Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 22, 2015 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Pandora Media, Inc. | |
Entity Central Index Key | 1,230,276 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 213,417,153 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 242,981 | $ 175,957 |
Short-term investments | 120,614 | 178,631 |
Accounts receivable, net of allowance of $1,218 at December 31, 2014 and $2,104 at September 30, 2015 | 262,910 | 218,437 |
Prepaid expenses and other current assets | 17,163 | 15,389 |
Total current assets | 643,668 | 588,414 |
Long-term investments | 78,982 | 104,243 |
Property and equipment, net | 56,424 | 42,921 |
Goodwill | 23,052 | 0 |
Intangible assets, net | 9,138 | 6,939 |
Other long-term assets | 9,479 | 6,773 |
Total assets | 820,743 | 749,290 |
Current liabilities | ||
Accounts payable | 20,131 | 10,825 |
Accrued liabilities | 37,099 | 15,754 |
Accrued royalties | 163,047 | 73,693 |
Deferred revenue | 22,682 | 14,412 |
Accrued compensation | 36,856 | 34,476 |
Total current liabilities | 279,815 | 149,160 |
Other long-term liabilities | 18,270 | 16,773 |
Total liabilities | 298,085 | 165,933 |
Stockholders’ equity | ||
Common stock: 209,071,488 shares issued and outstanding at December 31, 2014 and 213,461,778 at September 30, 2015 | 21 | 21 |
Additional paid-in capital | 870,511 | 781,009 |
Accumulated deficit | (347,249) | (196,997) |
Accumulated other comprehensive loss | (625) | (676) |
Total stockholders’ equity | 522,658 | 583,357 |
Total liabilities and stockholders’ equity | $ 820,743 | $ 749,290 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 2,104 | $ 1,218 |
Common stock, shares issued (in shares) | 213,461,778 | 209,071,488 |
Common stock, shares outstanding (in shares) | 213,461,778 | 209,071,488 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue | ||||
Advertising | $ 254,656 | $ 194,293 | $ 664,316 | $ 512,251 |
Subscription and other | 56,906 | 45,300 | 163,570 | 140,551 |
Total revenue | 311,562 | 239,593 | 827,886 | 652,802 |
Cost of revenue | ||||
Cost of revenue - Content acquisition costs | 211,272 | 111,315 | 467,429 | 331,051 |
Cost of revenue - Other | 21,414 | 15,453 | 57,690 | 44,421 |
Total cost of revenue | 232,686 | 126,768 | 525,119 | 375,472 |
Gross profit | 78,876 | 112,825 | 302,767 | 277,330 |
Operating expenses | ||||
Product development | 21,849 | 13,381 | 56,466 | 38,288 |
Sales and marketing | 107,286 | 72,320 | 285,595 | 200,416 |
General and administrative | 35,603 | 29,143 | 111,169 | 81,369 |
Total operating expenses | 164,738 | 114,844 | 453,230 | 320,073 |
Loss from operations | (85,862) | (2,019) | (150,463) | (42,743) |
Other income (expense), net | (36) | 44 | 417 | 236 |
Loss before provision for income taxes | (85,898) | (1,975) | (150,046) | (42,507) |
Provision for income taxes | (32) | (50) | (206) | (177) |
Net loss | $ (85,930) | $ (2,025) | $ (150,252) | $ (42,684) |
Weighted-average common shares outstanding used in computing basic and diluted net loss per share (in shares) | 212,760 | 206,982 | 211,487 | 204,208 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.40) | $ (0.01) | $ (0.71) | $ (0.21) |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (85,930) | $ (2,025) | $ (150,252) | $ (42,684) |
Change in foreign currency translation adjustment | (127) | (138) | (274) | (122) |
Change in net unrealized gains (losses) on marketable securities | 50 | (217) | 324 | (17) |
Other comprehensive income (loss) | (77) | (355) | 50 | (139) |
Total comprehensive loss | $ (86,007) | $ (2,380) | $ (150,202) | $ (42,823) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Operating activities | ||
Net loss | $ (150,252) | $ (42,684) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | ||
Depreciation and amortization | 15,194 | 11,224 |
Stock-based compensation | 79,473 | 60,116 |
Amortization of premium on investments, net | 1,712 | 2,106 |
Other operating activities | 1,610 | 797 |
Changes in operating assets and liabilities | ||
Accounts receivable | (45,796) | (34,142) |
Prepaid expenses and other assets | (6,564) | (4,003) |
Accounts payable and accrued liabilities | 31,101 | 5,807 |
Accrued royalties | 89,423 | 5,416 |
Accrued compensation | 4,333 | 12,579 |
Deferred revenue | 7,689 | (24,407) |
Reimbursement of cost of leasehold improvements | 1,014 | 3,161 |
Net cash provided by (used in) operating activities | 28,937 | (4,030) |
Investing activities | ||
Purchases of property and equipment | (27,333) | (23,479) |
Purchases of investments | (138,721) | (273,427) |
Proceeds from maturities of investments | 179,799 | 186,667 |
Proceeds from sale of investments | 41,317 | 0 |
Payments related to acquisitions, net of cash acquired | (23,028) | 0 |
Net cash provided by (used in) investing activities | 32,034 | (110,239) |
Financing activities | ||
Proceeds from employee stock purchase plan | 5,089 | 4,388 |
Proceeds from exercise of stock options | 3,718 | 15,168 |
Tax payments from net share settlements of restricted stock units | (2,295) | (1,986) |
Net cash provided by financing activities | 6,512 | 17,570 |
Effect of exchange rate changes on cash and cash equivalents | (459) | (172) |
Net increase (decrease) in cash and cash equivalents | 67,024 | (96,871) |
Cash and cash equivalents at beginning of period | 175,957 | 245,755 |
Cash and cash equivalents at end of period | 242,981 | 148,884 |
Supplemental disclosures of cash flow information | ||
Cash paid during the period for interest | 1,328 | 314 |
Purchases of property and equipment recorded in accounts payable and accrued liabilities | $ 343 | $ 2,550 |
Description of Business and Bas
Description of Business and Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | 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, 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 generate a majority of our revenue by offering local and national advertisers an opportunity to deliver targeted messages to our listeners using a combination of audio, display and video advertisements. We also generate revenue by offering 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. Our principal operations are located in the United States; we also operate in Australia and New Zealand. 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”) along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X, 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 Annual Report on Form 10-K for the year ended December 31, 2014. Certain changes in presentation have been made to conform the prior period presentation to current period reporting. We have reclassified goodwill and intangible assets from the other long-term assets line item to the goodwill and intangible assets, net line items in our condensed consolidated balance sheets. We have also reclassified certain non-cash amounts from the amortization of debt issuance costs and the change in accounts receivable line items to the other operating activities line item in our condensed consolidated statements of cash flows. Additionally, we have reclassified certain non-cash amounts from the purchases of property and equipment line item to the prepaid expenses and other assets line item of our condensed consolidated statements of cash flows. 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 in several areas including, but not limited to determining accrued royalties, selling prices for elements sold in multiple-element arrangements, the allowance for doubtful accounts, the fair value of stock options, market stock units ("MSUs") and the Employee Stock Purchase Plan ("ESPP"), the impact of forfeitures on stock-based compensation, the provision for (benefit from) income taxes, the subscription return reserve, the fair value of acquired intangible assets and goodwill and the useful lives of acquired intangible assets. 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 Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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 Annual Report on Form 10-K for the year ended December 31, 2014. Business Combinations, Goodwill and Intangible Assets, net We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. We review goodwill and indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of September 30, 2015 , no impairment of goodwill has been identified. Acquired finite-lived intangible assets are amortized over the estimated useful lives of the assets, which range from two to four years. Acquired finite-lived intangible assets consist primarily of patents, customer relationships, developed technology and trade names resulting from business combinations. We evaluate the recoverability of our intangible assets for potential impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to the fair value. In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life. Sales and Marketing Expenses - Advertising We expense the costs of producing advertisements as they are incurred and expense the cost of communicating advertisements at the time the advertisement airs or the event occurs, in each case as sales and marketing expense within the accompanying condensed consolidated statements of operations. During the three months ended September 30, 2014 and 2015 and the nine months ended September 30, 2014 and 2015 , we recorded advertising expenses of $3.9 million , $15.9 million , $6.2 million and $22.2 million , respectively. Stock-Based Compensation — MSUs We implemented a market stock unit program in March 2015 for certain key executives. Specifically, MSUs measure Pandora’s total stockholder return (“TSR”) performance against that of the Russell 2000 Index across three performance periods. We have determined the grant-date fair value of the MSUs using a Monte Carlo simulation performed by a third-party valuation specialist. