Operator: Welcome to Pandora's Fourth Quarter and Fiscal 2013 Financial Results Call for the quarter and year ended January 31, 2013. Some of our discussions will contain forward-looking statements which may include projected financial results or operating metrics, business strategies, anticipated future products or services, anticipated market demand or opportunities, , and other forward-looking topics. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual results could differ materially. For a discussion of these risk that could cause our results to differ from today's discussion, please refer to the documents we filed with the Securities and Exchange Commission.
Also I would also like to remind you that during the course of this conference call, we will discuss non-GAAP measures of our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release and Form 8-K filed earlier this afternoon with the SEC.
For your convenience, supplemental information has been included in today's press release and detailed financials regarding RPM metrics that are available on the Investor Relation's site. Today's call is available via webcast and a replay will be available for two weeks, following the conclusion of the call. To access the press release, supplemental financial information or the webcast replay, please consult the IR section of pandora.com.
With that let me turn the call over to Joe Kennedy, Pandora's Chairman and CEO.
Joe Kennedy - President and CEO: Thanks Dom. Pandora continues to demonstrate and expand its mobile leadership with both listeners and advertisers. For the fourth quarter total mobile revenue grew 111% to $80.3 million from $38 million in the same quarter last year, outpacing mobile listener hour growth, which grew 70% year-over-year. For the fiscal year ended 2013, total mobile revenue more than doubled from fiscal 2012 growing to 105% to $255.9 million, with full year mobile revenue growth also exceeding full year mobile listener hour growth, which grew 89% year-over-year. As a result of the success driving mobile monetization, total mobile RPM reached a record high rate for the year of $23.83.
Total listener hours for the quarter grew 53% year-over-year exceeding 4 billion for the quarter compared to $2.66 billion in the same quarter last year. For the fiscal year ended 2013, total listener hours grew 70% year-over-year, exceeding 14 billion compared to 8.2 billion in fiscal year 2012. We continue to lead the market with aggressive listener hour growth resulting in record market share.
Pandora's market share of all US radio as of January 31, 2013, also reached a high of 8.03%, up from 5.55% a year ago. As of this afternoon we've also released February listener metrics and reached another new record of 8.48% share this past month, up from 5.74% a year ago. Fourth quarter results exceeded the high end of our revised revenue and earnings expectations. Pandora's total revenue grew 54% to $125.1 million and non-GAAP EPS was a loss of $0.04.
Our mix of listener hours and advertising revenue continues to shift toward mobile. Listening on mobile and other connected devices represented 79% of total listener hours during the fourth quarter. For the year, listening hours on mobile and other connected devices represented 77% of total of listener hours.
Web total RPM for the quarter was $52.82 compared to $56.22 in the same quarter last year. Mobile and connected devices total RPM was $25.05 compared to $20.15 last year. For the full year, web total RPM was $52.36 compared to $58.84 for fiscal year 2012. Mobile and connected devices total RPM was $23.83 compared to $21.93 at the end of fiscal year 2012. Mobile monetization continues to be a core focus and we are pleased with the progress we've made throughout the year.
We remain focused on our mobile product as hours and ad revenue continued their shift toward mobile. Mobile provides national, regional, and in particular local advertisers the ability to reach listeners on their most personal and portable device, in their cars or on the go wherever they maybe. The $15 billion radio advertising market is approximately 70% to 80% spot radio ad dollars. And Pandora gives radio advertisers new and unique technological capabilities.
Pandora's positions as the number one radio station in virtually all local markets offers local advertisers new options to reach their consumer's such as targeting, interactivity and most important measurability. Our scale coupled with Pandora's unique cross-platform advertising capabilities has opened the door for Pandora to aggressively enter this lucrative, national and local spot radio ad markets.
Given our opportunity and unique product capabilities, our focus is not only on hiring sales people, but to hire the top performing people in those markets. We believe the best people, coupled with Pandora's unique advertising capabilities will help deliver premium value and ultimately help us to unlock Pandora's disruptive power to transform radio advertising.
As we mentioned over the past few quarters we have been working to streamline the radio ad volume process with the ultimate goal of making Pandora ads as easy to buy as traditional radio advertising.
On Tuesday we announced that Pandora's audience data will appear in the three most popular media volume platforms including STRATA and Mediaocean's Donovan and Mediabank stewardship systems. These systems enable radio buyers to compare Pandora's audience data side-by-side with that of the broadcast radio station they've historically used. STRATA and Mediaocean import Triton Digital's Webcast Metrics Local data into their software platforms allowing radio buyers to view Pandora national and local audience ratings.
