Pandora posted improved calendar-year financials, but missed its fourth-quarter guidance and provided future guidance below analysts' expectations. As a result, its shares were punished in after-hours trading.
Many of the key metrics revealed the sort of progress desired of a growing Internet company that's attempting to disrupt the established radio market. Revenue grew 44 percent to $920.8 million and net loss improved to $30.4 million from $40.7 million in 2013. Royalties were 48.8 percent of revenue -- $446.4 million -- an improvement from 53.8 percent the prior year.
There were, however, two big misses: fourth-quarter revenue and 2015 guidance. At $268 million, quarterly revenues were lower than the company's guidance range of $273 million to $278 million. The market was disappointed and drove down the company's shares as much as 26 percent in after-hours trading.
The target miss was blamed on an unexpected change in December advertising revenue. During Thursday afternoon's earnings call, CEO Brian McAndrews explained three verticals -- retail, telecom and consumer electronics -- had been increasing their advertising spend on Pandora until the sudden change in December. McAndrews doesn't know if the spending decline was the result of a reallocation or a broader spending decline, but the result was a reduction in expected advertising of "almost exactly" the amount of the shortfall.
The company also fell short of future revenue guidance. Pandora said it expected first-quarter revenue between $220 million and $225 million and full-year revenue between $1.15 billion and $1.17 billion. Wall Street analysts' consensus estimates were $244 million and $1.21 billion, according to the Financial Times.
Pandora's most-watched non-financial metric, the number of active users, rose 7 percent to 81.5 million. The number of subscribers inched upward to 3.6 million subs up from 3.5 million at the end of September and 3.3 million in March. Although listener growth has slowed, Pandora is getting people to listen longer. Listening hours grew 20 percent, or 5.2 billion hours, to 20 billion hours last year.
Through Thursday's close, Pandora shares were down 49 percent from its all-time high of $40.44 in March. Among investors worries are slowing user growth, competition from other streaming companies and concerns about the outcome of Webcasting IV, the rate-setting proceedings that will establishing webcasting royalties for 2016 through 2020.
Noting the share price at the moment, McAndrews brushed aside a question about the likelihood the company will be affected by market opinion. He said, "It won't really impact the kind of investments we're doing [or] the strategy we have."