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors and the risk-free interest rate for the expected term of the award. The variables used in these models are reviewed on an annual basis and adjusted, as needed. We recognize stock-based compensation for the MSUs over the requisite service period using the accelerated attribution method. Concentration of Credit Risk For the three and nine months ended September 30, 2014 and 2015 , we had no customers that accounted for more than 10% of our total revenue. As of December 31, 2014 and September 30, 2015 , we had no customers that accounted for more than 10% of our total accounts receivable. Recently Issued Accounting Standards In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2015-16, Business Combinations ("ASU 2015-16"). ASU 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Rather, the acquirer must recognize adjustments during the period in which the amounts are determined, including the effect on earnings of any amounts that would have been recorded in previous periods. The guidance is effective for fiscal years beginning after December 15, 2015, although early adoption is permitted. We are currently planning to early adopt this standard beginning with the three months ended December 31, 2015. We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 requires management of all entities to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable). The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within that fiscal year. We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-9”). ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue. Under the guidance, revenue is recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard may be effective for public entities with annual and interim reporting periods beginning after December 15, 2017. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. We are currently evaluating implementation methods and the effect that implementation of this standard will have on our consolidated financial statements upon adoption. |
Cash, Cash Equivalents and Inve
Cash, Cash Equivalents and Investments | 9 Months Ended |
Sep. 30, 2015 | |
Cash and Cash Equivalents [Abstract] | |
Cash, Cash Equivalents and Investments | Cash, Cash Equivalents and Investments Cash, cash equivalents and investments consisted of the following: As of As of (in thousands) Cash and cash equivalents Cash $ 72,487 $ 79,423 Money market funds 89,113 161,808 Commercial paper 9,349 1,750 Corporate debt securities 5,008 — Total cash and cash equivalents $ 175,957 $ 242,981 Short-term investments Commercial paper $ 45,443 $ 33,484 Corporate debt securities 128,691 84,629 U.S. government and government agency debt securities 4,497 2,501 Total short-term investments $ 178,631 $ 120,614 Long-term investments Corporate debt securities $ 100,998 $ 78,982 U.S. government and government agency debt securities 3,245 — Total long-term investments $ 104,243 $ 78,982 Cash, cash equivalents and investments $ 458,831 $ 442,577 Our short-term investments have maturities of twelve months or less 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, 2014 and September 30, 2015 . As of December 31, 2014 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 89,113 $ — $ — $ 89,113 Commercial paper 54,792 — — 54,792 Corporate debt securities 235,135 6 (444 ) 234,697 U.S. government and government agency debt securities 7,751 — (9 ) 7,742 Total cash equivalents and marketable securities $ 386,791 $ 6 $ (453 ) $ 386,344 As of September 30, 2015 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 161,808 $ — $ — $ 161,808 Commercial paper 35,234 — — 35,234 Corporate debt securities 163,735 100 (224 ) 163,611 U.S. government and government agency debt securities 2,500 1 — 2,501 Total cash equivalents and marketable securities $ 363,277 $ 101 $ (224 ) $ 363,154 The following table presents available-for-sale investments by contractual maturity date as of December 31, 2014 and September 30, 2015 . As of December 31, 2014 Adjusted Cost Fair Value (in thousands) Due in one year or less $ 282,206 $ 282,101 Due after one year through three years 104,585 104,243 Total $ 386,791 $ 386,344 As of September 30, 2015 Adjusted Cost Fair Value (in thousands) Due in one year or less $ 284,126 $ 284,172 Due after one year through three years 79,151 78,982 Total $ 363,277 $ 363,154 The following tables summarize our available-for-sale securities’ fair value and gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of December 31, 2014 and September 30, 2015 . As of December 31, 2014 Twelve Months or Less More than Twelve Months Total Fair Gross Unrealized Losses Fair Gross Unrealized Losses Fair Gross Unrealized Losses (in thousands) Money market funds $ — $ — $ — $ — $ — $ — Commercial paper — — — — — — Corporate debt securities 192,699 (422 ) 12,148 (22 ) 204,847 (444 ) U.S. government and government agency debt securities 5,240 (9 ) — — 5,240 (9 ) Total $ 197,939 $ (431 ) $ 12,148 $ (22 ) $ 210,087 $ (453 ) As of September 30, 2015 Twelve Months or Less More than Twelve Months Total Fair Gross Unrealized Losses Fair Gross Unrealized Losses Fair Gross Unrealized Losses (in thousands) Money market funds $ — $ — $ — $ — $ — $ — Commercial paper — — — — — — Corporate debt securities 82,366 (209 ) 14,569 (15 ) 96,935 (224 ) U.S. government and government agency debt securities — — — — — — Total $ 82,366 $ (209 ) $ 14,569 $ (15 ) $ 96,935 $ (224 ) 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 September 30, 2015 were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. As of September 30, 2015 , we owned 77 securities that were in an unrealized loss position. Based on our cash flow needs, we may be required to sell a portion of these securities prior to maturity. However, we expect to recover the full carrying value of these securities. As a result, no portion of the unrealized losses at September 30, 2015 is deemed to be other-than-temporary and the unrealized losses are not deemed to be credit losses. 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 and nine months ended September 30, 2015 , we did no t recognize any impairment charges. During the three and nine months ended September 30, 2015 , proceeds from the sale of available-for-sale securities were $37.7 million and $41.3 million . We did no t recognize a realized gain or loss in connection with these sales. |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value | 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, 2014 and September 30, 2015 : As of December 31, 2014 Fair Value Measurement Using Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Total (in thousands) Assets Money market funds $ 89,113 $ — $ 89,113 Commercial paper — 54,792 54,792 Corporate debt securities — 234,697 234,697 U.S. government and government agency debt securities — 7,742 7,742 Total assets measured at fair value $ 89,113 $ 297,231 $ 386,344 As of September 30, 2015 Fair Value Measurement Using Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Total (in thousands) Assets Money market funds $ 161,808 $ — $ 161,808 Commercial paper — 35,234 35,234 Corporate debt securities — 163,611 163,611 U.S. government and government agency debt securities — 2,501 2,501 Total assets measured at fair value $ 161,808 $ 201,346 $ 363,154 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, 2014 and September 30, 2015 , we held no Level 3 assets or liabilities. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings We have been in the past, and continue to be, a party to rate-setting, privacy and patent infringement litigation which have 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. Performing Rights Organization ("PRO") rate-setting litigation On November 5, 2012, we filed a petition in the rate court in the U.S. District Court for the Southern District of New York established by the consent decree between the American Society of Composers, Authors and Publishers (“ASCAP”) and the U.S. Department of Justice for the determination of reasonable license fees and terms for an ASCAP blanket license for the period from January 1, 2011 through December 31, 2015. A trial to determine the royalty rate for this blanket license concluded in February 2014, and in March 2014, the court issued its opinion establishing a royalty rate of 1.85% of revenue before certain deductions. On April 14, 2014, ASCAP, Sony/ATV, EMI Music Publishing, and Universal Publishing Group filed notices of appeal of the district court’s decision with the Second Circuit Court of Appeals. Oral arguments were held before the Second Circuit on March 19, 2015. On May 6, 2015 the Second Circuit upheld the district court’s ruling. On June 3, 2015, ASCAP petitioned the Second Circuit for a rehearing. On June 26, 2015, that petition was denied. On June 13, 2013, Broadcast Music, Inc. (“BMI”) filed a petition in the rate court in the U.S. District Court for the Southern District of New