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Press release from PR Newswire

Pandora Reports 3Q13 Financial Results

Tuesday, December 04, 2012

Pandora Reports 3Q13 Financial Results16:03 EST Tuesday, December 04, 2012- 3Q13 total revenue of $120.0 million grew 60% year-over-year - 3Q13 total mobile revenue of $73.9 million grew 112% year-over-year - 3Q13 total listener hours of 3.56 billion grew 67% year-over-year - Active users reach 59.2 million growing 47% year-over-yearOAKLAND, Calif., Dec. 4, 2012 /PRNewswire/ -- Pandora (NYSE: P), the leading Internet radio service, today announced financial results for the third quarter of fiscal 2013.  (Logo: http://photos.prnewswire.com/prnh/20110615/SF20192LOGO)"This quarter exceeded our expectations as we monetized mobile at record levels and grew total mobile revenue 112%," stated Joe Kennedy, Chairman & CEO of Pandora.  "During the quarter we launched Pandora 4.0, the biggest redesign on the iOS and Android platforms ever, bringing new, innovative and enhanced functionality to mobile devices for the first time for both users and advertisers."Fiscal 3Q13 Financial Results Total Revenue: For the third quarter of fiscal 2013, total revenue was $120.0 million, a 60% year-over-year increase.  Advertising revenue was $106.3 million, a 61% year-over-year increase.  Subscription and other revenue was $13.7 million, a 52% year-over-year increase.  Earnings per Share:  For the third quarter of fiscal 2013, GAAP basic and diluted earnings per share were $0.01. Non-GAAP basic and diluted earnings per share were $0.05, excluding approximately $7.1 million in stock-based compensation. Basic earnings per share was based on 169.4 million weighted average shares outstanding and diluted earnings per share was based on 190.3 million weighted average shares outstanding. Cash: For the third quarter of fiscal 2013, the company ended with $80.5 million in cash, cash equivalents and short-term investments, compared with $82.3 million at the end of the prior quarter.  For the third quarter of fiscal 2013, Pandora's cash used in operating activities was approximately $878 thousand compared to cash provided by operating activities of $111 thousand in the year-ago quarter.  Other Business MetricsTotal listener hours: Total listener hours grew 67% to 3.56 billion for the third quarter of fiscal 2013, compared to 2.12 billion for the third quarter of fiscal 2012.  GuidanceBased on information available as of December 4, 2012, the company is providing financial guidance for the fourth quarter and fiscal year 2013 as follows:  4Q13 Guidance:  Revenue is expected to be in the range of $120 million to $123 million.  Non-GAAP loss per share is expected to be between ($0.06) and ($0.09).  Non-GAAP loss per share excludes stock-based compensation expense, assumes minimal tax expense given our net operating loss position, and 171 million weighted average basic shares outstanding for the fourth quarter fiscal 2013.Fiscal 2013 Guidance:  Revenue is expected to be in the range of $422 million to $425 million.  Non-GAAP loss per share is expected to be between ($0.09) and ($0.12).  Non-GAAP loss per share excludes stock-based compensation expense, assumes minimal tax expense given our net operating loss position, and 168 million weighted average basic shares outstanding for fiscal 2013.3Q13 Financial Results Conference Call: Pandora will host a conference call today at 2 p.m. PT/ 5 p.m. ET to discuss the third quarter of fiscal 2013 financial results with the investment community. A live webcast of the event will be available on the Pandora Investor Relations website at http://investor.pandora.com. A live domestic dial-in is available at (877) 355-0067 or internationally at (443) 853-1239. A domestic replay will be available at (855) 859-2056 or internationally at (404) 537-3406, using passcode 35603295, and available via webcast until December 18, 2012. About PandoraPandora gives people music they love anytime, anywhere, through connected devices. (OK, we've added comedy as well so we're also up for playing some jokes you'll love.) Personalized stations launch instantly with the input of a single "seed" - a favorite artist, song or genre. The Music Genome Project®, a deeply detailed hand-built musical taxonomy, powers the personalization of Pandora® internet radio by using musicological "DNA" and constant listener feedback to craft personalized stations from a growing collection of hundreds of thousands of recordings. Tens of millions of people in the U.S. turn on Pandora to hear music they love.  www.pandora.com"Safe harbor" Statement:This press release contains forward-looking statements within the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding expected revenue and non-GAAP EPS. These forward-looking statements are based on Pandora's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: our operation in an emerging market and our relatively new and evolving business model; our ability to increase our listener base and listener hours; our ability to attract and retain advertisers; our ability to generate additional revenue on a cost-effective basis; competitive factors; our ability to continue operating under existing laws and licensing regimes; our ability to establish and maintain relationships with makers of mobile devices, consumer electronic products and automobiles; our ability to manage our growth; our ability to continue to innovate and keep pace with changes in technology and our competitors; risks related to service interruptions or security breaches; and general economic conditions worldwide. Further information on these factors and other risks that may affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our Annual Report on Form 10-K and our Form 10-Q for the current quarter, particularly under the heading "Risk Factors."The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in the company's most recent reports on Form 10-K and Form 10-Q, each as they may be amended from time to time.  