Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 24, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Pandora Media, Inc. | ' |
Entity Central Index Key | '0001230276 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 205,451,005 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ' | ' |
Cash and cash equivalents | $160,796 | $245,755 |
Short-term investments | 180,496 | 98,662 |
Accounts receivable, net of allowance of $1,272 at December 31, 2013 and $1,194 at March 31, 2014 | 148,320 | 164,023 |
Prepaid expenses and other current assets | 15,481 | 10,343 |
Total current assets | 505,093 | 518,783 |
Long-term investments | 104,569 | 105,686 |
Property and equipment, net | 38,697 | 35,151 |
Other long-term assets | 13,860 | 13,715 |
Total assets | 662,219 | 673,335 |
Current liabilities: | ' | ' |
Accounts payable | 10,087 | 14,413 |
Accrued liabilities | 14,810 | 14,885 |
Accrued royalties | 74,698 | 66,110 |
Deferred revenue | 28,123 | 42,650 |
Accrued compensation | 18,043 | 17,948 |
Total current liabilities | 145,761 | 156,006 |
Other long-term liabilities | 9,826 | 9,098 |
Total liabilities | 155,587 | 165,104 |
Stockholders' equity: | ' | ' |
Common stock: 195,395,940 shares issued and outstanding at December 31, 2013 and 205,237,705 at March 31, 2014 | 21 | 20 |
Additional paid-in capital | 702,301 | 675,103 |
Accumulated deficit | -195,522 | -166,591 |
Accumulated other comprehensive loss | -168 | -301 |
Total stockholders' equity | 506,632 | 508,231 |
Total liabilities and stockholders' equity | $662,219 | $673,335 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Condensed Consolidated Balance Sheets | ' | ' |
Accounts receivable, allowance (in dollars) | $1,194 | $1,272 |
Common stock, shares issued | 205,237,705 | 195,395,940 |
Common stock, shares outstanding | 205,237,705 | 195,395,940 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Revenue | ' | ' |
Advertising | $140,634 | $96,714 |
Subscription and other | 53,681 | 18,410 |
Total revenue | 194,315 | 115,124 |
Cost of revenue | ' | ' |
Cost of revenue - Content acquisition costs | 108,275 | 85,823 |
Cost of revenue - Other | 14,979 | 9,776 |
Total cost of revenue | 123,254 | 95,599 |
Gross profit | 71,061 | 19,525 |
Operating expenses | ' | ' |
Product development | 11,831 | 6,667 |
Sales and marketing | 61,864 | 38,045 |
General and administrative | 26,361 | 13,355 |
Total operating expenses | 100,056 | 58,067 |
Loss from operations | -28,995 | -38,542 |
Other income (expense) | ' | ' |
Interest income | 218 | 16 |
Interest expense | -129 | -144 |
Other income (expense), net | 3 | 1 |
Loss before provision for income taxes | -28,903 | -38,669 |
Income tax expense | -28 | -17 |
Net loss | ($28,931) | ($38,686) |
Weighted-average common shares outstanding used in computing basic and diluted net loss per share (in shares) | 199,857 | 172,733 |
Net loss per share, basic and diluted (in dollars per share) | ($0.14) | ($0.22) |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Loss (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Condensed Consolidated Statements of Comprehensive Loss | ' | ' |
Net loss | ($28,931) | ($38,686) |
Change in foreign currency translation adjustment | 19 | -4 |
Change in net unrealized losses on marketable securities | 114 | 3 |
Other comprehensive loss | 133 | -1 |
Total comprehensive loss | ($28,798) | ($38,687) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Operating activities | ' | ' |
Net loss | ($28,931) | ($38,686) |
Adjustments to reconcile net loss to net cash used in operating activities | ' | ' |
Depreciation and amortization | 3,346 | 2,034 |
Stock-based compensation | 17,392 | 6,524 |
Amortization of premium on investments | 694 | 60 |
Amortization of debt issuance costs | 49 | 66 |
Changes in assets and liabilities | ' | ' |
Accounts receivable | 15,703 | 3,647 |
Prepaid expenses and other assets | -5,212 | -1,143 |
Accounts payable and accrued liabilities | 1,401 | 1,911 |
Accrued royalties | 8,585 | 9,353 |
Accrued compensation | -735 | -4,065 |
Deferred revenue | -14,527 | 7,422 |
Net cash used in operating activities | -2,235 | -12,877 |
Investing activities | ' | ' |
Purchases of property and equipment | -11,774 | -4,318 |
Purchases of investments | -115,589 | -13,365 |
Proceeds from maturities of investments | 34,010 | 18,830 |
Net cash provided by (used in) investing activities | -93,353 | 1,147 |
Financing activities | ' | ' |
Proceeds from employee stock purchase plan | 863 | ' |
Proceeds from issuance of common stock | 9,751 | 4,033 |
Net cash provided by financing activities | 10,614 | 4,033 |
Effect of exchange rate changes on cash and cash equivalents | 15 | -6 |
Net decrease in cash and cash equivalents | -84,959 | -7,703 |
Cash and cash equivalents at beginning of period | 245,755 | 59,939 |
Cash and cash equivalents at end of period | $160,796 | $52,236 |
Description_of_Business_and_Ba
Description of Business and Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Description of Business and Basis of Presentation | ' |
Description of Business and Basis of Presentation | ' |
1. Description of Business and Basis of Presentation | |
Pandora Media, Inc. provides an internet radio service offering a personalized experience for each listener wherever and whenever they want to listen to radio on a wide range of smartphones, tablets, traditional computers and car audio systems, as well as a range of other internet-connected devices. We have pioneered a new form of radio—one that uses intrinsic qualities of music to initially create stations and then adapts playlists in real-time based on the individual feedback of each listener. We offer local and national advertisers an opportunity to deliver targeted messages to our listeners using a combination of audio, display and video advertisements. We also offer a paid subscription service which we call Pandora One. We were incorporated as a California corporation in January 2000 and reincorporated as a Delaware corporation in December 2010. | |
As used herein, “Pandora,” “we,” “our,” the “Company” and similar terms include Pandora Media, Inc. and its subsidiaries, unless the context indicates otherwise. | |
Basis of Presentation | |
The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Pandora and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of our management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in our Transition Report on Form 10-K for the eleven months ended December 31, 2013. | |
We changed our fiscal year from the twelve months ending January 31 to the calendar twelve months ending December 31, effective beginning with the year ended December 31, 2013. As a result of this change, our prior fiscal year was an 11-month transition period ended on December 31, 2013. All references herein to a fiscal year refer to the twelve months ended December 31 of such year, and references to the first, second, third and fourth fiscal quarters refer to the three months ended March 31, June 30, September 30 and December 31, respectively. Prior year results have been recast on a calendar quarter basis. Refer to our Transition Report on Form 10-K for the eleven months ended December 31, 2013 for additional information regarding our fiscal year change. | |