York established by the consent decree between BMI and the U.S. Department of Justice for the determination of reasonable fees and terms for a BMI blanket license for the period from January 1, 2013 through December 31, 2016. The rate proceeding concluded on March 13, 2015, and in May 2015, the court issued its opinion establishing a royalty rate of 2.5% of revenue before certain deductions. On June 26, 2015, we filed a notice of appeal of the court's decision with the Second Circuit Court of Appeals. On October 19, 2015, we filed our appeal brief. Briefing will continue through February 2016. The district court's decision and our appeal of the court's decision did not have a material impact on our consolidated statements of operations for the three and nine months ended September 30, 2015 . RMLC ("Radio Music Licensing Committee") In June 2013, we entered into an agreement to purchase the assets of KXMZ-FM and in June 2015 the Federal Communications Commission ("FCC") approved the transfer of the FCC licenses and the acquisition was completed. The agreement to purchase the assets of KXMZ allowed us to qualify for the RMLC royalty rate of 1.7% of revenue for a license to the ASCAP and BMI repertoires, before certain deductions, beginning in June 2013. As a result, we recorded cost of revenue - content acquisition costs at the RMLC royalty rate starting in June 2013, rather than the rate that was set in rate court proceedings in March 2014 for ASCAP and in May 2015 for BMI. In the three months ended September 30, 2015, despite confidence in our legal position that we were entitled to the RMLC royalty rate starting in June 2013, and as part of our strategy to strengthen our partnership with the music industry, management decided to forgo the application of the RMLC royalty rate from June 2013 through September 2015. As a result, we recorded a one-time cumulative charge to increase cost of revenue - content acquisition costs within our condensed consolidated financial statements of $23.9 million in the three and nine months ended September 30, 2015 related to spins played from June 2013 through September 30, 2015 in order to align the cumulative cost of revenue - content acquisition costs to the amounts previously paid at the rates that were set in the rate court proceedings in March 2014 for ASCAP and May 2015 for BMI. Pre-1972 copyright litigation 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 public performance of sound recordings recorded prior to February 15, 1972. In October 2015, the parties reached an agreement ("pre-1972 settlement") whereby we agreed to pay the plaintiffs a total of $90 million . The settlement resolves all past claims as to our use of pre-1972 recordings owned or controlled by the plaintiffs and enables us, without any additional payment, to reproduce, perform and broadcast such recordings in the United States through December 31, 2016. This agreement was approved by our board of directors and executed on October 21, 2015. Pursuant to this settlement, we agreed to pay the plaintiffs $60 million on or before October 23, 2015 and the plaintiffs will dismiss the case with prejudice. We recorded a one-time cumulative charge of $57.9 million to cost of revenue - content acquisition costs within our condensed consolidated statements of operations for the three and nine months ended September 30, 2015 related to the pre-1972 spins played through September 30, 2015. The remaining charge of $32.1 million will be recorded in cost of revenue - content acquisition costs over the future service period of October 1, 2015 through December 31, 2016 based on expected streaming of pre-1972 recordings over the period. This settlement will be paid in five installments. The first installment of $60 million was paid in October 2015, and the remaining amount will be paid in four equal installments of $7.5 million from January 1, 2016 through October 1, 2016. On October 2, 2014, Flo & Eddie Inc. filed a class action suit against Pandora Media Inc. in the federal district court for the Central District of California. The complaint alleges misappropriation and conversion in connection with the public performance of sound recordings recorded prior to February 15, 1972. On December 19, 2014, Pandora filed a motion to strike the complaint pursuant to California’s Anti-Strategic Lawsuit Against Public Participation (“Anti-SLAPP”) statute. This motion was denied, and we have appealed the ruling to the Ninth Circuit Court of Appeals. As a result, the district court litigation has been stayed pending the Ninth Circuit's review. On September 14, 2015, Arthur and Barbara Sheridan, et al filed a class action suit against Pandora Media, Inc. in the federal district court for the Northern District of California. The complaint alleges common law misappropriation, unfair competition, conversion, unjust enrichment and violation of California rights of publicity arising from allegations that we owe royalties for the public performance of sound recordings recorded prior to February 15, 1972. We are currently preparing our response to these allegations. On September 16, 2015, Arthur and Barbara Sheridan, et al filed a second class action suit against Pandora Media, Inc. in the federal district court for the Southern District of New York. The complaint alleges common law copyright infringement, violation of New York right of publicity, unfair competition and unjust enrichment arising from allegations that we owe royalties for the public performance of sound recordings recorded prior to February 15, 1972. We are currently preparing our response to these allegations. On October 17, 2015, Arthur and Barbara Sheridan, et al filed a third class action suit against us in the federal district court for the Northern District of Illinois (“Third Class Action Suit”). The complaint alleges common law copyright infringement, violation of the Illinois Uniform Deceptive Trade Practices Act, conversion, and unjust enrichment arising from allegations that we owe royalties for the public performance of sound recordings recorded prior to February 15, 1972. We are currently preparing our response to these allegations. On October 19, 2015, Arthur and Barbara Sheridan, et al filed a fourth class action suit against us in the federal district court for the District of New Jersey (“Fourth Class Action Suit”). The complaint alleges common law copyright infringement, unfair competition and unjust enrichment arising from allegations that we owe royalties for the public performance of sound recordings recorded prior to February 15, 1972. We are currently preparing our response to these allegations. The outcome of any litigation is inherently uncertain. Except as noted above, including with respect to the $90 million settlement for UMG Recordings, Inc. et al v. Pandora Media Inc. in the Supreme Court of the State of New York, we do not believe it is probable that the final outcome of the matters discussed above will, 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 current and past royalty rates that are materially less favorable than rates we currently pay or have paid in the past. 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. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Acquisitions In July 2015, we completed the acquisition of Next Big Sound, Inc. ("NBS"). Goodwill generated from the business acquisition is primarily attributable to expected synergies from future growth and from the potential to expand our Artist Marketing Platform ("AMP") and is not deductible for tax purposes. We have accounted for this acquisition as a business combination in the three months ended September 30, 2015 . NBS provides analytics for online music, including analyzing the popularity of musicians in social networks, streaming services and radio. In June 2013, we entered into an agreement to purchase the assets of KXMZ-FM. The Federal Communications Commission ("FCC") approved the transfer of the FCC licenses and the acquisition was completed in June 2015. We have accounted for this acquisition as a business combination in the nine months ended September 30, 2015 . These acquisitions were not material to our condensed consolidated financial statements, either individually or in the aggregate. Accordingly, pro forma historical results of operations related to these business acquisitions during the three and nine months ended September 30, 2015 have not been presented. We have included the financial results of these business acquisitions in our condensed consolidated financial statements from their respective dates of acquisition. The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 , are as follows: Goodwill (in thousands) Balance as of December 31, 2014 $ — Goodwill resulting from business combinations 23,052 Balance as of September 30, 2015 $ 23,052 The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangibles. As of December 31, 2014 As of September 30, 2015 Useful Lives From Date of Acquisition (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) (in thousands) Finite-lived intangible assets Patents 5.5 - 11 $ 8,030 $ (1,091 ) $ 6,939 $ 8,030 $ (1,640 ) $ 6,390 Developed technology 4 — — — 1,550 (97 ) 1,453 Customer relationships 2 — — — 940 (118 ) 822 Trade names 2 — — — 320 (40 ) 280 Total finite-lived intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 10,840 $ (1,895 ) $ 8,945 Indefinite-lived intangible assets FCC license - Broadcast Radio $ — $ — $ — $ 193 $ — $ 193 Total intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 11,033 $ (1,895 ) $ 9,138 Amortization expense of intangible assets was $0.2 million and $0.4 million for the three months ended September 30, 2014 and 2015 , and $0.5 million and $0.8 million for the nine months ended September 30, 2014 and 2015 , respectively. The following is a schedule of future amortization expense related to finite-lived intangible assets as of September 30, 2015 . As of (in thousands) Three months ending December 31, 2015 $ 439 2016 1,750 2017 1,435 2018 1,120 2019 926 Thereafter 3,275 Total future amortization expense $ 8,945 |
