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Pandora Media, Inc. (P)

F3Q13 Earnings Call

December 4, 2012 5:00 p.m. ET


Dominic Paschel - VP, Corporate Finance and IR

Joe Kennedy - Chairman & Chief Executive Officer

Steve Cakebread - Chief Financial Officer


Doug Anmuth - JPMorgan

Laura Martin - Needham & Company

Rich Tullo - Albert Fried

Nat Schindler - Bank of America Merrill Lynch

Jordan Rohan - Stifel Nicolaus

Rohit Kulkarni - Citi

Martin Pyykkonen - Wedge Partners

Michael Graham - Canaccord

So Young Lee - SunTrust

Jeff Houston - Barrington Research

Peter Stabler - Wells Fargo Securities

John Blackledge - Cowen and Company



Welcome to Pandora’s Third Quarter Fiscal 2013 Financial Results Conference Call. All lines have been placed on mute. There will be a question-and-answer session at the end of the conference. (Operator Instructions) Opening today’s call is Dominic Paschel, Vice President of Pandora.

Dominic Paschel

Good afternoon and welcome to Pandora’s third quarter fiscal 2013 financial results call for the quarter ended October 31, 2012.

Some of our discussions will contain forward-looking statements which may include projected financial results or operating metrics, business strategies, anticipated future products or services, anticipated market demand or opportunities and other forward-looking topics. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual results could differ materially. For a discussion of the risks that could cause our results to differ from today’s discussion, please refer to the documents we filed with the Securities and Exchange Commission.

Also, I would like to remind you that during the course of this conference call, we will discuss non-GAAP measures of our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release and Form 8-K filed earlier this afternoon with the SEC.

Today’s call is available via webcast and a replay will be available for two weeks following the conclusion of the call. To access the press release, supplemental financial information or the webcast replay, please consult the investor relations section of

With that, let me turn the call over to Joe Kennedy, Pandora’s Chairman and CEO.

Joe Kennedy

Thanks, Dom. This quarter exceeded our expectations as Pandora continues to demonstrate and expand its mobile leadership with both listeners and advertisers. For the third quarter, total mobile revenue grew 112% to $73.9 million from $34.9 million in the same quarter last year, as mobile revenue growth outpaced mobile listener hour growth which grew 85% year-over-year. As a result, mobile monetization reached a record high rate of $26.96 of total RPM. Total listener hours for the quarter grew 67% year-over-year, reaching 3.56 billion for the quarter compared to 2.12 billion for the same quarter last year.

Pandora's market share of all U.S. radio as of the October quarter end also reached a record high of 6.55%, up from 4.27% a year ago. We have also now released November listener metrics and reached another new record of 7.09% share this past month, up from 4.32% a year ago. Third quarter results exceeded the high end of our revenue and earnings expectations. Pandora’s total revenue grew 60% to $120 million and non-GAAP EPS was $0.05.

As we mentioned on our last earnings call, we plan to share more detail on RPM on a quarterly basis in order to help investors better understand our monetization efforts on both the desktop as well as mobile and other connected devices. RPM is defined as advertising revenue earned per 1000 ad supported listener hours. Total RPM includes subscription revenue in the numerator and subscription hours in the denominator,

Our mix of listener hours and advertising revenue continues to shift towards mobile. Listening on mobile and other connected devices represented 77% of total listener hours during the third quarter. Web total RPM for the quarter was $56.40 compared to $62.06 in the same quarter last year. Mobile and connected devices total RPM was $26.96 compared to $23.60 last year.

Mobile monetization remains a core focus and we’re pleased with the progress we've made as reflected in our record high mobile RPM. We remain focused on our mobile product as hours and ad revenue continued this shift towards mobile. Our goal is to provide consumers with the best personalized radio experience in the world and center stage for that is the mobile environment.

During the quarter we launched Pandora 4.0, the biggest redesign the Pandora app has undergone on both iOS and Android smartphones since launching on the two major platforms. Pandora 4.0 marks the first time a uniform interface exists across both the iOS and Android platforms and offers listeners a better music experience with expanded functionality, a detailed personal music profile, diverse social sharing capabilities and other innovative features that are available on mobile for the first time.

With Pandora 4.0, we have combined years of innovation and learning into one cross platform app that provides listeners an ideal environment for music discovery, exploration and sharing and ultimately sets a new standard for mobile personalized radio.

For advertisers, Pandora 4.0 also offers new capabilities, including for example, unified sponsorships across all mobile devices. With the new enhanced social features on mobile, we have built sponsorships that offer brands the opportunity to align with consumers positive experience of sharing the music they love. We've also focused on improving how ads are integrated into the core listening experience by making ad transitions more seamless and enhancing ad delivery and performance.

Our already extraordinary mobile phone footprint will be expanding even more. Microsoft has announced that Pandora is coming to Windows phone in calendar year 2013. Pandora has become truly a must have for many smartphone consumers and hence a must have for all smartphone platforms. That said, our focus by no means ends with smartphones.

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