Pandora Shares Rise on Higher-Than-Forecast Ad Revenue, 7% Workforce Cut

Pandora shares were up 6.5 percent in mid-day trading Friday to $12.78 after an announcement Thursday of a 7 percent workforce reduction and higher-than-forecast Q4 revenue projections. CEO Tim Westergren called the job cuts a “tough, but important” moment in evolving to a “large, enduring” business.” In a news release after markets closed Thursday, the company said it expects to exceed previously announced Q4 2016 revenue projections ($362 million to $374 million) and adjusted EBITDA loss guidance ($51 million to $39 million) ranges, crediting “strong advertising performance.” The company, due to launch its long-awaited on-demand music service this quarter, surpassed the 4.3 million paid subscriber mark in Q4, it said. Pandora launched its mid-tier Pandora Plus plan at the end of Q3 -- a remake of its Pandora One offering -- and said it generated more than 375,000 net new subscribers by year-end. It did so largely through homegrown marketing, saving on customer acquisition costs, said Westergren in a letter to shareholders. “More than 70 percent of our new subscribers came from in-app promotion,” said Westergren, saying that’s a competitive advantage that bodes well for Pandora being able to upsell existing customers to its upcoming premium subscription business. In the two months since the completion of direct agreements with music labels and publishers, the company saw a “dramatic increase” in partnership activity, with “thousands of artists” publishing more than 7,000 messages heard by Pandora listeners over 600 million times. Such artist engagement is driving listening session length, said Westergren. Dougherty & Co. analyst Steven Frankel maintained a “neutral” rating on Pandora in an investor note, citing stiff competition from Apple, Spotify and others as it rolls out its on-demand services. “Given the execution risk,” Dougherty will maintain its rating “until we have more confidence in management's ability to reach, maintain and scale profitability," Frankel said.