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 July, 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 July 23, 2024, Spotify Technology S.A. released its results for the quarter ended June 30, 2024 by posting its Q2 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 | Q2 2024 Update dated July 23, 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: July 23, 2024 | By: | /s/ Daniel Ek |
| Name: | Daniel Ek | |
| Title: | Chief Executive Officer |
Exhibit 99.1
Q2 2024 Update July 23rd, 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.20 p.23
Executive Summary USER & FINANCIAL SUMMARY Q2 2023 Q1 2024 Q2 2024 Y/Y Q/Q USERS (M) Total Monthly Active Users ("MAUs") 551 615 626 14% 2% Premium Subscribers 220 239 246 12% 3% Ad-Supported MAUs 343 388 393 15% 1% FINANCIALS (€M) Premium 2,773 3,247 3,351 21% 3% Ad-Supported 404 389 456 13% 17% Total Revenue 3,177 3,636 3,807 20% 5% Gross Profit 766 1,004 1,112 45% 11% Gross Margin 24.1% 27.6% 29.2% -- -- Operating (Loss)/Income (247) 168 266 -- -- Operating Margin (7.8%) 4.6% 7.0% -- -- Net Cash Flows From Operating Activities 13 211 492 -- -- Free Cash Flow* 9 207 490 -- -- * 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. Our business continued to perform well in Q2, led by healthy subscriber gains, improved monetization and record profitability. Although we did see another quarter of MAU variability, funnel conversion remained strong, particularly in developed markets where we recently adjusted pricing. As a result, Subscriber net additions of 7 million were 1 million ahead of guidance. Revenue grew 21% Y/Y on a constant currency* basis. Gross Margin of 29.2% was also ahead of guidance and up 510 bps Y/Y, while Operating Income of €266 million was better due to Gross Margin strength and lower marketing and personnel and related costs. Operating Income was impacted by €59 million in Social Charges, which were €46 million higher than forecast due to share price appreciation during the quarter. Q2 Free Cash Flow* reached €490 million. Overall, we are encouraged by the traction we are seeing from our monetization initiatives and remain focused on delivering on the 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 Expanded video podcast catalog to more than 250,000 shows Incorporated over 250,000 audiobook titles into our Premium offering in Canada, Ireland and New Zealand Introduced Basic plan in Australia, the United Kingdom and the United States to give eligible users the option for ad-free music listening without audiobook listening time Introduced Creative Lab, a new in-house ad creative agency and Quick Audio, a generative AI tool for advertisers Key Highlights Strong Revenue growth with record high profitability Total Revenue grew 20% Y/Y to €3.8 billion; on a constant currency* basis, Total Revenue grew 21% Y/Y On a constant currency basis, Premium ARPU grew 10% Y/Y (~300 bps of acceleration vs. Q1’24) Gross Margin finished at a record high of 29.2% (up 510 bps Y/Y) Operating Income finished at a record high of €266 million (a 7.0% margin) Unveiled new experiences and offerings for users and advertisers MAUs grew 14% Y/Y to 626 million, reflecting Y/Y and Q/Q growth across all regions Premium Subscribers grew 12% Y/Y to 246 million, reflecting Y/Y and Q/Q growth across all regions
