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Table of Contents
Pandora Media,€Inc.
€Notes to Consolidated Financial Statements
72
1.€€€€€€€€€€€€€€€€€€€€€€ Description of Business and Basis of Presentation
€
Pandora
Pandora is the world’s most powerful music discovery platform, offering a personalized experience for each of our
listeners wherever and whenever they want to listen to music -€whether through earbuds, car speakers or live on stage. Our
vision is to be the definitive source of music discovery and enjoyment for billions. The majority of our listener hours occur on
mobile devices, with the majority of our revenue generated from advertising on these devices. We offer both local and national
advertisers the opportunity to deliver targeted messages to our listeners using a combination of audio, display and video
advertisements.€We also generate revenue by offering an advertising-free 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, and we also operate in Australia, New Zealand and Canada.
Ticketfly
We completed the acquisition of Ticketfly on October 31, 2015. Ticketfly is a leading live events technology company
that provides ticketing and marketing software and services for venues and event promoters across North America. Ticketfly's
ticketing, digital marketing and analytics software helps promoters book talent, sell tickets and drive in-venue revenue, while
Ticketfly's consumer tools help fans find and purchase tickets to events. Ticketfly’s revenue primarily consists of service and
merchant processing fees from ticketing operations.
€
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 consolidated financial statements and accompanying notes have been prepared in accordance with United States
generally accepted accounting principles ("U.S.€GAAP") and include the accounts of Pandora and our wholly owned
subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
€
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 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
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 consolidated statements of cash
flows. Lastly, we have reclassified certain amounts from the accounts payable, accrued and other current liabilities line item to
the long-term liabilities line item of our 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 convertible debt, the fair value of acquired property and
equipment, 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.
€
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