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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): October 25, 2016
 

 
Pandora Media, Inc.
(Exact name of registrant as specified in its charter)
 

 
Delaware
 
001-35198
 
94-3352630
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
2101 Webster Street, Suite 1650
Oakland, CA 94612
(Address of principal executive offices, including zip code)
 
(510) 451-4100
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name or former address, if changed since last report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o                     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o                     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 





Item 2.02                   Results of Operations and Financial Condition.
 
On October 25, 2016, Pandora Media, Inc. (the "Company") issued a press release announcing its financial results for the three month period ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this current report and is incorporated herein by reference.
 
The information furnished on this Form 8-K, including the exhibit attached, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item  9.01                 Financial Statements and Exhibits.
 
(d)                 Exhibits.

Exhibit
No.
 
Exhibit Description
 
 
 
99.1

 
Press Release dated October 25, 2016






SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
 
 
PANDORA MEDIA, INC.
 
 
 
 
Dated: October 25, 2016
 
By:
/s/ Michael S. Herring
 
 
 
Michael S. Herring
President and Chief Financial Officer







EXHIBIT INDEX
 
Exhibit
No.
 
Exhibit Description
 
 
 
99.1
 
Press Release dated October 25, 2016



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
 36386440_pandoralogoa01.jpg

PANDORA REPORTS Q3 2016 FINANCIAL RESULTS

Q3 2016 total consolidated revenue was $351.9 million, growing 13% year-over-year
Q3 2016 advertising revenue was $273.7 million, growing 7% year-over-year
Q3 2016 ticketing service revenue was $22.1 million, growing approximately 25% year-over-year1 
Q3 2016 total listener hours were 5.40 billion, growing 5% year-over-year

OAKLAND, Calif. - October 25, 2016 - 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.


_________________________________________________________
1Ticketfly’s results are included in Pandora’s consolidated financial statements subsequent to the acquisition date of October 31, 2015. Related year-over-year growth rates are calculated based on Ticketfly’s pre-acquisition results.
2Adjusted EBITDA for the third quarter of 2015 also excluded expense from cost of revenue - content acquisition costs due to one-time cumulative charges of $57.9 million for the pre-1972 sound recordings settlement and $23.9 million as a result of management’s decision to forgo the application of the Radio Music Licensing Committee (“RMLC”) publisher royalty rate from June 2013 to September 2015 and Ticketfly and Rdio transaction costs.

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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.

Guidance

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.

ABOUT PANDORA 
Pandora is the world’s most powerful music discovery platform - a place where artists find their fans and listeners find music they love. We are driven by a single purpose: unleashing the infinite power of music by connecting artists and fans, whether through earbuds, car speakers, live on stage or anywhere fans want to experience it. Our team of highly trained musicologists analyze hundreds of attributes for each recording which powers our proprietary Music Genome Project®, delivering billions of hours of personalized music tailored to the tastes of each music listener, full of discovery, making artist/fan connections at unprecedented scale. Founded by musicians, Pandora empowers artists with valuable data and tools to help grow their careers and connect with their fans.

www.pandora.com | @pandoramusic |www.pandoraforbrands.com | @PandoraBrands | amp.pandora.com

"Safe harbor" Statement:
This press release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding expected revenue and adjusted EBITDA. These forward-looking statements are based on Pandora's current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: our operation in an emerging market and our relatively new and evolving business model; our ability to estimate revenue reserves; our ability to increase our listener base and

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listener hours; our ability to attract and retain advertisers; our ability to generate additional revenue on a cost-effective basis; competitive factors; our ability to continue operating under existing laws and licensing regimes; our ability to enter into and maintain commercially viable direct licenses with record labels for the right to reproduce and publicly perform sound recordings on our service; our ability to establish and maintain relationships with makers of mobile devices, consumer electronic products and automobiles; our ability to manage our growth and geographic expansion; our ability to continue to innovate and keep pace with changes in technology and our competitors; our ability to expand our operations to delivery of non-music content; our ability to protect our intellectual property; risks related to service interruptions or security breaches; and general economic conditions worldwide. Further information on these factors and other risks that may affect the business are included in filings with the Securities and Exchange Commission (SEC) from time to time, including under the heading “Risk Factors” in our Annual Report on Form 10-K for the current period.