Results Q2 2024 Actuals Guidance Total Revenue (€B) In-Line €3.8 €3.8 Gross Margin Above 29.2% 28.1% Operating Income (€M)* Above €266 €250 Key Highlights: Actuals vs. Guidance Users Results Q2 2024 Actuals Guidance Monthly Active Users (M) Below 626 631 Premium Subscribers (M) Above 246 245 Financials *Includes €59 million of Social Charge accruals which were €46 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 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Y/Y Y/Y FXN* USERS (M) Total Monthly Active Users ("MAUs") 551 574 602 615 626 14% -- Premium Subscribers 220 226 236 239 246 12% -- Ad-Supported MAUs 343 361 379 388 393 15% -- FINANCIALS (€M) Premium 2,773 2,910 3,170 3,247 3,351 21% 22% Ad-Supported 404 447 501 389 456 13% 12% Total Revenue 3,177 3,357 3,671 3,636 3,807 20% 21% Gross Profit 766 885 980 1,004 1,112 45% 47% Gross Margin 24.1% 26.4% 26.7% 27.6% 29.2% -- -- Total Operating Expenses 1,013 853 1,055 836 846 -16% -17% Operating (Loss)/Income (247) 32 (75) 168 266 -- -- Operating Margin (7.8%) 1.0% (2.0%) 4.6% 7.0% -- -- FREE CASH FLOW & LIQUIDITY (€M, unless otherwise denoted) Net Cash Flows From Operating Activities 13 211 397 211 492 -- -- Free Cash Flow* 9 216 396 207 490 -- -- Cash & Cash Equivalents, Restricted Cash & Short Term Investments (€B) 3.5 3.8 4.3 4.7 5.4 -- --
Revenue Profitability Free Cash Flow & Liquidity Gross Margin was 29.2% in Q2, up 510 bps Y/Y reflecting: Improved music and podcast profitability, Lapping of prior year charges related to efficiency actions and Other Costs of Revenue favorability, partially offset by Audiobooks costs Operating Income was €266 million in Q2 and reflected: Lower personnel and related costs and lower marketing spend, partially offset by €59 million in Social Charges At the end of Q2, our workforce consisted of 7,372 full-time employees** globally Revenue of €3,807 million grew 20% Y/Y in Q2 (or 21% Y/Y constant currency*), reflecting: Premium Revenue growth of 21% Y/Y (or 22% Y/Y constant currency*), driven by subscriber gains and ARPU increases; and Ad-Supported Revenue growth of 13% Y/Y (or 12% Y/Y constant currency*) Free Cash Flow* was €490 million in Q2. Our liquidity and balance sheet remained strong, with €5.4 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 December 2023 workforce reduction 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 €3,351 million (or 22% Y/Y constant currency*), reflecting subscriber growth of 12% Y/Y and a Premium ARPU increase of 8% Y/Y to €4.62 (or up 10% Y/Y constant currency vs. 7% Y/Y in Q1’24). Excluding the impact of FX, ARPU performance was driven by price increase benefits, partially offset by product/market mix. Double-digit advertising growth Ad-Supported revenue grew 13% Y/Y (or 12% Y/Y constant currency*), reflecting double digit Y/Y growth across all regions. Music advertising growth was driven by gains in impressions sold and increased pricing. Podcast advertising revenue growth was driven by growth in impressions sold across Original and Licensed podcasts and the Spotify Audience Network, partially offset by softer pricing. The Spotify Audience Network saw Q/Q growth in participating publishers and advertisers.
Premium Gross Margin was 31.4% in Q2, up 291 bps Y/Y. The Y/Y trend reflects improvements in music profitability and Other Cost of Revenue, partially offset by audiobooks costs. Gross Margin Music and podcast gains along with Other Cost of Revenue favorability aid Y/Y expansion Gross Margin finished at 29.2% in Q2, up 510 bps Y/Y. The Y/Y trend reflects improvement across music and podcasting and reductions in Other Cost of Revenue, partially offset by audiobooks costs. ~160 bps of the Y/Y improvement also reflects a lapping of prior year charges related to efficiency actions. Ad-Supported Gross Margin was 13.4% in Q2, up 1,907 bps Y/Y. ~1,260 bps of the Y/Y improvement reflects a lapping of prior year charges related to efficiency actions. The remaining Y/Y trend reflects improvement in music profitability and podcast trends as well as Other Cost of Revenue favorability.