Certain changes in presentation have been made to conform the prior period presentation to current period reporting. Our statements of operations now include the presentation of gross profit, which is calculated as total revenue less cost of revenue. In addition, we have reclassified certain software license fees, facilities-related expenses and depreciation expenses among the general and administrative, cost of revenue — other, sales and marketing and product development lines in our condensed consolidated statements of operations. | |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates are used for determining accrued royalties, selling prices for elements sold in multiple-element arrangements, the allowance for doubtful accounts, stock-based compensation, income taxes and the subscription return reserve. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements could be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2014 | |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies | ' |
2. Summary of Significant Accounting Policies | |
Other than discussed below, there have been no material changes to our significant accounting policies as compared to those described in our Transition Report on Form 10-K for the eleven months ended December 31, 2013. | |
Stock-Based Compensation — Employee Stock Purchase Plan | |
In December 2013, our board of directors approved the Employee Stock Purchase Plan (“ESPP”), subject to approval at the annual meeting of stockholders in June 2014. We estimate the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model. The determination of the fair value is affected by our stock price on the first date of the offering period, as well as other assumptions including the risk-free interest rate, the estimated volatility of our stock price over the term of the offering period, the expected term of the offering period and the expected dividend rate. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period, net of estimated forfeitures. If the stockholders do not approve the ESPP, the ESPP will be terminated, any contributions will be returned to the participants and we will reverse the accumulation of the expense related to the ESPP at that time. | |
Deferred Revenue | |
Our deferred revenue consists principally of both prepaid but unrecognized subscription revenue and advertising fees received or billed in advance of the delivery or completion of the delivery of services. Deferred revenue is recognized as revenue when the services are provided and all other revenue recognition criteria have been met. | |
In addition, subscription revenue derived from sales through certain mobile devices may be subject to refund or cancellation terms which may affect the timing or amount of the subscription revenue recognition. When refund rights exist, we recognize revenue when services have been provided and the rights lapse or when we have developed sufficient transaction history to estimate a return reserve. | |
We were required to defer revenue for certain in application (“in-app”) mobile subscriptions that contained refund rights until the refund rights lapsed or we developed sufficient operating history to estimate a return reserve. As of December 31, 2013, we had deferred all revenue related to these in-app mobile subscriptions subject to refund rights totaling approximately $14.2 million, as we did not have sufficient history to estimate a return reserve. Beginning in January 2014, we had sufficient historic transactional information which enabled us to estimate future returns. Accordingly, in January 2014, we began recording revenue related to these in-app mobile subscriptions net of estimated returns. This change resulted in a one-time increase in subscription revenue in the three months ended March 31, 2014 of approximately $14.2 million, as the previously deferred revenue was recognized. As of March 31, 2014, the deferred revenue related to the return reserve was not significant. | |
Concentration of Credit Risk | |
For the three months ended March 31, 2013 and 2014, we had no customers that accounted for more than 10% of our total revenue. As of December 31, 2013 and March 31, 2014, we had no customers that accounted for more than 10% of our total accounts receivable. | |
Cash_Cash_Equivalents_and_Inve
Cash, Cash Equivalents and Investments | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Cash, Cash Equivalents and Investments | ' | |||||||||||||
Cash, Cash Equivalents and Investments | ' | |||||||||||||
3. Cash, Cash Equivalents and Investments | ||||||||||||||
Cash, cash equivalents and investments consisted of the following: | ||||||||||||||
As of | As of | |||||||||||||
December 31, | March 31, | |||||||||||||
2013 | 2014 | |||||||||||||
(in thousands) | ||||||||||||||
Cash and cash equivalents: | ||||||||||||||
Cash | $ | 89,176 | $ | 60,096 | ||||||||||
Money market funds | 98,437 | 90,531 | ||||||||||||
Commercial paper | 54,247 | 4,000 | ||||||||||||
Corporate debt securities | 3,895 | 6,169 | ||||||||||||
Total cash and cash equivalents | $ | 245,755 | $ | 160,796 | ||||||||||
Short-term investments: | ||||||||||||||
Commercial paper | $ | 47,526 | $ | 78,424 | ||||||||||
Corporate debt securities | 50,436 | 101,372 | ||||||||||||
U.S. government and government agency debt securities | 700 | 700 | ||||||||||||
Total short-term investments | $ | 98,662 | $ | 180,496 | ||||||||||
Long-term investments: | ||||||||||||||
Corporate debt securities | $ | 100,690 | $ | 94,328 | ||||||||||
U.S. government and government agency debt securities | 4,996 | 10,241 | ||||||||||||
Total long-term investments | $ | 105,686 | $ | 104,569 | ||||||||||
Cash, cash equivalents and investments | $ | 450,103 | $ | 445,861 | ||||||||||
Our short-term investments have maturities of less than twelve months and are classified as available-for-sale. Our long-term investments have maturities of greater than twelve months and are classified as available-for-sale. | ||||||||||||||
The following tables summarize our available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of December 31, 2013 and March 31, 2014. | ||||||||||||||
As of December 31, 2013 | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||
Cost | Gains | Losses | Value | |||||||||||
(in thousands) | ||||||||||||||
Money market funds | $ | 98,437 | $ | — | $ | — | $ | 98,437 | ||||||
Commercial paper | 101,773 | — | — | 101,773 | ||||||||||
Corporate debt securities | 155,273 | 6 | (258 | ) | 155,021 | |||||||||
U.S. government and government agency debt securities | 5,700 | — | (4 | ) | 5,696 | |||||||||
Total cash equivalents and marketable securities | $ | 361,183 | $ | 6 | $ | (262 | ) | $ | 360,927 | |||||
As of March 31, 2014 | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||
Cost | Gains | Losses | Value | |||||||||||
(in thousands) | ||||||||||||||
Money market funds | $ | 90,531 | $ | — | $ | — | $ | 90,531 | ||||||
Commercial paper | 82,424 | — | — | 82,424 | ||||||||||
Corporate debt securities | 202,000 | 28 | (159 | ) | 201,869 | |||||||||
U.S. government and government agency debt securities | 10,952 | — | (11 | ) | 10,941 | |||||||||
Total cash equivalents and marketable securities | $ | 385,907 | $ | 28 | $ | (170 | ) | $ | 385,765 | |||||
The following table presents available-for-sale investments by contractual maturity date as of December 31, 2013 and March 31, 2014. | ||||||||||||||
As of December 31, 2013 | ||||||||||||||
Adjusted | Fair Value | |||||||||||||
Cost | ||||||||||||||
(in thousands) | ||||||||||||||
Due in one year or less | $ | 255,278 | $ | 255,241 | ||||||||||
Due after one year through three years | 105,905 | 105,686 | ||||||||||||
Total | $ | 361,183 | $ | 360,927 | ||||||||||
As of March 31, 2014 | ||||||||||||||
Adjusted | Fair Value | |||||||||||||
Cost | ||||||||||||||
(in thousands) | ||||||||||||||
Due in one year or less | $ | 281,237 | $ | 281,196 | ||||||||||
Due after one year through three years | 104,670 | 104,569 | ||||||||||||
