What Do Q4 2016 Financial Results Mean for the Future of Pandora?

Pandora Media posted narrower-than-expected adjusted loss per share of 27 cents per share for the quarter February 16, 2017

OAKLAND, CALIF.—Pandora Media posted narrower-than-expected adjusted loss per share (including stock-based compensation but excluding one-time items) of 27 cents per share for the fourth quarter of 2016. The Zacks Consensus Estimate was pegged at a loss of 36 cents, according to this article in finance.yahoo.com.

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Revenues increased 16.8 percent year over year to $392.6 million, ahead of the Zacks Consensus Estimate of $375.4 million. Revenue growth in the quarter was driven by higher advertising revenues (79.8 percent of total revenues), which increased 16.5 percent from the year-ago quarter to $313.3 million. Subscription service and other revenues (15.2 percent) increased 5 percent year over year to approximately $59.8 million. Revenues from ticketing services (4.9 percent) grew 91 percent to about $19.4 million, according to the same article.

Total listener hours, however, grew 0.2 percent on a year-over-year basis to 5.38 billion in the fourth quarter even as the number of active listeners fell to 81 million from 81.1 million of the prior-year quarter. Average revenue per paid subscriber (ARPU) was $4.73 in the quarter and licensing costs per paid subscriber (LPU) was $3.12. 

Pandora’s adjusted EBITDA loss was $30.4 million as against a profit of $24.8 million in the year-ago quarter.

The author of the Yahoo article also writes: “Pandora has taken strategic measures to post a turnaround. In the past few months, the company announced Pandora Plus and Pandora Premium services. While Plus is a “one-of-a-kind, ad-free radio experience” available for $4.99 per month, Premium creates a playlist for users based on their playlist history. It will be ad-free and will enable users to save songs for offline listening. Premium carries a price tag of $10. At the end of December, Pandora Plus had 375,000 users.

“Also, as part of its strategy, Pandora acquired companies like Next Big Sound, Rdio and Ticketfly. In addition, it is cutting label deals to reduce dependence on CRB rates and better manage its content costs. It has struck several licensing deals with Sony Music, Warner Brothers, a unit of Time Warner TWX and Universal Music Group. Pandora also announced a 7 percent cut in its workforce. 

“Though these initiatives appear to be headed in the right direction, analysts observe stiffening competition as a very powerful threat. Pandora’s entry has been pretty late in the on–demand music services arena, which boasts big names like Spotify and Apple.”

Techcrunch concludes their similar article on Pandora’s results as thus: “It’s still a tough business to be in and the company recently announced widespread layoffs. Competitor Spotify has also run into challenges, and as we recently reported, it is looking to postpone its IPO plans until it can better improve its financial position. 

Pandora has been subject to frequent acquisition rumors and its shares are up 58 percent in the past year as a result.

Seekingalpha.com published an article about the latest Pandora results as well.  “It has been our view that Pandora's technology has been blown past by names like Spotify and Apple Music. These companies coming to market with on-demand streaming while Pandora was still looping the same 30 songs on your "custom" radio station that you created was the key factor in the company missing the boat entirely. We talked about this in our last article on Pandora, where we reiterated our firmly held view that the company is far past its prime, has missed its niche, and has a better chance of withering away on its own than it does of becoming an acquisition target.”

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