Operating Expenses declined 16% Y/Y in Q2. Y/Y changes in Social Charge movements elevated Y/Y expense growth by ~400 bps while the lapping of the prior year charges related to efficiency initiatives lowered expense growth by ~700 bps. The remaining 14% Y/Y decline in Operating Expenses reflected a decrease in personnel and related costs and lower marketing spend. Currency movements had a <1% impact on reported Operating Expense growth. 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 €59 million in the current period, €58 million of which were in Operating Expenses. Prior year period Operating Expenses included €25 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 €490 million in Q2, a record high as a result of higher Net Income adjusted for non-cash items and favorability in net working capital. Capital expenditures were flat Y/Y at €2 million. While the magnitude of Free Cash Flow can fluctuate from quarter to quarter based on seasonality and timing, we have averaged over €360 million of positive Free Cash Flow on a trailing 12 month basis for the past three years. In Q2, trailing 12 month Free Cash Flow expanded to €1.3 billion. On a cumulative basis, we have generated over €2.6 billion of Free Cash Flow since the beginning of 2016, supporting our strong balance sheet and €5.4 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 14% Y/Y to 626 million, up from 615 million last quarter, but below our guidance by 5 million (<1%). Quarterly performance reflected: Growth across all regions, with Q/Q net additions led by Rest of World and Europe Continued recalibration of our marketing activities Monthly Active Users (MAUs)
Our Premium Subscribers grew 12% Y/Y to 246 million, up from 239 million last quarter and 1 million above guidance. Quarterly performance reflected: Y/Y and Q/Q growth across all regions, with outperformance led by North America and Europe Strong Q2 promotional campaign intake due to top-of-funnel health Premium Subscribers
PRODUCT & PLATFORM
Growing Global Music and Artist Discovery Predicted Spotify’s 2024 Songs of Summer as the Editorial team highlighted the summer’s defining songs, including Shaboozey’s “A Bar Song (Tipsy)” and Tems’ “Love Me Jeje”. Rolled out AI Playlist in Beta enabling users in the United Kingdom and Australia to create playlists by typing in their own prompts. Unveiled Live Listening Parties with numerous artists including Billie Eilish and Peso Pluma, hosting listening parties for their new albums with their top Spotify fans.
Growing User Experiences and Offerings There are now more than 250,000 video podcast shows on Spotify and more than 170 million users have watched a video podcast on Spotify. Introduced a new Spotify Basic plan in Australia, the United Kingdom and the United States to give eligible users the option for ad-free music listening without audiobook listening time. Announced Countdown Pages for audiobooks, allowing listeners to pre-save audiobooks before a book’s release date and enabling authors, publishers and narrators to promote their upcoming titles ahead of launch.
Expanding Advertising Innovation Introduced Creative Lab, Spotify’s new in-house creative agency that helps partners build brand experiences that leverage Spotify's creative and cultural potential to reach our engaged audience. Announced the forthcoming launch of Quick Audio, a generative AI tool for advertisers to create scripts and voiceovers.
OUTLOOK
Outlook for Q3’24 The following forward-looking statements reflect Spotify’s expectations for Q3 2024 as of July 23, 2024 and are subject to substantial uncertainty. Total MAUs 639 million Implies the addition of approximately 13 million net new MAUs in the quarter Total Premium Subscribers 251 million Implies the addition of approximately 5 million net new subscribers in the quarter Total Revenue €4.0 billion Assumes approximately 100 bps headwind to growth Y/Y due to foreign exchange rate movements; based on currency rates as of the Q2 close Gross Margin 30.2% Primarily driven by Y/Y improvement in music, podcasting and Other Cost of Revenue Operating Income €405 million Incorporates €15 million in Social Charges based on a Q2 close share price of $313.79
