Pandora Media Inc (NYSE:P), the world’s most powerful music discovery platform, today announced financial results for the third quarter ended September 30, 2015.
“Pandora exited Q3 with strong financial results. In a quarter where a large new entrant came into the music streaming landscape and over a hundred million dollars in combined marketing was spent across the sector to drive awareness of a multitude of offerings, Pandora more than held its own for users and hours growth,” said Pandora CEO Brian McAndrews. “We aggressively invested to deliver long-term growth and cement Pandora’s leadership in music. Our acquisition of Ticketfly will be truly transformative, extending our long-standing strength in music discovery to the large and fast-growing world of live events. Additionally, with our pre-1972 settlement, we are continuing to strengthen our relationships across the music landscape by resolving an historic source of tension. This progress points to a greater opportunity to work collaboratively toward a bright future for music in a digital era, those who make it, and the fans who love it.”
Third Quarter 2015 Financial Results
Revenue: For the third quarter of 2015, total revenue was $311.6 million, a 30% year-over-year increase. Advertising revenue was $254.7 million, a 31% year-over-year increase. Subscription and other revenue was $56.9 million, a 26% year-over-year increase.
Adjusted EBITDA: For the third quarter of 2015, adjusted EBITDA was $30.6 million, a 27% year-over-year improvement. Adjusted EBITDA excludes expense from cost of revenue – content acquisition costs due to one-time cumulative charges, inclusive of the effect on the current quarter, of $57.9 million for the pre-1972 sound recordings settlement and $23.9 million as a result of management’s decision to forgo the application of the Radio Music Licensing Committee (“RMLC”) publisher royalty rate from June 2013 to September 2015. Adjusted EBITDA also excludes $28.8 million in expense from stock-based compensation, $5.8 million of depreciation and amortization expense, approximately$36,000 of other expense and approximately $32,000 of provision for income taxes.
Cash and Investments: For the third quarter of 2015, the Company ended with $442.6 million in cash and investments, compared to $461.5 million at the end of the prior quarter. Cash provided by operating activities was $11.9 million for the third quarter of 2015, compared to $5.2 million in the same period of the prior year.
Other Business Metrics
Listener Hours: Total listener hours grew 3% to 5.14 billion for the third quarter of 2015, compared to 4.99 billion for the same period of the prior year.
Active Listeners: Active listeners were 78.1 million at the end of the third quarter of 2015, compared to 76.5 million for the same period of the prior year.
Based on information available as of October 22, 2015, the Company is providing the following financial guidance:
Fourth Quarter 2015 Guidance: Revenue is expected to be in the range of $325 million to $330 million. Adjusted EBITDA is expected to be in the range of $25 million to $30 million. Adjusted EBITDA excludes forecasted stock-based compensation expense of approximately $32 million and forecasted depreciation and amortization expense of approximately $6 million and assumes minimal provision for income taxes given our net loss position. Diluted shares outstanding for the fourth quarter 2015 are expected to be approximately 224 million.
Full Year 2015 Guidance: Revenue is expected to be in the range of $1.153 billion to $1.158 billion. Adjusted EBITDA is expected to be in the range of $51 million to $56 million. Adjusted EBITDA excludes forecasted stock-based compensation expense of approximately $111 million and forecasted depreciation and amortization expense of approximately $22 million and assumes minimal provision for income taxes given our net loss position. Diluted shares outstanding for the full year 2015 are expected to be approximately 221 million.
The above guidance does not include Ticketfly’s financial results for the fourth quarter 2015 or full year 2015. In addition, the above share amounts do not include the approximately 11.6 million shares of Pandora common stock that will be issued upon the closing of the Ticketfly transaction.
Starting in 2015, the Company is adjusting non-GAAP net income by considering the income tax effects of its non-GAAP adjustments. Prior to 2015, the Company’s non-GAAP effective tax rate was minimal. The Company expects that its non-GAAP effective tax rate will be minimal in periods that result in a non-GAAP net loss. The Company is currently forecasting a non-GAAP effective tax rate of approximately 35% to 40% for the full year 2015. The Company does not expect to pay significant cash income taxes for the foreseeable future due to its net operating loss position. (Original Source)
Shares of Pandora Media are dropping 14.64% to $16.38 in after-hours trading. P has a 1-year high of $23.67 and a 1-year low of $13.30. The stock’s 50-day moving average is $19.91 and its 200-day moving average is $17.86.
On the ratings front, Pandora Media has been the subject of a number of recent research reports. In a report released yesterday, RBC analyst Mark Mahaney reiterated a Buy rating on P, with a price target of $24, which implies an upside of 24.6% from current levels. Separately, on October 20, Stifel Nicolaus’ John Egbert maintained a Buy rating on the stock and has a price target of $30.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Mark Mahaney and John Egbert have a total average return of 21.5% and 0.4% respectively. Mahaney has a success rate of 64.4% and is ranked #6 out of 3795 analysts, while Egbert has a success rate of 40.0% and is ranked #2446.
The street is mostly Bullish on P stock. Out of 17 analysts who cover the stock, 12 suggest a Buy rating , 4 suggest a Hold and one recommends to Sell the stock. The 12-month average price target assigned to the stock is $23.22, which represents a potential upside of 20.6% from where the stock is currently trading.
Pandora Media Inc provides internet radio services on smartphones, tablets, traditional computers and car audio systems, as well as other internet-connected devices.