The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's most recent reports on Form 10-K and Form 10-Q, each as they may be amended from time to time. The Company's results of operations for the current period are not necessarily indicative of the Company's operating results for any future periods.

These documents are available online from the SEC or on the SEC Filings section of the Investor Relations section of our website at investor.pandora.com. Information on our website is not part of this release. All forward-looking statements in this press release are based on information currently available to the Company, which assumes no obligation to update these forward-looking statements in light of new information or future events.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company uses the following non-GAAP measures of financial performance: non-GAAP gross profit, non-GAAP net income (loss), non-GAAP basic EPS, non-GAAP diluted EPS and adjusted EBITDA. The presentation of this additional financial information is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. These non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. In addition, these non-GAAP financial measures may be different from the non-GAAP financial measures used by other companies. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. Management compensates for these limitations by reconciling these non-GAAP financial measures to the most comparable GAAP financial measures within our earnings releases.

Non-GAAP gross profit, non-GAAP net income (loss), non-GAAP basic EPS and non-GAAP diluted EPS differ from GAAP in that they exclude stock-based compensation expense, intangible amortization expense, amortization of non-recoupable ticketing contract advances, transaction costs from acquisitions and one-time cumulative charges to cost of revenue - content acquisition costs that are not directly reflective of our core business or operating results. The income tax effects of non-GAAP net income (loss) before provision for income taxes and the related non-GAAP adjustments have been reflected in non-GAAP net income (loss), non-GAAP basic EPS and non-GAAP diluted EPS.

Cost of Revenue - Content Acquisition Costs Charges: Cost of revenue - content acquisition costs included two one-time cumulative charges in the third quarter of 2015. The first charge related to the settlement of an outstanding lawsuit related to sound recordings recorded prior to February 15, 1972. On April 17, 2014, UMG Recordings, Inc., Sony Music Entertainment, Capitol Records, LLC, Warner Music Group Corp. and ABKCO Music and Records, Inc. filed suit against Pandora Media Inc. in the Supreme Court of the State of New York. The complaint claimed common law copyright infringement and unfair competition arising from allegations that Pandora owed royalties for the public performance of sound recordings recorded prior to February 15, 1972. In October 2015, as part of our strategy to strengthen our partnership with the music industry, the parties reached an agreement whereby we agreed to pay the plaintiffs a total of $90 million in exchange for the dismissal of the lawsuit, a release of all claims and a covenant not to sue for our use of pre-1972 sound recordings extending to December 31, 2016. The first installment

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of $60 million was paid in October 2015 and the remaining four installments of $7.5 million were paid in December 2015, March 2016, June 2016 and September 2016. Pursuant to this settlement, which covers approximately 90% of total pre-1972 spins on our service, we recorded a one-time adjustment of $57.9 million to cost of revenue - content acquisition costs in the third quarter of 2015 related to pre-1972 spins played through September 30, 2015.

The second charge related to management’s decision to forgo the application of the RMLC publisher royalty rate from June 2013 to September 2015. In June 2013, we entered into an agreement to purchase the assets of KXMZ-FM and in June 2015 the Federal Communications Commission ("FCC") approved the transfer of the FCC licenses and the acquisition was completed. The agreement to purchase the assets of KXMZ allowed us to qualify for the RMLC royalty rate of 1.7% of revenue for a license to the ASCAP and BMI repertoires, before certain deductions. As a result, we recorded cost of revenue - content acquisition costs at the RMLC royalty rate starting in June 2013, rather than the rates that were set in district court proceedings in March 2014 for ASCAP and in May 2015 for BMI. In the third quarter of 2015, despite confidence in our legal position that we were entitled to the RMLC royalty rate starting in June 2013, and as part of our strategy to strengthen our partnership with the music industry, management decided to forgo the application of the RMLC royalty rate from June 2013 through September 2015. As a result, we recorded a one-time cumulative charge to increase cost of revenue - content acquisition costs of $23.9 million in the third quarter of 2015 related to spins played from June 2013 through September 30, 2015.

For the third quarter of 2015, management considered its operating results without these two one-time cumulative charges to cost of revenue - content acquisition costs when evaluating its ongoing non-GAAP and adjusted EBITDA performance because these charges reflect aggregate charges to royalty rates across several prior years of activity, and are not directly reflective of our business or operating results.

