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Today, 12:48 PM
Yesterday, 4:34 PM
- Though Pandora (NYSE:P) beat Q4 revenue estimates (while missing EPS estimates), the company is guiding for 2016 revenue of $1.4B-$1.42B vs. a $1.42B consensus. In addition, with planned investments in an on-demand streaming service set to weigh, adjusted EBITDA is expected to drop to -$60M to -$80M from 2015's $51.7M and 2014's $58.2M.
- Q1 sales guidance of $280M-$290M is in-line with a $284M consensus. Q1 adjusted EBITDA guidance is at -$65M to -$75M.
- Metrics: Active listeners totaled 81.1M in Q4, up by 3M Q/Q but down by 0.4M Y/Y. Listener hours totaled 5.37B, up moderately from Q3's 5.14B and Q4 2014's 5.2B. Competition from Apple, Spotify, and others has been weighing on listener growth and engagement.
- Q4 details: Ad revenue +22% Y/Y to $269M. Subscription/other revenue +19% to $57M. Ticketing revenue (via Ticketfly) totaled $10.2M. Content acquisition costs rose 24% Y/Y to $142.9M (43% of revenue) ahead of 2016's higher CRB rates. GAAP operating expenses rose 49% to $122.9M.
Ad RPM (revenue per 1K listener hours) rose to $57.25 from $48.19 a year ago - PC RPM was $68.83, and mobile/other device RPM was $55.14. Pandora ended 2015 with $416.9M in cash and $234.6M in long-term debt.
- P -5.3% after hours to $8.61. Shares rose 8.2% in regular trading following an NYT report stating Pandora is thinking of selling itself.
- Pandora's Q4 results, earnings release
Yesterday, 2:24 PM
- Ahead of this afternoon's Q4 report, the NYT reports Pandora (NYSE:P) is "working with Morgan Stanley to meet potential buyers," and has held discussions about selling itself. Shares have jumpedin response.
- The paper cautions talks are preliminary. The news comes with Pandora's shares having fallen into the single digits thanks to a market rout and ongoing concerns about competition and user growth/engagement.
- Back in Oct. 2014, SA author Orange Peel Investments predicted Pandora would eventually drop to the $10 range, and then get bought out.
Tue, Jan. 19, 9:46 AM
- Though believing the stock could still ultimately go to zero, BTIG's Rich Greenfield has upgraded Pandora (P +0.6%) to Neutral on a belief the risk/reward for staying bearish is no longer as compelling following a selloff that has the Web radio leader's shares to the single digits.
- Greenfield, bearish for a long time, is still fairly pessimistic: "Our core thesis has not changed. We simply do not believe Pandora can ever generate meaningful earnings to justify its valuation. There are no barriers to entry in online music with competition continuing to build ... Pandora [also] faces an increasing wave of competition for mobile advertising dollars from a wide array of companies with far superior data/analytics (Google, Facebook, Instagram, Snapchat, Twitter, etc.)."
- Separately, Apple (NASDAQ:AAPL) has announced it's discontinuing the free/ad-supported version of iTunes Radio starting Jan. 28. The Beats 1 station will be Apple's only free Web radio service going forward. Ad-free radio streams will still be provided via the Apple Music subscription service; Apple didn't state whether the iTunes Match service will continue supporting ad-free iTunes Radio.
- The news comes ahead of Pandora's Feb. 11 Q4 report. Shares jumped last month after the CRB announced better-than-feared recording royalty rates for 2016-2020, but gave back their gains and then some as markets tumbled.
- After opening sharply higher, Pandora has quickly pared its gains. The Nasdaq is up 1%.
- Two weeks ago: Canaccord believes Pandora's listener hours tracking with estimates
- Three weeks ago: SunTrust downgrades Pandora, cites CRB ruling and spending concerns
Tue, Jan. 19, 9:17 AM
Mon, Jan. 4, 11:41 AM
- In a critical weekend column, Barron's Alexander Eule argues Pandora (NYSE:P) could still drop another 20% or more, and deems shares expensive at 32x a 2017 EPS consensus of $0.42 (well above a 2016 consensus of $0.12).
