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Pandora's (P) Q1 Loss Narrower Than Expected, Revenues Beat

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Pandora Media reported first-quarter 2018 adjusted loss of 27 cents per share, narrower than the Zacks Consensus Estimate of a loss of 37 cents. However, the figure was wider than the year ago quarter’s loss of 24 cents.

Revenues inched up 1% year over year to $319.2 million, beating the Zacks Consensus Estimate of $304 million.

Notably, Pandora shut down its operations in Australia and New Zealand ("ANZ") and divested its Ticketfly business last year. Excluding revenues from both the businesses, the top line grew 12% year over year.

During the quarter, Pandora announced the acquisition of AdsWizz, which has customers in 39 countries.
 

Pandora Media, Inc. Price, Consensus and EPS Surprise

 

Pandora Media, Inc. Price, Consensus and EPS Surprise | Pandora Media, Inc. Quote

 

Quarter Details

Advertising revenues (67.2% of total revenues) declined 3.9% from the year-ago quarter to $214.6 million.

Total listener hours fell 4.8% on a year-over-year basis to 4.96 billion in the quarter and the number of active listeners was at 72.3 million.

Subscription and other revenues (32.8% of total revenues), excluding ANZ and Ticketfly, surged 61.3% year over year to $104.7 million, on the back of growing Premium subscribers. Total number of subscribers grew by 19% to 5.63 million.

Average revenue per paid subscriber (ARPU) was $6.30, up 32.4% from the year-ago quarter, driven by growth in Pandora Premium subscribers, offsetting the decline in Plus subscribers.
 

 

Licensing costs per paid subscriber (LPU) was $4.65, up 57.1% year over year. This increase was largely due to the shift to the Premium tier from the Plus tier.

Operating Details

Pandora’s non-GAAP gross margin of 23.4% contracted 330 basis points (bps) due to the minimum guarantee for content rights. Ad RPM grew 9.1% year over year to an all time high of $55.52. Ad LPM grew 8.7% to $36.35.

The company’s non-GAAP operating expenses declined 3.9% from the year-ago quarter to $162.3 million. Product development and general & administrative (G&A) expenses declined 1.4% and 26.9% year over year, respectively. However, this was partially offset by 3.2% increase in sales & marketing (S&M) expense.

Pandora’s adjusted EBITDA loss was $73.3 million compared with a loss of $71.3 million in the year-ago quarter.

Balance Sheet & Cash Flow

Pandora exited the quarter with $544.4 million in cash and investments, up from $500.8 million at the end of the previous quarter.

Net cash outflow from operating activities was $35.9 million, compared with net cash inflow of $17.4 million in the previous quarter.

Outlook

Pandora expanded its presence by launching Pandora premium on Amazon Fire TV, Fitbit versa and on the web in the current quarter. Additionally, it also announced a partnership with Linkfire which will help it increase the customer base.

The company is also developing products (In-app voice capability, Podcast Genome and other non-music audio content), to help improve its audience trends that it will launch in the coming quarters.

For second-quarter 2018, revenues are expected in the range of $360-$375 million, reflecting 7% year-over-year growth rate at the mid-point. Management is looking at opportunities to increase its marketing spend to improve its MAU trends.

The company expects adjusted EBITDA loss in the range of $30-$45 million.

Zacks Rank & Stocks to Consider

Pandora carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector are Western Digital (WDC - Free Report) , Lam Research (LRCX - Free Report) and Twitter , 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 Western digital, Lam Research and Twitter is projected to be 19%, 17.7% and 23.1%, respectively.

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