In its earnings report last week, Pandora (NYSE: P) posted significant gains in subscription revenue and total subscribers, but it wasn’t enough to put Pandora in the black. During the first quarter of 2018, Pandora had total revenue of $319.2 million, a 12 percent increase year-over-year, excluding ANZ and Ticketfly income. Subscription revenue accounted for $104.7 million in total revenue, representing a 63 percent increase year-over-year.

Total subscribers grew to 5.63 million, a 19 percent increase year-over-year. In spite of the growth, Pandora reported a net loss of $132.3 million, or $0.56 per share, compared to a loss of $139.1 million, or $0.55 per share, for the first quarter of 2018.

‘Our results this quarter show we’re making progress. I’m encouraged by a lot of what I see: improving audience metrics; significant progress developing a more efficient marketing strategy; and the acceleration of our ad-tech roadmap. While we’re early in our efforts, I’m proud of how hard everyone here is working toward our goals,’ said Roger Lynch, Pandora CEO, during the earnings call.

‘The second reason I’m optimistic about Pandora’s future is that, as I said on our last call, we’re entering a “new era” of audio. This opportunity has influenced our strategy and priorities, and it frames almost everything we’re doing, including the progress we’re making,’ Lynch added. ‘…our results this quarter demonstrate that while we are still in the early innings of a long game, we’re making headway.’

Other highlights from the first quarter include:

• Of total revenue of $319.2 million, $214.6 million came from advertising revenue and $104.7 million came from subscription revenue.
• Content costs represented approximately 68 percent of revenue.
• Ad RPM was at an all-time first quarter high at $55.52, a 9 percent increase year-over-year.
• Approximately 13 million listeners have used Premium Access, allowing them to access premium features after watching a 15-second ad.
• Listener hours dropped to 4.96 billion in Q1 2018 from 5.21 billion in Q1 2017.
• Total monthly active listeners were 72.3 million at the end of Q1 2018, compared to 76.7 million at the end of Q1 2017, a drop of about 4 percent.
• ARPU grew to $6.30.
• Licensing cost per subscriber was $4.65, an increase from $2.96, largely due to the shift from Pandora Plus to Premium.
• Pandora Plus and Pandora Premium subscribers were 5.63 million at the end of Q1 2018. Total subscribers in Q1 2017 were 4.71 million.
• Cash and investments were $544 million at the end of Q1, compared to $501 million at the end of Q4 2017.
• Pandora announced the acquisition of AdsWizz and a partnership with smart link aggregator Linkfire to assist listeners with music discovery.
• During the quarter, Pandora Premium expanded to the web, Amazon Fire TV and Fitbit Versa.
• Last month the company launched personalized soundtracks, playlists that are automatically generated using machine learning for premium subscribers based on their musical tastes, moods and preferences.

The company offered the following guidance:

• The AdsWizz acquisition will close in mid-May.
• Total revenue will range between $360 million and $375 million.
• Adjusted EBITDA will range between a loss of $45 million to a loss of $30 million.

In spite of the dismal losses, Pandora’s stock has increased in value from $5.75 on May 3 to $7.50 as of 7:43 p.m. EDT yesterday.

Insider Take:

While Pandora is seeing growth in total revenue and total subscribers, it is still showing losses in terms of total active listeners and total listening hours. It isn’t clear what’s causing this trend. The bigger picture, however, is the continued net losses in the $130 million range. Sure, the company is in the process of a ‘long game,’ but how many more innings can Pandora go with these significant losses? How many CEOs will they try before they get it right? Or is it too late to salvage Pandora? It may, indeed, be an exciting time for the streaming music world, but it is not an exciting time to be Pandora.