Ticketfly and Rdio Transaction Costs: consists of transaction costs paid in connection with the acquisitions of Ticketfly and certain assets of Rdio, which were completed in the fourth quarter of 2015. Ticketfly and Rdio transaction costs are included in the general and administrative line item of our GAAP presentation. For the third quarter of 2015, management considered its operating results without these charges when evaluating its ongoing non-GAAP and adjusted EBITDA performance because these charges are not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Stock-based Compensation Expense: consists of expenses for stock options and other awards under our equity incentive plans. Stock-based compensation is included in the following cost and expense line items of our GAAP presentation: cost of revenue - other, cost of revenue - ticketing service, product development, sales and marketing and general and administrative.

Although stock-based compensation is an expense for the Company and is viewed as a form of compensation, management excludes stock-based compensation from our non-GAAP measures for purposes of evaluating our continuing operating performance primarily because it is a non-cash expense not believed by management to be reflective of our core business, ongoing operating results or future outlook. In addition, the value of stock-based instruments is determined using formulas that incorporate variables, such as market volatility, that are beyond our control.

Income Tax Effects of Non-GAAP Adjustments: The Company adjusts non-GAAP net income (loss) by considering the income tax effects of its non-GAAP net income (loss) before provision for income taxes and the related non-GAAP adjustments. The Company is currently forecasting a non-GAAP effective tax rate of approximately 30% to 35% for the full year 2016. The Company does not expect to pay significant cash income taxes for the foreseeable future due to its net operating loss position.

Adjusted EBITDA

Adjusted EBITDA excludes stock-based compensation expense, benefit from (provision for) income taxes, depreciation and intangible amortization expense, amortization of non-recoupable ticketing contract advances, other income (expense), transaction costs from acquisitions and one-time cumulative charges to cost of revenue - content acquisition costs that are not directly reflective of our core business or operating results.

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Benefit from (Provision for) Income Taxes: consists of expense recognized related to U.S. and foreign income taxes. The Company considers its adjusted EBITDA results without these charges when evaluating its ongoing performance because it is not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Depreciation and Intangible Amortization Expense: consists of non-cash charges that can be affected by the timing and magnitude of business combinations and asset purchases. Depreciation is included in the following cost and expense line items of our GAAP presentation: cost of revenue - other, cost of revenue - ticketing service, product development, sales and marketing and general and administrative. Intangible amortization expense is included in the following cost and expense line items of our GAAP presentation: cost of revenue - ticketing service, product development, sales and marketing and general and administrative. Depreciation and intangible amortization expense also consists of non-cash amortization of non-recoupable amounts paid in advance to the Company’s clients pursuant to ticketing agreements. Amortization of non-recoupable ticketing contract advances is included in the sales and marketing line of our GAAP presentation. Management considers its operating results without intangible amortization expense when evaluating its ongoing non-GAAP performance and without depreciation and intangible amortization expense when evaluating its ongoing adjusted EBITDA performance because these charges are non-cash expenses that can be affected by the timing and magnitude of business combinations, asset purchases and new client agreements and may not be reflective of our core business, ongoing operating results or future outlook.

Management believes these non-GAAP financial measures serve as useful metrics for our management and investors because they enable a better understanding of the long-term performance of our core business and facilitate comparisons of our operating results over multiple periods and to those of peer companies, and, when taken together with the corresponding GAAP financial measures and our reconciliations, enhance investors' overall understanding of our current financial performance.

In the financial tables below, the Company provides a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this earnings release.

###
Contacts:

Palmira Farrow
Corporate Finance & Investor Relations
investor@pandora.com
(510) 842-6960

Stephanie Barnes
Pandora Corporate Communications
press@pandora.com
(510) 842-6996


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Pandora Media, Inc.
Condensed Consolidated  Statements of Operations
(in thousands, except per share amounts)
(unaudited)
 
 
Three months ended 
 September 30,
 
Nine months ended 
 September 30,
 
2015
 
2016
 
2015
 
2016
Revenue
 

 
 

 
 
 
 
Advertising
$
254,656

 
$
273,716

 
$
664,316

 
$
759,150

Subscription and other
56,906

 
56,100

 
163,570

 
165,957

Ticketing service

 
22,085

 