Debt Instruments
Debt Instruments | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Debt Instruments | Debt Instruments We are party to a $60.0 million credit facility with a syndicate of financial institutions, which expires on September 12, 2018. As of September 30, 2015 , 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. We are in compliance with all financial covenants associated with the credit facility as of September 30, 2015 . |
Stock-based Compensation Plans
Stock-based Compensation Plans and Awards | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation Plans and Awards | Stock-based Compensation Plans and Awards ESPP The ESPP allows eligible employees to purchase shares of our common stock through payroll deductions of up to 15% of their eligible compensation. The ESPP provides for six -month offering periods, commencing in February and August of each year. The per-share fair value of shares to be granted under the ESPP is determined on the first day of the offering period using the Black-Scholes option pricing model using the following assumptions: Three months ended September 30, Nine months ended September 30, 2014 2015 2014 2015 Expected life (in years) 0.5 0.5 0.5 0.5 Risk-free interest rate 0.05 - 0.08% 0.07 - 0.24% 0.05 - 0.08% 0.05 - 0.24% Expected volatility 42 % 29 - 42% 42 % 29 - 42% Expected dividend yield 0 % 0 % 0 % 0 % During the three months ended September 30, 2014 and 2015 , we withheld $1.9 million and $1.8 million in contributions from employees and recognized $0.6 million and $0.6 million of stock-based compensation expense related to the ESPP, respectively. During the nine months ended September 30, 2014 and 2015 , we withheld $4.4 million and $5.1 million in contributions from employees and recognized $1.5 million and $1.9 million of stock-based compensation expense related to the ESPP, respectively. In the three months ended September 30, 2014 and 2015 , 149,378 and 255,432 shares of common stock were issued under the ESPP. In the nine months ended September 30, 2014 and 2015 , 149,378 and 538,398 shares of common stock were issued under the ESPP. 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 September 30, 2014 and 2015 , we recorded stock-based compensation expense from stock options of approximately $4.0 million and $2.3 million . During the nine months ended September 30, 2014 and 2015 , we recorded stock-based compensation expense from stock options of approximately $11.2 million and $7.5 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 September 30, Nine months ended September 30, 2014 2015 2014 2015 Expected life (in years) 6.08 6.08 6.08 6.08 Risk-free interest rate 1.93 % 1.92 % 1.71 - 1.93% 1.92 % Expected volatility 58 % 49 % 58 - 59% 49 % Expected dividend yield 0 % 0 % 0 % 0 % Restricted stock units ("RSUs") The fair value of the restricted stock units is expensed ratably over the vesting period. RSUs typically have an initial annual cliff vest and then vest quarterly thereafter over the service period, which is generally four years . During the three months ended September 30, 2014 and 2015 , we recorded stock-based compensation expense from RSUs of approximately $17.5 million and $25.4 million . During the nine months ended September 30, 2014 and 2015 , we recorded stock-based compensation expense from RSUs of approximately $47.4 million and $69.1 million . MSUs We implemented a market stock unit program in March 2015 for certain key executives. MSUs are earned as a function of Pandora’s TSR performance measured against that of the Russell 2000 Index across three performance periods: • One-third of the target MSUs are eligible to be earned for a performance period that is the first calendar year of the MSU grant (the “One-Year Performance Period”); • One-third of the target MSUs are eligible to be earned for a performance period that is the first two calendar years of the MSU grant (the “Two-Year Performance Period”); and • Any remaining portion of the target MSUs are eligible to be earned for a performance period that is the entire three calendar years of the MSU grant (the “Three-Year Performance Period”). For each performance period, a “performance multiplier” is calculated by comparing Pandora’s TSR for the period to the Russell 2000 Index TSR for the same period, using the average adjusted closing stock price of Pandora stock, and the Russell 2000 Index, for ninety calendar days prior to the beginning of the performance period and the last ninety calendar days of the performance period. In each period, the target number of shares will vest if the Pandora TSR is equal to the Russell 2000 Index TSR. For each percentage point that the Pandora TSR falls below the Russell 2000 Index TSR for the period, the performance multiplier is decreased by three percentage points. The performance multiplier is capped at 100% for the One-Year and Two-Year Performance Periods. However, the full award is eligible for a payout up to 200% of target, less any shares earned in prior periods, in the Three-Year Performance Period. Specifically, for each percentage point that the Pandora TSR exceeds the Russell 2000 Index TSR for the Three-Year Performance Period, the performance multiplier is increased by 2% . As such, the ability to exceed the target number of shares is determined exclusively with respect to Pandora's three-year TSR during the term of the award. We have determined the grant-date fair value of the MSUs using a Monte Carlo simulation performed by a third-party valuation firm. We recognize stock-based compensation for the MSUs over the requisite service period, which is approximately three years, using the accelerated attribution method. During the three and nine months ended September 30, 2015 , we granted 776,000 MSUs at a total grant-date fair value of $4.3 million . During the three and nine months ended September 30, 2015 , we recorded stock-based compensation expense from MSUs of approximately $0.5 million and $1.0 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 Nine months ended 2014 2015 2014 2015 (in thousands) (in thousands) Stock-based compensation expense Cost of revenue - Other $ 1,063 $ 1,427 $ 2,976 $ 4,040 Product development 4,402 6,189 12,289 16,148 Sales and marketing 10,442 13,732 28,675 38,403 General and administrative 6,204 7,446 16,176 20,882 Total stock-based compensation expense $ 22,111 $ 28,794 $ 60,116 $ 79,473 |
Net Loss Per Share
Net Loss Per Share | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | 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, restricted stock units and market stock units, to the extent dilutive. Basic and diluted net loss per share were the same for the three and nine months ended September 30, 2014 and 2015 , 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 September 30, Nine months ended September 30, 2014 2015 2014 2015 (in thousands except per share amounts) Numerator Net loss $ (2,025 ) $ (85,930 ) $ (42,684 ) $ (150,252 ) Denominator Weighted-average common shares outstanding used in computing basic and diluted net loss per share 206,982 212,760 204,208 211,487 Net loss per share, basic and diluted $ (0.01 ) $ (0.40 ) $ (0.21 ) $ (0.71 ) 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: As of September 30, 2014 2015 (in thousands) Options to purchase common stock 11,571 10,492 Restricted stock units 11,339 16,653 Market stock units — 776 Total common stock equivalents 22,910 27,921 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Acquisition of Ticketfly, Inc. ("Ticketfly") On October 7, 2015, we entered into an agreement to acquire Ticketfly, a leading live events technology company that provides ticketing services and marketing software for venues and event promoters across North America. Pursuant to the merger agreement, we have agreed to pay $225 million in cash and approximately 11.6 million shares of common stock, subject to customary adjustments for working capital, cash, indebtedness and transaction expenses. Per the agreement, we are entitled to a net cash balance of $50 million as part of these adjustments. In addition to the purchase price, unvested options and unvested RSUs of Ticketfly held by Ticketfly employees will be converted respectively into unvested options and unvested RSUs to acquire our common stock. The closing is subject to customary closing conditions, including the expiration or termination of any waiting periods under applicable antitrust laws, and we expect the closing to occur in the three months ending December 31, 2015. We will include the financial results of Ticketfly in our condensed consolidated financial statements as of the date of acquisition. Pre-1972 copyright litigation Refer to the pre-1972 settlement, Third Class Action Suit and Fourth Class Action Suit matters under the “Legal Proceedings” subheading in Note 5. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information related to the pre-1972 settlement and pending litigation filed after the three months ended September 30, 2015. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
