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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): July 31, 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 July 31, 2018, Pandora Media, Inc. (the “Company”) issued a press release announcing its financial results for the three month period ended June 30, 2018. 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 July 31, 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: July 31, 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
 394447110_pandoralogoa18.jpg

PANDORA REPORTS Q2 2018 FINANCIAL RESULTS
Stronger Year-On-Year Trends in Advertising and Subscription Businesses Drove Double Digit Revenue Growth

Total Q2 Revenue was $384.8 million, growing 12% year-over-year excluding Australia, New Zealand & Ticketfly, exceeding top-end of guidance
Q2 Subscription revenue was $113.7 million, growing 67% year-over-year excluding Australia, New Zealand & Ticketfly
Ad hour trends improved for the third straight quarter
Ad RPM hit an all-time Q2 high of $68.75, growing 4% year-over-year
Added 351 thousand to approximately 6 million subscribers; which grew 23% year-over-year
Announced partnerships with AT&T, Snap and Cheddar
Completed the acquisition of AdsWizz and launched Audio Programmatic

OAKLAND, Calif. - July 31, 2018 - Pandora (NYSE: P) today announced financial results for the second quarter ended June 30, 2018.

“We made continued progress against our strategy with total revenue growing 12%, subscription revenue up 67% and ad hour trends improving for the third straight quarter,” said Pandora CEO Roger Lynch. “New partnerships with top brands like Snap and AT&T, as well as enhancements to our ad tech and programmatic offerings, position us to further accelerate growth and ownership of the expanding digital audio marketplace.”

Second Quarter 2018 Financial Results & Highlights

Revenue: For the second quarter of 2018, total consolidated revenue was $384.8 million, an approximate 12% year-over-year increase compared to the year-ago quarter, excluding Australia, New Zealand and Ticketfly. This included $271.1 million in advertising revenue and $113.7 million in subscription revenue. We discontinued our service in Australia and New Zealand on July 31, 2017, and Ticketfly was sold to Eventbrite on September 1, 2017.

GAAP Net Loss and Adjusted EBITDA: For the second quarter of 2018, GAAP net loss was $92.0 million or $0.38 per share. This compared to a net loss of $275.1 million or $1.20 per share in the same quarter last year. Net loss included an unforecasted non-cash charge of $14.6 million related to the convertible debt exchange, a $7.2 million tax benefit for the release of a valuation allowance associated with the Adswizz acquisition and additional expense relating to restructuring and the AdsWizz transaction fees, all of which impacted net income by approximately $10.5 million, or $0.04 per share.

Our non-GAAP net loss was $38.9 million, or $0.15 per share. This compared to $50.1 million net loss or $0.21 in the year ago quarter. Adjusted EBITDA was a loss of $34.6 million, compared to a loss of $54.3 million in the same quarter last year.

Cash and Investments: For the second quarter of 2018, the Company ended with $420.8 million in cash and investments, compared to $544.4 million at the end of the prior quarter. This included $66.9 million use of cash for the AdsWizz acquisition, net of cash acquired.

Strategic Announcement: Pandora closed the acquisition of Adswizz on May 25, 2018. Final consideration was $146.6 million, comprised of $73.7 million in cash and 9.6 million shares.


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Additionally, Pandora announced the general availability of audio programmatic, Pandora’s first product integration with AdsWizz, which will allow Pandora to access additional demand, optimize pricing and increase efficiency of the company’s ad operations.

Product Launches: Pandora launched its Premium Family Plan that provides all the benefits of ad-free, on-demand music with Premium, for up to six people under one billing account for just $14.99 a month.

Listener Hours: Total listener hours were 5.09 billion for the second quarter of 2018, compared to 5.22 billion for the same period of the prior year.

Active Users: Active users were 71.4 million at the end of the second quarter of 2018.

Subscribers: Pandora Plus and Pandora Premium subscribers were approximately 6 million at the end of the second quarter of 2018.

Other Information

Guidance: Guidance will be discussed during the second quarter 2018 conference call.