Prior to these integrations, radio buyers using STRATA Mediaocean systems were required to manually research Pandora audience ratings. Radio buyers now have an easy and efficient way to evaluate Pandora's audience size and rankings to make them firm decisions about their media mix.
STRATA integration was released back in mid-January and all STRATA agencies now have access to Pandora audience data. Mediaocean is currently in beta release in a small number of agencies with rollout expected to all Mediabank system users in mid-March and all Donovan system users by the end of April.
With our number one position in most local markets the best sales talent in those markets and products that offer superior targeting, interactivity and measurability. We are well-positioned to increase our share of the $15 billion radio ad market, both nationally and locally.
As we've expand our audience our mission to deliver music that people love anytime, anywhere they want ultimately brings back our focus to the artists and musicians behind the music. While we're keenly focused on monetization mobile and increase in the size of our sales team.
Pandora continues our total commitment to supporting and encouraging artist to connect with their listeners. This year at Austin South by Southwest Music Festival, Pandora will host their second annual and Pandora Discovery Den and more than 40 acts are schedules to perform throughout the week. Offering live music to fans while in person and online via live audio stream on Pandora.com.
Pandora's artist date played a key role in selecting discovery talent, which spans across all genres from hip-hop to rock to Americana.
This diversified artistic programming along with the mix of established and more emerging talent is a reflection of Pandora's commitment to creating and improving the best personalized music experience.
Our mission has always been to help every talented artist, regardless of their sound regardless of their popularity reach the audience that will love their music. Our dream is that audiences around the world can find the music that they love and discover new music through Pandora's personalized radio.
The Pandora Discovery Den brings that concept to life in yet another way.
In summary, Pandora is executing aggressively on a large and growing opportunity as we expand our mobile leadership among both listeners and advertisers, demonstrated by the growth in mobile ad revenue at a faster rate than our growth in mobile listener hours. We are establishing a broad sales footprint with a high quality sales team to capture our share of the $15 billion radio advertising market. It's an important milestone that our systems are now integrated into the media buying platforms preferred by local and national radio advertisers and their agencies.
We enter fiscal 2014 in a strong position to increase our share of the radio advertising market. We continue to redefine radio for audiences, advertisers and artists. We see tremendous opportunity to grow all of the key dimensions of our business this year. We remain excited about our future and believe we've just scratched the surface of our potential.
With that, it's my great pleasure to hand it over to Mike Herring, our new Chief Financial Officer. We are very excited to have Mike join the team. In the final stage of the selection process, we had four candidates that we all thought were exceptionally strong and Mike was the first choice of everyone, on the management team and the Board. Welcome to the team, Mike.
Mike Herring - CFO: Thank you very much, Joe. I'm very excited to be here. So let me get started by walking through our fourth quarter performance in more detail. Pandora delivered fourth quarter revenue of $125.1 million representing 54% growth from the year ago quarter, above the high end of our revised guidance range. Advertising revenue was a $109 million, a 51% year-over-year increase. Subscription and other revenue were $16.1 million and grew 74% year-over-year.
For the year ended January 31st, Pandora delivered $427.1 million in revenue or 56% growth over the prior year. Advertising revenue was $375.2 million, a 56% increase. While prescription and other revenue was $51.9 million, or 51% growth year-over-year.
It's important to acknowledge that as Pandora entered into the fourth quarter with limited visibility and ad spend. The Company cautiously decreased outlook. Following strong execution by our sales team, we saw better than expected increases in mobile advertising, particularly in audio ad units when compared to last year.
Our advertising revenue growth is directly impacted by our ability to monetize mobile listening hours. For the past two quarters growth in mobile advertising revenue exceeded growth in mobile listening hours reflecting our improving monetization in mobile content where 79% of our listening hours occurred in the fourth quarter.
Important metrics in understanding the dynamics of our financial model include RPM and LPM. RPM is revenue earned per 1,000 listening hours. LPM is licensing cost per 1,000 listening hours. LPMs are essentially fixed with annual increases, so the margin on the business improves as RPM grows. A cornerstone of our future success is mobile RPM growth, and that is why we are so pleased with our performance in this area.
Fiscal 2013 total mobile RPM increased to $23.83 from $21.93 in fiscal 2012, and for the fourth quarter of fiscal 2013 reached $25.05. As listening hours concentration and our ad sales focus shifted to mobile, web RPM decreased from $58.84 in fiscal year 2012 to $52.36 this year. Our total combined RPM for the year ended fiscal 2013 with $30.49.
