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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 21, 2018
  
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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company                     o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o


 




Item 2.02                   Results of Operations and Financial Condition.
 
On February 21, 2018, Pandora Media, Inc. issued a press release announcing its financial results for the fourth quarter 2017 and year ended December 31, 2017. 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 February 21, 2018





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 21, 2018
 
By:
/s/ Naveen Chopra
 
 
 
Naveen Chopra
Chief Financial Officer







EXHIBIT INDEX
 
Exhibit
No.
 
Exhibit Description
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
 392282469_pandoralogoa14.jpg

PANDORA REPORTS Q4 2017 FINANCIAL RESULTS
Ad RPM Reaches an All-Time High; Subscription Revenue Grows 63%


•
Q4 Revenue excluding Australia, New Zealand & Ticketfly was $395.3 million, growing 7% year-over-year
•
Ad RPM hits an all-time high of $75.65 in Q4 2017, growing 12% year-over-year
•
Q4 Subscription revenue was $97.7 million, growing 63% year-over-year
•
Total subscribers were 5.48 million, growing 25% year-over-year
•
Q4 Revenue and Adjusted EBITDA significantly exceeded our forecast
•
Launched Premium Access, enabling greater interactivity in ad-supported tier
•
Announced plans to reinvest $45 million of expected annualized cost-savings toward key growth initiative


OAKLAND, Calif.- Feb. 21, 2018 - Pandora (NYSE: P) today announced financial results for the fourth quarter and full year ended December 31, 2017.

“Digital audio is on the verge of massive growth - music consumption is increasing, podcasts are gaining popularity and voice-activated devices are quickly becoming mainstream. Just like video, audio is transitioning from a one-to-many broadcast experience to a one-to-one model with personalization at the core. Pandora’s scale, listener engagement and data position us well to capitalize on these trends,” said Roger Lynch, CEO of Pandora. “From launching on-demand for our ad-supported listeners to expanding multiple device partnerships in the last quarter alone, we’re building a strong foundation for audience growth and improved monetization. These efforts will enable us to strengthen business fundamentals and reinvigorate Pandora in 2018.”

Fourth Quarter 2017 Financial Results & Highlights

Premium Access: Pandora successfully launched Premium Access, which allows ad-supported listeners access to on-demand experiences including, for the first time, the ability to search, play and share songs, albums and playlists by viewing a short video ad. Premium Access also unlocks new rewards-based video inventory for advertisers.

Revenue: For the fourth quarter of 2017, total consolidated revenue was $395.3 million, an approximate 7% year-over-year increase compared to the year-ago quarter, excluding Australia, New Zealand and Ticketfly. This included $297.7 million in advertising revenue and $97.7 million in subscription revenue. Revenue in the year-ago quarter, excluding Australia, New Zealand and Ticketfly was $370.5 million. We discontinued our service in Australia and New Zealand on July 31, 2017 and Ticketfly was sold to Eventbrite on September 1, 2017. Including Australia, New Zealand and Ticketfly, total consolidated revenue for the fourth quarter of 2016 was $392.6 million.

GAAP Net Loss and Adjusted EBITDA: For the fourth quarter of 2017, GAAP net loss was $44.7 million compared to a net loss of $90.0 million in the same quarter last year. Adjusted EBITDA was $5.8 million, compared to a loss of $30.4 million in the same quarter last year.

Cash and Investments: For the fourth quarter of 2017, the Company ended with $500.8 million in cash and investments, compared to $499.4 million at the end of the prior quarter. 



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Partnerships: Expanded partnerships across Sonos, Comcast’s Xfinity X1, Android TV and Amazon Fire TV in the fourth quarter.

Listener Hours: Total listener hours were 5.03 billion for the fourth quarter of 2017, compared to 5.38 billion for the same period of the prior year.

Active Listeners: Active listeners were 74.7 million at the end of the fourth quarter of 2017.

Subscribers: Pandora Plus and Pandora Premium subscribers were 5.48 million at the end of the fourth quarter.

Full Year 2017 Financial Results

Revenue: For the full year 2017, consolidated total revenue was $1.467 billion, a 6% year-over-year increase. This included ticketing revenue of $76.0 million from the period. Our ticketing service was sold to Eventbrite on September 1, 2017. Excluding revenue from Australia, New Zealand and Ticketfly, full year 2017 revenue was $1.385 billion, an 8% year-over-year increase. This included advertising revenue of $1.071 billion and subscription and other revenue of $314.3 million.