Total | $ | 385,907 | $ | 385,765 | ||||||||||
Our investment policy requires investments to be investment grade, primarily rated “A1” by Standard & Poor’s or “P1” by Moody’s or better for short-term investments and rated “A” by Standard & Poor’s or “A2” by Moody’s or better for long-term investments, with the objective of minimizing the potential risk of principal loss. In addition, the investment policy limits the amount of credit exposure to any one issuer. | ||||||||||||||
The unrealized losses on our available-for-sale securities as of March 31, 2014 were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. As of March 31, 2014, we owned 89 securities that were in an unrealized loss position. We do not intend nor expect to need to sell these securities before recovering the associated unrealized losses. We expect to recover the full carrying value of these securities. As a result, no portion of the unrealized losses at March 31, 2014 is deemed to be other-than-temporary and the unrealized losses are not deemed to be credit losses. No available-for-sale securities have been in an unrealized loss position for twelve months or more. When evaluating the investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the three months ended March 31, 2014, we did not recognize any impairment charges. | ||||||||||||||
Fair_Value
Fair Value | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Fair Value | ' | ||||||||||
Fair Value | ' | ||||||||||
4. Fair Value | |||||||||||
We record cash equivalents and short-term investments at fair value. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements are required to be disclosed by level within the following fair value hierarchy: | |||||||||||
Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | |||||||||||
Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. | |||||||||||
Level 3 — Inputs lack observable market data to corroborate management’s estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. | |||||||||||
When determining fair value, whenever possible we use observable market data and rely on unobservable inputs only when observable market data is not available. | |||||||||||
The fair value of these financial assets and liabilities was determined using the following inputs at December 31, 2013 and March 31, 2014: | |||||||||||
As of December 31, 2013 | |||||||||||
Fair Value Measurement Using | |||||||||||
Quoted Prices in | Significant | ||||||||||
Active Markets | Other | ||||||||||
for Identical | Observable | ||||||||||
Instruments | Inputs | ||||||||||
(Level 1) | (Level 2) | Total | |||||||||
(in thousands) | |||||||||||
Assets: | |||||||||||
Money market funds | $ | 98,437 | $ | — | $ | 98,437 | |||||
Commercial paper | — | 101,773 | 101,773 | ||||||||
Corporate debt securities | — | 155,021 | 155,021 | ||||||||
U.S. government and government agency debt securities | — | 5,696 | 5,696 | ||||||||
Total assets measured at fair value | $ | 98,437 | $ | 262,490 | $ | 360,927 | |||||
As of March 31, 2014 | |||||||||||
Fair Value Measurement Using | |||||||||||
Quoted Prices in | Significant | ||||||||||
Active Markets | Other | ||||||||||
for Identical | Observable | ||||||||||
Instruments | Inputs | ||||||||||
(Level 1) | (Level 2) | Total | |||||||||
(in thousands) | |||||||||||
Assets: | |||||||||||
Money market funds | $ | 90,531 | $ | — | $ | 90,531 | |||||
Commercial paper | — | 82,424 | 82,424 | ||||||||
Corporate debt securities | — | 201,869 | 201,869 | ||||||||
U.S. government and government agency debt securities | — | 10,941 | 10,941 | ||||||||
Total assets measured at fair value | $ | 90,531 | $ | 295,234 | $ | 385,765 | |||||
Our money market funds are classified as Level 1 within the fair value hierarchy because they are valued primarily using quoted market prices. Our other cash equivalents and short-term investments are classified as Level 2 within the fair value hierarchy because they are valued using professional pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. As of December 31, 2013 and March 31, 2014, we held no Level 3 assets or liabilities. | |||||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies | ' |
Commitments and Contingencies | ' |
5. Commitments and Contingencies | |
Legal Proceedings | |
We have been in the past, and continue to be, a party to privacy and patent infringement litigation which has consumed, and may continue to consume, financial and managerial resources. We are also from time to time subject to various other legal proceedings and claims arising in the ordinary course of our business. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Our management periodically evaluates developments that could affect the amount, if any, of liability that we have previously accrued and make adjustments as appropriate. Determining both the likelihood and the estimated amount of a loss requires significant judgment, and management’s judgment may be incorrect. We do not believe the ultimate resolution of any pending legal matters is likely to have a material adverse effect on our business, financial position, results of operations or cash flows. | |
In June 2011, a putative class action lawsuit was filed against Pandora in the United States District Court for the Northern District of California alleging that we unlawfully accessed and transmitted personally identifiable information of the plaintiffs in connection with their use of our Android mobile application. In addition to civil liability, the amended complaint includes allegations of violations of statutes under which criminal penalties could be imposed if we were found liable. Our motion to dismiss the first amended complaint was granted on March 26, 2013. The plaintiff filed a second amended complaint in May 2013, which contains allegations similar to those contained in the previous complaint. On March 10, 2014, our motion to dismiss was granted in part and denied in part. | |
In September 2011, a putative class action lawsuit was filed against Pandora in the United States District Court for the Northern District of California alleging that we violated Michigan’s video rental privacy law and consumer protection statute by allowing our listeners’ listening history to be visible to the public. Our motion to dismiss the complaint was granted on September 28, 2012, judgment was entered on November 14, 2012. The plaintiff appealed the judgment to the U.S. Court of Appeals for the Ninth Circuit. Briefing of the appeal was completed on August 2, 2013. No date has been set for oral argument. | |
On September 10, 2012, B.E. Technology, LLC filed suit against Pandora in the United States District Court for the Western District of Tennessee alleging that we infringe a B.E. Technology patent and seeking injunctive relief and monetary damages. We filed our answer on December 31, 2012. Defendants in other suits in which B.E. Technology is plaintiff have filed inter partes review petitions before the U.S. Patent and Trademark Office challenging the validity of the patent Pandora is alleged to have infringed. The trial court granted Pandora’s motion to stay this litigation until the inter partes review has been concluded. | |
On December 23, 2013, Operative Media, Inc. filed a complaint in the New York Supreme Court for New York County alleging that Pandora failed to pay invoices when due, failed to cooperate, and anticipatorily breached a software subscription contract. Pandora’s responsive pleading was filed in February 2014. The court entered a final judgment of dismissal on April 23, 2014. | |
We currently believe that Pandora has substantial and meritorious defenses to the claims in the lawsuits discussed above and intends to vigorously defend our position. | |