For the fourth quarter of fiscal 2013 GAAP and basic diluted loss per share was $0.09. Non-GAAP basic and diluted loss per share was $0.04, excluding approximately $6.9 million in stock-based compensation, exceeding the high-end of our revised non-GAAP EPS guidance by $0.02. Basic and diluted EPS were based on 170.9 million weighted average shares outstanding.
As we monetize mobile content and increase our top line revenue with a relatively fixed cost structure, we expect that an increasing percentage of mobile advertising revenue will contribute to the bottom line. We've experienced this in our web advertising business before, which is now performing at rates that are profitable to the Company and we expect a similar trajectory in mobile.
I joined Pandora because I'm bullish about the Company's future and its mission to reinvent radio. Clearly the Company has made great progress in tracking new listeners, growing listener hours, and ultimately increasing its share of all-U.S. radio to over 8%. One of the questions I asked before joining Pandora is what are the growth objectives and how is the Company mapping against those objectives. I was pleased with what I found and I thought investors would also like to know what convinced me to join.
Pandora focused on five primary growth objectives. First and foremost, to build the sales force. Pandora continues to build that sales force, expanding its footprint, including hiring the best local ad sales talent in the market where we are at or approaching number one in market share; second, the Company focuses on increasing utilization of its ad inventory and the progress here was highlighted previously by the fact that total mobile RPM reached a record high in fiscal 2013 of $23.83; third, internally we are maniacal about focusing on developing innovative and scalable products. In the third quarter last year, Pandora 4.0 was launched offering listeners a better music experience with expanded functionality, a detailed personal music profile, diverse social sharing capabilities and other innovative features available on mobile for the first time. For advertisers, Pandora 4.0 also offered new capabilities including, for example, unified sponsorships across all mobile devices.
The fourth objective is, over the long-term, to expand internationally. In the second quarter of fiscal 2013, Pandora took an important step in expanding our service to Australia and New Zealand and our user growth there has already outpaced user growth, population adjusted in the U.S. at the same stage of its development.
And finally, our fifth objective is to expand distribution. Pandora is now available through more than 1,000 integrations, including on more than 760 consumer electronic devices and over 85 vehicle models. So I'm excited to be here and especially excited about the progress we're making to achieve these growth objectives.
Moving back to results, our single largest single expense category content acquisition was $76.7 million or 61% of revenue for the fourth quarter. For the year, content acquisition cost totaled $258.7 million, also 61% of total revenue. As revenue leverage increases, the percentage of revenue paid for content acquisition will decrease, although the absolute dollar amount will increase with listener hours.
Starting this month, Pandora began to limit free mobile listening to 40 hours per month. This change will impact less than 4% of our mobile listeners and will increase the Company's ability to manage usage growth and the associated cost of content. With Pandora's market share of more than 8% of all U.S. radio, this is a proven targeted lever that will free-up dollars for additional investments in our key indicatives. We believe we have the scale and financial model to execute effectively with the current content acquisition cost structure. As we drive this leverage, we will invest aggressively in growing our business primarily through the initiatives that we have spoken about earlier.
As an organization, we increased headcount 40% year-over-year from 530 employees at the end of fiscal 2012 to 740 employees at the end of fiscal 2013.
Our marketing and sales expense represented 27% of revenue in the fourth quarter, an increase of 63% from $20.9 million to $34.1 million compared to the year ago quarter. We continue to focus on building our sales team as effectively as possible, managing our growth in markets by territory to make sure our new sales force additions are productive.
For fiscal year 2013 total marketing and sales expenses grew 66% to $107.7 million from $65 million in the fiscal year 2012. Our product development expense represented 4% of revenue in the fourth quarter an increase of 44% from $3.6 million to $5.2 million compared to the year ago quarter.
For the year, our product development expenses grew 35% to $18.1 million from $13.4 million in fiscal year 2012. This will continue to be an area of focus and investment as we develop innovative and scalable products. Our G&A expense represented 11% of revenue in the fourth quarter, an increase of 43% from $10.1 million to $14.3 million compared to the year ago quarter. For the year G&A expenses grew 36% to $48.2 million from $35.4 million in fiscal year 2012. We continue to see leverage in G&A as we grow the business. As a percentage of revenue G&A declined from 13% to 11% of revenue year-over-year.
Pandora entered the fourth quarter with – ended the fourth quarter with $89 million in cash, cash equivalents and short-term investments compared $80.5 million at the end of the prior quarter. Cash generated from operating activities was $8.4 million for the fourth quarter of fiscal 2013 compared to $1.9 million generated in the year ago quarter.