GAAP Net Loss and Adjusted EBITDA: For the full year of 2017, GAAP net loss was $518.4 million compared to a net loss of $343.0 million in the year ago period. Adjusted EBITDA was a loss of $125.0 million compared to a loss of $119.5 million last year.

Recent Events & Other Information

Strategic Realignment: Pandora recently announced an organizational restructuring designed to prioritize its strategic growth initiatives and optimize overall business performance. A combination of eliminated roles and other measures are expected to result in combined annualized savings of approximately $45 million to adjusted EBITDA. The savings will be reinvested into growth initiatives including ad-tech, non-music content, device integration and marketing technology, toward which the company will redeploy existing employees and hire for new positions.

Guidance: Guidance will be discussed during the fourth quarter and full year 2017 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 2017 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 (614) 999-7532 internationally. A domestic replay will be available at (855) 859-2056 or (404) 537-3406 internationally, using passcode 3687488, and available via webcast replay until March 14, 2018.

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, 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,

2


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 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 most recent reports on Form 10-K and Form 10-Q.

The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in our most recent reports on Form 10-K and Form 10-Q, each as they may be amended from time to time. Our results of operations for the current period are not necessarily indicative of our 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 loss, non-GAAP basic and diluted net loss per common share, adjusted EBITDA, non-GAAP product development, non-GAAP sales and marketing and non-GAAP general and administrative. 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 loss, non-GAAP basic and diluted net loss per common share, non-GAAP product development, non-GAAP sales and marketing and non-GAAP general and administrative differ from GAAP in that they exclude stock-based compensation expense, intangible amortization expense, amortization of non-recoupable ticketing contract advances, goodwill impairment, contract termination fees, expense associated with the restructurings and loss on sales of subsidiaries. The income tax effects of non-GAAP pre-tax loss have been reflected in non-GAAP net loss and non-GAAP basic and diluted net loss per common share.

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 expense, expense associated with the restructurings, goodwill impairment, contract termination fees and loss on sales of subsidiaries.

Stock-based Compensation Expense: consists of expenses for stock options, restricted stock units and other awards under our equity incentive plans. Stock-based compensation is included in the following cost and expense line items

3


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 and adjusted EBITDA results 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.

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 and intangible amortization expense 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. 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 and amortization of non-recoupable ticketing contract advances when evaluating its ongoing non-GAAP performance and without depreciation, intangible amortization expense and amortization of non-recoupable ticketing contract advances 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.

Other Expense: consists primarily of interest expense related to our Convertible Senior Notes and our Credit Facility. 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.

Expense Associated with the Restructurings: consists of employee-related expense recognized in connection with the workforce reduction in the first quarter of 2017 and the restructuring in Australia and New Zealand. These costs are included in the following cost and expense line items of our GAAP presentation: cost of revenue—other, product development, sales and marketing and general and administrative. This also consists of professional fees recognized in connection with the reorganization of the Company in the fourth quarter of 2017, which are included in the general and administrative line item of our GAAP presentation. The Company considers its non-GAAP and adjusted EBITDA results without these charges when evaluating its ongoing performance because these charges are not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Goodwill Impairment: consists of impairment charges primarily related to the Ticketfly disposition. The impairment charge was calculated as the excess of the carrying amount of the Ticketfly segment over the agreed-upon purchase price less costs to sell. The Company considers its operating results without these charges when evaluating its ongoing non-GAAP and adjusted EBITDA results because these charges are not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Contract Termination Fees: consists of termination and legal fees and benefits incurred in connection with the termination of the contractual commitment to sell redeemable convertible preferred stock to KKR Classic Investors L.P. The Company considers its operating results without these charges when evaluating its ongoing non-GAAP and

4


adjusted EBITDA results because these charges are not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Loss on Sales of Subsidiaries: consists of loss on sales of subsidiaries recognized during the period, primarily related to the Ticketfly disposition. This amount was calculated as the decrease in the fair value less costs to sell for sales of our subsidiaries and was recorded as a loss on sale during the period. The Company considers its operating results without these charges when evaluating its ongoing non-GAAP and adjusted EBITDA results because these charges are not believed by management to be reflective of our core business, ongoing operating results or future outlook.

Income Tax Effects of Non-GAAP Pre-tax Loss: The Company adjusts non-GAAP pre-tax net loss by considering the income tax effects of its non-GAAP adjustments. The Company is currently forecasting a non-GAAP effective tax rate of approximately 22% to 25% cumulatively for each quarter and the full year 2018. However, the Company is not expected to incur any material cash taxes due to its net operating loss position.

