Pandora Beats, Q3 2013 Revenue Up 60% To $120M, Net Income Of $2.1M; Q4 Forecast Much Lower Than Expected

Internet radio service Pandora released its financial results for the Q3 2013, ending October 31 2012. Revenue is up 60 percent compared to Q3 2012 to $120 million. Pandora reported a non-GAAP earnings per share of $0.05. It represents a GAAP net income of $2.052 million. Advertising revenue was $106.3 million, a 61 percent year-over-year increase. Subscription and other revenue was $13.7 million, a 52 percent year-over-year increase. Analysts were expecting revenue of $17.1 million and non-GAAP EPS between breakeven and $0.01. Pandora’s earnings were higher than expected. At the same time, the company lowered Q4 forecast, which disappointed investors. The most important expense for Pandora remains music royalties. Recently, it has been lobbying to lower those content costs. Pandora currently has $80.5 million in cash, cash equivalents and short-term investments. That?s down from the last quarter. It had 59.9 million active users this quarter, up from 54.9 million last quarter. An important metric is the total number of listener hours. It grew 67 percent year-over-year to 3.56 billion hours for this quarter. Growth is slowing down as it was at 3.3 billion hours last quarter. For Q4 2013, Pandora expects revenue between $120 million and $123 million and a non-GAAP loss per share. In addition to being much lower than expected, inaccurate reports from MarketWatch drove the stock down. Shares are currently down 17.57 percent in after-hour trading. The revision could be due to slower growth and an increase in operating costs. The company plans to continue hiring salespeople for its advertising activities. Apple and Microsoft could prepare Pandora competitors in the coming months. But Apple has hit some licensing trouble. It could delay the launch. Pandora has moved away from its series of net losses, but it apparently won’t be for long as the company expects a loss next quarter. Graphics by Bryce Durbin

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