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Pandora Media stocks drop despite meeting analysts’ expectations

By Tracy Vu | 11 Feb 2014

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Pandora Media, Inc. (NYSE: P), posted its earnings for the fourth quarter 2013 on Wednesday, Feb. 5, meeting analysts’ expectations for revenue and beating per share expectations.

This earnings report is the last to be reported according to the fiscal year. The company has transitioned to the calendar year to better align its business calendar with the advertising industry’s standard cycle.

The company reported its most profitable quarter since its 2011 public offering, reporting a profit of $8.98 million for the calendar fourth quarter 2013, or 4 cents per share, compared to $1.6 million, or 1 cent per share, for the same period a year ago.

Excluding one-time charges for stock compensation and other items, the company reported earnings per share of 11 cents, compared to six cents per share for the same period a year ago. The company beat analysts’ expectations of 8 cents per share.

Revenues for the fourth quarter were $200.4 million, up 52 percent from the $131.5 million reported for calendar year 2012.

For the 2013 calendar year, the company posted losses of $40.7 million, or 23 cents per share, compared to losses of $35.6 million, or 21 cents per share, for calendar 2012.

Year-end revenues were $637.9 million, up from $410 million reported for calendar 2012.

Excluding charges, the company reported year-end earnings of 6 cents per share compared to losses of 4 cents per share for 2012.

“We closed our first non-GAAP profitable year as a public company with market share and monetization record-high and with our records enhanced as the leading innovator in the space,” Pandora’s CEO Brian McAndrews said on the earnings call with analysts.

Pandora attributed much of its growth to increased listening hours and its focus on monetization, especially as the company continues to pursue its “Pandora Everywhere” strategy in an attempt to reach users across every platform.

This year, the company expanded its reach with integration on the Facebook Timeline, introduction of its app on the Windows phone and Android tablet, and expansion into automobiles. The number of active users rose by 13 percent from the same year-ago period, and listener hours grew 16 percent to 4.54 billion from 3.91 billion the same year-ago period.

McAndrews remarked on a conference call with analysts: “If we make Pandora accessible to wherever users want to listen to their personalized radio, our listener hours increase, driving our market share and attracting more advertisers and partners to our platform.”

Pandora continues to be the leader in Internet radio, holding 72 percent of the market and 8.6 percent of all U.S. radio consumption, which includes broadcast radio.

The company reported an increase in 2013 advertising revenue, with revenues generated per thousand listener hours, or RPM, of $40.95 compared to an RPM of $32.33 the same time last year.

Mobile advertising has grown the most, as more and more users are using Pandora on their phones. The company said mobile advertising RPM has increased 41.8 percent year-over-year, going from $25.52 in December of 2012 to $35.31 in December of 2013. With the announcement of Pandora’s expanded in-car advertising at this year’s Consumer Electronics Show, the company said advertising revenue is expected to grow.

Pandora’s stock took a hit on Feb. 5, the day of the earnings report, declining 9 percent when its earnings were released after the market close. The company’s stock, which was trading at $36.06 dipped to $32.28 at the 4 p.m. close of trading on the New York Stock Exchange.

January’s slowing listening statistics and the company’s forward-looking guidance seemed to be the drivers behind the decline. The company said it anticipated first quarter 2014 revenues of between $170 million and $176 million and per share losses of between 14 and 16 cents

Management forecasts revenues for the 2014 year to be $870 million to $890 million, short of analysts’ forecast of $900 million. The company said it expects earnings to come in at a loss of between 13 and 17 cents.

Since the company reported earnings, Pandora’s stock has ticked up, closing Tuesday at $35.47.

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