The company's results of operations for the current quarter are not necessarily indicative of the company's operating results for any future periods.These documents are available online from the SEC or on the SEC Filings section of the Investor Relations section of our website at investor.pandora.com. Information on our website is not part of this release. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events.Non-GAAP Financial MeasuresTo supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP measures of financial performance: non-GAAP net income (loss) and non-GAAP diluted earnings (loss) per share. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings press releases. These non-GAAP financial measures differ from GAAP in that they exclude stock-based compensation, which consists of expenses for stock options and other awards under our equity incentive plans. The non-GAAP net income (loss) and non-GAAP historical diluted earnings (loss) per share measures also exclude the applicable change in fair value of certain warrants issued by us. The change in fair value of certain warrants issued by us is included within other expense, and stock-based compensation is included in the following cost and expense line items of our GAAP presentation:Cost of revenue - other Product development Marketing and sales General and administrativeAlthough stock-based compensation is an expense for us and is viewed as a form of compensation, management excludes stock-based compensation from our non-GAAP measures for purposes of evaluating our continuing operating performance primarily because it is a non-cash expense not believed by management to be reflective of our core business, ongoing operating results or future outlook. Furthermore, determining the fair value of both stock-based compensation and stock-derived warrants involves a high degree of estimation and judgment such that the expense recorded may bear little resemblance to the actual value realized upon the future exercise or termination of the related stock-based instruments. In addition, the value of stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control. We believe these non-GAAP financial measures serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and, when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance.In the financial tables below, we provide a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this earnings release.We estimate revenue generated through both our mobile and other connected devices platform as well as our traditional computer platform. While we believe that such disaggregated revenue estimates provide directional insight for evaluating our efforts to monetize our service through these platforms, we do not validate such disaggregated revenue to the level of financial statement reporting. Such metrics should be seen as indicative only and as management's best estimate.Pandora Media, Inc.Condensed Consolidated  Statements of Operations(In thousands, except per share amounts)(Unaudited)Three months endedNine months endedOctober 31,October 31,2011201220112012Revenue:     Advertising$     65,985$     106,258$     167,904$      266,239     Subscription services and other9,02313,74725,11035,817Total revenue75,008120,005193,014302,056Costs and expenses:     Cost of revenue - Content acquisition costs37,65865,713100,539182,053     Cost of revenue - Other (1)6,2608,33816,08022,769     Product development (1)3,6854,3719,84212,965     Marketing and sales  (1)16,62826,71444,09473,631     General and administrative  (1)10,02112,70025,37433,914Total costs and expenses74,252117,836195,929325,332Income (loss) from operations7562,169(2,915)(23,276)Other income (expense):     Interest income 28193176     Interest expense(123)(137)(493)(397)     Other income (expense), net-1(4,485)1Income (loss) before provision for income taxes6612,052(7,862)(23,596)Income tax benefit (expense)(23)-(66)5Net income (loss)$          638$         2,052$       (7,928)$      (23,591)Accretion of redeemable convertible preferred stock--(110)-Increase in cumulative dividends payable upon conversion or liquidation of redeemable convertible preferred stock--(3,648)-Net income (loss) attributable to common stockholders$          638$         2,052$     (11,686)$      (23,591)Basic net income (loss) per share attributable to common stockholders $         0.00$           0.01$         (0.13)$          (0.14)Weighted-average shares used in computing basic per share amounts161,288169,39186,976167,423Diluted net income (loss) per share attributable to common stockholders$         0.00$           0.01$         (0.13)$          (0.14)Weighted-average number of shares used in computing diluted per share amounts191,014190,27886,976167,423(1) Amounts include stock-based compensation expenses as follows: 2011201220112012Cost of revenue - Other$          184$            333$            396$             900Product development4911,1801,0813,351Marketing