Pandora 2016 Annual Report Download - page 36

expenses. In addition, we plan to continue to invest heavily in our operations to support anticipated future growth. As a result of
these factors, we expect to incur annual net losses in the near term.
Our revenue has increased rapidly in recent periods; however, we do not expect to sustain our high revenue growth rates
in the future as a result of a variety of factors, including increased competition and the maturation of our business, and we
cannot guarantee that our revenue will continue to grow or will not decline. Investors should not consider our historical revenue
growth or operating expenses as indicative of our future performance. If revenue growth is lower than our expectations, or our
operating expenses exceed our expectations, our financial performance will be adversely affected. Further, if our future growth
and operating performance fail to meet investor or analyst expectations, it could have a material adverse effect on our stock
price.
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In addition, in our efforts to increase revenue as the number of listener hours has grown, we have expanded and expect to
continue to expand our sales force. If our hiring of additional sales personnel does not result in a sufficient increase in revenue,
the cost of this additional headcount will not be offset, which would harm our operating results and financial condition.
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If we fail to effectively manage our growth, our business and operating results may suffer.
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Our rapid growth has placed, and will continue to place, significant demands on our management and our operational
and financial infrastructure. In order to attain and maintain profitability, we will need to recruit, integrate and retain skilled and
experienced sales personnel who can demonstrate our value proposition to advertisers and increase the monetization of listener
hours, particularly on mobile devices, by developing relationships with both national and local advertisers to convince them to
migrate advertising spending to online and mobile digital advertising markets and utilize our advertising product solutions.
Continued growth could also strain our ability to maintain reliable service levels for our listeners, effectively monetize our
listener hours, develop and improve our operational, financial and management controls and enhance our reporting systems and
procedures. If our systems do not evolve to meet the increased demands placed on us by an increasing number of advertisers,
we may also be unable to meet our obligations under advertising agreements with respect to the timing of our delivery of
advertising or other performance obligations. As our operations grow in size, scope and complexity, we will need to improve
and upgrade our systems and infrastructure, which will require significant expenditures and allocation of valuable management
resources. If we fail to maintain the necessary level of discipline and efficiency and allocate limited resources effectively in our
organization as it grows, our business, operating results and financial condition may suffer.
Our business and prospects depend on the strength of our brands and failure to maintain and enhance our brands would
harm our ability to expand our base of listeners, advertisers and other partners.
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Maintaining and enhancing the “Pandora”, “Ticketfly” and “Next Big Sound” brands is critical to expanding our base of
listeners, advertisers, venue partners, concertgoers, content owners and other partners. Maintaining and enhancing our brands
will depend largely on our ability to continue to develop and provide an innovative and high quality experience for our listeners
and concertgoers and attract advertisers, content owners, venue partners and automobile, mobile device and other consumer
electronic product manufacturers to work with us, which we may not do successfully.
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Our brands may be impaired by a number of other factors, including service outages, data privacy and security issues,
listener perception of ad load and exploitation of our trademarks by others without permission. In addition, if our partners fail
to maintain high standards for products that integrate our service, or if we partner with manufacturers of products that our
listeners reject, the strength of our brand could be adversely affected.
We could be adversely affected by regulatory restrictions on the use of mobile and other electronic devices in motor vehicles
and legal claims arising from use of such devices while driving.
Regulatory and consumer agencies have increasingly focused on distraction to drivers that may be associated with use of
mobile and other devices in motor vehicles. In 2010, the U.S. Department of Transportation identified driver distraction as a top
priority, and in April€2013, the National Highway Traffic Safety Administration (the “NHTSA”) released voluntary Phase 1
Driver Distraction Guidelines for visual-manual devices not related to the driving task that are integrated into motor vehicles.
In March 2014, NHTSA held a public meeting soliciting comments related to its voluntary Phase 2 Driver Distraction
Guidelines for portable and aftermarket devices that may be used in motor vehicles, but such guidelines have not yet been
issued. If NHTSA or other agencies implemented regulatory restrictions and took enforcement action related to how drivers and
passengers in motor vehicles may engage with devices on which our service is broadcast, such restrictions or enforcement
actions could inhibit our ability to increase listener hours and generate ad revenue, which would harm our operating results. In
addition, concerns over driver distraction due to use of mobile and other electronic devices used to access our service in motor
vehicles could result in product liability or personal injury litigation and negative publicity.
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