Pandora’s stock is probably plunging as you read this; Wall Street is freaking out over disappointing earnings projections. But underneath all that noise is something interesting: for the quarter that just happened, Pandora actually made some money. In fact, Pandora just reported a solidly profitable fiscal quarter, thanks to strong increases across revenues, subscribers, active users and mobile usage.
All of which adds an interesting wrinkle to the whole royalties debate. Because maybe they can afford it.
During the three-month fiscal period ending Halloween, the publicly-traded Pandora posted revenues of roughly $120 million, a 60 percent gain over the same period last year. And, earnings gained 221 percent – ie, more than triple – to $2.1 million. Other areas were also booming: mobile revenue gained 112 percent to $73.9 million, total listener hours gained 67 percent to 3.56 billion, and active users gained 47 percent to 59.2 million.
(investor note: technically, this is Pandora’s fiscal 2013)
It gets even better for Pandora execs. Because after one-time, non-recurring charges are removed from the picture, Pandora’s profits are five times higher. Those costs, incidentally, were largely related to stock-based compensation of more than $7.1 million to top executives like cofounder Tim Westergren and CTO Tom Conrad, all of which ultimately cramped the profitability total.
All of which also seems to further erode the ‘we’re struggling’ narrative being spun by these same guys. Because if Pandora can achieve profitability once, why can’t it do it again, and again, and again? Especially given double-digit gains across revenues, listeners, and other critical metrics?
Indeed, this isn’t the first profitable performance for Pandora, though Wall Street clearly thinks this is a dog. During the call, Pandora warned investors that the next quarterly report (for the three months ending in January) would feature pronounced losses, a prediction that sent shares plunging more than 20 percent in aftermarket trading. Part of the sag, according to Pandora CEO Joe Kennedy, would come from oncoming ‘fiscal cliff’ skittishness among advertisers.
Which raises a serious problem: advertising forms a disproportionate share of revenues, a situation Pandora claims is exacerbated by menacing royalties. “These rates are extraordinarily, unfairly high by any measure,” Kennedy said. It’s all alarmist and scary, except for the part that just happened. Because latest financial data suggests they can afford it.