Spotify sees revenue growth easing as gears up for listing

STOCKHOLM (Reuters) - Spotify, the world’s top selling music streaming service, expects revenue to grow 20-30 percent this year as currency swings slow the pace from 2017, it said on Monday, as it gears up for a highly anticipated stock listing next week.

The Swedish company said it expected 2018 revenue of 4.9 billion to 5.3 billion euros ($6.1-$6.8 billion), which would mark a slowdown from the 39 percent growth recorded in 2017 when it inked improved licensing deals with major music labels.

For the first quarter, the company forecast revenue of 1.10-1.15 billion euros, up 22-27 percent from a year ago.

Spotify marks a breakthrough for Europe’s tech start-up scene as the region’s first company in decades to carve out, and so far, ably defend its niche - streaming music - against U.S. giants Apple (AAPL.O), Amazon (AMZN.O) and Google (GOOGL.O).

    Shares of Spotify Technology SA (SPOT.N) are set to begin trading on the New York Stock Exchange on April 3 in an unusual direct listing that gives insiders the option to sell instantly and does without the support of traditional underwriters - a recipe for potentially high volatility in early trading.

Richard Windsor, an independent financial analyst based in Abu Dhabi, said that, at first appearance, the outlook seemed designed to give the company a very low hurdle it can clear easily in its early days as a public company.

“Spotify has chosen a very unorthodox route to go public,” he said. “There is going to be no institutional support for the stock if things go wrong in the early days. The last thing, the absolute last thing this company needs is a bad first quarter.”

The company was valued around $20 billion based on private stock transactions among existing investors and employees in February, according to its filing.

    Loss-making Spotify, which is prioritizing rapid growth over profits, said it expected to have signed up between 73 and 76 million paying subscribers this month, roughly twice as many as closest rival Apple has disclosed. For the full year, it is aiming for 92-96 million premium users, it said.

It expects total monthly active users in March to number 168-171 million, including those who use the service for free in return for watching advertisements, up from 157 million at the end of last year.

Operating losses should narrow during 2018 to between 230 and 330 million euros, the company said, including 35-40 million euros in costs associated with its stock market listing. In 2017, Spotify reported charges on debt financing drove up operating losses to 378 million euros.

The 2018 sales forecast compares with the Stockholm-based company’s long-term target for revenue to grow between 25 and 35 percent, which it spelled out for investors earlier in March.

Gross margins for the first quarter are expected to rise to around 23-24 percent from 21 percent for last year as a whole and possibly reach 23-25 percent in 2018 overall. That remains well off its long-term target of 30 to 35 percent.

($1 = 0.8059 euros)