I will wrap up with thoughts regarding our guidance. Starting with the full fiscal 2014, we are estimating total revenues to be in the range of $600 million to $620 million or growth at the midpoint of 43%, from a profitability perspective. We expect fiscal 2014 non-GAAP net loss or earnings per share to be between a loss of $0.05 and a gain of $0.05.
Fiscal 2014 non-GAAP net loss per share excludes stock based compensation expense, assumes minimal tax expense, given our net operating loss position and is based on $176 million weighted average basic shares $199 million diluted shares outstanding for fiscal 2014. For the first quarter of fiscal 2014 we currently expect total revenue to be in the range of $120 million to $125 million.
Non-GAAP loss per share is expected to be between $0.13 and $0.10 for the first quarter. Non-GAAP loss per share excludes stock-based compensation expense, assumes a minimal tax expense given our net operating loss position and is based on 174 million weighted-average basic shares outstanding for the first quarter of fiscal year 2014.
When it comes to guidance philosophy we are a growth company, and our guidance reflects our growth expectations and investment we're making to achieve that growth. Our guidance assumes that we will continue to execute well on existing programs.
We are optimistic that recently announced initiatives like the limit on mobile listening hours and integrations with Mediaocean and STRATA, will have a positive impact on the ability to drive additional leverage in our business. Although we are optimistic about these initiatives, there remain new initiatives and as such we have limited visibility into the exact magnitude and timing of their ultimate impact.
Once again I'm excited to be here and working with this inspiring management team and very talented group of Pandora employees.
I look forward to meeting our investors and analysts and discussing our business as we get through the year.
Before we go to questions I'd like pass this time back to Joe for some final comments.
Joe Kennedy - President and CEO: As you've likely seen by now we're also announcing today that we started the process of identifying a successor for me. I love this business, which I helped to create. My heart is still 100% in Pandora and there is no opportunity I could be more excited about. But as I approach the start of my tenth year, my head is telling me it's time to get to a recharging station sooner rather than later. I am excited to continue to lead the Company as Chairman, CEO and President, all the way through a great transition no matter how much time that process takes. We have strong momentum especially with mobile monetization and a plan for the fiscal year that we're all excited about. We've got a terrific team, all the stronger with the addition of Mike, and I look forward to continuing to lead them.
With that, we'll open it up to your questions.
Operator: Douglas Anmuth, JPMorgan.
Douglas Anmuth - JPMorgan: Two things, first, I just wanted to ask if you could comment a little bit more about the early feedbacks from the STRATA integration; and if in particular, just talk a little bit more about the education process that's involved for radio buyers now that Pandora will be included in the platform. Then secondly, if you could give us some update on the sales force build out and perhaps add some numbers to it, overall have – I think you talked about a 100 most recently and 17 in the top 40 markets, if you could provide an update there that would be helpful and perhaps your past (indiscernible) through '13?
Joe Kennedy - President and CEO: Hey, Doug, in terms of the rollout of STRATA and Mediaocean, it's early to have specific data in terms of the impact of those systems. I think as you said, one of the important things that we are going through is just the rollout – the rollout encompasses certain system elements, but also we worked very closely with both STRATA and Mediaocean to put together training, because really the key thing is not just to get the software into all of the agencies that are clients of STRATA and Mediaocean, but to get the media planners and the media buyers trained in them, and I think we've had a good plan. We've been executing in way we have great support and cooperation from STRATA and Mediaocean. We have agencies who are interested in that and that's an up core part of this rollout that we are well on the way with but certainly not complete. In terms of the sales force build out, at a high level, we are nearing completion of having local teams in the 27 or 28 markets that we really want to focus on this year. We've done a great deal of hiring over the last few months. There's a bit more of that to go, but we feel good about the people that we have and the market opportunities that those 27 or 28 markets represent and look forward to the impact of those people as they get fully up to speed in market.
Operator: Scott Devitt, Morgan Stanley.
Scott Devitt - Morgan Stanley: Your February listening metrics looked quite strong and at 8.5% of radio it was particularly strong relative to even the recent past given that you are closer to 7% only two months ago. I was wondering, Joe, if you could just talk about some of the trends that are causing this meaningful change in share and whether the automobile segment is becoming a meaningful contributor? Then secondly, if you could breakout mobile revenue between subscription and advertising that would be helpful.
