forward-looking statements is included in our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 20-F filed with the SEC on February 8, 2024, as updated by subsequent reports filed with the SEC. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this shareholder update. Rounding Certain monetary amounts, percentages, and other figures included in this update have been subject to rounding adjustments. The sum of individual metrics may not always equal total amounts indicated due to rounding.
FINANCIAL STATEMENTS
Trending Charts MAUs, Ad-Supported Users, Premium Subscribers & Revenue By Segment * Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter.
Trending Charts Gross Profit by Segment, Gross Margin by Segment & Free Cash Flow * Last Twelve Months (LTM) represents annual performance covering the preceding 12 months relative to the last day of the quarter.
Interim condensed consolidated statement of operations (Unaudited) (in € millions, except share and per share data) Three months ended September 30, 2024 June 30, 2024 September 30, 2023 Revenue 3,988 3,807 3,357 Cost of revenue 2,748 2,695 2,472 Gross profit 1,240 1,112 885 Research and development 342 379 369 Sales and marketing 332 343 355 General and administrative 112 124 129 786 846 853 Operating income 454 266 32 Finance income 66 76 55 Finance costs (122) (72) (14) Finance (costs)/income - net (56) 4 41 Income before tax 398 270 73 Income tax expense/(benefit) 98 (4) 8 Net income attributable to owners of the parent 300 274 65 Earnings per share attributable to owners of the parent Basic 1.49 1.37 0.33 Diluted 1.45 1.33 0.33 Basic 201,575,568 199,959,172 194,881,723 Weighted-average ordinary shares outstanding Diluted 207,399,501 206,119,851 198,012,369
September 30, 2024 December 31, 2023 Assets Non-current assets Lease right-of-use assets 235 300 Property and equipment 195 247 Goodwill 1,128 1,137 Intangible assets 58 84 Long term investments 1,604 1,215 Restricted cash and other non-current assets 72 75 Finance lease receivables 64 — Deferred tax assets 194 28 3,550 3,086 Current assets Trade and other receivables 749 858 Income tax receivable 27 20 Short term investments 1,392 1,100 Cash and cash equivalents 4,688 3,114 Other current assets 147 168 7,003 5,260 Total assets 10,553 8,346 Equity and liabilities Equity Share capital — — Other paid in capital 5,825 5,155 Treasury shares (262) (262) Other reserves 2,481 1,812 Accumulated deficit (3,411) (4,182) Equity attributable to owners of the parent 4,633 2,523 Non-current liabilities Exchangeable Notes 1,340 1,203 Lease liabilities 446 493 Accrued expenses and other liabilities 5 26 Provisions 3 3 Deferred tax liabilities 20 8 1,814 1,733 Current liabilities Trade and other payables 1,084 978 Income tax payable 21 12 Deferred revenue 680 622 Accrued expenses and other liabilities 2,275 2,440 Provisions 24 21 Derivative liabilities 22 17 4,106 4,090 Total liabilities 5,920 5,823 Total equity and liabilities 10,553 8,346 Interim condensed consolidated statement of financial position (Unaudited) (in € millions)
September 30, 2024 June 30, 2024 September 30, 2023 Operating activities Net income 300 274 65 Adjustments to reconcile net income to net cash flows Depreciation of property and equipment 21 21 26 Amortization of intangible assets 9 9 10 Impairment charges on real estate assets — 14 — Write-off of content assets — — — Share-based compensation expense 63 81 85 Finance income (66) (76) (55) Finance costs 122 72 14 Income tax expense 98 (4) 8 Other — (1) (1) Changes in working capital: (Increase)/decrease in trade receivables and other assets (4) 40 (69) Increase in trade and other liabilities 86 28 62 Increase in deferred revenue 33 21 56 Increase/(decrease) in provisions — 4 (2) Interest paid on lease liabilities (9) (9) (9) Interest received 77 41 28 Income tax paid (15) (23) (7) Net cash flows from operating activities 715 492 211 Investing activities Payment of deferred consideration pertaining to business combinations — (3) — Purchases of property and equipment (4) (2) (1) Purchases of short term investments (1,439) (1,285) (406) Sales and maturities of short term investments 1,364 1,179 201 Dividends recieved — 18 — Change in restricted cash — — 6 Other (3) 1 (3) Net cash flows used in investing activities (82) (92) (203) Financing activities Proceeds from exercise of stock options 152 240 32 Payments of lease liabilities (18) (24) (13) Payments for employee taxes withheld from restricted stock unit releases (35) (32) (20) Net cash flows from/(used in) financing activities 99 184 (1) Net increase in cash and cash equivalents 732 584 7 Cash and cash equivalents at beginning of the period 4,054 3,451 2,550 Net foreign exchange (losses)/gains on cash and cash equivalents (98) 19 58 Cash and cash equivalents at period end 4,688 4,054 2,615 (Unaudited) (in € millions) Three months ended Interim condensed consolidated statement of cash flows
September 30, 2024 June 30, 2024 September 30, 2023 Basic earnings per share Net income attributable to owners of the parent 300 274 65 Shares used in computation: Weighted-average ordinary shares outstanding 201,575,568 199,959,172 194,881,723 Basic earnings per share attributable to owners of the parent 1.49 1.37 0.33 Diluted earnings per share Net income attributable to owners of the parent 300 274 65 Net income used in the computation of diluted earnings per share 300 274 65 Shares used in computation: Weighted-average ordinary shares outstanding 201,575,568 199,959,172 194,881,723 Stock options 3,989,363 4,216,472 1,191,994 Restricted stock units 1,814,968 1,925,727 1,917,347 Other contingently issuable shares 19,602 18,480 21,305 Diluted weighted-average ordinary shares 207,399,501 206,119,851 198,012,369 Diluted earnings per share attributable to owners of the parent 1.45 1.33 0.33 (Unaudited) (in € millions, except share and per share data) Three months ended Calculation of basic and diluted earnings per share
