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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): February 9, 2017
 

 
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 February 9, 2017, Pandora Media, Inc. issued a press release announcing its financial results for the fourth quarter 2016 and year ended December 31, 2016. A copy of the press release is furnished as Exhibit 99.1 to this current report.
 
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 February 9, 2017






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: February 9, 2017
 
By:
/s/ Michael S. Herring
 
 
 
Michael S. Herring
President and Chief Financial Officer








EXHIBIT INDEX
 
Exhibit
No.
 
Exhibit Description
 
 
 
99.1
 
Press Release dated February 9, 2017



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
37977588_pandoralogoa04.jpg 

PANDORA REPORTS Q4 and FULL YEAR 2016 FINANCIAL RESULTS

Q4 2016 Ad RPMs were $67.43, growing 18% year-over-year
Full year 2016 Ad RPMs were $55.94, growing 11% year-over-year
Q4 2016 total revenue was $392.6 million, growing 17% year-over-year
Full year 2016 total revenue was $1.385 billion, growing 19% year-over-year
Q4 2016 advertising revenue was $313.3 million, growing 16% year-over-year
Full year 2016 advertising revenue was $1.072 billion, growing 15% year-over-year
Q4 2016 ticketing service revenue was $19.4 million, growing approximately 20% year-over-year
Full year 2016 ticketing service revenue was $86.6 million, growing approximately 25% year-over-year

OAKLAND, Calif. - February 9, 2017 - Pandora (NYSE: P), the world’s most powerful music discovery platform, today announced financial results for the fourth quarter and full year ended December 31, 2016.

"We made significant progress in 2016 by driving leverage in our core business while accelerating subscriptions to our paid product," said Tim Westergren, founder and CEO of Pandora. "We enter 2017 laser-focused on the growth of our ad-supported business, the launch and growth of our subscription products, and an artist-to-fan platform to drive listener engagement and ticket sales. These three strategic pillars operate in harmony to create mutually reinforcing revenue streams across a large and growing addressable market."

Fourth Quarter 2016 Financial Results

Revenue: For the fourth quarter of 2016, consolidated total revenue was $392.6 million, a 17% year-over-year increase. Advertising revenue was $313.3 million, a 16% year-over-year increase. Subscription and other revenue was $59.8 million, a 5% year-over-year increase. Ticketing service revenue was $19.4 million, growing approximately 20% year-over-year.1 

GAAP Net Loss and Adjusted EBITDA: For the fourth quarter of 2016, GAAP net loss was $90.0 million compared to a net loss of $19.4 million in the same quarter last year, and adjusted EBITDA was a loss of $30.4 million, compared to a profit of $24.8 million in the same quarter last year. For the fourth quarter of 2016, adjusted EBITDA differs from GAAP net loss in that it excludes $34.6 million in expense from stock-based compensation, $17.3 million of depreciation and amortization expense, $7.2 million of other expense and $0.5 million of provision for income taxes.

Average Revenue Per Paid Subscriber ("ARPU") and Licensing Costs Per Paid Subscriber ("LPU"): For the fourth quarter of 2016, subscription ARPU was $4.73 and subscription LPU was $3.12. Beginning with the fourth quarter of 2016, subscription ARPU and LPU are new metrics that replace subscription RPM and LPM.


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.

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Cash and Investments: For the fourth quarter of 2016, the Company ended with $243.3 million in cash and investments, compared to $264.0 million at the end of the prior quarter. 

Cash used in operating activities was $2.6 million for the fourth quarter of 2016, compared to $71.0 million of cash used in operating activities in the same period of the prior year. The year-over-year decrease in cash used in operating activities is primarily due to a decrease in payments of content acquisition costs compared to the year ago quarter. Content acquisition costs paid during the quarter decreased year-over-year as a result of the prepayment of such costs during the third quarter of 2016.

