Pandora Earnings Fall Short of Expectations, CEO Stresses Mobile Growth

Pandora trader wearing single symbol P on his jacket at the NYSE
Pandora trader wearing single symbol P on his jacket at the NYSE

Pandora may have grown its quarterly revenue 71 percent and its ‘listener hours’ 99 percent over the year-ago quarter, but results fell short of expectations, sending the stock plummeting by some 15 percent after hours. (Click here for the latest after-hours quote.)

What happened?

The company’s quarterly revenue came in at $81.3 million, nearly two million short of expectations, and the company reported a three cent loss, a penny more than Wall Street projected.

Plus, guidance for the coming quarter and the full year disappointed expectations. Though the company points out this is the first time Pandora has shared any projections for the coming year, Wall Street analysts had been looking for full-year Fiscal 2013 earnings of a penny. Pandora said in its latest earnings report that a loss of 11 to 16 cents should be expected.

I snagged Pandora’s CEO Joe Kennedy on the phone immediately after the numbers crossed the wires, and he stressed the company’s “tremendous strategic progress.”

He pointed out that the company’s growth in share of radio listening has doubled year-over-year, and perhaps most importantly, its mobile revenue is going gangbusters. Kennedy tells me that mobile revenue in its fiscal 2012 more than quadrupled to over $100 million, which puts Pandora second only to Google

in terms of mobile ad revenue. Its mobile business is growing sequentially each quarter, and in this most recent quarter was responsible for about half the company’s ad revenue. Plus, the mobile ad revenue per listener hour is growing as well—up from just $13 per 1,000 mobile listener hour to $20 for the same metric.

Kennedy pointed out that Pandora is still making three times as much money off desktop listening as it is off mobile listening, which means they’re well positioned to grow mobile monetization. Plus, Kennedy says the company is well positioned to take advantage of the mobile ad market as it grows over the next few years.

So if the company is growing market share and growing mobile revenue, why does it still expect to lose money in this current fiscal year? Kennedy didn’t address my pressing questions about the rising cost of content—content acquisition costs more than doubled from the year ago quarter to $48 million. But he did say that the company continues to invest in technology and its sales team to grow the service and its footprint.

Questions? Comments?