We are also subject to legal proceedings involving musical work royalty rates. On November 5, 2012, we filed a petition in the rate court established by the consent decree between the American Society of Composers, Authors and Publishers (“ASCAP”) and the U.S. Department of Justice in the U.S. District Court for the Southern District of New York for the determination of reasonable license fees and terms for the ASCAP consent decree license applicable to the period January 1, 2011 through December 31, 2015. On June 11, 2013 we filed a motion for partial summary judgment seeking a determination that as a matter of law the publishers alleged to have withdrawn certain rights of public performance by digital audio transmission from the scope of grant of rights ASCAP could license on behalf of such publishers subsequent to the date of our request for a license from ASCAP were not valid as to our ASCAP consent decree license. On September 17, 2013, our motion for partial summary judgment was granted, alleviating the need to negotiate direct licenses for such purportedly withdrawn performance rights. A trial to determine the royalty rates we will pay ASCAP concluded in February 2014 and the court issued its opinion in March 2014. | |
On June 13, 2013, Broadcast Music, Inc. (“BMI”) filed a petition in the rate court established by the consent decree between BMI and the U.S. Department of Justice in the U.S. District Court for the Southern District of New York for the determination of reasonable fees and terms for the BMI consent decree license applicable to the period January 1, 2013 through December 31, 2017. We filed our response on July 19, 2013. On November 1, 2013, we filed a motion for partial summary judgment seeking a determination that as a matter of law the publishers alleged to have withdrawn certain rights of public performance by digital audio transmission from the scope of grant of rights BMI could license on behalf of such publishers subsequent to the date of our request for a license from BMI were not valid as to our BMI consent decree license. On December 18, 2013, our motion for summary judgment was denied. | |
On April 17, 2014, UMG Recordings, Inc., Sony Music Entertainment, Capitol Records, LLC, Warner Music Group Corp., and ABKCO Music and Records, Inc. filed suit against Pandora Media Inc. in the Supreme Court of the State of New York. The complaint claims common law copyright infringement and unfair competition arising from allegations that Pandora owes royalties for the performance of sound recordings recorded prior to February 15, 1972. | |
The outcome of any litigation is inherently uncertain. Based on our current knowledge we believe that the final outcome of the matters discussed above will not likely, individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations or cash flows; however, in light of the uncertainties involved in such matters, there can be no assurance that the outcome of each case or the costs of litigation, regardless of outcome, will not have a material adverse effect on our business. In particular, rate court proceedings could take years to complete, could be very costly and may result in royalty rates that are materially less favorable than rates we currently pay. | |
Indemnification Agreements, Guarantees and Contingencies | |
In the ordinary course of business, we are party to certain contractual agreements under which we may provide indemnifications of varying scope, terms and duration to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. Such indemnification provisions are accounted for in accordance with guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others. To date, we have not incurred, do not anticipate incurring and therefore have not accrued for, any costs related to such indemnification provisions. | |
While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any claims under indemnification arrangements will have a material adverse effect on our financial position, results of operations or cash flows. | |
Other_LongTerm_Assets
Other Long-Term Assets | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Other Long-Term Assets | ' | |||||||
Other Long-Term Assets | ' | |||||||
6. Other Long-Term Assets | ||||||||
As of | As of | |||||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
Other long-term assets: | ||||||||
Patents, net of amortization | $ | 7,636 | $ | 7,455 | ||||
Long-term security deposits | 4,736 | 4,853 | ||||||
Other | 1,343 | 1,552 | ||||||
Total other long-term assets | $ | 13,715 | $ | 13,860 | ||||
Pending Acquisition | ||||||||
In June 2013, we entered into a local marketing agreement to program KXMZ-FM, a Rapid City, South Dakota-area terrestrial radio station. In addition, we entered into an agreement to purchase the assets of KXMZ-FM for a total purchase price of approximately $0.6 million in cash, subject to certain closing conditions. As of March 31, 2014, we have paid $0.4 million of the purchase price, which is included in the other long-term assets line item of our balance sheets. | ||||||||
The completion of the KXMZ-FM acquisition is subject to various closing conditions, which include, but are not limited to, regulatory approval by the Federal Communications Commission. Upon completion of these conditions, we expect to account for this acquisition as a business combination. | ||||||||
Debt_Instruments
Debt Instruments | 3 Months Ended |
Mar. 31, 2014 | |
Debt Instruments | ' |
Debt Instruments | ' |
7. Debt Instruments | |
We are party to a $60.0 million credit facility with a syndicate of financial institutions, which expires on September 12, 2018. The interest rate on borrowings is either LIBOR plus 2.00% - 2.25% or an alternate base rate plus 1.00% - 1.25%, both of which are per annum rates based on outstanding borrowings. The amount of borrowings available under the credit facility at any time is based on our monthly accounts receivable balance at such time, and the amounts borrowed are collateralized by our personal property (including such accounts receivable but excluding intellectual property). Under the credit facility, we can request up to $15.0 million in letters of credit be issued by the financial institutions. | |
The credit facility contains customary events of default, conditions to borrowing and covenants, including restrictions on our ability to dispose of assets, make acquisitions, incur debt, incur liens and make distributions to stockholders. The credit facility also includes a financial covenant requiring the maintenance of minimum liquidity of at least $5.0 million. During the continuance of an event of a default, the lenders may accelerate amounts outstanding, terminate the credit facility and foreclose on all collateral. | |
As of March 31, 2014, we had no borrowings outstanding, $1.1 million in letters of credit outstanding and $58.9 million of available borrowing capacity under the credit facility. | |
Stockbased_Compensation_Plans_
Stock-based Compensation Plans and Awards | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Stock-based Compensation Plans and Awards | ' | |||||||
Stock-based Compensation Plans and Awards | ' | |||||||
8. Stock-based Compensation Plans and Awards | ||||||||
Employee Stock Purchase Plan | ||||||||