Full Year 2016 Financial Results

Revenue: For the full year 2016, total consolidated revenue was $1.385 billion, a 19% year-over-year increase. Advertising revenue was $1.072 billion, a 15% year-over-year increase. Subscription and other revenue was $225.8 million, a 2% year-over-year increase. Ticketing service revenue was $86.6 million, growing approximately 25% year-over-year.1 

GAAP Net Loss and Adjusted EBITDA: For the full year 2016, GAAP net loss was $343.0 million compared to a net loss of $169.7 million last year, and adjusted EBITDA was a loss of $119.5 million, compared to a profit of $51.7 million last year. For the full year 2016, adjusted EBITDA differs from GAAP net loss in that it excludes $138.5 million in expense from stock-based compensation, $60.8 million of depreciation and amortization expense, $24.4 million of other expense and $0.2 million of benefit from income taxes.

Other Business Metrics

Listener Hours: Total listener hours grew 0.4% to 5.38 billion for the fourth quarter of 2016, compared to 5.37 billion for the same period of the prior year.

Total listener hours grew 4% to 21.96 billion for the full year 2016, compared to 21.11 billion for the same period of the prior year.

Active Listeners: Active listeners were 81.0 million at the end of the fourth quarter of 2016, compared to 81.1 million for the same period of the prior year.

Subscribers: Subscribers grew 12% to 4.39 million at the end of the fourth quarter of 2016, compared to 3.93 million for the same period of the prior year.



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Guidance

Based on information available as of February 9, 2017, the Company is providing the following financial guidance:

First Quarter 2017 Guidance: Revenue is expected to be in the range of $310 million to $320 million. Adjusted EBITDA loss is expected to be in the range of $80 million to $70 million, excluding one-time severance costs of approximately $6 million. Adjusted EBITDA differs from GAAP net loss in that it excludes forecasted stock-based compensation expense of approximately $37 million, forecasted depreciation and amortization expense of approximately $19 million, other expense of approximately $7 million and a provision for income taxes of approximately $0.3 million and assumes minimal cash taxes given our net loss position. Basic shares outstanding for the first quarter 2017 are expected to be approximately 238 million. We anticipate a non-GAAP effective tax rate between 30-37% for the first quarter 2017.

Full Year 2017 Guidance: Revenue is expected to be in the range of $1.55 billion to $1.70 billion. We are managing towards full year 2017 adjusted EBITDA profitability, but at this time we are not providing full year 2017 adjusted EBITDA guidance. Full year 2017 adjusted EBITDA perspectives and considerations will be discussed on the quarterly conference call.

Fourth Quarter and Full Year 2017 Financial Results Conference Call: Pandora will host a conference call today at 2 p.m. PT/5 p.m. ET to discuss fourth quarter and full year 2016 financial results with the investment community. A live 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. A domestic replay will be available at (855) 859-2056 or internationally at (855) 859-2056, using passcode 51921242, and available via webcast until February 23, 2017.

ABOUT PANDORA 
Pandora (NYSE: P) 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 | Pandora Blog | Pandora LinkedIn | @PandoraPulse

"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 number of subscribers, listener base and 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 and publishers for the right to reproduce and publicly perform sound recordings and the underlying musical works contained therein 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

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(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 full year 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 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.

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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 full year 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 full year 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 37% cumulatively for each quarter and the full year 2017. 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.

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

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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)


 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2015
 
2016
 
2015
 
2016
Revenue
 

 
 

 
 

 
 

Advertising
$
268,989

 
$
313,340

 
$
933,305

 
$
1,072,490

Subscription and other
57,001

 
59,829

 
220,571

 
225,786

Ticketing service (1)
10,167

 
19,429

 
10,167

 
86,550

Total revenue
336,157

 
392,598

 
1,164,043

 
1,384,826

 
 
 
 
 
 
 
 
Cost of revenue
 

 
 

 
 

 
 

