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Pandora Posts Third-Quarter Loss as Marketing Costs Rise

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Nov. 22 (Bloomberg) -- Pandora Media Inc., the biggest U.S. online radio service, reported a third-quarter loss after spending more on development, marketing and overhead as it defends its turf against new competition.

The net loss was $1.7 million, or 1 cent a share, compared with profit of $2.05 million, or 1 cent, a year earlier, the Oakland, California-based company said in a statement yesterday. Excluding items, profit of 6 cents matched the average of 22 analysts’ estimates, according to data compiled by Bloomberg.

Pandora reported a drop in active users last month and continues to increase spending on marketing and sales staff to attract more listeners and advertisers. It has also released new programs for Apple Inc. devices and new applications for Google Inc.’s Android and Chromecast as total costs in the quarter jumped 53 percent to $181.9 million from a year earlier.

“We are investing aggressively in product development,” Mike Herring, chief financial officer, said in an interview. “We also continue to invest heavily in sales and marketing to drive market share and top-line growth.”

The company is facing new competition including from Apple’s iTunes Radio. The Cupertino, California-based company has said its advertising-supported service drew 11 million users in the days after becoming available on Sept. 18.

Topping Estimates

Pandora slipped 1.3 percent to $29.29 in extended trading yesterday after the company announced its results. The stock gained 4.4 percent to $29.68 at the close in New York and has more than tripled this year.

Sales in the three months ended in October climbed 50 percent to $180.4 million from a year earlier, topping the $178.3 million average of analysts’ estimates.

The company will report on a calendar year starting with the fourth quarter, which will cover the two months through December. For the period covered by the fiscal fourth quarter, ending in January, Pandora forecast revenue of $185 million to $190 million and adjusted earnings per share of 2 cents to 4 cents. Analysts on average estimate earnings of 3.8 cents a share on sales of $186 million.

For the two-month period ending Dec. 31, Pandora said it expects $132 million to $136 million in revenue and adjusted earnings of 5 cents to 7 cents a share.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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