 
67,121

Total revenue
311,562

 
351,901

 
827,886

 
992,228

 
 
 
 
 
 
 
 
Cost of revenue
 

 
 

 
 
 
 
Cost of revenue - Content acquisition costs
211,272

 
174,334

 
467,429

 
522,231

Cost of revenue - Other (1)
21,414

 
25,556

 
57,690

 
71,388

Cost of revenue - Ticketing service (1)

 
15,318

 

 
45,223

Total cost of revenue
232,686

 
215,208

 
525,119

 
638,842

Gross profit
78,876

 
136,693

 
302,767

 
353,386

 
 
 
 
 
 
 
 
Operating expenses
 

 
 
 
 
 
 
Product development (1)
21,849

 
33,657

 
56,466

 
103,311

Sales and marketing (1)
107,286

 
116,475

 
285,595

 
357,909

General and administrative (1)
35,603

 
41,768

 
111,169

 
128,626

Total operating expenses
164,738

 
191,900

 
453,230

 
589,846

Loss from operations
(85,862
)
 
(55,207
)
 
(150,463
)
 
(236,460
)
 
 
 
 
 
 
 
 
Interest expense
(131
)
 
(6,494
)
 
(386
)
 
(18,916
)
Other income, net
95

 
579

 
803

 
1,696

Total other income (expense), net
(36
)
 
(5,915
)
 
417

 
(17,220
)
Loss before benefit from (provision for) income taxes
(85,898
)
 
(61,122
)
 
(150,046
)
 
(253,680
)
 
 
 
 
 
 
 
 
Benefit from (provision for) income taxes
(32
)
 
(412
)
 
(206
)
 
711

Net loss
$
(85,930
)
 
$
(61,534
)
 
$
(150,252
)
 
$
(252,969
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.40
)
 
$
(0.27
)
 
$
(0.71
)
 
$
(1.10
)
Weighted-average basic and diluted shares
212,760

 
232,139

 
211,487

 
229,524

 
(1) Includes stock-based compensation expense as follows:
 
 
Three months ended 
 September 30,
 
Nine months ended 
 September 30,
 
2015
 
2016
 
2015
 
2016
Cost of revenue - Other
$
1,427

 
$
1,538

 
$
4,040

 
$
4,559

Cost of revenue - Ticketing service

 
27

 

 
154

Product development
6,189

 
7,347

 
16,148

 
23,091

Sales and marketing
13,732

 
14,932

 
38,403

 
43,673

General and administrative
7,446

 
8,910

 
20,882

 
32,364

Total stock-based compensation expense
$
28,794

 
$
32,754

 
$
79,473

 
$
103,841





Pandora Media, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
  
 
As of December 31,
 
As of September 30,
 
2015
 
2016
 
(audited)
 
(unaudited)
Assets
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
334,667

 
$
207,695

Short-term investments
35,844

 
50,052

Accounts receivable, net
277,075

 
282,802

Prepaid content acquisition costs
2,099

 
102,623

Prepaid expenses and other current assets
33,821

 
34,166

Total current assets
683,506

 
677,338

 
 
 
 
Long-term investments
46,369

 
6,273

Property and equipment, net
66,370

 
118,453

Goodwill
303,875

 
306,706

Intangible assets, net
110,745

 
95,565

Other long-term assets
29,792

 
32,528

Total assets
$
1,240,657

 
$
1,236,863

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 
 
 
Accounts payable
$
17,897

 
$
13,983

Accrued liabilities
37,185

 
33,968

Accrued content acquisition costs
97,390

 
106,275

Accrued compensation
43,788

 
52,089

Deferred revenue
19,939

 
31,971

Other current liabilities
15,632

 
20,739

Total current liabilities
231,831

 
259,025

 
 
 
 
Long-term debt, net
234,577

 
337,429

Other long-term liabilities
30,862

 
33,402

Total liabilities
497,270

 
629,856

 
 
 
 
Stockholders’ equity
 

 
 

Common stock
23

 
23

Additional paid-in capital
1,110,539

 
1,227,197

Accumulated deficit
(366,658
)
 
(619,627
)
Accumulated other comprehensive loss
(517
)
 