Cost of revenue - Content acquisition costs
142,933

 
212,122

 
610,362

 
734,353

Cost of revenue - Other (2)
22,168

 
29,901

 
79,858

 
101,289

Cost of revenue - Ticketing service (1) (2)
7,121

 
14,057

 
7,121

 
59,280

Total cost of revenue
172,222

 
256,080

 
697,341

 
894,922

Gross profit
163,935

 
136,518

 
466,702

 
489,904

 
 
 
 
 
 
 
 
Operating expenses
 

 
 
 
 

 
 

Product development (2)
28,115

 
38,325

 
84,581

 
141,636

Sales and marketing (2)
112,574

 
133,546

 
398,169

 
491,455

General and administrative (2)
42,774

 
46,946

 
153,943

 
175,572

Total operating expenses
183,463

 
218,817

 
636,693

 
808,663

Loss from operations
(19,528
)
 
(82,299
)
 
(169,991
)
 
(318,759
)
 
 
 
 
 
 
 
 
Interest expense
(1,590
)
 
(7,228
)
 
(1,976
)
 
(26,144
)
Other income (expense), net
(47
)
 
1

 
756

 
1,697

Total other expense, net
(1,637
)
 
(7,227
)
 
(1,220
)
 
(24,447
)
Loss before benefit from (provision for) income taxes
(21,165
)
 
(89,526
)
 
(171,211
)
 
(343,206
)
 
 
 
 
 
 
 
 
Benefit from (provision for) income taxes
1,756

 
(483
)
 
1,550

 
228

Net loss
$
(19,409
)
 
$
(90,009
)
 
$
(169,661
)
 
$
(342,978
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.09
)
 
$
(0.38
)
 
$
(0.79
)
 
$
(1.49
)
Weighted-average basic and diluted shares
220,625

 
234,173

 
213,790

 
230,693


(1) The quarter and year ended 12/31/15 consist of two months of Ticketfly activity from the acquisition date of October 31, 2015 to December 31, 2015.
(2) Includes stock-based compensation expense as follows:
 
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2015
 
2016
 
2015
 
2016
Cost of revenue - Other
$
1,491

 
$
1,549

 
$
5,531

 
$
6,108

Cost of revenue - Ticketing service
40

 
34

 
40

 
188

Product development
7,523

 
7,884

 
23,671

 
30,975

Sales and marketing
14,344

 
14,445

 
52,747

 
58,118

General and administrative
8,774

 
10,705

 
29,656

 
43,069

Total stock-based compensation expense
$
32,172

 
$
34,617

 
$
111,645

 
$
138,458





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

 
 

Cash and cash equivalents
$
334,667

 
$
199,944

Short-term investments
35,844

 
37,109

Accounts receivable, net
277,075

 
309,267

Prepaid content acquisition costs
2,099

 
46,310

Prepaid expenses and other current assets
33,821

 
33,191

Total current assets
683,506

 
625,821

 
 
 
 
Long-term investments
46,369

 
6,252

Property and equipment, net
66,370

 
124,088

Goodwill
303,875

 
306,691

Intangible assets, net
110,745

 
90,425

Other long-term assets
29,792

 
31,533

Total assets
$
1,240,657

 
$
1,184,810

 
 
 
 
Liabilities and stockholders’ equity
 

 
 

Current liabilities
 

 
 

Accounts payable
$
17,897

 
$
15,224

Accrued liabilities
37,185

 
35,465

Accrued content acquisition costs
97,390

 
93,723

Accrued compensation
43,788

 
60,353

Deferred revenue
19,939

 
28,359

Other current liabilities
15,632

 
20,993

Total current liabilities
231,831

 
254,117

 
 
 
 
Long-term debt
234,577

 
342,247

Other long-term liabilities
30,862

 
34,187

Total liabilities
497,270

 
630,551

 
 
 
 
Stockholders’ equity
 

 
 

Common stock
23

 
24

Additional paid-in capital
1,110,539

 
1,264,693

Accumulated deficit
(366,658
)
 
(709,636
)
Accumulated other comprehensive loss
(517
)
 
