Pandora's (P) Q2 Earnings Lag Estimates, Revenues Beat

Pandora MediaP reported second-quarter 2018 adjusted loss of 15 cents per share, wider than the Zacks Consensus Estimate of a loss of 14 cents. However, the figure was narrower than the year-ago quarter's loss of 21 cents.

Revenues, excluding Australia and New Zealand ("ANZ") and Ticketfly, increased 11.7% year over year to $384.8 million, beating the Zacks Consensus Estimate of $374 million.

Quarter Details

Advertising revenues (70.5% of total revenues) declined 1.9% from the year-ago quarter to $271.1 million.

Total listener hours fell 2.5% on a year-over-year basis to 5.09 billion in the quarter and the number of active listeners was 71.4 million.

Subscription and other revenues (29.6% of total revenues), excluding ANZ and Ticketfly, surged 66.7% year over year to $113.7 million on the back of growing Premium subscribers and higher average revenue per paid subscribers (ARPUs). Total subscribers increased 23% to 5.98 million.

In the reported quarter, ARPU was $6.52, up 35.3% from the year-ago quarter, driven by growth in Pandora Premium subscribers.

Licensing costs per paid subscriber (LPU) was $4.78, up 53.7% year over year. This increase was largely due to the shift to Premium tier from Plus tier.

Operating Details

Pandora's non-GAAP gross margin of 33.3% contracted 340 basis points (bps) due to minimum guarantee for content rights. Ad RPM grew 3.9% year over year to $68.75. Ad LPM grew 2.9% to $36.87.

Reported operating expenses, excluding ANZ and Ticketfly, declined 8.2% from the year-ago quarter to $219.3 million. sales & marketing (S&M) expense declined 6.2% year over year to $40.4 million. However, product development and general & administrative (G&A) increased 12.6% and 17% respectively year over year.

Pandora's adjusted EBITDA loss was $34.6 million compared with a loss of $41.9 million in the year-ago quarter.

Pandora Media, Inc. Price, Consensus and EPS Surprise

Pandora Media, Inc. Price, Consensus and EPS Surprise | Pandora Media, Inc. Quote

Balance Sheet & Cash Flow

Pandora exited the quarter with $420.8 million in cash and investments, down from $544.4 million at the end of the previous quarter due to the acquisition of AdsWizz.

In the reported quarter, net cash outflow from operating activities was $49.4 million against net cash inflow of $17.4 million in the previous quarter.


For third-quarter 2018, management expects revenues in the range of $390-$405 million. Adjusted EBITDA is expected to be in the range of a loss of $10-25 million. Management expects shares outstanding to be approximately 269 million.

Zacks Rank & Stocks to Consider

Pandora currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Science Applications International Corporation SAIC , Seagate Technology STX and Vishay Intertechnology VSH , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Long-term earnings growth for Science Applications, Seagate and Vishay is projected to be 5%, 18.9% and 8%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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