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Pandora's (P) Q4 Loss Widens, Revenues Surpass Estimates
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Pandora Media Inc. incurred adjusted loss per share of 21 cents for fourth-quarter 2017, wider than the Zacks Consensus Estimate of a loss of 7 cents per share and the year-ago quarter’s loss of 13 cents.
Revenues increased 0.7% year over year to $395.3 million, which beat the Zacks Consensus Estimate of $375 million.
The company shut down its operations in Australia and New Zealand ("ANZ") and sold its Ticketfly business last year. Excluding revenues from both the businesses, the top line grew 7% year over year.
The company has underperformed the industry in the past year. While the industry gained 19.2%, Pandora lost 62.4% over the same time frame.
Quarter Details
Advertising revenues (75.3% of total revenues) declined 5% from the year-ago quarter to $297.7 million due to a decline in active users. Excluding ANZ, ad revenues dropped 4.4%.
Total listener hours fell 6.5% on a year-over-year basis to 5.03 billion in the quarter and the number of active listeners declined 6% year over year to 74.7 million.
Subscription and other revenues (24.7%) increased 63.2% year over year to $97.8 million on the back of subscriber growth and higher ARPUs.
Average revenue per paid subscriber (ARPU) was $6.08, up 32.8% from the year-ago period, driven by growth in Pandora Premium subscribers.
Licensing costs per paid subscriber (LPU) was $4.41, up 41.3% year over year due to the shift from Pandora Plus to Premium.
Pandora’s gross margin (excluding ANZ and Ticketfly) of 38% expanded 200 basis points (bps) year over year, driven by growth in ad RPM (revenue per thousand listening hours). Ad RPM rose 12.2% from year-ago quarter to $75.65.
The company’s non-GAAP operating expenses declined 6% year over year, driven by fall in sales and marketing as well as general and administrative spend. Pandora’s adjusted EBITDA loss was $5.8 million compared with a loss of $30.4 million in the year-ago quarter.
Pandora Media, Inc. Price, Consensus and EPS Surprise
Pandora exited the quarter with $500.8 million in cash and investments, up from $493.1 million at the end of the prior quarter.
Net cash flow from operating activities was $7.91 million, while net cash outflow was $79,199 in the previous quarter.
Outlook
The company expects the launch of Premium Access in the quarter to aid subscription of Pandora Premium. The company’s expanded partnerships with Sonos, Comcast’s Xfinity X1, Android TV and Amazon Fire TV are also anticipated to drive results. Management expects to invest more in creating new advertising and marketing technologies.
Pandora provided guidance for the first quarter.
For first-quarter 2018, revenues are expected in the range of $295–$305 million, reflecting 5% year-over-year growth rate at the midpoint. Management expects advertising revenues to be weakest in the first quarter and to pick up in the subsequent quarters.
The company expects adjusted EBITDA loss in the range of $90–$100 million.
Long-term earnings growth for NVIDIA, Lam Research and Paycom is projected to be 10.3%, 14.9% and 10%, respectively.
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Pandora's (P) Q4 Loss Widens, Revenues Surpass Estimates
Pandora Media Inc. incurred adjusted loss per share of 21 cents for fourth-quarter 2017, wider than the Zacks Consensus Estimate of a loss of 7 cents per share and the year-ago quarter’s loss of 13 cents.
Revenues increased 0.7% year over year to $395.3 million, which beat the Zacks Consensus Estimate of $375 million.
The company shut down its operations in Australia and New Zealand ("ANZ") and sold its Ticketfly business last year. Excluding revenues from both the businesses, the top line grew 7% year over year.
The company has underperformed the industry in the past year. While the industry gained 19.2%, Pandora lost 62.4% over the same time frame.
Quarter Details
Advertising revenues (75.3% of total revenues) declined 5% from the year-ago quarter to $297.7 million due to a decline in active users. Excluding ANZ, ad revenues dropped 4.4%.
Total listener hours fell 6.5% on a year-over-year basis to 5.03 billion in the quarter and the number of active listeners declined 6% year over year to 74.7 million.
Subscription and other revenues (24.7%) increased 63.2% year over year to $97.8 million on the back of subscriber growth and higher ARPUs.
Average revenue per paid subscriber (ARPU) was $6.08, up 32.8% from the year-ago period, driven by growth in Pandora Premium subscribers.
Licensing costs per paid subscriber (LPU) was $4.41, up 41.3% year over year due to the shift from Pandora Plus to Premium.
Pandora’s gross margin (excluding ANZ and Ticketfly) of 38% expanded 200 basis points (bps) year over year, driven by growth in ad RPM (revenue per thousand listening hours). Ad RPM rose 12.2% from year-ago quarter to $75.65.
The company’s non-GAAP operating expenses declined 6% year over year, driven by fall in sales and marketing as well as general and administrative spend. Pandora’s adjusted EBITDA loss was $5.8 million compared with a loss of $30.4 million in the year-ago quarter.
Pandora Media, Inc. Price, Consensus and EPS Surprise
Pandora Media, Inc. Price, Consensus and EPS Surprise | Pandora Media, Inc. Quote
Balance Sheet & Cash Flow
Pandora exited the quarter with $500.8 million in cash and investments, up from $493.1 million at the end of the prior quarter.
Net cash flow from operating activities was $7.91 million, while net cash outflow was $79,199 in the previous quarter.
Outlook
The company expects the launch of Premium Access in the quarter to aid subscription of Pandora Premium. The company’s expanded partnerships with Sonos, Comcast’s Xfinity X1, Android TV and Amazon Fire TV are also anticipated to drive results. Management expects to invest more in creating new advertising and marketing technologies.
Pandora provided guidance for the first quarter.
For first-quarter 2018, revenues are expected in the range of $295–$305 million, reflecting 5% year-over-year growth rate at the midpoint. Management expects advertising revenues to be weakest in the first quarter and to pick up in the subsequent quarters.
The company expects adjusted EBITDA loss in the range of $90–$100 million.
Zacks Rank & Stocks to Consider
Pandora carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Lam Research Corporation (LRCX - Free Report) and Paycom Software (PAYC - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for NVIDIA, Lam Research and Paycom is projected to be 10.3%, 14.9% and 10%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>