Pandora Media (NYSE:P) released solid fourth-quarter 2016 results Thursday after the market closed, detailing progress in accelerating growth of paid subscriptions while enjoying leverage in its core ad-enabled music streaming business.

Keeping in mind Pandora stock already popped last month -- when it announced it would exceed its previous financial guidance while at the same time reduce the size of its U.S. workforce -- let's dig deeper to see both what drove Pandora's business as it capped 2016 and what investors can expect going forward.

Collage of artists on Pandora

Image source: Pandora Media, Inc.

Pandora Media results: The raw numbers


Q4 2016

Q4 2015

Year-Over-Year Growth


$392.6 million

$336.2 million


GAAP net income (loss)

($90.0 million)

($19.4 million)


GAAP earnings (loss) per share




Data source: Pandora Media, Inc.

What happened with Pandora Media this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation, Pandora incurred a net loss of $29.7 million, or $0.13 per diluted share, compared to net income of $10.2 million, or $0.04 per diluted share in last year's fourth quarter.
  • Adjusted earnings before interest, taxes, depreciation, and amortization was loss of $30.4 million, compared to a profit of $24.8 million in last year's fourth quarter. 
  • By comparison, Pandora's financial guidance provided last quarter called for lower fourth-quarter revenue of $362 million to $374 million and an adjusted EBITDA loss ranging from $51 million to $39 million.
  • Advertising revenue grew 16% year over year, to $313.3 million.
    • Local advertising revenue grew 26% year over year during the fourth quarter and accounted for 27% of total ad revenue.
  • Subscription and other revenue grew 5%, to $59.8 million, with paid subscribers increasing 12% year over year, to 4.39 million at the end of the quarter.
  • Ticketing revenue grew 20%, to $19.4 million, stemming from Pandora's acquisition of TicketFly in 2015.
    • Gross transaction value excluding box office sales were $130 million, growing 30% year over year.
    • Pandora sold 3.8 million fee-generating tickets to 1.6 million unique customers during the quarter. Pandora further believes this base represents a "significant opportunity to leverage Ticketfly's business in the future to drive Premium subscription trials and ticket bundles."
  • Ended the quarter with cash and investments of $243.3 million, down from $264 million at the end of Q3.
  • Total listener hours grew 0.4% year over year, to 5.38 billion.
  • Active listeners fell 0.1% year over year, to 81 million at the end of 2016.
  • Fourth-quarter ad revenue per 1,000 listener hours grew 18% year over year, to $67.43.
  • Average revenue per paid subscriber (ARPU) was $4.73, while licensing costs per paid subscriber (LPU) was $3.12.
  • Subsequent to the end of the quarter, initiated operational efficiency measures to reduce overall operating costs in 2017, including a 7% reduction in Pandora's U.S. employee base (excluding Ticketfly).

What management had to say

As Pandora founder and CEO Tim Westergren said:

We made significant progress in 2016 by driving leverage in our core business while accelerating subscriptions to our paid product. We enter 2017 laser-focused on the growth of our ad-supported business, the launch and growth of our subscription products, and an artist-to-fan platform to drive listener engagement and ticket sales. These three strategic pillars operate in harmony to create mutually reinforcing revenue streams across a large and growing addressable market.

Looking forward

Pandora expects first-quarter revenue in the range of $310 million to $320 million (up from $297.3 million in last year's Q1), with adjusted EBITDA of $80 million to $70 million. For the full year of 2017, Pandora estimates total revenue will be in the range of $1.55 billion to $1.7 billion, representing year-over-year growth of 17% at the midpoint -- and with the admission that this is a wider-than-usual range "due to uncertainty around the speed at which subscription products ramp."

To that end, Pandora management did promise additional color on that range as visibility increases. Pandora similarly opted not to offer specific adjusted EBITDA guidance for the full year for the same reason, but rather reaffirmed the company's previous assertion that it will "manage the business to 2017 adjusted EBITDA profitability."

And that's fair enough, as Pandora's promising new subscription services aim to disrupt markets that some investors worry are already crowded by other well-funded competitors. Nonetheless, Pandora's relative outperformance this quarter was a good start, and I think investors should be excited to see the spoils of Pandora's year of investment finally come to fruition.