Management believes these non-GAAP financial measures and adjusted EBITDA 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:

Derrick Nueman / Conrad Grodd
Investor Relations
investor@pandora.com
(510) 842-6960

Jette Speights
Pandora Corporate Communications
press@pandora.com
(510) 858-3865


5


Pandora Media, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

Quarter ended 
 December 31,
 
Year ended 
 December 31,

2016
 
2017
 
2016
 
2017
Revenue
 

 
 

 
 
 
 
Advertising
$
313,340

 
$
297,674

 
$
1,072,490

 
$
1,074,927

Subscription and other
59,829

 
97,661

 
225,786

 
315,853

Ticketing service
19,429

 
—

 
86,550

 
76,032

Total revenue
392,598

 
395,335

 
1,384,826

 
1,466,812

Cost of revenue
 

 
 

 
 

 
 
Cost of revenue—Content acquisition costs
212,122

 
216,515

 
734,353

 
804,032

Cost of revenue—Other (1)
30,520

 
32,379

 
102,717

 
112,638

Cost of revenue—Ticketing service (1)
14,057

 
—

 
59,280

 
50,397

Total cost of revenue
256,699

 
248,894

 
896,350

 
967,067

Gross profit
135,899

 
146,441

 
488,476

 
499,745

Operating expenses
 

 
 
 
 
 
 
Product development (1)
37,976

 
34,035

 
140,707

 
154,325

Sales and marketing (1)
133,251

 
113,961

 
490,364

 
492,542

General and administrative (1)
46,971

 
40,061

 
176,164

 
190,711

Goodwill impairment
—

 
—

 
—

 
131,997

Contract termination fees
—

 
—

 
—

 
23,044

Total operating expenses
218,198

 
188,057

 
807,235

 
992,619

Loss from operations
(82,299
)
 
(41,616
)
 
(318,759
)
 
(492,874
)
Interest expense
(7,228
)
 
(6,958
)
 
(26,144
)
 
(29,335
)
Other income, net
1

 
2,158

 
1,697

 
3,024

Total other expense, net
(7,227
)
 
(4,800
)
 
(24,447
)
 
(26,311
)
Loss before (provision for) benefit from income taxes
(89,526
)
 
(46,416
)
 
(343,206
)
 
(519,185
)
(Provision for) benefit from income taxes
(483
)
 
1,667

 
228

 
790

Net loss
$
(90,009
)
 
$
(44,749
)
 
$
(342,978
)
 
$
(518,395
)
Net loss available to common stockholders
$
(90,009
)
 
$
(52,068
)
 
$
(342,978
)
 
$
(558,561
)
Basic and diluted net loss per common share
$
(0.38
)
 
$
(0.21
)
 
$
(1.49
)
 
$
(2.29
)
Weighted-average basic and diluted common shares
234,173

 
249,746

 
230,693

 
243,637


 (1) Includes stock-based compensation expense as follows: 
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2016
 
2017
 
2016
 
2017
Cost of revenue—Other
$
1,549

 
$
817

 
$
6,108

 
$
3,249

Cost of revenue—Ticketing service
34

 
—

 
188

 
69

Product development
7,884

 
7,478

 
30,975

 
33,243

Sales and marketing
14,445

 
13,459

 
58,118

 
56,116

General and administrative
10,705

 
8,350

 
43,069

 
35,754

Total stock-based compensation expense
$
34,617

 
$
30,104

 
$
138,458

 
$
128,431





Pandora Media, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
  
 
As of December 31,
 
2016
 
2017
Assets
 
 
 
Current assets
 

 
 

Cash and cash equivalents
$
199,944

 
$
499,597

Short-term investments
37,109

 
1,250

Accounts receivable, net
309,267

 
336,429

Prepaid content acquisition costs
46,310

 
55,668

Prepaid expenses and other current assets
33,191

 
19,220

Total current assets
625,821

 
912,164

Convertible promissory note receivable
—

 
35,471

Long-term investments
6,252

 
—

Property and equipment, net
124,088

 
116,742

Goodwill
306,691

 
71,243

Intangible assets, net
90,425

 
19,409

Other long-term assets
31,533

 
11,293

Total assets
$
1,184,810

 
$
1,166,322

Liabilities, redeemable convertible preferred stock and stockholders’ equity
 

 
 

