Pandora closed a record Q2 of fiscal 2014, with revenue of $162.0 million, growing 58% year-over-year. Total mobile revenue was up 92% year-over-year to $116.0 million. Total listener hours grew 18% to 3.88 billion, compared to 3.30 billion for Q2 of fiscal 2013. Pandora’s share of total U.S. radio listening in July was 7.08%, an increase from 6.02% at the same time last year. Active users reached 71.2 million, up 30% YOY.
“Our second fiscal quarter was an important inflection point in Pandora’s history. Strong momentum in our mobile business, with non-GAAP total mobile revenue growing 92% year-over-year to $116 million, clearly demonstrates the leverage in Pandora’s business model,” said Joe Kennedy, Pandora CEO. “To drive future growth, we are accelerating investment in new technologies, channels and capabilities that maximize the value Pandora delivers.”
GAAP basic and diluted EPS were ($0.04), based on 175.3 million weighted average shares outstanding. Non-GAAP basic and diluted EPS were $0.04, including $4.7 million in revenue relating to their subscription return reserve, and excluding $10.5 million in expense from stock-based compensation. Non-GAAP basic and diluted EPS were based on 175.3 and 196.7 million weighted average shares outstanding.
Following these numbers, Canaccord Genuity analyst Michael Graham increased his price target to $25 from $24. He said “Pandora’s Q2 results were strong and we believe the company is in the early stages of ramping monetization efforts. With the stock up ~32% since the Q1 earnings call, we would not be surprised to see some volatility, but we believe business momentum is strong.”
Graham decreased his 2013 and 2014 Annual EPS estimates to $0.01 and $0.23, respectively. He also increased his 2013 and 2014 Annual Revenue estimates to $644M and $912M, respectively. He maintained his BUY rating.
RBR-TVBR observation: Let’s forget for a moment why Pandora is so appealing to those wishing to create their own channels and get served/control the music they like for free (and the wealth of music discovery). What also gets and keeps listeners on Pandora is the one spot per commercial break. It’s almost impossible for traditional radio to raise rate so much that it could compete in that kind of arena. “Less is More” years ago from Clear Channel didn’t work. The best we can do—and have been doing on many stations for years—is lump all of the spots together for the most part once an hour and hope listeners will stay thru the break or return after it’s over. The biggest battleground is still going to be the dash, where the music actually sounds decent from a smartphone (amplified by the car speakers), rather than from tinny-sounding speakers. Get back to music curation from DJs who know their music and listeners will feel like they’ve got “Pandora with a personality.” ‘Nuff said.