- Eule highlights Pandora's recent growth challenges amid stiff competition from the likes of Spotify and Apple - "radio seems quaint, when there’s an unlimited jukebox at your fingertips." - and the recent CRB recording royalty ruling, which is expected to increase Pandora's 2016 content costs by 15%. Curiously, the Rdio acquisition and Pandora's plans to launch an on-demand streaming service aren't mentioned.
- Separately, SunTrust's Bob Peck has downgraded Pandora to Neutral, and cut his target by $3 to $15. He considers the CRB ruling "modestly positive," but notes it could still increase Pandora's content costs by $40M in both 2016 and 2017. "While our revenue [estimates] increase and are in line with Street consensus, our revised EBITDA projections of $41M for 2016 and $103M for 2017 are materially below the Street."
- Peck also thinks questions remain about investments and competition for an on-demand service launch, and near-term losses related to Rdio and Ticketfly. "Given the uncertainty and upcoming investments, we believe it will be difficult for P to outperform until visibility improves."
- Pandora is slightly more than $1 above a 52-week low of $11.38. The Nasdaq is down 2.8%.
Dec. 18, 2015, 6:58 PM
- Up 13.5% yesterday after the Copyright Royalty Board announced smaller-than-feared 2016-2020 royalty rate increases for ad-supported music webcasts (and lower rates for subscription-based webcasts), Pandora (NYSE:P) gave back a chunk of its gains today. The Nasdaq fell 1.6%.
- FBR and Albert Fried have respectively upgraded Pandora to Market Perform and Overweight since the CRB ruling. Fried's Rich Tullo, who was a staunch Pandora bear for a long time: "It’s a win ... Any number below 20 cents was good for the company.”
- FBN's Shebly Seyrafi (Outperform) sees Pandora's content acquisition costs rising to 50% of revenue in 2016 from 45% in 2015, but then declining to 43% in 2017 and eventually reaching the company's 40% long-term target. "Although we were expecting a lower rate ($.15-$.16 per 100 songs) in C2016, we were also expecting larger annual increases in the years C2017-C2020 than increases in the CPI during this period ... We expect the company to use the proceeds (~300M+) from its recent convertible toward making direct deals with the labels to help the company’s on-demand business."
- Needham's Laura Martin (Buy) thinks a mixture of lower subscription rates and higher ad-supported rates will lead Pandora to emphasize its subscription efforts. "[That's] better for shareholders since companies with two revenue streams are predictably valued at a premium to single-revenue business models."
- Though upgrading, FBR's Barton Crockett is still worried about the bottom-line impact of Pandora's planned on-demand streaming launch, and forecasts 2016 adjusted EBITDA of just $19.5M (below a ~$100M consensus). "While management is clearly happy to have CRB settled, it clearly seems to be aiming to make 2016 an investment year ... if usage is weak and ad-loads are constrained by competitive concerns for the user experience —a distinct possibility in this environment—then the investor reaction to stepped- up investment could be choppy."
Dec. 17, 2015, 9:20 AM
Dec. 16, 2015, 5:38 PM
Dec. 16, 2015, 5:20 PM
- The CRB has posted the following regarding future U.S. music webcasting recording royalty rates: "The rate for commercial subscription services in 2016 is $0.0022 per-performance. The rate for commercial nonsubscription services in 2016 is $0.0017 per-performance. The rates for the period 2017 through 2020 for both subscription and nonsubscription services shall be adjusted to reflect the increases or decreases, if any, in the general price level, as measured by the Consumer Price Index applicable to that rate year, as set forth in the regulations adopted by the Judges’ determination."
- For reference, the 2015 rate for free (non-subscription) streams is $0.0014. Trade group SoundExchange had been seeking $0.0025.
- After initially plunging on the numbers, Pandora (NYSE:P) has quickly jumped to $15.22 after hours.
- Update (5:37PM ET): Pandora is now up 19.1% to $16.00.