Current liabilities
 
 
 
Accounts payable
$
15,224

 
$
14,896

Accrued liabilities
35,465

 
34,535

Accrued content acquisition costs
93,723

 
97,751

Accrued compensation
60,353

 
47,635

Deferred revenue
28,359

 
31,464

Other current liabilities
20,993

 
—

Total current liabilities
254,117

 
226,281

Long-term debt, net
342,247

 
273,014

Other long-term liabilities
34,187

 
23,500

Total liabilities
630,551

 
522,795

Redeemable convertible preferred stock
—

 
490,849

Stockholders’ equity
 

 
 

Common stock
24

 
25

Additional paid-in capital
1,264,693

 
1,422,221

Accumulated deficit
(709,636
)
 
(1,269,351
)
Accumulated other comprehensive loss
(822
)
 
(217
)
Total stockholders’ equity
554,259

 
152,678

Total liabilities, redeemable convertible preferred stock and stockholders’ equity
$
1,184,810

 
$
1,166,322






Pandora Media, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited)

Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2016
 
2017
 
2016
 
2017
Operating activities
 
 
 
 
 


 

Net loss
$
(90,009
)
 
$
(44,749
)
 
$
(342,978
)
 
$
(518,395
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
 
 
 
 



 
Goodwill impairment
—

 
—

 
—

 
131,997

(Gain) loss on sales of subsidiaries
—

 
(81
)
 
—

 
9,378

Depreciation and amortization
17,277

 
13,827

 
60,757

 
62,948

Stock-based compensation
34,617

 
30,104

 
138,458

 
128,431

Amortization of premium on investments, net
66

 
3

 
405

 
81

Accretion of discount on convertible promissory note receivable
—

 
(516
)
 
—

 
(687
)
Other operating activities
612

 
157

 
881

 
447

Amortization of debt discount
4,728

 
5,219

 
18,315

 
20,153

Interest income
—

 
(823
)
 
—

 
(1,081
)
Provision for bad debt
907

 
1,360

 
3,522

 
12,211

Changes in restricted cash
—

 
(1,257
)
 
—

 
(1,257
)
Changes in operating assets and liabilities
 
 
 
 



 
Accounts receivable
(27,372
)
 
(25,466
)
 
(35,710
)
 
(36,760
)
Prepaid content acquisition costs
56,313

 
24,484

 
(44,211
)
 
(9,358
)
Prepaid expenses and other assets
334

 
1,389

 
(12,321
)
 
(16,566
)
Accounts payable, accrued and other current liabilities
10,284

 
9,310

 
5,294

 
9,053

Accrued content acquisition costs
(12,543
)
 
(2,047
)
 
(3,668
)
 
4,016

Accrued compensation
4,994

 
1,967

 
15,364

 
(10,679
)
Other long-term liabilities
786

 
(2,475
)
 
1,384

 
(3,007
)
Deferred revenue
(3,612
)
 
(2,513
)
 
8,420

 
3,105

Reimbursement of cost of leasehold improvements
—

 
25

 
4,397

 
5,261

Net cash (used in) provided by operating activities
(2,618
)
 
7,918

 
(181,691
)

(210,709
)
Investing activities
 
 
 
 
 


 

Purchases of property and equipment
(13,369
)
 
(2,795
)
 
(59,769
)
 
(15,656
)
Internal-use software costs
(7,871
)
 
(6,209
)
 
(30,210
)
 
(20,157
)
Changes in restricted cash
—

 
—

 
(250
)
 
(642
)
Purchases of investments
—

 
—

 
(12,413
)
 
—

Proceeds from maturities of investments
12,840

 
4,998

 
47,656

 
42,082

Proceeds from sales of investments
—

 
—

 
3,507

 
—

(Payments for) proceeds from sales of subsidiaries, net of cash
—

 
(1,111
)
 
—

 
124,319

Payments related to acquisitions, net of cash acquired
—

 
—

 
(676
)
 
—

Net cash (used in) provided by investing activities
(8,400
)
 
(5,117
)
 
(52,155
)

129,946

Financing activities
 
 
 
 
 


 

Proceeds from issuance of redeemable convertible preferred stock
—

 
—

 
—

 
480,000

Payments of issuance costs
—

 
(1,227
)
 
(32
)
 