In December 2013, our board of directors approved the Employee Stock Purchase Plan (“ESPP”), subject to approval at the annual meeting of stockholders in June 2014. The ESPP allows eligible employees to purchase shares of our common stock through payroll deductions of up to 15% of their eligible compensation, subject to a maximum of $25,000 per calendar year. Shares reserved for issuance under the ESPP include 4,000,000 shares of common stock. The ESPP provides for six-month offering periods, with the first offering period commencing in February 2014. At the end of each offering period employees are able to purchase shares at 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the last day of the offering period. | ||||||||
We estimate the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model. The determination of the fair value is affected by our stock price on the first date of the offering period, as well as other assumptions including the risk-free interest rate, the estimated volatility of our stock price over the term of the offering period, the expected term of the offering period and the expected dividend rate. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period, net of estimated forfeitures. If the stockholders do not approve the ESPP, the ESPP will be terminated, any contributions will be returned to the participants and we will reverse the accumulation of the expense related to the ESPP at that time. | ||||||||
The per-share fair value of shares granted under the ESPP was determined on the first day of the offering period using the Black-Scholes option pricing model using the following assumptions: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Expected life (in years) | N/A | 0.5 | ||||||
Risk-free interest rate | N/A | 0.08 | % | |||||
Expected volatility | N/A | 42 | % | |||||
Expected dividend yield | N/A | 0 | % | |||||
During the three months ended March 31, 2014, we withheld $0.9 million in contributions from employees and recognized $0.3 million of stock-based compensation expense related to the ESPP. No shares of common stock were issued under the ESPP for the three months ended March 31, 2014. | ||||||||
Employee Stock-Based Awards | ||||||||
Our 2011 Equity Incentive Plan (the “2011 Plan”) provides for the issuance of stock options, restricted stock units and other stock-based awards to our employees. The 2011 Plan is administered by the compensation committee of our board of directors. | ||||||||
Stock options | ||||||||
We measure stock-based compensation expenses for stock options at the grant date fair value of the award and recognize expenses on a straight-line basis over the requisite service period, which is generally the vesting period. We estimate the fair value of stock options using the Black-Scholes option-pricing model. During the three months ended March 31, 2013 and 2014, we recorded stock-based compensation expense from stock options of approximately $1.7 million and $3.5 million. | ||||||||
The per-share fair value of each stock option was determined on the grant date using the Black-Scholes option pricing model using the following assumptions: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Expected life (in years) | 5.99 - 6.32 | 6.08 | ||||||
Risk-free interest rate | 0.99 - 1.19 | % | 1.71 - 1.82 | % | ||||
Expected volatility | 57 - 58 | % | 58.85 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Restricted stock units | ||||||||
The fair value of the restricted stock units (“RSUs”) is expensed ratably over the vesting period. RSUs vest annually on a cliff basis over the service period, which is generally four years. During the three months ended March 31, 2013 and 2014, we recorded stock-based compensation expense from RSUs of approximately $4.8 million and $13.6 million. | ||||||||
Stock-based Compensation Expense | ||||||||
Stock-based compensation expense related to all employee and non-employee stock-based awards was as follows: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Stock-based compensation expense: | ||||||||
Cost of revenue - Other | $ | 413 | $ | 881 | ||||
Product development | 1,445 | 3,461 | ||||||
Sales and marketing | 4,421 | 8,311 | ||||||
General and administrative | 245 | 4,739 | ||||||
Total stock-based compensation expense | $ | 6,524 | $ | 17,392 | ||||
Net_Loss_Per_Share
Net Loss Per Share | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Net Loss Per Share | ' | |||||||
Net Loss Per Share | ' | |||||||
9. Net Loss Per Share | ||||||||
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. | ||||||||
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and restricted stock units, to the extent dilutive. Basic and diluted net loss per share were the same for the three months ended March 31, 2013 and 2014, as the inclusion of all potential common shares outstanding would have been anti-dilutive. | ||||||||
The following table sets forth the computation of historical basic and diluted net loss per share: | ||||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
(in thousands except per share amounts) | ||||||||
Numerator: | ||||||||
Net loss | $ | (38,686 | ) | $ | (28,931 | ) | ||
Denominator: | ||||||||
Weighted-average common shares outstanding used in computing basic and diluted net loss per share | 172,733 | 199,857 | ||||||
Net loss per share, basic and diluted | $ | (0.22 | ) | $ | (0.14 | ) | ||
The following potential common shares outstanding were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive: | ||||||||
Three months ended | ||||||||
March 31, | March 31, | |||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
Options to purchase common stock | 26,047 | 13,518 | ||||||
Restricted stock units | 7,886 | 11,752 | ||||||
Total common stock equivalents | 33,933 | 25,270 |
Description_of_Business_and_Ba1
Description of Business and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Description of Business and Basis of Presentation | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The interim unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Pandora and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of our management, the interim unaudited condensed consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position for the periods presented. These interim unaudited condensed consolidated financial statements are not necessarily indicative of the results expected for the full fiscal year or for any subsequent period and should be read in conjunction with the audited consolidated financial statements and related notes included in our Transition Report on Form 10-K for the eleven months ended December 31, 2013. | |
We changed our fiscal year from the twelve months ending January 31 to the calendar twelve months ending December 31, effective beginning with the year ended December 31, 2013. As a result of this change, our prior fiscal year was an 11-month transition period ended on December 31, 2013. All references herein to a fiscal year refer to the twelve months ended December 31 of such year, and references to the first, second, third and fourth fiscal quarters refer to the three months ended March 31, June 30, September 30 and December 31, respectively. Prior year results have been recast on a calendar quarter basis. Refer to our Transition Report on Form 10-K for the eleven months ended December 31, 2013 for additional information regarding our fiscal year change. | |
Certain changes in presentation have been made to conform the prior period presentation to current period reporting. Our statements of operations now include the presentation of gross profit, which is calculated as total revenue less cost of revenue. In addition, we have reclassified certain software license fees, facilities-related expenses and depreciation expenses among the general and administrative, cost of revenue — other, sales and marketing and product development lines in our condensed consolidated statements of operations. | |
