Pandora (NYSE: P), the go-to music source for fans and artists, today announced financial results for the third quarter ended September 30, 2016.
“Pandora’s transformation continues with the launch of compelling new products and partnerships that open up significant revenue streams,” said Tim Westergren, Founder and CEO of Pandora. “Only Pandora is uniquely positioned to create deeply personalized and easy to use listening experiences that delight and engage listeners. A great product that’s effectively monetized is the cornerstone of success in digital music streaming.”
Third Quarter 2016 Financial Results
Revenue: For the third quarter of 2016, total consolidated revenue was $351.9 million, a 13% year-over-year increase. Advertising revenue was $273.7 million, a 7% year-over-year increase. Subscription and other revenue was $56.1 million, a 1% year-over-year decrease. Ticketing service revenue was $22.1 million, an approximate 25% year-over-year increase1.
GAAP Net Loss and Adjusted EBITDA: For the third quarter of 2016, GAAP net loss was $61.5 million compared to a net loss of $85.9 million in the same quarter last year, and adjusted EBITDA was a loss of $6.6 million, compared to a profit of $31.5 million in the same quarter last year. For the third quarter of 2016, adjusted EBITDA differs from GAAP net loss in that it excludes $32.8 million in expense from stock-based compensation, $15.8 million of depreciation and amortization expense, $5.9 million of other expense and $0.4 million of provision for income taxes2.
Cash and Investments: For the third quarter of 2016, the Company ended with $264.0 million in cash and investments, compared to $311.3 million at the end of the prior quarter. During the third quarter of 2016, we borrowed $90.0 million under our credit facility to enhance our working capital position. In addition, in September 2016, we signed direct licensing agreements for recorded music with major and independent labels, distributors and publishers. The majority of these licensing agreements include minimum guarantee payments, some of which are paid in advance. In connection with these agreements, prepaid content acquisition costs increased $93.3 million in the third quarter of 2016.
Cash used in operating activities was $120.5 million for the third quarter of 2016, compared to $11.9 million of cash provided by operating activities in the same period of the prior year.
Other Business Metrics
Listener Hours: Total listener hours grew 5% to 5.40 billion for the third quarter of 2016, compared to 5.14 billion for the same period of the prior year.
Active Listeners: Active listeners were 77.9 million at the end of the third quarter of 2016, compared to 78.1 million for the same period of the prior year.
Based on information available as of October 25, 2016, the Company is providing the following financial guidance:
Fourth Quarter 2016 Guidance: Revenue is expected to be in the range of $362 million to $374 million. Adjusted EBITDA loss is expected to be in the range of $51 million to $39 million. Adjusted EBITDA differs from GAAP net loss in that it excludes forecasted stock-based compensation expense of approximately $35 million, depreciation and amortization expense of approximately $18 million, a provision for income taxes of approximately $0.4 million and other expense, net, of $6 million and assumes minimal cash taxes given our net loss position. Basic shares outstanding for the fourth quarter 2016 are expected to be approximately 234 million.
Full Year 2016 Guidance: Revenue is expected to be in the range of $1.354 billion to $1.366 billion. Adjusted EBITDA loss is expected to be in the range of $140 million to $128 million. Adjusted EBITDA differs from GAAP net loss in that it excludes forecasted stock-based compensation expense of approximately $139 million, depreciation and amortization expense of approximately $62 million, a benefit from income taxes of approximately $0.3 million and other expense, net, of $24 million and assumes minimal cash taxes given our net loss position. Basic shares outstanding for the full year 2016 are expected to be approximately 231 million. We anticipate a non-GAAP effective tax rate between 30-35% for full year 2016.
Third Quarter 2016 Financial Results to be Presented During Analyst Day Event: Pandora will host an analyst day event and video webcast today starting at 1:30 p.m. PT/4:30 p.m. ET to provide financial analysts an opportunity to hear from members of the Pandora leadership team and discuss Pandora’s strategic vision in light of the recently announced product transformation and landmark label deals. The live video webcast of the event will be available on the Pandora Investor Relations website at http://investor.pandora.com. A live domestic dial‐in is available at (877) 355‐0067 or internationally at (614) 999‐7532, using passcode 93896108. A domestic replay will be available via video webcast replay until December 2, 2016 at http://investor.pandora.com.