Pandora Misses Q4 Estimates Despite Usage Gains

Online radio service Pandora Tuesday reported another quarter of user growth in the fourth quarter, but continues to struggle with profitability.

The company reported a loss of 5 cents a share on revenue of $81.3 million, missing the Wall Street consensus estimate of a 2 cent per share loss and revenue of $83 million in its fourth quarter ending Jan. 31. Excluding about $3.4 million in stock-based compensation, Pandora would have had a loss of 3 cents a share.

In a conference call with analysts, Pandora CEO Joseph Kennedy said ad revenue in the quarter was weaker than expected because of slower holiday-season ad sales and lower ad rates than anticipated. He said the company’s premium inventory sell-through rate hit a seasonal low point in January as ad spending declined and usage increased steeply.

Pandora's overall revenue of $81.3 million was up 71% from a year ago, with ad sales up 74% to $72.1 million. Subscription and other revenue grew 51% to $9.2 million. Pandora again showed strong gains in usage during the fourth quarter, with total listening hours doubling to 2.7 billion. Its active user base rose 62% to 47 million and its share of total U.S. radio listening doubled to 5.5% from 2.7% a year ago.

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With the majority of Pandora listening taking place on mobile devices, Kennedy emphasized that mobile monetization is growing. Total mobile revenue quadrupled from $25 million to $100 million in its last fiscal year. Kennedy added that he believes the only company with higher mobile ad revenue than Pandora in 2011 was Google.

He expects the company's mobile business to continue expanding as desktop Web and traditional radio advertisers shift more dollars to the mobile space this year.

Pandora projected that first-quarter revenue is in the range of $72 million to $75 million on seasonally softer ad sales. It expects a widening loss of 18 cents to 21 cents. For the full year, the company estimates revenue between $410 and $420 million and a net loss of 11 cents to 16 cents.

Starting Wednesday, Pandora will begin reporting user metrics on a monthly basis. In February, Pandora had 49 million active users and generated 975 million total listening hours.



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