) reported loss of 21 cents per share in the first quarter of
2014, wider than the Zacks Consensus Estimate by a couple of
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Revenues jumped 53.9% year over year to $180.1 million and
comfortably beat the Zacks Consensus Estimate of $176.0 million.
The year-over-year increase was on account of higher advertising
revenues (72.4% of revenues), which increased 45.4% from the
year-ago quarter to $140.6 million. Subscription service and
other revenues (27.6% of revenues) improved 191.6% year over year
to $53.7 million.
Total advertising revenue per thousand listener hours (Ad RPMs)
from mobile and other connected devices increased 34.0% from the
year-ago quarter. Mobile advertising RPMs reached $29.46 in the
first quarter increasing 44.0% from $20.43 in the year-ago
quarter, despite intensifying competition from
Total listener hours grew 12.0% on a year-over-year basis to 4.8
billion in the first quarter in comparison to 4.26 billion in the
same period last year.
Active users increased 8% year over year from 69.5 million to
75.3 million in the first quarter of 2014. In March, Pandora
experienced its first-ever week with over 25 million active
listeners every weekday, which it considers a milestone.
Pandora's share of the total U.S. radio listening market
increased from 8.1% a year ago to 9.1% at the end of March.
However, as more and more people try
) iTunes Radio, we believe that Pandora will lose some market
share going forward.
Operating expenses (including stock-based compensation), as a
percentage of revenues, surged 590 basis points (bps) to 55.5% in
the quarter. The significant year-over-year increase was
primarily due to higher sales & marketing (up 180 bps),
product development (up 90 bps) and general and administrative
expenses (up 320 bps) in the quarter.
Pandora reported operating loss of $28.9 million compared with a
loss of $35.8 million in the year-ago quarter. Net loss
(including stock based compensation) was $42.9 million compared
with net loss of $36.8 million in the year-ago quarter.
The company exited the quarter with $445.9 million in cash and
investments compared with $450.1 million in the prior quarter.
During the quarter, Pandora declared its intention of
discontinuing the monthly disclosure of key audience metrics. The
final monthly release will be provided in June covering the key
metrics for May 2014. However, the company's usual practice of
providing listener metrics on a quarterly basis will remain
Pandora increased headcount, primarily in sales and engineering,
by 47.0% on a year over year basis to 1206 employees in the first
For the second quarter of 2014, revenues are expected to be in
the range of $213.0 million to $218.0 million. The Zacks
Consensus Estimate is pegged at $220.0 million. The company
expects to report results in the range of a breakeven to earnings
of 3 cents per share.
For 2014, revenues are expected to be in the range of $880.0
million to $900.0 million, up 37.0% from the prior range of
$870.0 million to $890.0 million. The Zacks Consensus Estimate
stands at $895.0 million. Earnings are expected to be in
the range of 13-17 cents per share for the full year.
Pandora reported mixed first quarter results. Improving
monetization and strong mobile growth are positives. Pandora
raised additional capital from its stock offering in September,
which it expects to use for domestic and international expansion
as well as for strategic acquisitions. This is expected to boost
the top-line going forward.
However, rising costs related to licensing will remain a headwind
in the near term. Moreover, higher operating expenses are
expected to hurt profitability in the near term.
Nevertheless, we believe that Pandora's popular service, driven
by its effective discovery engine and a well-established
infrastructure place it well to compete against the likes of
Apple, Spotify and
Currently, Pandora has a Zacks Rank #2 (Buy).