(822
)
Total stockholders’ equity
743,387

 
554,259

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

 
$
1,184,810






Pandora Media, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2015
 
2016
 
2015
 
2016
Operating Activities
 

 
 

 
 

 
 

Net loss
$
(19,409
)
 
$
(90,009
)
 
$
(169,661
)
 
$
(342,978
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
 
 
 
 
Depreciation and amortization
9,264

 
17,277

 
24,458

 
60,757

Stock-based compensation
32,172

 
34,617

 
111,645

 
138,458

Amortization of premium on investments, net
199

 
66

 
1,911

 
405

Other operating activities
524

 
1,519

 
2,134

 
4,403

Amortization of debt discount
1,084

 
4,728

 
1,084

 
18,315

Changes in operating assets and liabilities
 
 
 
 
 
 
 
Accounts receivable
(10,108
)
 
(27,372
)
 
(55,904
)
 
(35,710
)
Prepaid content acquisition costs
(1,232
)
 
56,313

 
(1,399
)
 
(44,211
)
Prepaid expenses and other assets
(11,122
)
 
334

 
(17,519
)
 
(12,321
)
Accounts payable, accrued and other current liabilities
(11,521
)
 
10,284

 
18,080

 
5,294

Accrued content acquisition costs
(65,687
)
 
(12,543
)
 
23,736

 
(3,668
)
Accrued compensation
3,045

 
4,994

 
7,378

 
15,364

Other long-term liabilities
4,505

 
786

 
6,005

 
1,384

Deferred revenue
(2,743
)
 
(3,612
)
 
4,946

 
8,420

Reimbursement of cost of leasehold improvements
10

 

 
1,024

 
4,397

Net cash used in operating activities
(71,019
)
 
(2,618
)
 
(42,082
)
 
(181,691
)
 
 
 
 
 
 
 
 
Investing Activities
 

 
 

 
 

 
 

Purchases of property and equipment
(2,176
)
 
(13,369
)
 
(23,512
)
 
(59,769
)
Internal-use software costs
(2,565
)
 
(7,871
)
 
(8,562
)
 
(30,210
)
Changes in restricted cash

 

 

 
(250
)
Purchases of investments
(2,259
)
 

 
(140,980
)
 
(12,413
)
Proceeds from maturities of investments
49,199

 
12,840

 
228,998

 
47,656

Proceeds from sales of investments
70,039

 

 
111,356

 
3,507

Payments related to acquisitions, net of cash acquired
(246,538
)
 

 
(269,566
)
 
(676
)
Net cash used in investing activities
(134,300
)
 
(8,400
)
 
(102,266
)
 
(52,155
)
 
 
 
 
 
 
 
 
Financing activities
 

 
 

 
 

 
 

Proceeds from issuance of convertible notes
345,000

 

 
345,000

 

Payments for purchase of capped call
(43,160
)
 

 
(43,160
)
 

Payment of debt issuance costs
(8,909
)
 

 
(8,909
)
 
(32
)
Borrowings under debt arrangements

 

 

 
90,000

Proceeds from employee stock purchase plan
2,463

 
3,306

 
7,552

 
9,701

Proceeds from exercise of stock options
1,474

 
446

 
5,192

 
3,457

Tax payments from net share settlements of restricted stock units
(245
)
 
(243
)
 
(2,540
)
 
(3,369
)
Net cash provided by financing activities
296,623

 
3,509

 
303,135

 
99,757

 
 
 
 
 
 
 
 
Effects of exchange rate changes on cash and cash equivalents
382

 
(242
)
 
(77
)
 
(634
)
 
 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
91,686

 
(7,751
)
 
158,710

 
(134,723
)
Cash and cash equivalents at beginning of period
242,981

 
207,695

 
175,957

 
334,667

Cash and cash equivalents at end of period
$
334,667

 
$
199,944

 
$
334,667

 
$
199,944






Pandora Media, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(unaudited)
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2015
 
2016
 
2015
 
2016
Gross profit
 

 
 

 
 

 
 