Use of Estimates | ' |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates are used for determining accrued royalties, selling prices for elements sold in multiple-element arrangements, the allowance for doubtful accounts, stock-based compensation, income taxes and the subscription return reserve. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements could be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
Summary of Significant Accounting Policies | ' |
Stock-Based Compensation - Employee Stock Purchase Plan | ' |
Stock-Based Compensation — Employee Stock Purchase Plan | |
In December 2013, our board of directors approved the Employee Stock Purchase Plan (“ESPP”), subject to approval at the annual meeting of stockholders in June 2014. We estimate the fair value of shares to be issued under the ESPP on the first day of the offering period using the Black-Scholes valuation model. The determination of the fair value is affected by our stock price on the first date of the offering period, as well as other assumptions including the risk-free interest rate, the estimated volatility of our stock price over the term of the offering period, the expected term of the offering period and the expected dividend rate. Stock-based compensation expense related to the ESPP is recognized on a straight-line basis over the offering period, net of estimated forfeitures. If the stockholders do not approve the ESPP, the ESPP will be terminated, any contributions will be returned to the participants and we will reverse the accumulation of the expense related to the ESPP at that time. | |
Deferred Revenue | ' |
Deferred Revenue | |
Our deferred revenue consists principally of both prepaid but unrecognized subscription revenue and advertising fees received or billed in advance of the delivery or completion of the delivery of services. Deferred revenue is recognized as revenue when the services are provided and all other revenue recognition criteria have been met. | |
In addition, subscription revenue derived from sales through certain mobile devices may be subject to refund or cancellation terms which may affect the timing or amount of the subscription revenue recognition. When refund rights exist, we recognize revenue when services have been provided and the rights lapse or when we have developed sufficient transaction history to estimate a return reserve. | |
We were required to defer revenue for certain in application (“in-app”) mobile subscriptions that contained refund rights until the refund rights lapsed or we developed sufficient operating history to estimate a return reserve. As of December 31, 2013, we had deferred all revenue related to these in-app mobile subscriptions subject to refund rights totaling approximately $14.2 million, as we did not have sufficient history to estimate a return reserve. Beginning in January 2014, we had sufficient historic transactional information which enabled us to estimate future returns. Accordingly, in January 2014, we began recording revenue related to these in-app mobile subscriptions net of estimated returns. This change resulted in a one-time increase in subscription revenue in the three months ended March 31, 2014 of approximately $14.2 million, as the previously deferred revenue was recognized. As of March 31, 2014, the deferred revenue related to the return reserve was not significant. | |
Concentration of Credit Risk | ' |
Concentration of Credit Risk | |
For the three months ended March 31, 2013 and 2014, we had no customers that accounted for more than 10% of our total revenue. As of December 31, 2013 and March 31, 2014, we had no customers that accounted for more than 10% of our total accounts receivable. | |
Cash_Cash_Equivalents_and_Inve1
Cash, Cash Equivalents and Investments (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Cash, Cash Equivalents and Investments | ' | |||||||||||||
Schedule of cash, cash equivalents and investments | ' | |||||||||||||
As of | As of | |||||||||||||
December 31, | March 31, | |||||||||||||
2013 | 2014 | |||||||||||||
(in thousands) | ||||||||||||||
Cash and cash equivalents: | ||||||||||||||
Cash | $ | 89,176 | $ | 60,096 | ||||||||||
Money market funds | 98,437 | 90,531 | ||||||||||||
Commercial paper | 54,247 | 4,000 | ||||||||||||
Corporate debt securities | 3,895 | 6,169 | ||||||||||||
Total cash and cash equivalents | $ | 245,755 | $ | 160,796 | ||||||||||
Short-term investments: | ||||||||||||||
Commercial paper | $ | 47,526 | $ | 78,424 | ||||||||||
Corporate debt securities | 50,436 | 101,372 | ||||||||||||
U.S. government and government agency debt securities | 700 | 700 | ||||||||||||
Total short-term investments | $ | 98,662 | $ | 180,496 | ||||||||||
Long-term investments: | ||||||||||||||
Corporate debt securities | $ | 100,690 | $ | 94,328 | ||||||||||
U.S. government and government agency debt securities | 4,996 | 10,241 | ||||||||||||
Total long-term investments | $ | 105,686 | $ | 104,569 | ||||||||||
Cash, cash equivalents and investments | $ | 450,103 | $ | 445,861 | ||||||||||
Summary of available-for-sale securities' adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category | ' | |||||||||||||
As of December 31, 2013 | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||
Cost | Gains | Losses | Value | |||||||||||
(in thousands) | ||||||||||||||
Money market funds | $ | 98,437 | $ | — | $ | — | $ | 98,437 | ||||||
Commercial paper | 101,773 | — | — | 101,773 | ||||||||||
Corporate debt securities | 155,273 | 6 | (258 | ) | 155,021 | |||||||||
U.S. government and government agency debt securities | 5,700 | — | (4 | ) | 5,696 | |||||||||
Total cash equivalents and marketable securities | $ | 361,183 | $ | 6 | $ | (262 | ) | $ | 360,927 | |||||
As of March 31, 2014 | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||
Cost | Gains | Losses | Value | |||||||||||
(in thousands) | ||||||||||||||
Money market funds | $ | 90,531 | $ | — | $ | — | $ | 90,531 | ||||||
Commercial paper | 82,424 | — | — | 82,424 | ||||||||||
Corporate debt securities | 202,000 | 28 | (159 | ) | 201,869 | |||||||||
U.S. government and government agency debt securities | 10,952 | — | (11 | ) | 10,941 | |||||||||
Total cash equivalents and marketable securities | $ | 385,907 | $ | 28 | $ | (170 | ) | $ | 385,765 | |||||
Schedule of available-for-sale investments by contractual maturity date | ' | |||||||||||||
As of December 31, 2013 | ||||||||||||||
Adjusted | Fair Value | |||||||||||||
Cost | ||||||||||||||
(in thousands) | ||||||||||||||
Due in one year or less | $ | 255,278 | $ | 255,241 | ||||||||||
Due after one year through three years | 105,905 | 105,686 | ||||||||||||
Total | $ | 361,183 | $ | 360,927 | ||||||||||
As of March 31, 2014 | ||||||||||||||
Adjusted | Fair Value | |||||||||||||
Cost | ||||||||||||||
(in thousands) | ||||||||||||||
Due in one year or less | $ | 281,237 | $ | 281,196 | ||||||||||
Due after one year through three years | 104,670 | 104,569 | ||||||||||||
Total | $ | 385,907 | $ | 385,765 |
Fair_Value_Tables
Fair Value (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Fair Value | ' | ||||||||||
Schedule of fair value of financial assets and liabilities | ' | ||||||||||
As of December 31, 2013 | |||||||||||
Fair Value Measurement Using | |||||||||||
Quoted Prices in | Significant | ||||||||||
Active Markets | Other | ||||||||||
for Identical | Observable | ||||||||||
Instruments | Inputs | ||||||||||
(Level 1) | (Level 2) | Total | |||||||||
(in thousands) | |||||||||||
Assets: | |||||||||||
Money market funds | $ | 98,437 | $ | — | $ | 98,437 | |||||
Commercial paper | — | 101,773 | 101,773 | ||||||||