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”) along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission ("SEC") Regulation S-X, and include the accounts of Pandora and our wholly-owned subsidiaries. |
Consolidation | 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 Annual Report on Form 10-K for the year ended December 31, 2014. Certain changes in presentation have been made to conform the prior period presentation to current period reporting. We have reclassified goodwill and intangible assets from the other long-term assets line item to the goodwill and intangible assets, net line items in our condensed consolidated balance sheets. We have also reclassified certain non-cash amounts from the amortization of debt issuance costs and the change in accounts receivable line items to the other operating activities line item in our condensed consolidated statements of cash flows. Additionally, we have reclassified certain non-cash amounts from the purchases of property and equipment line item to the prepaid expenses and other assets line item of our condensed consolidated statements of cash flows. |
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 in several areas including, but not limited to determining accrued royalties, selling prices for elements sold in multiple-element arrangements, the allowance for doubtful accounts, the fair value of stock options, market stock units ("MSUs") and the Employee Stock Purchase Plan ("ESPP"), the impact of forfeitures on stock-based compensation, the provision for (benefit from) income taxes, the subscription return reserve, the fair value of acquired intangible assets and goodwill and the useful lives of acquired intangible assets. 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. |
Business Combinations, Goodwill and Intangible Assets, net | We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. We review goodwill and indefinite-lived intangible assets for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test under Accounting Standards Update (ASU) No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment, issued by the Financial Accounting Standards Board (FASB). If we determine that it is more likely than not that its fair value is less than its carrying amount, then the two-step goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of September 30, 2015 , no impairment of goodwill has been identified. Acquired finite-lived intangible assets are amortized over the estimated useful lives of the assets, which range from two to four years. Acquired finite-lived intangible assets consist primarily of patents, customer relationships, developed technology and trade names resulting from business combinations. We evaluate the recoverability of our intangible assets for potential impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to the fair value. In addition to the recoverability assessment, we routinely review the remaining estimated useful lives of finite-lived intangible assets. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized over the revised estimated useful life. |
Sales and Marketing Expenses - Advertising | We expense the costs of producing advertisements as they are incurred and expense the cost of communicating advertisements at the time the advertisement airs or the event occurs, in each case as sales and marketing expense within the accompanying condensed consolidated statements of operations. |
Stock-Based Compensation - MSUs | We implemented a market stock unit program in March 2015 for certain key executives. Specifically, MSUs measure Pandora’s total stockholder return (“TSR”) performance against that of the Russell 2000 Index across three performance periods. We have determined the grant-date fair value of the MSUs using a Monte Carlo simulation performed by a third-party valuation specialist. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors and the risk-free interest rate for the expected term of the award. The variables used in these models are reviewed on an annual basis and adjusted, as needed. We recognize stock-based compensation for the MSUs over the requisite service period using the accelerated attribution method. |
Concentration of Credit Risk | For the three and nine months ended September 30, 2014 and 2015 , we had no customers that accounted for more than 10% of our total revenue. As of December 31, 2014 and September 30, 2015 , we had no customers that accounted for more than 10% of our total accounts receivable. |
Recently Issued Accounting Standards | In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2015-16, Business Combinations ("ASU 2015-16"). ASU 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Rather, the acquirer must recognize adjustments during the period in which the amounts are determined, including the effect on earnings of any amounts that would have been recorded in previous periods. The guidance is effective for fiscal years beginning after December 15, 2015, although early adoption is permitted. We are currently planning to early adopt this standard beginning with the three months ended December 31, 2015. We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 requires management of all entities to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable). The guidance is effective for fiscal years beginning after December 15, 2016 and for interim periods within that fiscal year. We do not expect the adoption of this guidance to have a material effect on our consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-9, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-9”). ASU 2014-9 outlines a single comprehensive model for entities to use in accounting for revenue. Under the guidance, revenue is recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard may be effective for public entities with annual and interim reporting periods beginning after December 15, 2017. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt the guidance. We are currently evaluating implementation methods and the effect that implementation of this standard will have on our consolidated financial statements upon adoption. |
Commitments and Contingencies | 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. |
Cash, Cash Equivalents and In18
Cash, Cash Equivalents and Investments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Cash and Cash Equivalents [Abstract] | |
Schedule of cash, cash equivalents and investments | Cash, cash equivalents and investments consisted of the following: As of As of (in thousands) Cash and cash equivalents Cash $ 72,487 $ 79,423 Money market funds 89,113 161,808 Commercial paper 9,349 1,750 Corporate debt securities 5,008 — Total cash and cash equivalents $ 175,957 $ 242,981 Short-term investments Commercial paper $ 45,443 $ 33,484 Corporate debt securities 128,691 84,629 U.S. government and government agency debt securities 4,497 2,501 Total short-term investments $ 178,631 $ 120,614 Long-term investments Corporate debt securities $ 100,998 $ 78,982 U.S. government and government agency debt securities 3,245 — Total long-term investments $ 104,243 $ 78,982 Cash, cash equivalents and investments $ 458,831 $ 442,577 |
Summary of available-for-sale securities' adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category | 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, 2014 and September 30, 2015 . As of December 31, 2014 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 89,113 $ — $ — $ 89,113 Commercial paper 54,792 — — 54,792 Corporate debt securities 235,135 6 (444 ) 234,697 U.S. government and government agency debt securities 7,751 — (9 ) 7,742 Total cash equivalents and marketable securities $ 386,791 $ 6 $ (453 ) $ 386,344 As of September 30, 2015 Adjusted Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Money market funds $ 161,808 $ — $ — $ 161,808 Commercial paper 35,234 — — 35,234 Corporate debt securities 163,735 100 (224 ) 163,611 U.S. government and government agency debt securities 2,500 1 — 2,501 Total cash equivalents and marketable securities $ 363,277 $ 101 $ (224 ) $ 363,154 |
Schedule of available-for-sale investments by contractual maturity date | The following table presents available-for-sale investments by contractual maturity date as of December 31, 2014 and September 30, 2015 . As of December 31, 2014 Adjusted Cost Fair Value (in thousands) Due in one year or less $ 282,206 $ 282,101 Due after one year through three years 104,585 104,243 Total $ 386,791 $ 386,344 As of September 30, 2015 Adjusted Cost Fair Value (in thousands) Due in one year or less $ 284,126 $ 284,172 Due after one year through three years 79,151 78,982 Total $ 363,277 $ 363,154 |
