Pandora Posts Widened Losses in Second Quarter Amidst Acquisition Rumors

Andrew Harrer/Bloomberg via Getty Images

The Pandora Media Inc. logo is seen on an Apple Inc. iPhone displayed for a photograph in Washington, D.C. on Sept. 17, 2013. 

Pandora's second-quarter earnings point to a company in transition -- and courting an acquisition?

Another quarter, another loss for Pandora, the pioneering digital radio company founded sixteen years ago. Overall revenue was up year-over-year, at $343 million. The company's net losses ballooned significantly year-over-year, however, from $16.2 million in Q2 2015 to $71.8 million this quarter, due to several factors; sales and marketing costs increased $29.8 million, interest expenses went from $124,000 to $6.2 million, and "other" losses went from $256,000 in the black to $5.9 million in the red, among other increased expenses.

Content acquisition costs -- royalties -- stood at $176.6 million for the quarter, or 51 percent of total revenue. As well, "revenue was below expectations due to softening of the media advertising market," CEO Tim Westergren said during today's earnings call. Westergren touted the company's $2 billion paid in royalties to the recording industry as well -- pointing to the charm offensive he has embarked on this year.

Pandora's stock went through hell last October, when shares plunged 35 percent in a single day following worries of Apple Music's ascent, and eventually reached a near-all-time low of $7.88 in February after it posted disappointing full-year numbers. The company responded aggressively, acquiring pieces of the defunct streaming service Rdio after that company's bankruptcy declaration, with which it plans to build its own on-demand offering, and ousting CEO Brian McAndrews, replacing him with Westergren.

Referencing that upcoming service, Westergren said during today's earnings call that it is having "very productive negotiations with the three major labels" ahead of its launch, and CFO Mike Herring said it was speaking to a host of indies as well. "Pandora plans to deliver a powerfully differentiated music experience to accelerate growth and deliver value to listeners, music makers, advertisers and ultimately shareholders," Westergren writes in today's earnings release.

Rumors percolated in February that the company was looking for a buyer, which now seem to have been coming from Liberty Media, owner of SiriusXM, which the Wall Street Journal reported today had floated an offer that Pandora's board refused, and that the company had courted both Amazon and Apple. Shares jumped 10 percent on that news, before flattening down below the day's opening price.

As the company's earnings call is underway, this story is still developing...


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