Corporate debt securities | — | 155,021 | 155,021 | ||||||||
U.S. government and government agency debt securities | — | 5,696 | 5,696 | ||||||||
Total assets measured at fair value | $ | 98,437 | $ | 262,490 | $ | 360,927 | |||||
As of March 31, 2014 | |||||||||||
Fair Value Measurement Using | |||||||||||
Quoted Prices in | Significant | ||||||||||
Active Markets | Other | ||||||||||
for Identical | Observable | ||||||||||
Instruments | Inputs | ||||||||||
(Level 1) | (Level 2) | Total | |||||||||
(in thousands) | |||||||||||
Assets: | |||||||||||
Money market funds | $ | 90,531 | $ | — | $ | 90,531 | |||||
Commercial paper | — | 82,424 | 82,424 | ||||||||
Corporate debt securities | — | 201,869 | 201,869 | ||||||||
U.S. government and government agency debt securities | — | 10,941 | 10,941 | ||||||||
Total assets measured at fair value | $ | 90,531 | $ | 295,234 | $ | 385,765 |
Other_LongTerm_Assets_Tables
Other Long-Term Assets (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Other Long-Term Assets | ' | |||||||
Schedule of other long-term assets | ' | |||||||
As of | As of | |||||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
Other long-term assets: | ||||||||
Patents, net of amortization | $ | 7,636 | $ | 7,455 | ||||
Long-term security deposits | 4,736 | 4,853 | ||||||
Other | 1,343 | 1,552 | ||||||
Total other long-term assets | $ | 13,715 | $ | 13,860 |
Stockbased_Compensation_Plans_1
Stock-based Compensation Plans and Awards (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Stock-based Compensation Plans and Awards | ' | |||||||
Schedule of assumptions used for determining the per-share fair value of shares granted under the ESPP | ' | |||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Expected life (in years) | N/A | 0.5 | ||||||
Risk-free interest rate | N/A | 0.08 | % | |||||
Expected volatility | N/A | 42 | % | |||||
Expected dividend yield | N/A | 0 | % | |||||
Schedule of assumptions used for estimating the per-share fair value of stock options | ' | |||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
Expected life (in years) | 5.99 - 6.32 | 6.08 | ||||||
Risk-free interest rate | 0.99 - 1.19 | % | 1.71 - 1.82 | % | ||||
Expected volatility | 57 - 58 | % | 58.85 | % | ||||
Expected dividend yield | 0 | % | 0 | % | ||||
Schedule of stock-based compensation expenses related to all employee and non-employee stock-based awards | ' | |||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Stock-based compensation expense: | ||||||||
Cost of revenue - Other | $ | 413 | $ | 881 | ||||
Product development | 1,445 | 3,461 | ||||||
Sales and marketing | 4,421 | 8,311 | ||||||
General and administrative | 245 | 4,739 | ||||||
Total stock-based compensation expense | $ | 6,524 | $ | 17,392 |
Net_Loss_Per_Share_Tables
Net Loss Per Share (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Net Loss Per Share | ' | |||||||
Schedule of the computation of historical basic and diluted net loss per share | ' | |||||||
Three months ended | ||||||||
March 31, | ||||||||
2013 | 2014 | |||||||
(in thousands except per share amounts) | ||||||||
Numerator: | ||||||||
Net loss | $ | (38,686 | ) | $ | (28,931 | ) | ||
Denominator: | ||||||||
Weighted-average common shares outstanding used in computing basic and diluted net loss per share | 172,733 | 199,857 | ||||||
Net loss per share, basic and diluted | $ | (0.22 | ) | $ | (0.14 | ) | ||
Schedule of potential common shares outstanding that were excluded from the computation of diluted net loss per share | ' | |||||||
Three months ended | ||||||||
March 31, | March 31, | |||||||
2013 | 2014 | |||||||
(in thousands) | ||||||||
Options to purchase common stock | 26,047 | 13,518 | ||||||
Restricted stock units | 7,886 | 11,752 | ||||||
Total common stock equivalents | 33,933 | 25,270 |
Description_of_Business_and_Ba2
Description of Business and Basis of Presentation (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Description of Business and Basis of Presentation | ' |
Current fiscal year end date | '--12-31 |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Deferred Revenue | ' | ' |
Deferred revenue related to in-application ("in-app") mobile subscriptions | ' | $14.20 |
Increase in subscription revenue | $14.20 | ' |
Cash_Cash_Equivalents_and_Inve2
Cash, Cash Equivalents and Investments (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||||
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total cash and cash equivalents | $160,796 | $245,755 | $52,236 | $59,939 |
Total short-term investments | 180,496 | 98,662 | ' | ' |
Total long-term investments | 104,569 | 105,686 | ' | ' |
Cash, cash equivalents and investments | 445,861 | 450,103 | ' | ' |
Cash | ' | ' | ' | ' |
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total cash and cash equivalents | 60,096 | 89,176 | ' | ' |
Money market funds | ' | ' | ' | ' |
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total cash and cash equivalents | 90,531 | 98,437 | ' | ' |
Commercial paper | ' | ' | ' | ' |
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total cash and cash equivalents | 4,000 | 54,247 | ' | ' |
Total short-term investments | 78,424 | 47,526 | ' | ' |
Corporate debt securities | ' | ' | ' | ' |
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total cash and cash equivalents | 6,169 | 3,895 | ' | ' |
Total short-term investments | 101,372 | 50,436 | ' | ' |
Total long-term investments | 94,328 | 100,690 | ' | ' |
U.S. government and government agency debt securities | ' | ' | ' | ' |
Cash, Cash Equivalents and Investments | ' | ' | ' | ' |
Total short-term investments | 700 | 700 | ' | ' |
Total long-term investments | $10,241 | $4,996 | ' | ' |
Cash_Cash_Equivalents_and_Inve3
Cash, Cash Equivalents and Investments (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
item | ||
Available-for-sale securities | ' | ' |
Adjusted Cost | $385,907 | $361,183 |
Unrealized Gains | 28 | 6 |
Unrealized Losses | -170 | -262 |
Fair Value | 385,765 | 360,927 |
Adjusted Cost | ' | ' |
Due in one year or less | 281,237 | 255,278 |
Due after one year through three years | 104,670 | 105,905 |
Total | 385,907 | 361,183 |
Fair Value | ' | ' |
Due in one year or less | 281,196 | 255,241 |
Due after one year through three years | 104,569 | 105,686 |
Total | 385,765 | 360,927 |
Number of owned securities that were in an unrealized loss position | 89 | ' |
Unrealized losses deemed to be other-than-temporary | 0 | ' |
Available-for-sale securities that have been in an unrealized loss position for twelve months or more | 0 | ' |
Money market funds | ' | ' |
Available-for-sale securities | ' | ' |
Adjusted Cost | 90,531 | 98,437 |
Fair Value | 90,531 | 98,437 |
Commercial paper | ' | ' |
Available-for-sale securities | ' | ' |
Adjusted Cost | 82,424 | 101,773 |
Fair Value | 82,424 | 101,773 |
Corporate debt securities | ' | ' |
Available-for-sale securities | ' | ' |
Adjusted Cost | 202,000 | 155,273 |
Unrealized Gains | 28 | 6 |
Unrealized Losses | -159 | -258 |
Fair Value | 201,869 | 155,021 |
U.S. government and government agency debt securities | ' | ' |
Available-for-sale securities | ' | ' |
Adjusted Cost | 10,952 | 5,700 |
Unrealized Losses | -11 | -4 |
Fair Value | $10,941 | $5,696 |
Fair_Value_Details
Fair Value (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets: | ' | ' |
Total assets measured at fair value | $385,765 | $360,927 |
Money market funds | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 90,531 | 98,437 |
Commercial paper | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 82,424 | 101,773 |
Corporate debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 201,869 | 155,021 |
