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Pandora Q1 earnings: Stock leaps as annual growth in key metrics exceeds forecast


Yesterday Pandora delivered one of its happiest quarterly reports in a couple of years, revealing forecast-beating annual growth in revenue and monetization efficiency. Pandora stock was rocketing up an eye-popping 25% in afternoon trading today.

“We’re entering a new era of audio. […] Right now, there have never been more ways to deliver audio content. There have never been more kinds of audio content. And that content has never been more personalized, and the market for it has never been bigger.” –Roger Lynch, CEO Pandora

Key financials included:

  • Q1 Revenue was $319.2 million, growing 12% year-over-year excluding ANZ & Ticketfly
  • Q1 Subscription revenue was $104.7 million, growing 63% year-over-year excluding ANZ & Ticketfly
  • Ad RPM hit an all-time Q1 high of $55.52, growing 9% year-over-year
  • Total subscribers were 5.63 million, growing 19% year-over-year
  • Q1 Revenue and Adjusted EBITDA significantly exceeded our forecast

Of interest in the revenue numbers above is the breakout of subscription revenue and ad-supported revenue: Subscription revenue is about one-third of total, yet serves only about 8% of total monthly listeners. (Pandora claims 72.3 monthly uniques, and 5.63 subscribers to its two paid plans.)

Pandora’s legacy business is radio-style streaming supported by a nationwide ad sales and delivery enterprise that explicitly competes with AM/FM for listening and revenue share. The company’s leaders continue to advocate for a wide-open opportunity on the ad-supported side.

Pandora entered the on-demand music category one year ago with Pandora Premium, a fully interactive in-cloud music collection service that competes with Spotify Premium, Apple Music, iHeartRadio All Access, and others. Pandora Premium ($10/month) is a step up in cost and features from Pandora Plus ($5/month), which mainly removes commercials. Spotify and iHeartRadio also provide free ad-supported listening, but Apple Music (and Deezer and Napster) do not.

“The acquisition of AdsWizz will be a big step and signals a clear acceleration of our ad-tech capabilities, allowing us to transition from the largest digital audio ad publisher to the largest digital audio ad platform” –Roger Lynch

During the call, Pandora spoke early and often about the acquisition of ad-tech company AdsWizz. But investors knew about that already, and the stock spike is no doubt a result of the company exceeding earlier guidance. To put the stock bounce in broader context, the chart below is a five-year view of P stock price, harking back to 2014 when the competitive landscape for streaming audio was substantially different.

 

Brad Hill

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