Last week Pandora (NYSE: P) announced its first quarter financial results and operational highlights, including the launch of Pandora Premium, the company’s new on-demand subscription product. One of the biggest highlights of the quarter was subscription growth. Pandora said it now has 4.71 million subscribers, up from 3.93 million in the first quarter of 2016, representing a 20 percent increase. This included 1.3 million trial starts across subscription tiers since Premium was launched to select listeners in mid-March.

“With the introduction of Pandora Premium last month, our most important new product since our birth, we aim to do the same thing for on-demand that we did for digital radio – reinventing the experience through simplicity and personalization. On-demand becomes but one feature in an intuitive interactive experience where the music you love finds you,” said Westergren in the earnings call.

“Currently, fewer than 100 million people worldwide pay for streaming music. The vast majority of prospective subscribers have yet to find a service worth paying for,” he added. “We believe there is significant opportunity ahead of us, and it starts with our own ad-supported and paid radio listeners – where research tells us that approximately 30 percent are strong candidates for an on-demand tier.”

Pandora also reported total consolidated revenue of $316.0 million, a 6 percent increase year-over-year. This included $64.9 million in subscription revenue, a 19 percent increase year-over-year; advertising revenue of $223.3 million, a 1 percent increase year-over-year; and ticketing service revenue of $27.8 million, a 25 percent increase. Ad RPMs for the quarter were $50.87, a 12 percent increase year-over-year.

“Although it remains early days, we are enthusiastic about the recent launch of Pandora Premium,” said Westergren. “Pandora Premium is a major leap forward for the company and allows us to offer a variety of products to our large base of listeners. Additionally, our Q1 results were consistent with our expectations and demonstrated Pandora’s ability to improve ad monetization, while controlling costs and evolving our consumer experience in ways that enhance usage trends of our most engaged listeners.”

Other highlights for the quarter include:

• More than 82 percent of new trial subscribers occurred on the Pandora platform with virtually no acquisition costs.
• Almost half of Premium trial listeners used Pandora daily during their first week.
• Approximately half of all early Premium subscribers are trying exclusive features including the My Thumps Up playlist, Linked playlists and the “magic wand” to add similar songs to their playlists.
• GAAP net loss for the quarter was $132.3 million, or $(0.56) per share, compared to a net loss of $115.1 million, or $(0.51) per share, for the same period last year.
• Adjusted EBITA loss was $71.3 million.
• Total listener hours were 5.21 billion, compared to 5.52 billion for the same period last year.
• Active listeners were 76.7 million, compared to 79.4 million for the same period last year.

During the earnings call, Pandora announced a $150 million investment from KKR, a global investment firm. Pandora also announced that Richard Sarnoff of KKR will join Pandora’s board of directors, Jim Feuille and Peter Gotcher will step down from the board, and a search will identify new board members. Also, joining the Pandora team is Naveen Chopra as CFO.

For the second quarter, Pandora estimated revenue to be between $360 million and $375 million and adjusted EBITDA loss between $65 million and $50 million. For the full-year, Pandora estimates revenue between $1.5 billion and $1.65 billion.

Investors’ reaction to the “solid” first quarter results was lackluster. Financials were released on May 8, and stock closed at $10.40 per share that day. As of 5:55 PM EDT on May 16, stock stood at $9.35 per share, down more than $1.00 per share from its position last year – $10.59 per share on May 17, 2016.

Insider Take:

While Westergren is enthusiastic about the launch of Pandora Premium, and he’s outlined a solid plan to continue steering the ship in a positive direction, Pandora is still losing millions of dollars every quarter and, in this quarter, it has also lost listeners and total listener hours dropped.

The company has taken on a new investor which will help with cash flow, but it won’t stem the existing losses. Pandora can’t continue to sustain such losses. Pandora Premium will help, of course, but since it launched in March, many of the trial listeners will still be in their trial period during the second quarter, so the company won’t see a big revenue change in the subscription category until at least the third quarter.

On the earnings call, Westergren boasted about the great data the company has on what listeners want, but he needs to use that data to deliver, and soon, or Pandora is ripe for an acquisition by a competitor.