(30,511
)
Repayment of debt arrangements
—

 
—

 
—

 
(90,000
)
Borrowings under debt arrangements
—

 
—

 
90,000

 
—

Proceeds from employee stock purchase plan
3,306

 
2,914

 
9,701

 
10,926

Proceeds from exercise of stock options
446

 
1,942

 
3,457

 
9,778

Tax payments from net share settlements of restricted stock units
(243
)
 
—

 
(3,369
)
 
—

Net cash provided by financing activities
3,509

 
3,629

 
99,757


380,193

Effect of exchange rate changes on cash and cash equivalents
(242
)
 
(14
)
 
(634
)
 
223

Net (decrease) increase in cash and cash equivalents
(7,751
)
 
6,416

 
(134,723
)

299,653

Cash and cash equivalents at beginning of period
207,695

 
493,181

 
334,667

 
199,944

Cash and cash equivalents at end of period
$
199,944

 
$
499,597

 
$
199,944


$
499,597




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,
 
2016
 
2017
 
2016
 
2017
Advertising revenue
 
 
 
 
 
 
 
Advertising revenue
$
313,340

 
$
297,674

 
$
1,072,490

 
$
1,074,927

Australia and New Zealand ("ANZ") advertising revenue
(1,988
)
 
—

 
(7,760
)
 
(4,139
)
Advertising revenue, excluding ANZ
$
311,352

 
$
297,674

 
$
1,064,730

 
$
1,070,788

 
 
 
 
 
 
 
 
Subscription revenue
 
 
 
 
 
 
 
Subscription revenue
59,829

 
97,661

 
225,786

 
315,853

ANZ subscription revenue
(686
)
 
—

 
(2,582
)
 
(1,578
)
Subscription revenue, excluding ANZ
$
59,143

 
$
97,661

 
$
223,204

 
$
314,275

 
 
 
 
 
 
 
 
Total revenue
 
 
 
 
 
 
 
Total revenue
392,598

 
395,335

 
1,384,826

 
1,466,812

ANZ total revenue
(2,674
)
 
—

 
(10,342
)
 
(5,717
)
Ticketing service revenue
(19,429
)
 
—

 
(86,550
)
 
(76,032
)
Total revenue, excluding ANZ and Ticketfly
$
370,495

 
$
395,335

 
$
1,287,934

 
$
1,385,063

 
 
 
 
 
 
 
 
Gross profit
 

 
 

 
 
 
 
Gross profit
$
135,899

 
$
146,441

 
$
488,476

 
$
499,745

Stock-based compensation—Cost of revenue
1,583

 
817

 
6,296

 
3,318

Amortization of intangibles—Cost of revenue
1,419

 
1,532

 
5,675

 
7,032

Expense associated with the restructurings
—

 
—

 
—

 
390

Ticketing service revenue
(19,429
)
 
—

 
(86,550
)
 
(76,032
)
ANZ total revenue
(2,674
)
 
—

 
(10,342
)
 
(5,717
)
Cost of revenue - Ticketing service (1)
12,604

 
—

 
53,417

 
47,963

Cost of revenue - ANZ (1)
2,581

 
(124
)
 
6,278

 
5,660

Non-GAAP gross profit, excluding ANZ and Ticketfly
$
131,983

 
$
148,666

 
$
463,250

 
$
482,359

Non-GAAP gross margin
36
%
 
38
%
 
36
%
 
35
%
 
 
 
 
 
 
 
 
Adjusted EBITDA and non-GAAP net loss
 

 
 

 
 
 
 
Net loss
(90,009
)
 
(44,749
)
 
(342,978
)
 
(518,395
)
Depreciation and amortization
17,277

 
13,827

 
60,757

 
62,948

Stock-based compensation
34,617

 
30,104

 
138,458

 
128,431

Other expense, net
7,227

 
4,800

 
24,447

 
26,311

Provision for (benefit from) income taxes
483

 
(1,667
)
 
(228
)
 
(790
)
Expense associated with the restructurings
—

 
3,599

 
—

 
12,032

Goodwill impairment
—

 
—

 
—

 
131,997

(Gain) loss on sales of subsidiaries
—

 
(81
)
 
—

 
9,378

Contract termination fees
—

 
—

 
—

 
23,044

Adjusted EBITDA
$
(30,405
)
 
$
5,833

 
$
(119,544
)
 
$
(125,044
)
Income tax effects of non-GAAP pre-tax loss
19,018

 
(42,674
)
 
60,543

 
21,563

Other expense, net
(7,227
)
 
(4,800
)
 
(24,447
)
 