Webcast Information We will host a live question and answer session starting at 8:00 a.m. ET today on investors.spotify.com. Daniel Ek, our Founder and CEO, and Ben Kung, our Interim Chief Financial Officer, will be on hand to answer questions submitted through slido.com using the event code #SpotifyEarningsQ224. Participants also may join using the listen-only conference line by registering through the following site: https://registrations.events/direct/Q4I570506 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 June 30, 2024 March 31, 2024 June 30, 2023 Revenue 3,807 3,636 3,177 Cost of revenue 2,695 2,632 2,411 Gross profit 1,112 1,004 766 Research and development 379 389 453 Sales and marketing 343 324 399 General and administrative 124 123 161 846 836 1,013 Operating income/(loss) 266 168 (247) Finance income 76 59 33 Finance costs (72) (53) (27) Finance income/(costs) - net 4 6 6 Income/(loss) before tax 270 174 (241) Income tax (benefit)/expense (4) (23) 61 Net income/(loss) attributable to owners of the parent 274 197 (302) Earnings/(loss) per share attributable to owners of the parent Basic 1.37 0.99 (1.55) Diluted 1.33 0.97 (1.55) Basic 199,959,172 198,025,456 194,420,128 Weighted-average ordinary shares outstanding Diluted 206,119,851 203,773,043 194,420,128
June 30, 2024 December 31, 2023 Assets Non-current assets Lease right-of-use assets 254 300 Property and equipment 211 247 Goodwill 1,167 1,137 Intangible assets 68 84 Long term investments 1,931 1,215 Restricted cash and other non-current assets 70 75 Finance lease receivables 52 — Deferred tax assets 49 28 3,802 3,086 Current assets Trade and other receivables 753 858 Income tax receivable 35 20 Short term investments 1,344 1,100 Cash and cash equivalents 4,054 3,114 Other current assets 158 168 6,344 5,260 Total assets 10,146 8,346 Equity and liabilities Equity Share capital — — Other paid in capital 5,637 5,155 Treasury shares (262) (262) Other reserves 2,595 1,812 Accumulated deficit (3,711) (4,182) Equity attributable to owners of the parent 4,259 2,523 Non-current liabilities Exchangeable Notes 1,323 1,203 Lease liabilities 472 493 Accrued expenses and other liabilities 11 26 Provisions 3 3 Deferred tax liabilities 19 8 1,828 1,733 Current liabilities Trade and other payables 1,091 978 Income tax payable 17 12 Deferred revenue 657 622 Accrued expenses and other liabilities 2,223 2,440 Provisions 24 21 Derivative liabilities 47 17 4,059 4,090 Total liabilities 5,887 5,823 Total equity and liabilities 10,146 8,346 Interim condensed consolidated statement of financial position (Unaudited) (in € millions)
June 30, 2024 March 31, 2024 June 30, 2023 Operating activities Net income/(loss) 274 197 (302) Adjustments to reconcile net income/(loss) to net cash flows Depreciation of property and equipment 21 22 30 Amortization of intangible assets 9 9 14 Impairment charges on real estate assets 14 4 90 Write-off of content assets — — 30 Share-based compensation expense 81 69 97 Finance income (76) (59) (33) Finance costs 72 53 27 Income tax (benefit)/expense (4) (23) 61 Other (1) — 2 Changes in working capital: Decrease in trade receivables and other assets 40 80 (97) Increase/(decrease) in trade and other liabilities 28 (171) 77 Increase in deferred revenue 21 7 18 Increase/(decrease) in provisions 4 — (2) Interest paid on lease liabilities (9) (9) (10) Interest received 41 37 26 Income tax paid (23) (5) (15) Net cash flows from operating activities 492 211 13 Investing activities Payment of deferred consideration pertaining to business combinations (3) (7) — Purchases of property and equipment (2) (5) (2) Purchases of short term investments (1,285) (998) (138) Sales and maturities of short term investments 1,179 900 265 Dividends recieved 18 — — Change in restricted cash — 1 (2) Other 1 (5) (10) Net cash flows used in investing activities (92) (114) 113 Financing activities Proceeds from exercise of stock options 240 242 35 Payments of lease liabilities (24) (15) (27) Lease incentives received — — — Payments for employee taxes withheld from restricted stock unit releases (32) (25) (16) Net cash flows from financing activities 184 202 (8) Net increase in cash and cash equivalents 584 299 118 Cash and cash equivalents at beginning of the period 3,451 3,114 2,443 Net foreign exchange gains/(losses) on cash and cash equivalents 19 38 (11) Cash and cash equivalents at period end 4,054 3,451 2,550 (Unaudited) (in € millions) Three months ended Interim condensed consolidated statement of cash flows