and sales1,4633,1862,9658,854General and administrative5372,3741,2975,505$       2,675$         7,073$         5,739$        18,610Pandora Media, Inc.Condensed Consolidated Balance Sheets(In thousands, except share and per share amounts)(Unaudited)As of January 31,As of October 31,20122012AssetsCurrent assets:Cash and cash equivalents$                      44,126$                        57,725Short-term investments46,45522,778Accounts receivable, net66,73897,864Prepaid expenses and other current assets2,8064,409Total current assets160,125182,776Property and equipment, net15,57616,387Other assets2,3142,612Total assets$                    178,015$                      201,775Liabilities and stockholders' equityCurrent liabilities:Accounts payable$                        2,053$                          3,615Accrued liabilities3,8386,234Accrued royalties33,82244,430Deferred revenue19,23226,976Accrued compensation11,96211,719Total current liabilities70,90792,974Other long-term liabilities2,5684,064Total liabilities73,47597,038Stockholders' equity:     Common stock1617Additional paid-in capital205,955229,742Accumulated deficit(101,426)(125,017)Accumulated other comprehensive loss(5)(5)Total stockholders' equity104,540104,737Total liabilities and stockholders' equity $                    178,015$                      201,775Pandora Media, Inc.Condensed Consolidated Statements of Cash Flows  (In thousands)  (Unaudited)Three months endedNine months endedOctober 31,October 31,2011201220112012Operating ActivitiesNet income (loss)$          638$       2,052$     (7,928)$    (23,591)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization1,2721,8112,9875,147Loss on disposition of assets283-28323Stock-based compensation2,6757,0735,73918,610Remeasurement of preferred stock warrants--4,499-Amortization of premium on investments-87-279Amortization of debt issuance costs and debt discount6666124198Changes in assets and liabilities:Accounts receivable(8,812)(17,477)(18,035)(31,126)Prepaid expenses and other assets1,671(1,360)711(2,036)Accounts payable and accrued liabilities1,3972,8152594,532Accrued royalties1,1084,0777,54210,608Accrued compensation 584(2,853)4,404(243)Deferred revenue(771)2,8312,5227,744   Reimbursement of cost of leasehold improvements--3751,243Net cash provided by (used in) operating activities111(878)3,482(8,612)Investing ActivitiesPurchases of property and equipment(3,653)(2,094)(9,024)(5,981)Purchases of short-term investments(36,934)(15,031)(36,934)(50,124)Maturities of short-term investments-24,900-73,460Net cash provided by (used in) investing activities(40,587)7,775(45,958)17,355Financing activitiesRepayments of debt--(7,596)-Proceeds from exercise of preferred stock warrants--165-Proceeds from initial public offering, net of offering costs(754)-90,912-Proceeds from issuance of common stock 1741,4988285,065Tax withholdings related to net share settlements of restricted stock units -(208)-(208)Payment of dividends to preferred stockholders at initial public offering(375)-(31,005)-Net cash provided by (used in) financing activities(955)1,29053,3044,857Effects of foreign currency translation on cash and cash equivalents-(1)-(1)Net increase (decrease) in cash and cash equivalents(41,431)8,18610,82813,599Cash and cash equivalents at beginning of period95,30749,53943,04844,126Cash and cash equivalents at end of period$     53,876$     57,725$     53,876$     57,725Pandora Media, Inc.Reconciliation of GAAP to Non-GAAP Measures(In thousands, except per share data)(Unaudited)Three months endedNine months endedOctober 31,October 31,2011201220112012Net loss and net loss per share reconciliationsGAAP net income (loss)$         638$        2,052$       (7,928)$     (23,591)Stock-based compensation2,6757,0735,73918,610Change in the fair value of the warrant--4,499-Non-GAAP net income (loss)$    3,313$       9,125$       2,310$     (4,981)Non-GAAP net income (loss)  per common share - basic $        0.02$          0.05$          0.01$         (0.03)Weighted-average common shares outstanding - basic*161,288169,391157,007167,423Non-GAAP net income (loss) per common share - diluted$        0.02$          0.05$          0.01$         (0.03)Weighted-average common shares outstanding - diluted*191,014190,278186,508167,423Costs and expenses reconciliation:GAAP costs and expenses$    74,252$    117,836$    195,929$    325,332Stock-based compensation (2,675)(7,073)(5,739)(18,610)Non-GAAP costs and expenses $  71,577$  110,763$  190,190$  306,722Loss from operations reconciliation:GAAP income (loss) from operations$         756$        2,169$       (2,915)$     (23,276)Stock-based compensation in cost of revenue 184333396900Stock-based compensation in product development4911,1801,0813,351Stock-based compensation in marketing and sales1,4633,1862,9658,854Stock-based compensation in general and administrative 5372,3741,2975,505Non-GAAP  income (loss) from operations $    3,431$       9,242$       2,824$     (4,666)*Weighted-average common shares for the nine months ended October 31, 2011 have been computed to give effect to the conversion of the convertible preferred stock and warrants into common stock as though the conversion had occurred at the beginning of the period.SOURCE PandoraFor further information: Dominic Paschel, Corporate Finance & Investor Relations, (510) 842-6960, investor@pandora.com, or Eric Brown, Pandora Communications and Public Relations, (510) 842-6960, press@pandora.com