Q3 revenue was $417.6 million, a 16 percent growth year-over-year, with subscriptions now making up 30 percent of that. There are now 6.8 million Pandora Plus and Pandora Premium subscribers, up around 12 percent, year-over-year. Active users were down to 68.8 million at the end of the third quarter of 2018, and total listener hours were 4.81 billion for the third quarter of 2018.
“I’m proud of the progress we’ve made over the past year to reinvigorate Pandora,” said Roger Lynch, the company’s CEO. “A year ago, we committed to drive listener engagement through product innovation, expand our content, and increase distribution partnerships. We also prioritized making our ad tech capabilities a strategic advantage. And we executed. We launched new products like Premium Access, delivering on-demand functionality and improved listener engagement in our ad-supported tier; forged partnerships with leading brands such as T-Mobile, AT&T, Comcast, and Snap; and solidified our global leadership in digital audio advertising with the acquisition of AdsWizz and the launch of our programmatic audio marketplace.”
Continued Lynch, “Looking ahead, I couldn’t be more excited about Pandora joining forces with SiriusXM. A combined Pandora-SiriusXM will create the world’s largest audio entertainment company, bringing Pandora additional resources to accelerate growth and building on SiriusXM’s leadership in the car, subscription expertise, and unique content.”
Added CFO Naveen Chopra, “Our Q3 financial results, which exceeded both revenue and adjusted EBITDA guidance, showed meaningful improvement. Revenue growth accelerated, thanks to better monetization and a fast-growing subscription business; gross margins are expanding as evidenced by a 500 basis point sequential improvement in Q3; and we’re operating more efficiently: we recorded a 300 basis point reduction in operating expenses (excluding marketing and subscription commissions) as a percentage of revenue. All of this puts us on track to significantly improve cash flow and adjusted EBITDA next year and beyond.”
At the end of September it was announced SiriusXM will acquire the Oakland-based music service in an all-stock transaction, which was valued at approximately $3.5 billion and expected to be made official in Q1 of next year. Also beginning in 2019, a partnership with SoundCloud will enable advertisers and brands to purchase SoundCloud’s U.S. ad inventory directly through Pandora. This will increase Pandora’s U.S. ad audience reach to over 100 million users. Concurrently, SoundCloud entered into an agreement to use AdsWizz’s programmatic platform globally.
The year-over-year earnings comparisons do not include Australia and New Zealand, where the service was discontinued in July 2017, and Ticketfly, which was sold to Eventbrite in September 2017.
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