Analysis

Pandora: Net losses grow, CEO leaving, but shares soar nonetheless


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pandoraPersonal radio service Pandora has endured some rocky times since its IPO in 2011, but its latest quarterly financial results are being seen as a bright spot – even though losses increased year-on-year.

Pandora reported revenues of $125.1m for its fiscal Q4, which ended on 31 January 2013. That’s up 54% year-on-year, with advertising accounting for $109m of it.

Pandora’s users listened for 4.05bn hours in its Q4, up 53% year-on-year, and the company ended the year with an 8% share of total US radio listening. Its net loss for the quarter was $14.6m compared to $8.2m a year ago. Separately, Pandora announced that it ended February with 67.7m active listeners.

If losses are increasing, why the positive reaction from investors? Mobile growth.

Right at the start of Pandora’s earnings call with analysts, CEO Joe Kennedy focused on mobile, noting that Pandora’s mobile revenues grew 111% year-on-year to $80.3m in its Q4, outpacing its 70% mobile listener growth in the same period.

Mobile is now 79% of Pandora’s total listener hours, but there’s at least more evidence now that the company’s mobile advertising revenues can pay for all that mobile usage. “For the past two quarters, growth in mobile advertising revenue exceeded growth in mobile listening hours,” as CFO Michael Herring put it.

Pandora still had to pay 61% of its Q4 revenues in ‘content acquisition costs’, which it’s campaigning hard to bring down in the next rate-setting process.

That lobbying will be going ahead without Kennedy though: Pandora’s CEO announced yesterday that he’ll be leaving the company once a successor is found, after nine years as its boss.

“The time is right to begin a process to identify my successor,” said Kennedy. “There is a tremendous market opportunity ahead and I look forward to continuing to work with all the great people at Pandora to keep driving the business forward.”

Stuart Dredge

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