Second Quarter 2018 Financial Results Conference Call: Pandora will host a conference call today at 2 p.m. PT/5 p.m. ET to discuss second quarter 2018 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 passcode7592268, and available via webcast replay until August 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, and the benefits to Pandora from the acquisition of AdsWizz. 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 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

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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, expense associated with the restructurings, transaction costs, loss on sales of subsidiaries and loss on extinguishment of convertible debt. 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, provision for income taxes, depreciation and intangible amortization expense, amortization of non-recoupable ticketing contract advances, other expense, expense associated with the restructurings, transaction costs 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 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.

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.


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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 reductions in the first quarters of 2018 and 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 first quarters of 2017 and 2018, 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.

Transaction Costs: consists of professional and legal fees recognized during the period, primarily related to the AdsWizz acquisition. These costs 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.

Loss on Sales of Subsidiaries: consists of loss on sales of subsidiaries recognized during the period, primarily related to the Ticketfly disposition, including the cancellation of the convertible promissory note receivable. These amounts were calculated as the decrease in the fair value less costs to sell for sales of our subsidiaries and were recorded as loss on sales 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.

Loss on Extinguishment of Convertible Debt: consists of loss on extinguishment of convertible debt recognized during the period. This amount were calculated as the difference in the fair value and carrying value of the convertible debt immediately prior to extinguishment and was recorded as loss on extinguishment of convertible debt 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.

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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



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

Three months ended 
 June 30,
 
Six months ended 
 June 30,

2017 (1)
 
2018 (1)
 
2017 (1)
 
2018 (1)
Revenue
 

 
 

 
 
 
 
Advertising
$
278,204

 
$
271,056

 
$
501,512

 
$
485,624

Subscription and other
68,900

 
113,738

 
133,778

 
218,403

Ticketing service
29,730

 

 
57,548

 

Total revenue
376,834

 
384,794

 
692,838

 
704,027

Cost of revenue
 

 
 

 
 
 
 
Cost of revenue—Content acquisition costs
195,875

 
226,860

 
383,295

 
444,440

Cost of revenue—Other (2)
27,440

 
32,727

 
52,972

 
59,576

Cost of revenue—Ticketing service (2)
20,510

 

 
39,128

 

Total cost of revenue
243,825

 
259,587

 
475,395

 
504,016

Gross profit
133,009

 
125,207

 
217,443

 
200,011

Gross margin
35
%
 
33
%
 
31
%
 
28
%
Operating expenses
 

 
 
 
 
 
 
Product development (2)
41,233

 
40,351

 
80,821

 
76,235

Sales and marketing (2)
145,891

 
125,375

 
270,993

 
249,591

General and administrative (2)
57,954

 
53,617

 
102,479

 
95,248

Goodwill impairment
131,997

 

 
131,997

 

Contract termination fees
23,467

 

 
23,467

 

Total operating expenses
400,542

 
219,343

 
609,757

 
421,074

Loss from operations
(267,533
)
 
(94,136
)
 
(392,314
)
 
(221,063
)
Interest expense
(7,404
)
 
(6,745
)
 
(14,785
)
 
(14,031
)
Other income, net
78

 
1,767

 
307

 
4,349

Total other expense, net
(7,326
)
 
(4,978
)
 
(14,478
)
 
(9,682
)
Loss before provision for income taxes
(274,859
)
 
(99,114
)
 
(406,792
)
 
(230,745
)
Provision for income taxes
(277
)
 
7,132

 
(611
)
 
7,058

Net loss
(275,136
)
 
(91,982
)
 
(407,403
)
 
(223,687
)
Net loss available to common stockholders
$
(289,664
)
 
$
(99,455
)
 
$
(421,931
)
 
$
(238,523
)
Basic and diluted net loss per common share
$
(1.20
)
 
$
(0.38
)
 
$
(1.76
)
 
$
(0.93
)
Weighted-average basic and diluted common shares
241,320

 
259,822

 
239,428

 
256,397


(1) Includes results for Australia, New Zealand and Ticketfly, where applicable
 (2) Includes stock-based compensation expense as follows: 
 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2018
 
