Spotify Technology SA on Wednesday reported a 31% jump in paid music subscribers to 130 million and a 22% rise in revenue in the first quarter.

Spotify faces stiff competition from Apple and Amazon.com and earns by selling music subscriptions and showing ads to free users.

Beginning in late February, Spotify says it saw some impact to its business. While MAUs and Subs remained in line with the forecast and held steady, in hard hit markets like Italy and Spain, the company saw a notable decline in Daily Active Users and consumption. But over the last few weeks, Spotify says it has seen listening start to rebound, and in many markets, consumption has meaningfully recovered.

In any case, both new and reactivated MAUs grew substantially even during lockdown periods in major markets. Additionally, despite some of the consumption changes, the ratio of Daily Active Users relative to Monthly Active Users was strong in the quarter.

In addition, Spotify's audience through TV and Game Consoles has grown materially, in excess of 50% over the same time period. In fact, for Ad-Supported MAU in the US, game consoles have been a top 2 or 3 platform in terms of consumption for the better part of the month, and connected device usage generally is up more than 40% among Ad-Supported users globally.

Here is what the company said:

"Every day now looks like the weekend. This trend was seen more significantly in Podcasts than in Music, likely due to the fact that Car and Commute use cases have changed quite dramatically. However, listening time around activities like cooking, doing chores, family time, and relaxing at home have each been up double digits over the past few weeks. Audio has also taken on a greater role in managing the stress and anxiety many are feeling in today’s unprecedented environment. Two in five consumers we surveyed in the US said they were listening to music to manage stress more than they typically do, which explains the recent rise we’ve seen in searches for “chill” and “instrumental”. We’ve also seen an uptick in consumption of podcasts related to wellness and meditation over the last few weeks."

For Q1, Spotify reported the following:

• Total MAUs grew 31% Y/Y to 286 million, in line with the company's forecast and expectations.
  
• At the end of Q1’20 Spotify had 130 million Premium Subscribers globally, up 31% Y/Y and ahead of our forecast.
• Churn improved more than 70 bps Y/Y, but ticked up approximately 10 bps sequentially.
• Spotify's total revenue of €1,848 million grew 22% Y/Y in Q1. Consolidated revenue was roughly in line with expectations. Premium revenue grew 23% Y/Y to €1,700 million, and slightly outperformed the company's expectations. Ad-Supported revenues grew 17% Y/Y, but fell short of expectations as a result of impacts from COVID-19, particularly the last three weeks of the quarter.
• For the Premium business, average revenue per user (“ARPU”) of €4.42 in Q1 was down 6% Y/Y (down 7% excluding the impact from FX rates). A significant portion of this decline was driven by the continuation of longer free trials rolling over from Q4 and additional intake during Q1. Excluding the impact of Trials & Campaigns, ARPU would have declined 4% Y/Y as a result of continued mix shifts in product and geography.
• Ad-Supported revenues of €148 million fell short of Spotify's forecast. In March, the company saw deceleration across all sales channels as previously booked business was cancelled or paused, and Programmatic buyers pulled back spend. Ad-Supported Revenue in the last 3 weeks of the quarter was more than 20% below forecasted levels as a result.
• Revenue from Spotify's Direct and Ad Studio channels finished ahead of forecast given pacing in the preceding months. However, revenues from Programmatic were hit particularly hard, finishing the quarter short of expectations.
• Gross Margin finished as 25.5% in Q1 which both exceeded Spotify's expectations and finished at the high end of our guidance range.
• Operating expenses totaled €489 million in Q1, an increase of 16% from 1Q’19 but short of Spotify's plan.

Spotify decided to slow the pace of hiring for the remainder of the year until the company has better visibility into the economic impact of COVID-19.

Q2 2020 Guidance:

• Total MAUs: 289-299 million
• Total Premium Subscribers: 133-138 million
• Total Revenue: €1.75-€1.95 billion
• Assumes approximately 300 bps headwind to growth Y/Y due to movements in foreign exchange rates
• Gross Margin: 23.3-25.3%
• Operating Profit/Loss: €(45)-€(95) million
• Includes expected charitable contributions of roughly €(9) million

Spotify is reiterating Full Year 2020 Guidance with the exception of Revenue:

• Total MAUs: 328-348 million
• Total Premium Subscribers: 143-153 million
• Total Revenue: Reduced to €7.65-€8.05 billion from €8.08-€8.48 billion
• The two biggest drivers of the reduction in revenue guidance relate to changes in foreign exchange rates and changes in our advertising expectations related to
• COVID-19. F/X is the largest impact accounting for almost half of the change
• Gross Margin: 23.2-25.2%
• Operating Profit/Loss: €(150)-€(250) million