Pandora Media Inc Stock Dives After Revenue Miss

Pandora Media Inc Stock Dives After Revenue Miss

Pandora Media reported fourth quarter earnings after the closing bell on Wednesday. The music streaming website reported adjusted earnings per share of $.18 on revenue of $268 million.  Wall Street was expecting results of $.19 earnings per share on revenue of $276.53 million. Due to earnings miss, Pandora share skidded -22% after hours.  Full year 2014 earnings per share totaled up to -$.15 per share on revenue of $920.8 million. Earnings were hit in the fourth quarter due $26.9 million expense from stock compensation and intangible asset amortization costs of $0.2 million and full year stock compensation costs totaled $87.1 million and intangible asset amortization hit earnings with $0.7 million.

Fourth quarter revenue up 33% YoY, full year up 44% YoY

While revenue estimates did miss Wall Street estimates, the company did report revenue growth of 33% from fourth quarter 2013.  Advertising revenue still makes up a bulk of the total revenue with a fourth quarter haul of $220.1 million, a 36% increase from fourth quarter 2013 ad revenues.  Subscription revenue for its “ad free listening” service made up the additional $47.9 million, which showed growth of 24% from last year’s fourth quarter.  Adjusted EBITDA came in at $43.8 million, which represented a 68% increase from 2013 results for fourth quarter.

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Full year 2014 revenue of $920.8 million represented a 44% year over year increase from total revenue for 2013.  Full year 2014 ad revenue totaled up to $732.3 million, which was a 40% increase from 2013.  Subscription revenue for 2014 ran up $174.3 million for Pandora, up 38% year over year.  Adjusted EBITDA resulted at $58.2 million, a 158% increase from 2013 results.

Turning to listening hours for the fourth quarter 2014, listeners gathered up 5.20 billion compared to 4.54 billion from fourth quarter 2013, a growth of 15% year over year.  Active listeners growth only came in 7% higher year over year to 81.5 million.

First quarter and full year 2015 guidance

For the first quarter of 2015, the company listed guidance on revenue to range from $220-225 million.  Adjusted EBITDA is expected to come in at a loss ranging from $35 million to $30 million, due to amortization costs, income taxes, and stock compensation.

Full year 2015 revenue is expected to range between $1.15 and $1.17 billion with adjusted EBITDA expectations ranging from $70 to $80 million.

Overall, Pandora missed estimates and management certainly has some explaining on the costs and reasoning for the loss.  Also, with competitors such as Apple Radio, 8Tracks, and other streaming music, it will be important to get a greater insight for what management plans to do in 2015 to attract more listeners and how it will continue to distinguish itself from its competitors.  Moving forward, it will also be important to see how analysts respond to the earnings call and how forward guidance fits into their own estimates, additionally whether or not to downgrade ratings and price targets for 2015.

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