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

Zacks Equity Research
Updated

Pandora Media P 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.

Guidance

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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