=Spotify (SPOT) reported earnings on Wed 6 Feb 2019 (b/o)

Spotify to acquire Gimlet Media, the producer of podcast content, and Anchor, the company 'leading the market for podcast creation, publishing, and monetization services'; terms not disclosed

• The transactions are expected to close in the first quarter of 2019. Terms of the transactions were not disclosed.

Spotify reports Q4 operating profit, reports revs in-line; guides Q1 and FY19 revs in-line with larger than expected operating losses

• Reports Q4 (Dec) GAAP earnings of 0.36 per share, not comparable to the S&P Capital IQ Consensus of (0.23); revenues rose 30.1% year/year to 1.5 bln vs the 1.5 bln S&P Capital IQ Consensus. Operating income would have been slightly above the high end of Q4 guidance ex-lower social costs due to the decline in the stock; strong gross margin and slower than planned headcount growth were the primary drivers of this performance. Premium revenue was 1,320 million in Q4, up 30% Y/Y. Average revenue per user (ARPU) was 4.89 in Q4. This represents a 7% Y/Y decline, which continues to be driven by product mix (Family Plan and Student Plan as a percentage of the total base), and is increasingly driven by market mix as growth in our relatively lower ARPU markets is outpacing geographies with higher ARPU. Premium Subscribers reached 96 million, up 36% Y/Y, hitting the high end of our guidance range of 93-96 million. Outperformance was largely attributable to better than expected intake from our Google Home promotion and annual Holiday campaign. MAUs grew 29% Y/Y to 207 million, outperforming the high end of our 199-206 million MAU guidance range. This outperformance was broad based, with growth in most markets exceeding our expectations, primarily as a result of improved retention relative to our forecast. Latin America and other emerging regions continue to see especially strong growth. Adj. gross margin 25.8% vs. 24-46% guidance
• Co issues in-line guidance for Q1, sees Q1 revs of EUR 1.35-1.55 bln vs. 1.47 bln S&P Capital IQ Consensus; operating loss EUR 120-50M, bleow estimates; MAU +24-27% to 215-220M, premium subs +29-33% to 90-100M, gross margin 22.5-24.5%
• Co issues in-line guidance for FY19, sees FY19 revs of EUR 6.35-6.80 bln vs. 6.71 bln S&P Capital IQ Consensus; operating loss EUR 200-360M, below estimates; MAU +18-28% to 245-265M, premium subs +21-32% to 117-127M, gross margin 22.0-25.0%
• During Q4, the company repurchased 687,271 shares at a total cost of $87.3 million and an average cost of $127.01 per share. 
• Entered into definitive agreements to acquire two of the leading players in the emerging podcast marketplace. We want to acquire more, and have line-of-sight on total spend of $400-$500M on multiple acquisitions in 2019. Growing podcast listening on Spotify is an important strategy for driving top of funnel growth, increased user engagement, lower churn, faster revenue growth, and higher margins. We intend to lean into this strategy in 2019, both to acquire exclusive content and to increase investment in the production of content in-house.