Mostly notably, Pandora has posted back-to-back upside quarterly results with the company exceeding analysts’ revenue and earnings expectations. Underlying the better-than-expected results are some key operating metrics that are pointing to brighter days ahead for the embattled company.
After the close last night, Pandora reported a Q2 loss per share of ($0.15), beating the consensus by $0.02. Perhaps more importantly, this was an improvement over last year's ($0.21) mark, with Adjusted EBITDA also showing significant improvement at ($34.6) mln compared to ($54.3) mln in the year-ago quarter.
What primarily drove the improvement on the profitability side is that Pandora ratcheted down its Sales and Marketing expense by 14% year/year.
Despite the slowdown in marketing spend, total revenue climbed by 12% to $384.8 mln vs. the $372.5 mln consensus, excluding Australia, New Zealand, and Ticketfly. Pandora discontinued its service in Australia and New Zealand on July 31, 2017, and it sold Ticketfly on September 1, 2017. In the prior two quarters, revenue was up a modest 1%.
While outperforming expectations is certainly a positive, what really piques investors' interest is that Pandora's key operating metrics are pointing in the right direction. For instance, Ad RPM (revenue per thousand impressions) hit an all-time high of $68.75 in the quarter, up 4% from last year. At the same time, subscription ARPU edged higher by 3% quarter/quarter to $6.52. So, in other words, the company is driving higher revenue from both advertisers and listeners. On top of that, Pandora added 351K subscribers, up 23% year/year.
What's behind the improved performance is a combination of better execution and service enhancements, as well as new ad technology which is driving stronger Ad RPM. Some may recall that back on May 25, the company closed on its acquisition of Adswizz, a developer of programmatic ad platforms specifically tailored for music, podcasts, and broadcasting. Advertisers are increasingly moving towards programmatic platforms and Pandora now has access to additional advertiser demand, while also optimizing ad pricing.
To wrap up, while Pandora still has a lot of work to do, particularly in regards to bottom line performance, its financial results over the past two quarters is helping to convert some skeptics and improve sentiment regarding the stock.