- Update 2 (8:54PM ET): Pandora has responded to the CRB's decision. CEO Brian McAndrews: "This is a balanced rate that we can work with and grow from ... We are moving full-steam ahead with our ambitious plan to continue to build the world’s most powerful music discovery platform." The company states the new rates (higher ad-supported rates, lower subscription rates) represent a 15% increase over Pandora's effective 2015 per-performance royalty rate.
Dec. 15, 2015, 1:18 PM
- Ahead of tomorrow's huge Copyright Royalty Board (CRB) decision on the recording royalty rates Pandora (NYSE:P) and other online radio providers will have to pay from 2016-2020, the company has announced a multi-year performance royalty deal with Warner/Chappell, Warner Music's publishing arm.
- Specific terms are confidential. Pandora: "The deal allows Warner/Chappell Music to obtain its goal of delivering improved performance royalties for its songwriters, while Pandora will benefit from greater rate certainty and the ability to add new flexibility to the company's product offering over time. The royalties paid by Pandora to sound recording owners are not affected by this agreement."
- The agreement comes a month after one with Sony/ATV, the world's biggest music publisher. Pandora is outperforming on a good day for equities.
Dec. 2, 2015, 5:40 PM
Dec. 2, 2015, 4:44 PM
- Pandora (NYSE:P) is selling $300M worth of convertible senior notes due 2020. Initial purchaser Morgan Stanley is expected have a $45M overallotment option.
- Aside from capped called transactions related to the offering, net proceeds will be used for "general corporate purposes." Pandora recently struck a $450M half-cash/half-stock deal to buy Ticketfly, as well as a $75M deal to buy assets from Rdio.
- Shares have fallen to $13.49 after hours. Pandora had $442.6M in cash at the end of Q3, and no debt.
Nov. 25, 2015, 8:45 AM
- Pandora (NYSE:P) states the Register of Copyrights declined to express an opinion on the matter of differentiated music webcasting royalty rates. She added that since all participants in the ongoing Web IV rate proceeding had assumed a non-differentiated (uniform) rate structure, such a structure is the only reasonable outcome for the proceeding.
- Pandora has been seeking a uniform rate structure. The Register of Copyrights' opinion comes ahead of a mid-December decision by the Copyright Royalty Board (CRB) on the recording royalty rates Pandora will pay from 2016-2020. Pandora rose in September after the CRB backed the admissibility of Pandora's deal with indie music rights agency Merlin as a benchmark for broader recording royalty rates.
- Recording royalty payments account for much of Pandora's content acquisition costs, which in turn totaled $129.5M (42% of revenue) in Q3 after backing out one-time charges. Shares have risen to $13.97 premarket.
Nov. 11, 2015, 2:03 PM
- Pandora (P +3.8%) is now up 9% from Monday's close, possibly aided by a Bloomberg report stating the company is mulling expansion into the U.K. and other overseas markets. The gains also come amid two conference talks by CFO Mike Herring: Herring presented at a Wells Fargo conference yesterday, and at an RBC conference today (webcasts: I, II).
- With 27.5M shares (14% of the float) shorted as of Oct. 15, and many shorts holding decent paper profits, short-covering could be helping.
- Separately, at the M1 Summit mobile conference, VP Lisa Sullivan-Cross suggested Pandora is thinking of adding an offline mode. Cross: "It's something we're looking at ... We know our customers want it." Spotify and various other subscription services support offline downloads.
Nov. 5, 2015, 12:25 PM
- Pandora (NYSE:P) has inked a multi-year performance royalty licensing deal with Sony/ATV, the world's biggest music publisher. Terms are undisclosed.
- Sony: "We are pleased that our songwriters will begin to enjoy the benefit of better rates on one of the most important platforms for music consumption and discovery." Pandora notes performance royalties paid to rights holders for master recordings aren't affected by the deal. Recording royalties paid to SoundExchange have historically accounted for a much bigger portion of Pandora's content costs.
- In May, publishing rights group BMI won a ruling (it has since been appealed) granting it higher performance royalties from Pandora. In September, Pandora won a favorable ruling from the Copyright Royalty Board regarding the use of a deal with indie rights agency Merlin as a benchmark for broader recording royalty rates.
- Three days ago: Pandora strikes distribution deal for hit podcast Serial
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