(26,311
)
(Provision for) benefit from income taxes
(483
)
 
1,667

 
228

 
790

Depreciation
(10,558
)
 
(11,932
)
 
(34,491
)
 
(46,155
)
Non-GAAP net loss
$
(29,655
)
 
$
(51,906
)
 
$
(117,711
)
 
$
(175,157
)
 
 
 
 
 
 
 
 
Non-GAAP net loss per common share - basic and diluted
$
(0.13
)
 
$
(0.21
)
 
$
(0.51
)
 
$
(0.72
)
Weighted average basic and diluted common shares
234,173

 
249,746

 
230,693

 
243,637

(1) Excludes costs related to stock-based compensation, amortization of intangibles, amortization of non-recoupable ticketing contract advances and expense related to restructurings.



Pandora Media, Inc.
Reconciliation of GAAP to Non-GAAP Measures continued
(in thousands)
(unaudited)
 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2016
 
2017
 
2016
 
2017
Product development
 
 
 
 
 
 
 
Product development
37,976

 
34,035

 
140,707

 
154,325

Stock-based compensation
(7,884
)
 
(7,478
)
 
(30,975
)
 
(33,243
)
Amortization of intangibles
(1,822
)
 
(97
)
 
(7,289
)
 
(2,270
)
Expense associated with the restructurings
—

 
—

 
—

 
(733
)
Product development - Ticketing service (1)
(3,965
)
 
—

 
(14,270
)
 
(11,344
)
Product development - ANZ (1)
(110
)
 
(43
)
 
(459
)
 
(338
)
Non-GAAP product development, excluding ANZ and Ticketfly
$
24,195

 
$
26,417

 
$
87,714

 
$
106,397

 
 
 
 
 
 
 
 
Sales and marketing
 
 
 
 
 
 
 
Sales and marketing
133,251

 
113,961

 
490,364

 
492,542

Stock-based compensation
(14,445
)
 
(13,459
)
 
(58,118
)
 
(56,116
)
Amortization of intangibles
(1,713
)
 
(83
)
 
(6,850
)
 
(3,049
)
Amortization of non-recoupable ticketing contract advances
(1,582
)
 
—

 
(5,720
)
 
(3,709
)
Loss on sales of subsidiaries
—

 
—

 
—

 
(75
)
Expense associated with the restructurings
—

 
—

 
—

 
(5,493
)
Sales and marketing - Ticketing service (1)
(4,405
)
 
—

 
(18,421
)
 
(15,326
)
Sales and marketing - ANZ (1)
(3,129
)
 
19

 
(10,365
)
 
(4,392
)
Non-GAAP sales and marketing, excluding ANZ and Ticketfly
$
107,977

 
$
100,438

 
$
390,890

 
$
404,382

 
 
 
 
 
 
 
 
General and administrative
 
 
 
 
 
 
 
General and administrative
46,971

 
40,061

 
176,164

 
190,711

Stock-based compensation
(10,705
)
 
(8,350
)
 
(43,069
)
 
(35,754
)
Amortization of intangibles
(183
)
 
(183
)
 
(732
)
 
(733
)
Gain (loss) on sales of subsidiaries
—

 
81

 
—

 
(9,303
)
Expense associated with the restructurings
—

 
(3,599
)
 
—

 
(5,416
)
General and administrative - Ticketing service (1)
(2,866
)
 
—

 
(11,954
)
 
(15,696
)
General and administrative - ANZ (1)
(511
)
 
(474
)
 
(2,687
)
 
(2,048
)
Non-GAAP general and administrative, excluding ANZ and Ticketfly
$
32,706

 
$
27,536

 
$
117,722

 
$
121,761

(1) Excludes costs related to stock-based compensation, amortization of intangibles, amortization of non-recoupable ticketing contract advances and expense related to restructurings.




Pandora Media, Inc.
Ad RPM, Ad LPM, Subscription ARPU and Subscription LPU History
(unaudited)

 
Quarter ended 
 December 31,
 
Year ended 
 December 31,
 
2016
 
2017
 
2016
 
2017
Advertising RPM
$
67.43

 
$
75.65

 
$
55.94

 
$
65.32

Advertising LPM
$
37.07

 
$
36.77

 
$
32.40

 
$
35.70

Subscription ARPU
$
4.73

 
$
6.08

 
N/A

 
$
5.34

Subscription LPU
$
3.12

 
$
4.41

 
N/A

 
$
3.62






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