Summary of available-for-sale securities' fair value and gross unrealized losses | The following tables summarize our available-for-sale securities’ fair value and gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of December 31, 2014 and September 30, 2015 . As of December 31, 2014 Twelve Months or Less More than Twelve Months Total Fair Gross Unrealized Losses Fair Gross Unrealized Losses Fair Gross Unrealized Losses (in thousands) Money market funds $ — $ — $ — $ — $ — $ — Commercial paper — — — — — — Corporate debt securities 192,699 (422 ) 12,148 (22 ) 204,847 (444 ) U.S. government and government agency debt securities 5,240 (9 ) — — 5,240 (9 ) Total $ 197,939 $ (431 ) $ 12,148 $ (22 ) $ 210,087 $ (453 ) As of September 30, 2015 Twelve Months or Less More than Twelve Months Total Fair Gross Unrealized Losses Fair Gross Unrealized Losses Fair Gross Unrealized Losses (in thousands) Money market funds $ — $ — $ — $ — $ — $ — Commercial paper — — — — — — Corporate debt securities 82,366 (209 ) 14,569 (15 ) 96,935 (224 ) U.S. government and government agency debt securities — — — — — — Total $ 82,366 $ (209 ) $ 14,569 $ (15 ) $ 96,935 $ (224 ) |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of financial assets and liabilities inputs | The fair value of these financial assets and liabilities was determined using the following inputs at December 31, 2014 and September 30, 2015 : As of December 31, 2014 Fair Value Measurement Using Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Total (in thousands) Assets Money market funds $ 89,113 $ — $ 89,113 Commercial paper — 54,792 54,792 Corporate debt securities — 234,697 234,697 U.S. government and government agency debt securities — 7,742 7,742 Total assets measured at fair value $ 89,113 $ 297,231 $ 386,344 As of September 30, 2015 Fair Value Measurement Using Quoted Prices in Active Markets for Identical Instruments (Level 1) Significant Other Observable Inputs (Level 2) Total (in thousands) Assets Money market funds $ 161,808 $ — $ 161,808 Commercial paper — 35,234 35,234 Corporate debt securities — 163,611 163,611 U.S. government and government agency debt securities — 2,501 2,501 Total assets measured at fair value $ 161,808 $ 201,346 $ 363,154 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Changes in the Carrying Amount of Goodwill | The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 , are as follows: Goodwill (in thousands) Balance as of December 31, 2014 $ — Goodwill resulting from business combinations 23,052 Balance as of September 30, 2015 $ 23,052 |
Summary of Gross Carrying Amounts and Accumulated Amortization of Intangibles - Finite Lived | The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangibles. As of December 31, 2014 As of September 30, 2015 Useful Lives From Date of Acquisition (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) (in thousands) Finite-lived intangible assets Patents 5.5 - 11 $ 8,030 $ (1,091 ) $ 6,939 $ 8,030 $ (1,640 ) $ 6,390 Developed technology 4 — — — 1,550 (97 ) 1,453 Customer relationships 2 — — — 940 (118 ) 822 Trade names 2 — — — 320 (40 ) 280 Total finite-lived intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 10,840 $ (1,895 ) $ 8,945 Indefinite-lived intangible assets FCC license - Broadcast Radio $ — $ — $ — $ 193 $ — $ 193 Total intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 11,033 $ (1,895 ) $ 9,138 |
Summary of Gross Carrying Amounts and Accumulated Amortization of Intangibles - Indefinite Lived | The following summarizes information regarding the gross carrying amounts and accumulated amortization of intangibles. As of December 31, 2014 As of September 30, 2015 Useful Lives From Date of Acquisition (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value (in thousands) (in thousands) Finite-lived intangible assets Patents 5.5 - 11 $ 8,030 $ (1,091 ) $ 6,939 $ 8,030 $ (1,640 ) $ 6,390 Developed technology 4 — — — 1,550 (97 ) 1,453 Customer relationships 2 — — — 940 (118 ) 822 Trade names 2 — — — 320 (40 ) 280 Total finite-lived intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 10,840 $ (1,895 ) $ 8,945 Indefinite-lived intangible assets FCC license - Broadcast Radio $ — $ — $ — $ 193 $ — $ 193 Total intangible assets $ 8,030 $ (1,091 ) $ 6,939 $ 11,033 $ (1,895 ) $ 9,138 |
Schedule of Future Amortization Expense Related to Finite-lived Intangible Assets | The following is a schedule of future amortization expense related to finite-lived intangible assets as of September 30, 2015 . As of (in thousands) Three months ending December 31, 2015 $ 439 2016 1,750 2017 1,435 2018 1,120 2019 926 Thereafter 3,275 Total future amortization expense $ 8,945 |
Stock-based Compensation Plan21
Stock-based Compensation Plans and Awards (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of assumptions used for determining the per-share fair value of shares granted under the ESPP | The per-share fair value of shares to be granted under the ESPP is determined on the first day of the offering period using the Black-Scholes option pricing model using the following assumptions: Three months ended September 30, Nine months ended September 30, 2014 2015 2014 2015 Expected life (in years) 0.5 0.5 0.5 0.5 Risk-free interest rate 0.05 - 0.08% 0.07 - 0.24% 0.05 - 0.08% 0.05 - 0.24% Expected volatility 42 % 29 - 42% 42 % 29 - 42% Expected dividend yield 0 % 0 % 0 % 0 % 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 September 30, Nine months ended September 30, 2014 2015 2014 2015 Expected life (in years) 6.08 6.08 6.08 6.08 Risk-free interest rate 1.93 % 1.92 % 1.71 - 1.93% 1.92 % Expected volatility 58 % 49 % 58 - 59% 49 % Expected dividend yield 0 % 0 % 0 % 0 % |
Schedule of stock-based compensation expenses related to all employee and non-employee stock-based awards | Stock-based compensation expense related to all employee and non-employee stock-based awards was as follows: Three months ended Nine months ended 2014 2015 2014 2015 (in thousands) (in thousands) Stock-based compensation expense Cost of revenue - Other $ 1,063 $ 1,427 $ 2,976 $ 4,040 Product development 4,402 6,189 12,289 16,148 Sales and marketing 10,442 13,732 28,675 38,403 General and administrative 6,204 7,446 16,176 20,882 Total stock-based compensation expense $ 22,111 $ 28,794 $ 60,116 $ 79,473 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of the computation of historical basic and diluted net loss per share | The following table sets forth the computation of historical basic and diluted net loss per share: Three months ended September 30, Nine months ended September 30, 2014 2015 2014 2015 (in thousands except per share amounts) Numerator Net loss $ (2,025 ) $ (85,930 ) $ (42,684 ) $ (150,252 ) Denominator Weighted-average common shares outstanding used in computing basic and diluted net loss per share 206,982 212,760 204,208 211,487 Net loss per share, basic and diluted $ (0.01 ) $ (0.40 ) $ (0.21 ) $ (0.71 ) |
Schedule of potential common shares outstanding excluded from the computation of diluted net loss per share | 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: As of September 30, 2014 2015 (in thousands) Options to purchase common stock 11,571 10,492 Restricted stock units 11,339 16,653 Market stock units — 776 Total common stock equivalents 22,910 27,921 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies - Narrative (Details) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2015performance_period | Sep. 30, 2015USD ($)customer | Sep. 30, 2014USD ($)customer | Sep. 30, 2015USD ($)customer | Sep. 30, 2014USD ($)customer | Dec. 31, 2014customer | |
Concentration Risk [Line Items] | ||||||
Goodwill impairment | $ | $ 0 | |||||
Advertising expense | $ | $ 15,900,000 | $ 3,900,000 | $ 22,200,000 | $ 6,200,000 | ||
Revenue | Customer concentration risk | ||||||
Concentration Risk [Line Items] | ||||||
Number of major customers representing 10% or more of total revenue/total accounts receivable | 0 | 0 | 0 | 0 | ||
Accounts receivable | Customer concentration risk | ||||||
Concentration Risk [Line Items] | ||||||
Number of major customers representing 10% or more of total revenue/total accounts receivable | 0 | 0 | ||||
Market stock units | ||||||
Concentration Risk [Line Items] | ||||||
Number of performance periods | performance_period | 3 | |||||
Minimum | ||||||
Concentration Risk [Line Items] | ||||||
Estimated useful lives of finite-lived intangible assets | 2 years | |||||
Maximum | ||||||
Concentration Risk [Line Items] | ||||||
Estimated useful lives of finite-lived intangible assets | 4 years |
Cash, Cash Equivalents and In24
Cash, Cash Equivalents and Investments - Schedule of cash, cash equivalents and investments (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Dec. 31, 2013 |
Cash, Cash Equivalents and Investments | ||||
Total cash and cash equivalents | $ 242,981 | $ 175,957 | $ 148,884 | $ 245,755 |
Total short-term investments | 120,614 | 178,631 | ||
Total long-term investments | 78,982 | 104,243 | ||
Cash, cash equivalents and investments | 442,577 | 458,831 | ||
Cash | ||||
Cash, Cash Equivalents and Investments | ||||
Total cash and cash equivalents | 79,423 | 72,487 | ||
Money market funds | ||||
Cash, Cash Equivalents and Investments | ||||
Total cash and cash equivalents | 161,808 | 89,113 | ||
Commercial paper | ||||
Cash, Cash Equivalents and Investments | ||||
Total cash and cash equivalents | 1,750 | 9,349 | ||
Total short-term investments | 33,484 | 45,443 | ||
Corporate debt securities | ||||
Cash, Cash Equivalents and Investments | ||||
Total cash and cash equivalents | 0 | 5,008 | ||
Total short-term investments | 84,629 | 128,691 | ||