(586
)
Total stockholders’ equity
743,387

 
607,007

Total liabilities and stockholders’ equity
$
1,240,657

 
$
1,236,863






Pandora Media, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Three months ended 
 September 30,
 
Nine months ended 
 September 30,
 
2015
 
2016
 
2015
 
2016
Operating Activities
 

 
 

 
 
 
 
Net loss
$
(85,930
)
 
$
(61,534
)
 
$
(150,252
)
 
$
(252,969
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
 
 
 
 
 

 
 

Depreciation and amortization
5,829

 
15,843

 
15,194

 
43,480

Stock-based compensation
28,794

 
32,754

 
79,473

 
103,841

Amortization of premium on investments, net
483

 
92

 
1,712

 
339

Other operating activities
666

 
1,410

 
1,610

 
2,884

Amortization of debt discount

 
4,649

 

 
13,587

Changes in operating assets and liabilities
 
 
 
 
 

 
 
Accounts receivable
(29,673
)
 
(20,477
)
 
(45,796
)
 
(8,338
)
Prepaid content acquisition costs
2,280

 
(93,253
)
 
(167
)
 
(100,524
)
Prepaid expenses and other assets
(6,740
)
 
(3,786
)
 
(6,397
)
 
(12,655
)
Accounts payable, accrued and other current liabilities
17,642

 
12,419

 
29,601

 
(4,990
)
Accrued content acquisition costs
81,726

 
(17,302
)
 
89,423

 
8,875

Accrued compensation
(1,564
)
 
4,873

 
4,333

 
10,370

Other long-term liabilities
3,096

 
597

 
1,500

 
598

Deferred revenue
(4,996
)
 
3,220

 
7,689

 
12,032

Reimbursement of cost of leasehold improvements
265

 

 
1,014

 
4,397

Net cash provided by (used in) operating activities
11,878

 
(120,495
)
 
28,937

 
(179,073
)
 
 
 
 
 
 
 
 
Investing Activities
 

 
 

 
 
 
 
Purchases of property and equipment
(6,758
)
 
(11,836
)
 
(21,336
)
 
(46,400
)
Internal-use software costs
(2,628
)
 
(8,029
)
 
(5,997
)
 
(22,339
)
Changes in restricted cash

 

 

 
(250
)
Purchases of investments
(27,180
)
 
(1,322
)
 
(138,721
)
 
(12,413
)
Proceeds from maturities of investments
47,680

 
14,809

 
179,799

 
34,816

Proceeds from sales of investments
37,655

 
3,007

 
41,317

 
3,507

Payments related to acquisition, net of cash acquired
(22,828
)
 

 
(23,028
)
 
(676
)
Net cash provided by (used in) investing activities
25,941

 
(3,371
)
 
32,034

 
(43,755
)
 
 
 
 
 
 
 
 
Financing activities
 

 
 

 
 
 
 
Borrowings under debt agreements

 
90,000

 

 
90,000

Proceeds from employee stock purchase plan
1,814

 
2,558

 
5,089

 
6,395

Proceeds from exercise of stock options
856

 
1,138

 
3,718

 
3,011

Payment of debt issuance costs

 

 

 
(32
)
Tax payments from net share settlements of restricted stock units
(1,388
)
 
(365
)
 
(2,295
)
 
(3,126
)
Net cash provided by financing activities
1,282

 
93,331

 
6,512

 
96,248

 
 
 
 
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(223
)
 
(137
)
 
(459
)
 
(392
)
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
38,878

 
(30,672
)
 
67,024

 
(126,972
)
Cash and cash equivalents at beginning of period
204,103

 
238,367

 
175,957

 
334,667

Cash and cash equivalents at end of period
$
242,981

 
$
207,695

 
$
242,981

 
$
207,695






Pandora Media, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(unaudited)
 
 
Three months ended 
 September 30,
 
Nine months ended 
 September 30,
 
2015
 
2016
 
2015
 
2016
Gross profit
 

 
 

 
 
 
 
GAAP gross profit
$
78,876

 
$
136,693

 
$
302,767

 
$
353,386

Stock-based compensation: Cost of revenue - Other
1,427

 
1,538

 
4,040

 
4,559

Stock-based compensation: Cost of revenue - Ticketing service

 
27

 

 
154

Amortization of intangibles - Cost of revenue - Ticketing service

 
1,420

 