2017
 
2018
Cost of revenueOther
$
814

 
$
800

 
$
1,629

 
$
1,542

Cost of revenueTicketing service
34

 

 
63

 

Product development
9,422

 
8,028

 
17,337

 
14,445

Sales and marketing
15,102

 
11,092

 
28,598

 
22,909

General and administrative
13,236

 
7,608

 
20,599

 
15,068

Total stock-based compensation expense
$
38,608

 
$
27,528

 
$
68,226

 
$
53,964






Pandora Media, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
  
 
As of December 31,
 
As of June 30,
 
2017
 
2018
 
(audited)
 
(unaudited)
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
499,597

 
$
292,996

Short-term investments
1,250

 
127,791

Accounts receivable, net
336,429

 
339,592

Prepaid content acquisition costs
55,668

 
24,379

Prepaid expenses and other current assets
19,220

 
21,799

Total current assets
912,164

 
806,557

Convertible promissory note receivable
35,471

 

Property and equipment, net
116,742

 
110,583

Goodwill
71,243

 
178,917

Intangible assets, net
19,409

 
59,863

Other long-term assets
11,293

 
12,023

Total assets
$
1,166,322

 
$
1,167,943

Liabilities, redeemable convertible preferred stock and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
14,896

 
$
17,704

Accrued liabilities
34,535

 
60,047

Accrued content acquisition costs
97,751

 
125,791

Accrued compensation
47,635

 
48,184

Deferred revenue
31,464

 
43,512

Total current liabilities
226,281

 
295,238

Long-term debt, net
273,014

 
250,267

Other long-term liabilities
23,500

 
25,919

Total liabilities
522,795

 
571,424

Redeemable convertible preferred stock
490,849

 
505,684

Stockholders’ equity
 
 
 
Common stock
25

 
27

Additional paid-in capital
1,422,221

 
1,598,905

Accumulated deficit
(1,269,351
)
 
(1,507,874
)
Accumulated other comprehensive loss
(217
)
 
(223
)
Total stockholders’ equity
152,678

 
90,835

Total liabilities, redeemable convertible preferred stock and stockholders’ equity
$
1,166,322

 
$
1,167,943






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

Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2018
 
2017
 
2018
Operating activities
 
 
 
 
 
 
 
Net loss
$
(275,136
)
 
$
(91,982
)
 
$
(407,403
)
 
$
(223,687
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
 
 
 
 
Loss on dispositions

 

 

 
2,173

Goodwill impairment
131,997

 

 
131,997

 

Loss on extinguishment of convertible debt

 
14,600

 

 
14,600

Depreciation and amortization
17,435

 
14,283

 
35,115

 
28,062

Stock-based compensation
38,608

 
27,528

 
68,226

 
53,964

Amortization of premium on investments, net
20

 
(552
)
 
73

 
(670
)
Accretion of discount on convertible promissory note receivable

 

 

 
(534
)
Other operating activities
(179
)
 
166

 
186

 
231

Amortization of debt discount
4,913

 
5,022

 
9,799

 
10,418

Interest income

 

 

 
(810
)
Provision for bad debt
7,884

 
1,831

 
9,274

 
1,516

Changes in operating assets and liabilities
 
 
 
 
 
 
 
Accounts receivable
(32,347
)
 
(51,049
)
 
12,594

 
16,111

Prepaid content acquisition costs
8,673

 
11,522

 
6,441

 
31,289

Prepaid expenses and other assets
(3,567
)
 
242

 
(9,146
)
 
(1,346
)
Accounts payable, accrued and other current liabilities
1,880

 
(1,148
)
 
15,072

 
3,601

Accrued content acquisition costs
(1,713
)
 
19,537

 
(5,475
)
 
28,040

Accrued compensation
16

 
2,517

 
(13,191
)
 
1,170

Other long-term liabilities
420

 
(8,241
)
 
