Pandora Beats Expectations, Raises Revenue Forecast On Mobile Surge

Pandora was among the most actively traded stocks early Thursday, up as much as 20 percent following better-than expected results for fiscal 2013 Q2, ended July 31. In an earnings webcast Wednesday, the company said an 86 percent spike in mobile revenue year over year helped fuel revenue growth of 51 percent to $101.3 million. Net loss for fiscal Q2 widened to $5.4 million from a loss of $1.8 million in fiscal Q2 2012, Pandora said. The company raised full-year revenue guidance to $425 million-$432 million from $420 million-$427 million.

Pandora’s share of all U.S. radio listening at the end of July topped 6 percent, up from 3.5 percent a year ago, said CEO Joe Kennedy, who said 3.3 billion listener hours for the quarter were an 80 percent jump over Q2 2012. More than 75 percent of total listening hours took place on mobile and connected devices, he said, and Pandora’s audience grew across all key radio buying demographics in Q2.

While there’s still an “extraordinary” amount of growth opportunity in the U.S., Pandora is planning its first international expansion, into Australia and New Zealand, as part of goal to have “billions” of listeners worldwide “someday,” Kennedy said. Pandora will initially focus on generating audience growth in Australia and New Zealand to achieve the scale necessary to attract advertisers, he said. Regarding future expansion, Kennedy said, “We continue to pursue international expansion where we can achieve royalty economics that are consistent with long-term value."

Kennedy cited a study released by the Mobile Marketing Association Wednesday suggesting that 7 percent of consumer marketers’ ad budgets should go toward mobile, compared with 1 percent or less, “where the industry was a year ago,” based on “pretty intensive ROI [return on investment] analysis. He said consumers’ focus on a mobile device is “dramatically different” and “more intense” than their focus on a computer screen which is reflected in clickthroughs and other response rates that advertisers measure.

Pandora continues to expect subscriptions to account for 10-15 percent of its revenue, Kennedy said, a target the company has maintained since its initial public offering. He referred to “some success” in subscription-based apps on mobile devices, where Pandora has experimented with subscription models, including its first $4/month plan that joined its standard $36 annual rate. After seeing positive results with the monthly plan, Pandora has rolled out a monthly plan for PC listeners as well, he said. Pandora closed up 14 percent Thursday at $11.52.