 
4,256

Pre-1972 sound recordings settlement
57,947

 

 
57,947

 

RMLC publisher royalty charge
23,934

 

 
23,934

 

Non-GAAP gross profit
$
162,184

 
$
139,678

 
$
388,688

 
$
362,355

 
 
 
 
 
 
 
 
Net loss
 

 
 

 
 
 
 
GAAP net loss
$
(85,930
)
 
$
(61,534
)
 
$
(150,252
)
 
$
(252,969
)
Amortization of intangibles
438

 
5,138

 
804

 
15,409

Amortization of non-recoupable ticketing contract advances

 
1,696

 

 
4,138

Stock-based compensation
28,794

 
32,754

 
79,473

 
103,841

Pre-1972 sound recordings settlement
57,947

 

 
57,947

 

RMLC publisher royalty charge
23,934

 

 
23,934

 

Ticketfly and Rdio transaction costs
809

 

 
809

 

Income tax effects of non-GAAP net loss before provision for income taxes and the related non-GAAP adjustments
(2,332
)
 
5,889

 
(2,332
)
 
41,525

Non-GAAP net income (loss)
$
23,660

 
$
(16,057
)
 
$
10,383

 
$
(88,056
)
 
 
 
 
 
 
 
 
Non-GAAP EPS - basic
$
0.11

 
$
(0.07
)
 
$
0.05

 
$
(0.38
)
Non-GAAP EPS - diluted
$
0.11

 
$
(0.07
)
 
$
0.05

 
$
(0.38
)
 
 
 
 
 
 
 
 
Weighted average basic shares
212,760

 
232,139

 
211,487

 
229,524

Weighted average diluted shares
222,889

 
232,139

 
220,496

 
229,524

 
 
 
 
 
 
 
 
Adjusted EBITDA
 

 
 

 
 
 
 
GAAP net loss
$
(85,930
)
 
$
(61,534
)
 
$
(150,252
)
 
$
(252,969
)
Depreciation and amortization
5,829

 
15,843

 
15,194

 
43,480

Stock-based compensation
28,794

 
32,754

 
79,473

 
103,841

Ticketfly and Rdio transaction costs
809

 

 
809

 

Other expense (income), net
36

 
5,915

 
(417
)
 
17,220

Provision for (benefit from) income taxes
32

 
412

 
206

 
(711
)
Pre-1972 sound recordings settlement
57,947

 

 
57,947

 

RMLC publisher royalty charge
23,934

 

 
23,934

 

Adjusted EBITDA
$
31,451

 
$
(6,610
)
 
$
26,894

 
$
(89,139
)
 
 
 
 
 
 
 
 
Cost of revenue - content acquisition costs
 
 
 
 
 
 
 
GAAP cost of revenue - content acquisition costs
$
211,272

 
$
174,334

 
$
467,429

 
$
522,231

Pre-1972 sound recordings settlement
(57,947
)
 

 
(57,947
)
 

RMLC publisher royalty charge
(23,934
)
 

 
(23,934
)
 

Non-GAAP cost of revenue - content acquisition costs
$
129,391

 
$
174,334

 
$
385,548

 
$
522,231










Pandora Media, Inc.
RPM and LPM History
(unaudited)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2016
 
2015
 
2016
 
RPM
 
LPM
 
RPM
 
LPM
 
RPM
 
LPM
 
RPM
 
LPM
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Advertising
$
56.84

 
$
36.46

 
$
58.10

 
$
31.60

 
$
48.24

 
$
26.79

 
$
52.26

 
$
30.90

Subscription
85.28

 
72.10

 
81.69

 
37.16

 
82.84

 
49.95

 
80.98

 
35.88

Total
$
60.52

 
$
41.06

 
$
61.09

 
$
32.31

 
$
52.57

 
$
29.69

 
$
55.80

 
$
31.52

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total based on non-GAAP results (1)
$
60.52

 
$
25.15

 
$
61.09

 
$
32.31

 
$
52.57

 
$
24.49

 
$
55.80

 
$
31.52

(1) Total non-GAAP RPMs are the same as GAAP RPMs for all periods presented. Total non-GAAP LPMs are based on non-GAAP cost of revenue - content acquisition costs.
    

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