176

 
(9,027
)
Deferred revenue
120

 
5,830

 
4,116

 
12,047

Reimbursement of cost of leasehold improvements

 
537

 
5,236

 
894

Net cash used in operating activities
(100,976
)
 
(49,357
)
 
(136,910
)
 
(31,958
)
Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(6,561
)
 
(1,580
)
 
(8,541
)
 
(4,990
)
Internal-use software costs
(3,129
)
 
(5,089
)
 
(10,894
)
 
(10,578
)
Payments related to acquisition, net of cash acquired

 
(66,924
)
 

 
(66,924
)
Purchases of investments

 
(75,245
)
 

 
(164,586
)
Proceeds from maturities of investments
14,054

 
37,500

 
25,274

 
38,750

Proceeds from cancellation of convertible promissory note receivable

 

 

 
34,742

Net cash provided by (used in) investing activities
4,364

 
(111,338
)
 
5,839

 
(173,586
)
Financing activities
 
 
 
 
 
 
 
Proceeds from issuance of redeemable convertible preferred stock
172,500

 

 
172,500

 

Payments of issuance costs
(12,625
)
 
(4,516
)
 
(12,625
)
 
(4,516
)
Proceeds from employee stock purchase plan
3,348

 
2,237

 
6,146

 
2,274

Proceeds from exercise of stock options
750

 
175

 
3,138

 
423

Tax withholdings related to net share settlements of restricted stock units

 
(190
)
 

 
(477
)
Net cash provided by (used in) financing activities
163,973

 
(2,294
)
 
169,159

 
(2,296
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
82

 
(10
)
 
292

 
(18
)
Net increase (decrease) in cash, cash equivalents and restricted cash
67,443

 
(162,999
)
 
38,380

 
(207,858
)
Less: Cash held for sale
(28,101
)
 

 
(28,101
)
 

Cash, cash equivalents and restricted cash at beginning of period
172,757

 
455,995

 
201,820

 
500,854

Cash, cash equivalents and restricted cash at end of period
$
212,099

 
$
292,996

 
$
212,099

 
$
292,996








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

 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2018
 
2017
 
2018
Reconciliation of cash, cash equivalents and restricted cash as shown in the statements of cash flows
 
 
 
 
 
 
 
Cash and cash equivalents
$
209,581

 
$
292,996

 
$
209,581

 
$
292,996

Restricted cash included in other long-term assets line item of Condensed Consolidated Balance Sheets
2,518

 

 
2,518

 

Total cash, cash equivalents and restricted cash
$
212,099

 
$
292,996

 
$
212,099

 
$
292,996






Pandora Media, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(unaudited)

 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2018
 
2017
 
2018
Gross profit
 

 
 

 
 
 
 
GAAP gross profit
$
133,009

 
$
125,207

 
$
217,443

 
$
200,011

Stock-based compensation—Cost of revenue
848

 
800

 
1,692

 
1,542

Amortization of intangibles—Cost of revenue
2,514

 
1,951

 
3,933

 
3,106

Expense associated with the restructurings
78

 

 
390

 

Non-GAAP gross profit
$
136,449

 
$
127,958

 
$
223,458

 
$
204,659

Non-GAAP gross margin
36
%
 
33
%
 
32
%
 
29
%
 
 
 
 
 
 
 
 
Adjusted EBITDA and non-GAAP net loss
 

 
 

 
 
 
 
GAAP net loss
$
(275,136
)
 
$
(91,982
)
 
$
(407,403
)
 
$
(223,687
)
Depreciation and amortization
17,435

 
14,283

 
35,115

 
28,062

Stock-based compensation
38,608

 
27,528

 
68,226

 
53,964

Other expense, net
7,326

 
4,978

 
14,478

 
9,682

Provision for income taxes
277

 
(7,132
)
 
611

 
(7,058
)
Expense associated with the restructurings
1,733

 
1,379

 
7,913

 
10,247

Transaction costs

 
1,700

 

 
4,059

Goodwill impairment
131,997

 

 
131,997

 

Loss on extinguishment of convertible debt

 
14,600

 

 
14,600

Loss on sale of subsidiaries

 

