Last week internet radio company Pandora (NYSE: P) reported its financials for the second quarter of 2017. While revenue and subscription categories improved, the company continued to sustain an enormous net loss. Can it survive?

Revenue highlights for the second quarter of 2017 include total consolidated revenue of $376.8 million, a 10 percent increase year-over-year, advertising revenue of $278.2 million, a 5 percent increase year-over-year, subscription and other revenue of $68.9 million, a 25 percent increase year-over-year, and ticketing service revenue of $29.7 million, a 31 percent increase year-over-year. Revenue exceeded Pandora’s second quarter guidance.

Other second quarter financial highlights include:

• GAAP net loss was $275.1 million, or $1.20 per share, compared to $76.3 million year-over-year due to one-time expenses and a “goodwill impairment charge” to reflect the write-down related to the net assets of Ticketfly.
• Local revenue pushed above 30 percent of total ad revenue for the first time.
• Adjusted EBITDA was a loss of $54.3 million, compared to a loss of $25.1 million year-over-year.
• Non-GAAP sales and marketing expenses were $126.6 million, a 20 percent increase year-over-year. Much of the increase was direct marketing spend to launch Pandora Premium and do brand advertising campaigns.
• Operating costs included $23.5 million in contract termination fees and $1.7 million in expenses associated with the company’s restructuring efforts.
• The company ended the quarter with $227.6 million in cash and investments, compared to $203.0 million at the end of the first quarter of 2017.

“We have taken a number of steps to hone the company’s strategy and position Pandora to continue to build audience and extend monetization through a combination of advertising and subscription revenue streams. In addition to exceeding our revenue expectations this quarter, we also announced several important strategic moves including a $480 million investment from Sirius XM, the sale of Ticketfly, and changes to our board and management team,” said Naveen Chopra, CFO and interim CEO of Pandora, in a statement. “We remain laser-focused on execution that attracts listeners and investments that drive the growth and monetization of our audience.”

Chopra replaces Tim Westergren, Pandora co-founder and former CEO, who stepped down in June. Mike Herring, former president, and Nick Bartle, former CMO, left Pandora along with Westergren.

In addition to these leadership changes, operational highlights for the second quarter include:

• In June, SiriusXM committed to making a strategic cash investment of $480 million.
• In June, Pandora announced the sale of Ticketfly to Eventbrite for $200 million. The sale is expected to close in the second half of August. Pandora purchased Ticketfly in October 2015 for $450 million.
• Pandora reported 4.86 million paid subscribers, a 26 percent increase compared to 3.93 million paid subscribers at the end of Q2 2016. At the end of Q1, Pandora had 4.71 million subscribers.
• Ad RPM was $66.15, a 24 percent increase compared to $53.34 year-over-year.
• Listeners tuned in an average 26 days per quarter and approximately 23 hours per month.
• Total listener hours were 5.22 billion, compared to 5.66 million for the same period last year.
• Active listeners were 76.0 million at the end of Q2, a 2.7 percent decrease from 76.7 million at the end of Q1 2017.
• Pandora Premium was fulling launched in Q2. When a listener upgrades from ad-supported services to Pandora Premium, hours per listener increase by 43 percent.
• At the end of the quarter, Pandora Premium had 390,000 subscribers with 64 percent coming from the ad-supported tier.
• Pandora will discontinue operations in Australia and New Zealand which will cause a loss of 1.3 million active users and a $50 million to $55 million reduction in revenue for 2017.

In the earnings call, Chopra thanked Westergren for his contributions to the Pandora team, saying he fundamentally changed how people to listen to music. He also talked about the SiriusXM investment and divesture of Ticketfly.

“We also secured a major investment from SiriusXM, which will dramatically strengthen our balance sheet and bring valuable strategic insights to Pandora,” Chopra said. “Additionally, we see opportunity, as does Sirius, after the requisite government approval, to potentially up-sell, cross-sell and share content or technology.”

“Furthermore, we decided to divest a non-core asset, Ticketfly, which will allow us to focus on our key advertising and subscription-based operations while exploring commercial relationships with a broader set of ticketing partners,” Chopra added. “Together with the proceeds from the Sirius investment, we believe that Pandora’s financial future is secure with ample firepower to enable sustained, profitable growth.”

Chopra summarized Pandora’s strategy this way.

“These changes present the opportunity to refine our strategic, operational and financial objectives in light of evolving industry dynamics and changing consumer behavior. We have built a unique ecosystem at Pandora: a very large base of highly engaged listeners that power a compelling advertising business which has significant growth potential, thanks to renewed focus on technology and innovation.

“In addition, we now have the ability to provide fully on-demand listening through our subscription products. These services help retain and grow listeners, in particular younger demographics, and enhance their engagement on our platform in a way that is highly accretive over the long-term.

“It is this ecosystem approach, that allows us to catalyze and benefit from changing consumer behavior – whether it be the continuing ability to capture listeners from terrestrial radio or the opportunity to engage listeners in a rapidly growing world of connected audio devices. And, we will have the financial resources to pursue these opportunities, among others, and in conjunction with our new partners at Sirius, drive value creation for all of our shareholders,” Chopra said.

Pandora provided the following guidance, which include impacts from the divesture of Ticketfly and the closing of operations in Australia and New Zealand.

• 2017 revenue of $1.45 billion to $1.50 billion
• Revenue for Q3 of $370 million to $385 million, or 14 percent growth year-over-year when adjusting for Ticketfly divesture
• Adjusted EBITDA to range between a $5 million loss and a $20 million loss

Insider Take:

It is hard to summarize Pandora’s position in just a few paragraphs. In many ways, Pandora is improving. It is showing growth in revenue and in subscribers, but it is spending a lot to get those subscribers. It is also doing well on the ad side of the business, and its expanded product line and new subscription options will benefit all revenue streams.

From an asset standpoint, Pandora desperately needs SiriusXM’s $480 million investment, but we don’t fully understand why it has sold Ticketfly at a $250 million loss or why it is discontinuing operations in Australia and New Zealand when they’ll lose more than 1 million listeners and revenue of $50 million to $55 million.

Bottom line: Pandora lost more this quarter than it has in assets. Regardless of all of the positives, it cannot continue to sustain such losses much longer. It looks ripe for acquisition. Its stock was valued at $8.60 per share at 4:25 PM EDT yesterday. On August 8, 2016, Pandora stock was $13.55 per share.