Inside the numbers at Pandora Media


RBR-TVBR analysis
You know by now that Pandora Media had over $90 million of revenues in the first nine months of its most recent fiscal year, as the company made its financial data public for the first time as it prepares to sell $100 million of stock which will trade on Wall Street. What else is to be gleaned from that IPO filing?

Well, the Internet radio company has been growing revenues impressively in recent years. Subscription revenues have been growing by huge percentages, but they are far, far less than advertising revenues – sort of the reverse of satellite radio.

Subscription revenues more than quadrupled from the fiscal year ended 1/31/09, $1.1 million, to the next year ended 1/1/10, $5 million. And they skyrocketed to $12.3 million in the first nine months of the most recent fiscal year from only $2.6 million for the same period a year earlier.

Even so, those revenues pale against advertising revenues, which jumped from $18.3 million in the year ended 1/31/09 to $50.1 million in the year ended 1/31/10. And then they jumped again to $77.9 million in the first nine months of the most recent fiscal year from $28.7 million a year earlier.

What’s really significant about the most recent fiscal year, though, is that the company turned cash flow positive. For the first nine months of the most recent fiscal year revenues exceeded operating costs by $819,000. That’s not a lot, but it compares to an operating loss of $17.8 million for the same period a year earlier. For those nine months it had a net loss attributable to common shareholders of $7.1 million, but that’s hardly unusual for a developing company.

Far and away the biggest operating expense is “content acquisition,” which was $45.4 million in the first nine months of the current fiscal year. That will keep growing as Pandora gets more listeners because that number includes music royalty payments, with the meter running each time an individual person listens to a streamed song. As previously noted, payments to SoundExchange have been consuming 45% of Pandora’s revenues, with an additional 4% going to ASCAP, BMI and SESAC.

Pandora founder and Chief Strategy Officer Tim Westergren, pictured, sold nearly $2.2 million of his stock when some of the private equity investors offered staffers an opportunity to sell some of their shares last August. CEO Joseph Kennedy sold over $2.5 million of his holdings. Even so, both still hold far more shares than they sold – about 2.4% of the company pre-IPO for Westergren and 2.7% for Kennedy. In all, some 23 employees sold $7.9 million of stock to the private equity investors.

Pandora has raised capital several times over its 11-year history, dating back to its corporate origins as It took the name Pandora in 2005. It last sold $3.8 million of new stock in a private placement on January 27, 2011, just two weeks and a day before filing the IPO.
Who owns Pandora now? Only one of the names is likely to be familiar to broadcasters – that’s Hearst Corporation, which owns 5.75% pre-IPO. The larger holders are Crosslink Capital, 23.03%; Walden Venture Capital, 18.59%; Greylock Partners, 14.13%; and Labrador Ventures, 8.5%. The only other holder of 5% or more is GGV Capital at 5.17%.

As is the usual case with an IPO filing, there are still lots of blanks to be filled in before stock is actually sold to the public. Before that happens we will likely see financial results for the most recent fiscal year, which ended January 31, 2011.

Read RBR’s previous reports on the Pandora IPO.

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Pandora files $100 million IPO