Job Cuts, Expense Reduction Planned For Pandora

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With its stock languishing below $6 since October 2017 and pressure to control costs at a heightened state, Oakland, Calif.-based streaming audio pioneer Pandora on Wednesday initiated what it calls “an organizational structuring designed to prioritize its strategic growth initiatives and optimize overall business performance.”


For employees at the company’s Bay Area headquarters, that could spell bad news.

Pandora is expanding its presence and workforce in Atlanta, a move it says can provide “a significant opportunity to add instrumental talent in a region with lower costs.”

In a statement released late Wednesday, Pandora said its structural “redesign” shifts resources to focus on ad-tech and audience development efforts, while positioning the company for improved operating leverage “over time.”

Pandora adds that the initiative “simplifies the organization into a flatter structure for smarter, faster execution.”

While Pandora will add staff in Atlanta, “eliminated roles and other cost-saving measures” are on the way. “These are expected to result in combined annualized savings of approximately $45 million to adjusted EBITDA,” Pandora notes.

The savings, it says, 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.

“Even with significant reinvestment in these growth initiatives, the cost reduction efforts mean that Pandora expects operating expenses, excluding subscription commissions, to represent a lower percentage of revenue in full-year 2018 than in 2017,” Pandora adds.

Commenting on the moves, Pandora CEO Roger Lynch says, “As our dynamic industry evolves, we must also evolve. As I shared last quarter, we know where and how to invest in order to grow. We have an aggressive plan in place that includes strategic investments in our priorities: ad-tech, product, content, partnerships and marketing. I am confident these changes will enable us to drive revenue and listener growth.”

Commenting on Atlanta, Lynch called it a city “with a rich history in music and a large pool of diverse tech talent that we can tap into as we scale. While we are committed to having Oakland remain our headquarters, we’re excited to build on the great foundation of our awesome team there and expand our presence in Atlanta over time. These changes allow us to act faster, invest for growth and extend our leadership as the audio market hits what we believe will soon be a major inflection point.”

As stated in Pandora Media’s 8-K filing with the SEC outlining the initiatives, its reduction in force plan affects approximately 5% of the company’s employee base.
Pandora’s Board of Directors approved the plan on January 11, and affected employees were informed of the plan on Wednesday (1/31).
Pandora expects the reduction in force plan to be substantially completed by the end of March.
Total costs and cash expenditures for the reduction in force plan are estimated at $6.5 million to $8.5 million, substantially all of which are related to employee severance and benefits costs, Pandora says.
Pandora expects to recognize most of these pre-tax reduction in force charges in Q1 2018.