Total long-term investments | 78,982 | 100,998 | ||
U.S. government and government agency debt securities | ||||
Cash, Cash Equivalents and Investments | ||||
Total short-term investments | 2,501 | 4,497 | ||
Total long-term investments | $ 0 | $ 3,245 |
Cash, Cash Equivalents and In25
Cash, Cash Equivalents and Investments - Summary of available-for-sale securities' adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | $ 363,277 | $ 386,791 |
Unrealized Gains | 101 | 6 |
Unrealized Losses | (224) | (453) |
Fair Value | 363,154 | 386,344 |
Money market funds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 161,808 | 89,113 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Fair Value | 161,808 | 89,113 |
Commercial paper | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 35,234 | 54,792 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Fair Value | 35,234 | 54,792 |
Corporate debt securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 163,735 | 235,135 |
Unrealized Gains | 100 | 6 |
Unrealized Losses | (224) | (444) |
Fair Value | 163,611 | 234,697 |
U.S. government and government agency debt securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Adjusted Cost | 2,500 | 7,751 |
Unrealized Gains | 1 | 0 |
Unrealized Losses | 0 | (9) |
Fair Value | $ 2,501 | $ 7,742 |
Cash, Cash Equivalents and In26
Cash, Cash Equivalents and Investments - Schedule of available-for-sale investments by contractual maturity date (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Adjusted Cost | ||
Due in one year or less | $ 284,126 | $ 282,206 |
Due after one year through three years | 79,151 | 104,585 |
Total | 363,277 | 386,791 |
Fair Value | ||
Due in one year or less | 284,172 | 282,101 |
Due after one year through three years | 78,982 | 104,243 |
Total | $ 363,154 | $ 386,344 |
Cash, Cash Equivalents and In27
Cash, Cash Equivalents and Investments - Summary of available-for-sale securities' fair value and gross unrealized losses (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, continuous unrealized loss position, twelve months or less, fair value | $ 82,366 | $ 197,939 |
Available-for-sale securities, continuous unrealized loss position, twelve months or less, gross unrealized loss | (209) | (431) |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value | 14,569 | 12,148 |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, gross unrealized loss | (15) | (22) |
Available-for-sale securities, continuous unrealized loss position, fair value | 96,935 | 210,087 |
Available-for-sale securities, continuous unrealized loss position, gross unrealized loss | (224) | (453) |
Corporate debt securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, continuous unrealized loss position, twelve months or less, fair value | 82,366 | 192,699 |
Available-for-sale securities, continuous unrealized loss position, twelve months or less, gross unrealized loss | (209) | (422) |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value | 14,569 | 12,148 |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, gross unrealized loss | (15) | (22) |
Available-for-sale securities, continuous unrealized loss position, fair value | 96,935 | 204,847 |
Available-for-sale securities, continuous unrealized loss position, gross unrealized loss | (224) | (444) |
U.S. government and government agency debt securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities, continuous unrealized loss position, twelve months or less, fair value | 0 | 5,240 |
Available-for-sale securities, continuous unrealized loss position, twelve months or less, gross unrealized loss | 0 | (9) |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, fair value | 0 | 0 |
Available-for-sale securities, continuous unrealized loss position, twelve months or longer, gross unrealized loss | 0 | 0 |
Available-for-sale securities, continuous unrealized loss position, fair value | 0 | 5,240 |
Available-for-sale securities, continuous unrealized loss position, gross unrealized loss | $ 0 | $ (9) |
Cash, Cash Equivalents and In28
Cash, Cash Equivalents and Investments - Narrative (Details) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015USD ($)security | Sep. 30, 2015USD ($)security | Sep. 30, 2014USD ($) | |
Cash and Cash Equivalents [Abstract] | |||
Number of owned securities that were in an unrealized loss position | security | 77 | 77 | |
Unrealized losses deemed to be other-than-temporary | $ 0 | $ 0 | |
Proceeds from sale of available-for-sale securities | 37,655,000 | 41,317,000 | $ 0 |
Realized gain or loss in connection with sale of available-for-sale securities | $ 0 | $ 0 |
Fair Value - Schedule of fair v
Fair Value - Schedule of fair value of financial assets and liabilities inputs (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets: | ||
Total assets measured at fair value | $ 363,154 | $ 386,344 |
Money market funds | ||
Assets: | ||
Total assets measured at fair value | 161,808 | 89,113 |
Commercial paper | ||
Assets: | ||
Total assets measured at fair value | 35,234 | 54,792 |
Corporate debt securities | ||
Assets: | ||
Total assets measured at fair value | 163,611 | 234,697 |
U.S. government and government agency debt securities | ||
Assets: | ||
Total assets measured at fair value | 2,501 | 7,742 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | ||
Assets: | ||
Total assets measured at fair value | 161,808 | 89,113 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Money market funds | ||
Assets: | ||
Total assets measured at fair value | 161,808 | 89,113 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Commercial paper | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | Corporate debt securities | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Quoted Prices in Active Markets for Identical Instruments (Level 1) | U.S. government and government agency debt securities | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Total assets measured at fair value | 201,346 | 297,231 |
Significant Other Observable Inputs (Level 2) | Money market funds | ||
Assets: | ||
Total assets measured at fair value | 0 | 0 |
Significant Other Observable Inputs (Level 2) | Commercial paper | ||
Assets: | ||
Total assets measured at fair value | 35,234 | 54,792 |
Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Assets: | ||
Total assets measured at fair value | 163,611 | 234,697 |
Significant Other Observable Inputs (Level 2) | U.S. government and government agency debt securities | ||
Assets: | ||
Total assets measured at fair value | $ 2,501 | $ 7,742 |
Fair Value - Narrative (Details
Fair Value - Narrative (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets measured at fair value | $ 363,154,000 | $ 386,344,000 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets measured at fair value | 0 | 0 |
Total liabilities measured at fair value | $ 0 | $ 0 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) | Oct. 23, 2015USD ($) | Oct. 26, 2015USD ($) | May. 31, 2015 | Mar. 31, 2014 | Jun. 30, 2013 | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Oct. 01, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Oct. 01, 2016installment | Dec. 31, 2016USD ($) |
Loss Contingencies [Line Items] | ||||||||||||
Cost of revenue - content acquisition costs one-time cumulative charge | $ 211,272,000 | $ 111,315,000 | $ 467,429,000 | $ 331,051,000 | ||||||||
Rate-Setting Litigation, ASCAP and U.S. Department of Justice | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Royalty expense, percent | 1.85% | |||||||||||
Rate-Setting Litigation, Broadcast Music, Inc. and U.S. Department of Justice | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Royalty expense, percent | 2.50% | |||||||||||
Radio Music Licensing Committee | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Royalty expense, percent | 1.70% | |||||||||||
Cost of revenue - content acquisition costs one-time cumulative charge | 23,900,000 | 23,900,000 | ||||||||||
Pre-1972 Copyright Litigation | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Litigation settlement, expense | $ 57,900,000 | $ 57,900,000 | ||||||||||
Pre-1972 Copyright Litigation | Forecast | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Litigation settlement, expense | $ 32,100,000 | |||||||||||
Pre-1972 Copyright Litigation | Subsequent Event | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Litigation settlement, amount | $ 90,000,000 | |||||||||||
Payment for legal settlement | $ 60,000,000 | $ 60,000,000 | ||||||||||
Number of litigation installments | installment | 5 | |||||||||||
Pre-1972 Copyright Litigation | Subsequent Event | Forecast | ||||||||||||
Loss Contingencies [Line Items] | ||||||||||||
Payment for legal settlement | $ 7,500,000 |
Goodwill and Intangible Asset32
Goodwill and Intangible Assets - Schedule of Changes in the Carrying Amount of Goodwill (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Goodwill [Roll Forward] | |
Balance as of December 31, 2014 | $ 0 |
Goodwill resulting from business combinations | 23,052 |
Balance as of September 30, 2015 | $ 23,052 |
Goodwill and Intangible Asset33
Goodwill and Intangible Assets - Summary of Gross Carrying Amounts and Accumulated Amortization of Intangibles (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Finite-lived intangible assets | ||
Gross Carrying Amount | $ 10,840 | $ 8,030 |
Accumulated Amortization | (1,895) | (1,091) |