U.S. government and government agency debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 10,941 | 5,696 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 90,531 | 98,437 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Money market funds | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 90,531 | 98,437 |
Significant Other Observable Inputs (Level 2) | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 295,234 | 262,490 |
Significant Other Observable Inputs (Level 2) | Commercial paper | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 82,424 | 101,773 |
Significant Other Observable Inputs (Level 2) | Corporate debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 201,869 | 155,021 |
Significant Other Observable Inputs (Level 2) | U.S. government and government agency debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 10,941 | 5,696 |
Total | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 385,765 | 360,927 |
Total | Money market funds | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 90,531 | 98,437 |
Total | Commercial paper | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 82,424 | 101,773 |
Total | Corporate debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 201,869 | 155,021 |
Total | U.S. government and government agency debt securities | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 10,941 | 5,696 |
Level 3 | ' | ' |
Assets: | ' | ' |
Total assets measured at fair value | 0 | 0 |
Liabilities: | ' | ' |
Liabilities measured at fair value | $0 | $0 |
Other_LongTerm_Assets_Details
Other Long-Term Assets (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Mar. 31, 2014 |
KXMZ-FM | KXMZ-FM | |||
Other long-term assets | ' | ' | ' | ' |
Patents, net of amortization | $7,455,000 | $7,636,000 | ' | ' |
Long-term security deposits | 4,853,000 | 4,736,000 | ' | ' |
Other | 1,552,000 | 1,343,000 | ' | ' |
Total other long-term assets | 13,860,000 | 13,715,000 | ' | ' |
Purchase price of assets of KXMZ-FM | ' | ' | 600,000 | ' |
Purchase price of assets of KXMZ-FM paid in cash | ' | ' | ' | $400,000 |
Debt_Instruments_Details
Debt Instruments (Details) (USD $) | 3 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2014 |
Credit facility | ' |
Debt Instruments | ' |
Maximum borrowings available | $60 |
Minimum liquidity requirement | 5 |
Outstanding balance of borrowings | 0 |
Available borrowing capacity | 58.9 |
Credit facility | LIBOR | ' |
Debt Instruments | ' |
Variable interest rate base | 'LIBOR |
Credit facility | LIBOR | Minimum | ' |
Debt Instruments | ' |
Margin (as a percent) | 2.00% |
Credit facility | LIBOR | Maximum | ' |
Debt Instruments | ' |
Margin (as a percent) | 2.25% |
Credit facility | Alternate base rate | ' |
Debt Instruments | ' |
Variable interest rate base | 'alternate base rate |
Credit facility | Alternate base rate | Minimum | ' |
Debt Instruments | ' |
Margin (as a percent) | 1.00% |
Credit facility | Alternate base rate | Maximum | ' |
Debt Instruments | ' |
Margin (as a percent) | 1.25% |
Letters of credit | ' |
Debt Instruments | ' |
Maximum borrowings available | 15 |
Outstanding amount | $1.10 |
Stockbased_Compensation_Plans_2
Stock-based Compensation Plans and Awards (Details) (USD $) | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | |||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
ESPP | ESPP | ESPP | ESPP | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options | Restricted stock units | Restricted stock units | |||
Black-Scholes option pricing model | Maximum | Black-Scholes option pricing model | Black-Scholes option pricing model | Minimum | Maximum | |||||||||
Black-Scholes option pricing model | Black-Scholes option pricing model | |||||||||||||
Stock-based Compensation Plans and Awards | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of eligible compensation to purchase common stock through payroll deductions (as a percent) | ' | ' | ' | ' | ' | 15.00% | ' | ' | ' | ' | ' | ' | ' | ' |
Shares of common stock reserved for issuance | ' | ' | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of eligible compensation per calendar year to purchase common stock | ' | ' | ' | ' | ' | $25,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Offering period | ' | ' | '6 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Exercise price as a percentage of the fair market value of the common stock | ' | ' | 85.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Assumptions used to calculate per-share fair value of award | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected life | ' | ' | ' | ' | '6 months | ' | ' | ' | '6 years 29 days | ' | '5 years 11 months 26 days | '6 years 3 months 25 days | ' | ' |
Risk-free interest rate, minimum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 1.71% | 0.99% | ' | ' | ' | ' |
Risk-free interest rate, maximum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | 1.82% | 1.19% | ' | ' | ' | ' |
Risk-free interest rate (as a percent) | ' | ' | ' | ' | 0.08% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected volatility, minimum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 57.00% | ' | ' | ' | ' |
Expected volatility, maximum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | 58.00% | ' | ' | ' | ' |
Expected volatility (as a percent) | ' | ' | ' | ' | 42.00% | ' | ' | ' | 59.00% | ' | ' | ' | ' | ' |
Expected dividend yield (as a percent) | ' | ' | ' | ' | 0.00% | ' | ' | ' | 0.00% | 0.00% | ' | ' | ' | ' |
Vesting term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '4 years | ' |
Contributions from employees withheld | ' | ' | ' | 900,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock-based compensation expense | $17,392,000 | $6,524,000 | ' | $300,000 | ' | ' | $3,500,000 | $1,700,000 | ' | ' | ' | ' | $13,600,000 | $4,800,000 |
Common stock issued (in shares) | ' | ' | ' | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stockbased_Compensation_Plans_3
Stock-based Compensation Plans and Awards (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock-based compensation expenses: | ' | ' |
Total stock-based compensation expense | $17,392 | $6,524 |
Cost of revenue - Other | ' | ' |
Stock-based compensation expenses: | ' | ' |
Total stock-based compensation expense | 881 | 413 |
Product development | ' | ' |
Stock-based compensation expenses: | ' | ' |
Total stock-based compensation expense | 3,461 | 1,445 |
Sales and marketing | ' | ' |
Stock-based compensation expenses: | ' | ' |
Total stock-based compensation expense | 8,311 | 4,421 |
General and administrative | ' | ' |
Stock-based compensation expenses: | ' | ' |
Total stock-based compensation expense | $4,739 | $245 |
Net_Loss_Per_Share_Details
Net Loss Per Share (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Numerator: | ' | ' |
Net loss | ($28,931) | ($38,686) |
Denominator: | ' | ' |
Weighted-average common shares outstanding used in computing basic and diluted net loss per share (in shares) | 199,857 | 172,733 |
Net loss per share, basic and diluted (in dollars per share) | ($0.14) | ($0.22) |
Anti-dilutive securities | ' | ' |
Potential common shares outstanding that were excluded from the computation of diluted net loss per share | 25,270 | 33,933 |
Options to purchase common stock | ' | ' |
Anti-dilutive securities | ' | ' |
Potential common shares outstanding that were excluded from the computation of diluted net loss per share | 13,518 | 26,047 |
Restricted stock units | ' | ' |
Anti-dilutive securities | ' | ' |
Potential common shares outstanding that were excluded from the computation of diluted net loss per share | 11,752 | 7,886 |