GAAP gross profit
$
163,935

 
$
136,518

 
$
466,702

 
$
489,904

Stock-based compensation: Cost of revenue - Other
1,491

 
1,549

 
5,531

 
6,108

Stock-based compensation: Cost of revenue - Ticketing service
40

 
34

 
40

 
188

Amortization of intangibles - Cost of revenue - Ticketing service
937

 
1,419

 
937

 
5,675

Pre-1972 sound recordings settlement

 

 
57,947

 

RMLC publisher royalty charge

 

 
23,934

 

Non-GAAP gross profit
$
166,403

 
$
139,520

 
$
555,091

 
$
501,875

 
 
 
 
 
 
 
 
Net loss
 

 
 

 
 

 
 

GAAP net loss
$
(19,409
)
 
$
(90,009
)
 
$
(169,661
)
 
$
(342,978
)
Amortization of intangibles
2,593

 
5,137

 
3,397

 
20,546

Amortization of non-recoupable ticketing contract advances
696

 
1,582

 
696

 
5,720

Stock-based compensation
32,172

 
34,617

 
111,645

 
138,458

Pre-1972 sound recordings settlement

 

 
57,947

 

RMLC publisher royalty charge

 

 
23,934

 

Ticketfly and Rdio transaction costs
2,853

 

 
3,662

 

Income tax effects of non-GAAP net loss before provision for income taxes and the related non-GAAP adjustments
(8,697
)
 
19,018

 
(11,029
)
 
60,543

Non-GAAP net income (loss)
$
10,208

 
$
(29,655
)
 
$
20,591

 
$
(117,711
)
 
 
 
 
 
 
 
 
Non-GAAP EPS - basic
$
0.05

 
$
(0.13
)
 
$
0.10

 
$
(0.51
)
Non-GAAP EPS - diluted
$
0.04

 
$
(0.13
)
 
$
0.09

 
$
(0.51
)
 
 
 
 
 
 
 
 
Weighted average basic shares
220,625

 
234,173

 
213,790

 
230,693

Weighted average diluted shares
229,408

 
234,173

 
222,743

 
230,693

 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
GAAP net loss
$
(19,409
)
 
$
(90,009
)
 
$
(169,661
)
 
$
(342,978
)
Depreciation and amortization
9,264

 
17,277

 
24,458

 
60,757

Stock-based compensation
32,172

 
34,617

 
111,645

 
138,458

Ticketfly and Rdio transaction costs
2,853

 

 
3,662

 

Other expense, net
1,637

 
7,227

 
1,220

 
24,447

Provision for (benefit from) income taxes
(1,756
)
 
483

 
(1,550
)
 
(228
)
Pre-1972 sound recordings settlement

 

 
57,947

 

RMLC publisher royalty charge

 

 
23,934

 

Adjusted EBITDA
$
24,761

 
$
(30,405
)
 
$
51,655

 
$
(119,544
)
 
 
 
 
 
 
 
 
Cost of revenue - content acquisition costs
 
 
 
 
 
 
 
GAAP cost of revenue - content acquisition costs
$
142,933

 
$
212,122

 
$
610,362

 
$
734,353

Pre-1972 sound recordings settlement

 

 
(57,947
)
 

RMLC publisher royalty charge

 

 
(23,934
)
 

Non-GAAP cost of revenue - content acquisition costs
$
142,933

 
$
212,122

 
$
528,481

 
$
734,353

 




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

 
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2015
 
2016
 
2015
 
2016
 
 
 
 
 
 
 
 
Advertising RPM
$
57.20

 
$
67.43

 
$
50.52

 
$
55.94

Advertising LPM
$
24.21

 
$
37.07

 
$
26.13

 
$
32.40






Pandora Media, Inc.
ARPU and LPU History
(unaudited)

 
Quarter ended 
 December 31,
 
2015
 
2016
 
 
 
 
Subscription ARPU
N/A
 
$
4.73

Subscription LPU
N/A
 
$
3.12



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