June 30, 2024 March 31, 2024 June 30, 2023 Basic earnings/(loss) per share Net income/(loss) attributable to owners of the parent 274 197 (302) Shares used in computation: Weighted-average ordinary shares outstanding 199,959,172 198,025,456 194,420,128 Basic earnings/(loss) per share attributable to owners of the parent 1.37 0.99 (1.55) Diluted earnings/(loss) per share Net income/(loss) attributable to owners of the parent 274 197 (302) Net income/(loss) used in the computation of diluted earnings/(loss) per share 274 197 (302) Shares used in computation: Weighted-average ordinary shares outstanding 199,959,172 198,025,456 194,420,128 Stock options 4,216,472 3,684,589 — Restricted stock units 1,925,727 2,038,363 — Other contingently issuable shares 18,480 24,635 — Diluted weighted-average ordinary shares 206,119,851 203,773,043 194,420,128 Diluted earnings/(loss) per share attributable to owners of the parent 1.33 0.97 (1.55) (Unaudited) (in € millions, except share and per share data) Three months ended Calculation of basic and diluted earnings/(loss) per share
Three months ended June 30, 2024 June 30, 2023 IFRS revenue 3,807 3,177 Foreign exchange effect on 2024 revenue using 2023 rates (41) Revenue excluding foreign exchange effect 3,848 IFRS revenue year-over-year change % 20% Revenue excluding foreign exchange effect year-over-year change % 21% IFRS Premium revenue 3,351 2,773 Foreign exchange effect on 2024 Premium revenue using 2023 rates (45) Premium revenue excluding foreign exchange effect 3,396 IFRS Premium revenue year-over-year change % 21% Premium revenue excluding foreign exchange effect year-over-year change % 22% IFRS Ad-Supported revenue 456 404 Foreign exchange effect on 2024 Ad-Supported revenue using 2023 rates 4 Ad-Supported revenue excluding foreign exchange effect 452 IFRS Ad-Supported revenue year-over-year change % 13% Ad-Supported revenue excluding foreign exchange effect year-over-year change % 12% 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 June 30, 2024 June 30, 2023 IFRS Research and development expenses 379 453 Foreign exchange effect on 2024 expenses using 2023 rates 3 Research and development expenses excluding foreign exchange effect 376 IFRS Research and development expenses year over year change % (16)% Research and development expenses excluding foreign exchange effect year-over-year change % (17)% Reconciliation of IFRS to non-IFRS results Three months ended June 30, 2024 June 30, 2023 IFRS Sales and marketing expenses 343 399 Foreign exchange effect on 2024 expenses using 2023 rates — Sales and marketing expenses excluding foreign exchange effect 343 IFRS Sales and marketing expenses year over year change % (14)% Sales and marketing expenses excluding foreign exchange effect year-over-year change % (14)% Three months ended June 30, 2024 June 30, 2023 IFRS General and administrative expenses 124 161 Foreign exchange effect on 2024 expenses using 2023 rates — General and administrative expenses excluding foreign exchange effect 124 IFRS General and administrative expenses year over year change % (23)% General and administrative expenses excluding foreign exchange effect year-over-year change % (23)% Three months ended June 30, 2024 June 30, 2023 IFRS Operating expenses 846 1,013 Foreign exchange effect on 2024 operating expenses using 2023 rates 3 Operating expenses excluding foreign exchange effect 843 IFRS Operating expenses year over year change % (16)% Operating expenses excluding foreign exchange effect year-over-year change % (17)%
Free Cash Flow (Unaudited) (in € millions) Three months ended December March 31, June 30, September December March 31, June 30, September December March 31, June 30, September December March 31, June 30, 31, 2020 2021 2021 30, 2021 31, 2021 2022 2022 30, 2022 31, 2022 2023 2023 30, 2023 31, 2023 2024 2024 Net cash flows from/(used in) operating activities 107 65 54 123 119 37 39 40 (70) 59 13 211 397 211 492 Capital expenditures (35) (24) (20) (25) (16) (10) (5) (5) (5) (2) (2) (1) (1) (5) (2) Change in restricted cash 2 — — 1 — (5) 3 — 2 — (2) 6 — 1 — Free Cash Flow 74 41 34 99 103 22 37 35 (73) 57 9 216 396 207 490 Free Cash Flow (Unaudited) (in € millions) Last twelve months ended September December March 31, June 30, September December March 31, June 30, September December March 31, June 30, 30, 2021 31, 2021 2022 2022 30, 2022 31, 2022 2023 2023 30, 2023 31, 2023 2024 2024 Net cash flows from operating activities 349 361 333 318 235 46 68 42 213 680 832 1,311 Capital expenditures (104) (85) (71) (56) (36) (25) (17) (14) (10) (6) (9) (9) Change in restricted cash 3 1 (4) (1) (2) — 5 — 6 4 5 7 Free Cash Flow 248 277 258 261 197 21 56 28 209 678 828 1,309 Reconciliation of IFRS to non-IFRS results 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 Q2 close, our stock price was $313.79. In Q3, a 10% increase or decrease in our stock price compared to the quarter-end price would have an approximate +/- €30M impact on Social Charges.
