Company Update (NYSE:P): Pandora Media Inc Announces Fourth Quarter and Full Year 2015 Financial Results


Pandora Media Inc (NYSE:P), the world’s most powerful music discovery platform, today announced financial results for the fourth quarter and full year ended December 31, 2015.

“In 2015 we demonstrated the power of our core industry-leading internet radio business and made substantial investments and progress toward building the world’s go-to music destination for listeners and artists alike – uniquely unifying the full music experience under one roof, spanning radio, on-demand, and live music,” said Brian McAndrews, CEO of Pandora. “We enter 2016 with an enhanced portfolio of assets, cost certainty and substantial competitive advantages. We’re invested in the long-term and I could not have more conviction about the ability of Pandora to lead the future of music. Given our confidence in our core advertising model, the massive long-term opportunity and the competitive advantages we have built, we believe 2016 is the time to build on this foundation and invest in our many opportunities to fuel revenue acceleration in 2017 and bolster long-term growth prospects.”

Fourth Quarter 2015 Financial Results

Revenue: For the fourth quarter of 2015, consolidated total revenue was $336.2 million, a 25% year-over-year increase. Excluding revenue from ticketing services, total revenue was$326.0 million, an increase of 22% year-over-year. Advertising revenue was $269.0 million, a 22% year-over-year increase. Subscription and other revenue was $57.0 million, a 19% year-over-year increase. Ticketing service revenue for the two month period endingDecember 31, 2015 was $10.2 million, as a result of our acquisition of Ticketfly, which closed on October 31, 2015.

Adjusted EBITDA: For the fourth quarter of 2015, consolidated adjusted EBITDA was$24.8 million, compared to $43.8 million in the same quarter last year. Excluding the impact of Ticketfly, adjusted EBITDA for the fourth quarter of 2015 was $27.3 million, in line with guidance. Consolidated adjusted EBITDA excludes $32.2 million in expense from stock-based compensation, $9.3 million of depreciation and amortization expense, $2.9 million of Ticketfly and Rdio transaction costs, approximately $1.6 million of other expense and approximately $1.8 million of benefit from income taxes.

Cash and Investments: For the fourth quarter of 2015, the Company ended with $416.9 million in cash and investments, compared to $442.6 million at the end of the prior quarter. Cash used in operating activities was $71.0 million for the fourth quarter of 2015, compared to $25.1 million of cash generated by operating activities in the same period of the prior year. The year-over-year decrease in cash generated by operating activities is primarily due to fourth quarter of 2015 payments for royalty settlements entered into in the third quarter of 2015. The Company also paid $246.5 million for the Ticketfly and Rdio acquisitions, offset by proceeds from our convertible debt and capped call transactions which generated net proceeds of $293.3 million.

Full Year 2015 Financial Results

Revenue: For the full year 2015, consolidated total revenue was $1.164 billion, a 26% year-over-year increase on a GAAP basis and a 28% year-over-year increase on a non-GAAP basis1. Excluding revenue from ticketing services, full year 2015 revenue was $1.154 billion or growth of 25% on a GAAP basis and 27% on a non-GAAP basis. Advertising revenue was $933.3 million, a 27% year-over-year increase. Subscription and other revenue was $220.6 million, a 17% year-over-year increase on a GAAP basis and a 27% year-over-year increase on a non-GAAP basis. Ticketing service revenue for the two month period ending December 31, 2015 was $10.2 million as a result of our acquisition of Ticketfly.

Adjusted EBITDA: For the full year 2015, consolidated adjusted EBITDA was $51.7 million, compared to $58.2 million last year. Excluding the impact of Ticketfly, adjusted EBITDA for the full year was $54.2 million, in line with guidance. Consolidated adjusted EBITDA excludes expense from cost of revenue – content acquisition costs due to one-time cumulative charges 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 $111.6 million in expense from stock-based compensation, $24.5 million of depreciation and amortization expense, $3.7 million of Ticketfly and Rdio transaction costs, approximately $1.2 million of other expense and approximately $1.6 million of benefit from income taxes.

Other Business Metrics

Listener Hours: Total listener hours grew 3% to 5.37 billion for the fourth quarter of 2015, compared to 5.20 billion for the same period of the prior year.

Total listener hours grew 5% to 21.11 billion for the full year 2015, compared to 20.03 billion for the same period of the prior year.

Active Listeners: Active listeners were 81.1 million at the end of the fourth quarter of 2015, compared to 81.5 million for the same period of the prior year.

Guidance

Based on information available as of February 11, 2016, the Company is providing the following financial guidance:

First Quarter 2016 Guidance: Revenue is expected to be in the range of $280 million to $290 million. Adjusted EBITDA loss is expected to be in the range of $75 million to $65 million. Adjusted EBITDA excludes forecasted stock-based compensation expense of approximately $38 million and forecasted depreciation and amortization expense of approximately $14 million and a provision for income taxes of approximately $0.5 millionand assumes minimal cash taxes given our net loss position. Basic shares outstanding for the first quarter 2016 are expected to be approximately 227 million. We anticipate a non-GAAP effective tax rate between 30-35% for the first quarter 2016.

Full Year 2016 Guidance: Revenue is expected to be in the range of $1.40 billion to $1.42 billion. Adjusted EBITDA loss is expected to be in the range of $80 million to $60 million. Adjusted EBITDA excludes forecasted stock-based compensation expense of approximately $164 million and forecasted depreciation and amortization expense of approximately $62 million and a provision for income taxes of approximately $2.0 millionand assumes minimal cash taxes given our net loss position. Basic shares outstanding for the full year 2016 are expected to be approximately 231 million. We anticipate a non-GAAP effective tax rate between 30-35% for full year 2016. Original Source)

Shares of Pandora Media are falling nearly 6% in after-hours trading. P has a 1-year high of $22.60 and a 1-year low of $7.72. The stock’s 50-day moving average is $10.48 and its 200-day moving average is $15.14.

On the ratings front, Pandora has been the subject of a number of recent research reports. In a report released yesterday, Cowen analyst John Blackledge downgraded P to Hold, with a price target of $9, which represents a potential upside of 11.1% from where the stock is currently trading. Separately, on February 9, Albert Fried’s Richard Tullo maintained a Buy rating on the stock and has a price target of $16.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, John Blackledge and Richard Tullo have a total average return of -3.9% and 0.0% respectively. Blackledge has a success rate of 41.2% and is ranked #2851 out of 3569 analysts, while Tullo has a success rate of 45.6% and is ranked #1754.

Overall, 14 research analysts have assigned a Hold rating and 10 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $18.36 which is 126.7% above where the stock opened today.

Pandora Media Inc provides internet radio services on smartphones, tablets, traditional computers and car audio systems, as well as other internet-connected devices.