Three months ended September 30, 2024 September 30, 2023 IFRS revenue 3,988 3,357 Foreign exchange effect on 2024 revenue using 2023 rates (90) Revenue excluding foreign exchange effect 4,078 IFRS revenue year-over-year change % 19% Revenue excluding foreign exchange effect year-over-year change % 21% IFRS Premium revenue 3,516 2,910 Foreign exchange effect on 2024 Premium revenue using 2023 rates (84) Premium revenue excluding foreign exchange effect 3,600 IFRS Premium revenue year-over-year change % 21% Premium revenue excluding foreign exchange effect year-over-year change % 24% IFRS Ad-Supported revenue 472 447 Foreign exchange effect on 2024 Ad-Supported revenue using 2023 rates (6) Ad-Supported revenue excluding foreign exchange effect 478 IFRS Ad-Supported revenue year-over-year change % 6% Ad-Supported revenue excluding foreign exchange effect year-over-year change % 7% Revenue on a constant currency basis (Unaudited) (in € millions, except percentages) Reconciliation of IFRS to non-IFRS results
Operating expenses on a constant currency basis (Unaudited) (in € millions, except percentages) Three months ended September 30, 2024 September 30, 2023 IFRS Research and development expenses 342 369 Foreign exchange effect on 2024 expenses using 2023 rates (6) Research and development expenses excluding foreign exchange effect 348 IFRS Research and development expenses year over year change % (7)% Research and development expenses excluding foreign exchange effect year-over-year change % (6)% Reconciliation of IFRS to non-IFRS results Three months ended September 30, 2024 September 30, 2023 IFRS Sales and marketing expenses 332 355 Foreign exchange effect on 2024 expenses using 2023 rates (6) Sales and marketing expenses excluding foreign exchange effect 338 IFRS Sales and marketing expenses year over year change % (6)% Sales and marketing expenses excluding foreign exchange effect year-over-year change % (5)% Three months ended September 30, 2024 September 30, 2023 IFRS General and administrative expenses 112 129 Foreign exchange effect on 2024 expenses using 2023 rates (1) General and administrative expenses excluding foreign exchange effect 113 IFRS General and administrative expenses year over year change % (13)% General and administrative expenses excluding foreign exchange effect year-over-year change % (12)% Three months ended September 30, 2024 September 30, 2023 IFRS Operating expenses 786 853 Foreign exchange effect on 2024 operating expenses using 2023 rates (13) Operating expenses excluding foreign exchange effect 799 IFRS Operating expenses year over year change % (8)% Operating expenses excluding foreign exchange effect year-over-year change % (6)%
Three months ended March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December March 31, June 30, 31, 2022 2023 2023 September 30, 2023 December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 Net cash flows from/(used in) operating activities 65 54 123 119 37 39 40 (70) 59 13 211 397 211 492 715 Capital expenditures (24) (20) (25) (16) (10) (5) (5) (5) (2) (2) (1) (1) (5) (2) (4) Change in restricted cash — — 1 — (5) 3 — 2 — (2) 6 — 1 — — Free Cash Flow 41 34 99 103 22 37 35 (73) 57 9 216 396 207 490 711 Last twelve months ended December March 31, June 30, September December March 31, June 30, September December March 31, June 30, September 31, 2021 2022 2022 30, 2022 31, 2022 2023 2023 30, 2023 31, 2023 2024 2024 30, 2024 Net cash flows from operating activities 361 333 318 235 46 68 42 213 680 832 1,311 1,815 Capital expenditures (85) (71) (56) (36) (25) (17) (14) (10) (6) (9) (9) (12) Change in restricted cash 1 (4) (1) (2) — 5 — 6 4 5 7 1 Free Cash Flow 277 258 261 197 21 56 28 209 678 828 1,309 1,804 Free Cash Flow (Unaudited) (in € millions) Reconciliation of IFRS to non-IFRS results Free Cash Flow (Unaudited) (in € millions) Twelve months ended December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Net cash flows from operating activities 101 179 344 573 259 361 46 680 Capital expenditures (27) (36) (125) (135) (78) (85) (25) (6) Change in restricted cash (1) (34) (10) 2 2 1 — 4 Free Cash Flow 73 109 209 440 183 277 21 678 Free Cash Flow (Unaudited) (in € millions)
APPENDIX
Social Charges Sensitivity Meaningful movements in our stock price can lead to Social Charge variance Our guidance incorporates the impact of Social Charges, the vast majority of which appear in Operating Expenses. The amount of Social Charges we accrue for and ultimately pay can be volatile, as they are tied to the value of our share price. Since we do not forecast stock price changes in our guidance, meaningful movements in our stock price over the course of a quarter can lead to meaningful changes in Social Charges. As an example, at the Q3 close, our stock price was $368.53. In Q3, a 10% increase or decrease in our stock price compared to the quarter-end price would have an approximate +/- €32M impact on Social Charges.