 

 
2,173

Contract termination fees
23,467

 

 
23,467

 

Adjusted EBITDA
$
(54,293
)
 
$
(34,646
)
 
$
(125,596
)
 
$
(107,958
)
Income tax effects of non-GAAP pre-tax loss
23,596

 
5,247

 
55,754

 
26,997

Other expense, net
(7,326
)
 
(4,978
)
 
(14,478
)
 
(9,682
)
Provision for income taxes
(277
)
 
$
7,132

 
$
(611
)
 
$
7,058

Depreciation
(11,821
)
 
(11,655
)
 
(22,378
)
 
(23,916
)
Non-GAAP net loss
$
(50,121
)
 
$
(38,900
)
 
$
(107,309
)
 
$
(107,501
)
 
 
 
 
 
 
 
 
Non-GAAP net loss per common share - basic and diluted
(0.21
)
 
(0.15
)
 
(0.45
)
 
(0.42
)
Weighted average basic and diluted common shares
241,320

 
259,822

 
239,428

 
256,397






Pandora Media, Inc.
Reconciliation of GAAP to Non-GAAP Measures continued
(in thousands, except per share amounts)
(unaudited)

 
Three months ended 
 June 30,
 
Six months ended 
 June 30,
 
2017
 
2018
 
2017
 
2018
Product development
 
 
 
 
 
 
 
GAAP product development
$
41,233

 
$
40,351

 
$
80,821

 
$
76,235

Stock-based compensation
(9,422
)
 
(8,028
)
 
(17,337
)
 
(14,445
)
Amortization of intangibles
(254
)
 
(97
)
 
(2,076
)
 
(194
)
Expense associated with the restructurings
(8
)
 

 
(710
)
 
(622
)
Non-GAAP product development
$
31,549

 
$
32,226

 
$
60,698

 
$
60,974

 
 
 
 
 
 
 
 
Sales and marketing
 
 
 
 
 
 
 
GAAP sales and marketing
$
145,891

 
$
125,375

 
$
270,993

 
$
249,591

Stock-based compensation
(15,102
)
 
(11,092
)
 
(28,598
)
 
(22,909
)
Amortization of intangibles
(1,170
)
 
(397
)
 
(2,883
)
 
(480
)
Amortization of non-recoupable ticketing contract advances
(1,493
)
 

 
(3,479
)
 

Loss on sale of subsidiaries

 

 

 
(100
)
Expense associated with the restructurings
(1,551
)
 

 
(5,207
)
 
(4,608
)
Non-GAAP sales and marketing
$
126,575

 
$
113,886

 
$
230,826

 
$
221,494

 
 
 
 
 

 

General and administrative
 
 
 
 
 
 
 
GAAP general and administrative
$
57,954

 
$
53,617

 
$
102,479

 
$
95,248

Stock-based compensation
(13,236
)
 
(7,608
)
 
(20,599
)
 
(15,068
)
Amortization of intangibles
(183
)
 
(183
)
 
(366
)
 
(366
)
Transaction costs

 
(1,700
)
 

 
(4,059
)
Loss on extinguishment of convertible debt

 
(14,600
)
 

 
(14,600
)
Loss on sale of subsidiaries

 

 

 
(2,073
)
Expense associated with the restructurings
(96
)
 
(1,379
)
 
(1,606
)
 
(5,017
)
Non-GAAP general and administrative
$
44,439

 
$
28,147

 
$
79,908

 
$
54,065






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

 
Three months ended June 30,
Six months ended June 30,
 
2017
 
2018
2017
 
2018
Advertising RPM
$
66.15

 
$
68.75

$
58.34

 
$
62.15

Advertising LPM
$
35.84

 
$
36.87

$
34.61

 
$
36.61






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

 
Three months ended June 30,
Six months ended June 30,
 
2017
 
2018
2017
 
2018
Subscription ARPU
$
4.82

 
$
6.52

$
4.79

 
$
6.41

Subscription LPU
$
3.11

 
$
4.78

$
3.03

 
$
4.72



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