Net Carrying Value | 8,945 | 6,939 |
Indefinite-lived intangible assets | ||
Net Carrying Value | 193 | 0 |
Total intangible assets, Gross Carrying Amount | 11,033 | 8,030 |
Total intangible assets, Accumulated Amortization | (1,895) | (1,091) |
Total intangible assets, Net Carrying Value | $ 9,138 | 6,939 |
Minimum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 2 years | |
Maximum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 4 years | |
Patents | ||
Finite-lived intangible assets | ||
Gross Carrying Amount | $ 8,030 | 8,030 |
Accumulated Amortization | (1,640) | (1,091) |
Net Carrying Value | 6,390 | 6,939 |
Indefinite-lived intangible assets | ||
Total intangible assets, Accumulated Amortization | $ (1,640) | (1,091) |
Patents | Minimum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 5 years 6 months | |
Patents | Maximum | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 11 years | |
Developed technology | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 4 years | |
Finite-lived intangible assets | ||
Gross Carrying Amount | $ 1,550 | 0 |
Accumulated Amortization | (97) | 0 |
Net Carrying Value | 1,453 | 0 |
Indefinite-lived intangible assets | ||
Total intangible assets, Accumulated Amortization | $ (97) | 0 |
Customer relationships | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 2 years | |
Finite-lived intangible assets | ||
Gross Carrying Amount | $ 940 | 0 |
Accumulated Amortization | (118) | 0 |
Net Carrying Value | 822 | 0 |
Indefinite-lived intangible assets | ||
Total intangible assets, Accumulated Amortization | $ (118) | 0 |
Trade names | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Useful Lives From Date of Acquisition (in years) | 2 years | |
Finite-lived intangible assets | ||
Gross Carrying Amount | $ 320 | 0 |
Accumulated Amortization | (40) | 0 |
Net Carrying Value | 280 | 0 |
Indefinite-lived intangible assets | ||
Total intangible assets, Accumulated Amortization | $ (40) | $ 0 |
Goodwill and Intangible Asset34
Goodwill and Intangible Assets - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense of intangible assets | $ 0.4 | $ 0.2 | $ 0.8 | $ 0.5 |
Goodwill and Intangible Asset35
Goodwill and Intangible Assets - Schedule of Future Amortization Expense Related to Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Three months ending December 31, 2015 | $ 439 | |
2,016 | 1,750 | |
2,017 | 1,435 | |
2,018 | 1,120 | |
2,019 | 926 | |
Thereafter | 3,275 | |
Net Carrying Value | $ 8,945 | $ 6,939 |
Debt Instruments - Narrative (D
Debt Instruments - Narrative (Details) | Sep. 30, 2015USD ($) |
Line of credit | |
Debt Instruments | |
Credit facility | $ 60,000,000 |
Outstanding balance of borrowings | 0 |
Available borrowing capacity | 58,900,000 |
Letter of credit | |
Debt Instruments | |
Outstanding amount | $ 1,100,000 |
Stock-based Compensation Plan37
Stock-based Compensation Plans and Awards - Narrative (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2015performance_period | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($)shares | Sep. 30, 2015USD ($)shares | Sep. 30, 2014USD ($)shares | |
Stock-based Compensation Plans and Awards | |||||
Stock-based compensation expense | $ 28,794 | $ 22,111 | $ 79,473 | $ 60,116 | |
Employee stock | |||||
Stock-based Compensation Plans and Awards | |||||
Percentage of eligible compensation to purchase common stock through payroll deductions (as a percent) | 15.00% | 15.00% | |||
Offering period | 6 months | ||||
Contributions from employees withheld | $ 1,800 | 1,900 | $ 5,100 | 4,400 | |
Stock-based compensation expense | $ 600 | $ 600 | $ 1,900 | $ 1,500 | |
Common stock issued (in shares) | shares | 149,378 | 538,398 | 149,378 | ||
Option grants in period | shares | 255,432 | ||||
Stock options | |||||
Stock-based Compensation Plans and Awards | |||||
Stock-based compensation expense | $ 2,300 | $ 4,000 | $ 7,500 | $ 11,200 | |
Restricted stock units | |||||
Stock-based Compensation Plans and Awards | |||||
Stock-based compensation expense | 25,400 | $ 17,500 | $ 69,100 | $ 47,400 | |
Vesting period | 4 years | ||||
Market stock units | |||||
Stock-based Compensation Plans and Awards | |||||
Stock-based compensation expense | $ 500 | $ 1,000 | |||
Number of performance periods | performance_period | 3 | ||||
Total stockholder return, duration period | 90 days | ||||
Performance multiplier, percentage point decrease | 3.00% | ||||
Performance multiplier, percentage point increase | 2.00% | ||||
Grants in period | shares | 776,000 | 776,000 | |||
Total grant date fair value | $ 4,300 | $ 4,300 | |||
Market stock units | One-Year Performance Period | |||||
Stock-based Compensation Plans and Awards | |||||
Vesting percent | 33.33% | ||||
Market stock units | Two-Year Performance Period | |||||
Stock-based Compensation Plans and Awards | |||||
Vesting percent | 33.33% | ||||
Market stock units | Maximum | One and Two-Year Performance Period | |||||
Stock-based Compensation Plans and Awards | |||||
Performance multiplier | 100.00% | ||||
Market stock units | Maximum | Three-Year Performance Period | |||||
Stock-based Compensation Plans and Awards | |||||
Performance multiplier | 200.00% |
Stock-based Compensation Plan38
Stock-based Compensation Plans and Awards - Schedule of assumptions used for determining the per-share fair value (Details) - Black Scholes Options Pricing Model | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Employee stock | ||||
Assumptions used to calculate per-share fair value of award | ||||
Expected life (in years) | 6 months | 6 months | 6 months | 6 months |
Expected volatility | 42.00% | 42.00% | ||
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Employee stock | Minimum | ||||
Assumptions used to calculate per-share fair value of award | ||||
Risk-free interest rate | 0.07% | 0.05% | 0.05% | 0.05% |
Expected volatility | 29.00% | 29.00% | ||
Employee stock | Maximum | ||||
Assumptions used to calculate per-share fair value of award | ||||
Risk-free interest rate | 0.24% | 0.08% | 0.24% | 0.08% |
Expected volatility | 42.00% | 42.00% | ||
Stock options | ||||
Assumptions used to calculate per-share fair value of award | ||||
Expected life (in years) | 6 years 29 days | 6 years 29 days | 6 years 29 days | 6 years 29 days |
Risk-free interest rate | 1.92% | 1.93% | 1.92% | |
Expected volatility | 49.00% | 58.00% | 49.00% | |
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Stock options | Minimum | ||||
Assumptions used to calculate per-share fair value of award | ||||
Risk-free interest rate | 1.71% | |||
Expected volatility | 58.00% | |||
Stock options | Maximum | ||||
Assumptions used to calculate per-share fair value of award | ||||
Risk-free interest rate | 1.93% | |||
Expected volatility | 59.00% |
Stock-based Compensation Plan39
Stock-based Compensation Plans and Awards - Schedule of stock-based compensation expenses related to all employee and non-employee stock-based awards (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Stock-based compensation expenses: | ||||
Total stock-based compensation expense | $ 28,794 | $ 22,111 | $ 79,473 | $ 60,116 |
Cost of revenue - Other | ||||
Stock-based compensation expenses: | ||||
Total stock-based compensation expense | 1,427 | 1,063 | 4,040 | 2,976 |
Product development | ||||
Stock-based compensation expenses: | ||||
Total stock-based compensation expense | 6,189 | 4,402 | 16,148 | 12,289 |
Sales and marketing | ||||
Stock-based compensation expenses: | ||||
Total stock-based compensation expense | 13,732 | 10,442 | 38,403 | 28,675 |
General and administrative | ||||
Stock-based compensation expenses: | ||||
Total stock-based compensation expense | $ 7,446 | $ 6,204 | $ 20,882 | $ 16,176 |
Net Loss Per Share - Schedule o
Net Loss Per Share - Schedule of the computation of historical basic and diluted net loss per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Numerator | ||||
Net loss | $ (85,930) | $ (2,025) | $ (150,252) | $ (42,684) |
Denominator | ||||
Weighted-average common shares outstanding used in computing basic and diluted net loss per share (in shares) | 212,760 | 206,982 | 211,487 | 204,208 |
Net loss per share, basic and diluted (in dollars per share) | $ (0.40) | $ (0.01) | $ (0.71) | $ (0.21) |
Net Loss Per Share - Schedule41
Net Loss Per Share - Schedule of potential common shares outstanding excluded from the computation of diluted net loss per share (Details) - shares shares in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Anti-dilutive securities | ||
Total common stock equivalents (in shares) | 27,921 | 22,910 |
Options to purchase common stock | ||
Anti-dilutive securities | ||
Total common stock equivalents (in shares) | 10,492 | 11,571 |
Restricted stock units | ||
Anti-dilutive securities | ||
Total common stock equivalents (in shares) | 16,653 | 11,339 |
Market stock units | ||
Anti-dilutive securities | ||
Total common stock equivalents (in shares) | 776 | 0 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) - USD ($) shares in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | |
Subsequent Event [Line Items] | |||
Cash payment to acquire business | $ 23,028,000 | $ 0 | |
Subsequent Event | Forecast | Ticketfly | |||
Subsequent Event [Line Items] | |||
Cash payment to acquire business | $ 225,000,000 | ||
Shares issued to acquire business | 11.6 | ||
Net cash entitled to from business acquisition | $ 50,000,000 |