Pandora’s Q3 2018: 6.8 Million Subscribers, Plummeting Active Users and Listening Hours

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Pandora’s latest financial report reveals one thing – the digital radio service probably couldn’t survive on its own.

Two months ago, Liberty Media’s John Malone achieved what he had long fought for.  SiriusXM had finally acquired Pandora Radio for a cool $3.5 billion.

The move came after two desperate fiscal quarters for Pandora Radio.

In the first quarter of 2018, Pandora’s key metrics, including listener engagement, plummeted.  Despite posting $104.7 million in subscriber revenue, the digital radio service had 72.3 million active listeners, down nearly 5% over the same period last year.

Then, in the second quarter of 2018, Pandora posted $384.8 million in revenue.  Yet, listening hours and active users continued to plummet.  The digital radio service had 71.4 million active listeners, down from 76 million a year earlier.  Total listening hours reached 5.09 billion, down from 5.22 billion.

SiriusXM, meanwhile, has 33.5 million subscribers and continues to post a net profit each fiscal quarter.

Now, following the acquisition, Pandora has posted its Q3 2018 report.  And, the report confirms why the digital radio service desperately needed an acquisition.

Rising advertising and subscription revenue, plummeting listener engagement.

In its Q3 2018 report, Pandora revealed that it had added 784,000 subscribers during the last fiscal quarter.  The digital radio service now has 6.8 million subscribers.

Advertising revenue reached $291.9 million, up 6% over the same period last year.  The company attributed the growth in revenue to “record monetization from high sell-through, the launch of new innovative ad formats, and a continued mix shift toward higher CPM advertising products as well as the inclusion of AdsWizz.”

Subscription revenue also totaled $125.8 million, up 49% over the same period last year.  The company has added 1.6 million net new subscribers over that time.  Pandora also stated the higher ARPU from its Premium service helped boost subscription revenue.

For the third quarter of 2018, the company’s total consolidated non-GAAP (generally accepted accounting principles) gross profit reached $160.2 million.  Last year, the digital radio service posted $131.7 million in non-GAAP profit.  GAAP gross profit reached $156.1 million, up from $135.9 million in the same period last year.

Yet, don’t expect the company to be a money-maker.

GAAP net loss reached $63.7 million, or around $0.27 per share.  Last year, the company posted a net loss of $66.2 million, or $0.34 per share.  Non-GAAP net loss reached $15.5 million, or $0.06 per share, down slightly from a net loss of $15.9 million, or $0.06 per share, in Q3 2017.

Revealing further losses, adjusted EBITDA totaled $3.9 million in losses, down from $5.3 million in the same quarter last year.  Pandora attributed the loss to a significant increase in year-over-year marketing spend.

The company ended the third quarter with $387.6 million in cash and investments, down from $420.8 million at the end of Q2 2018.

Pandora also continues to bleed listeners.

Active users totaled 68.8 million at the end of the third quarter.  Total listener hours also decreased to 4.81 billion.