Joe Kennedy - President and CEO: I'll let Mike and his team work on the second piece. I think the trend that you see, we were really excited about the February trends. I mean it’s a short month, 28 days even the comparable month last year was 29. I think you run any kind of metrics on that and it’s a good story and we're getting more listening per active user per day than we've ever seen before. I continue to believe that it's really the cumulative effect of two things. So it's just continued improvement in the product, everything from continued investment we make in the core playlist, intellectual property, the investments we made in UI with Pandora 4.0, combined with as you alluded to the distribution footprint of over thousand different ways for people to listen to Pandora on the go, in a car, in the living room. I wouldn't attribute the increase to the car in particular. I still think that fundamentally the continued penetration of smartphones across the U.S. population is the single most important catalyst, but we're also seeing tremendous growth in the living room, the (indiscernible) devices as well and obviously the news continues to be good on the automotive side. But yeah, certainly the playlist, the product, the distribution footprint that are enabling people to listen more different ways and we're seeing that in terms of how often they listen during the month and how much they listen during the month. To the second question on sub revenue, I don't know whether we've broken that out or not.
Mike Herring - CFO: So in terms of – I think you were asking specifically about mobile, from an RPM perspective…
Joe Kennedy - President and CEO: From a revenue perspective.
Mike Herring - CFO: Total mobile ad revenue I think it was around $80 million for the quarter.
Joe Kennedy - President and CEO: Total-total.
Mike Herring - CFO: Total-total. I think we've got it. So the total mobile revenue was $80.3 million and that breaks down $70.8 million advertising and $9.5 million subscription.
Operator: Laura Martin, Needham.
Laura Martin - Needham: So Joe, I'm really interested in two things; one is I really love this idea of capping the heaviest users on mobile. This has been a good idea for the last two years. What changed? Why now? How are you thinking about that trying to limit? Did you just do P&L per customer and realized those customers will cost you a fortune and you just want to stop or – this has always been a good idea, so why now? And then, I'm really interested – you really were right on top of our advertising estimate, but this subscription and other line was like 30% above where we came in. Could you talk about what you – was this extra sales force you were talking in the quarter that had you come in stronger in that subscription line than you would thought, why was that subscription line so strong in the quarters that turned out? Thanks.
Joe Kennedy - President and CEO: Sure. The 40 hour limit is something that we did on the desktop back in 2009, we did report about 27 to 28 months. We always know that was a lever we could use to move between usage growth and the associated content cost on the one hand and monetization on the other hand. Why now on mobile, and I'd really highlight two things. one is the achievement of our share. we now have north of 8% share, in fact, just under 8.5% share with the February data that we've released. We now have the audience scale that's meaningful to national advertisers, meaningful to local advertisers, radio interactive, we have that – we didn't have that kind share and scale even a year ago and certainly two years ago. So, we have the share that we need to penetrate all of the ad markets that we've been talking about without question, so that's the first thing that's why now. The second is really about the user experience and the key based on what we learned back in 2009 with the 40 hour limit is to give the consumer a great set of choices, these are people who love Pandora, they are heaviest users, they love Pandora, we love them. In a world in which they would have to enter a credit card into a mobile browser, a 40 hour limit isn't a 40 hour limits it's a 40 hour brick wall. What we've seen over the last 15, 16 months in terms of in app purchasing capability is that it really is much more seamless and frictionless to pay things, pay for things on mobile devices when you can charge on to your iTunes account, you can use Google Play to charge things on an Android phone. And so the development of that capability and our confidence in it enables us to offer this full set of choices to consumers and we really care about that given great experience, they can listen on the desktop, they can pay $0.99 and continue to listen on mobile with ads, but we get the $0.99, they can upgrade to Pandora 1 due to either of those things in app, certainly some consumers are just going to manage their listener hour. So I think we can accomplish this business objective of working this lever on monetization on one hand, usage growth and content cost on the other hand and put it in a very prudent place, manage appropriately the monetization of our heaviest listeners and still provide consumers a great experience and a great set of choices and we are able to do that now and we couldn't say that a year ago or two years ago. That actually relates to the second part of your question on our subscription performance. We have been very pleased with our continued growth in subscription and most of that subscription growth is coming on mobile and it's a combination of our marketing efforts in product, our marketing efforts using house advertising and this seamless frictionless ability of people to charge that, that upgrade to their iTunes account and we actually now also have the integration, (integrable) plays. So good numbers on subscription and we're excited about the progress we are seeing there.
Operator: Rich Tullo, Albert Fried & Co.
Rich Tullo - Albert Fried & Co.: My first question is, there seems to be a virtuous cycle between the mobile -- growth in the mobile ad inventory and the uptick in that from advertisers and then on the other side growth in subscriptions. Am I thinking about this the right way that as you monetize more mobile ad inventory just certain people will just opt for no advertising and pay you, is it as simple as that?
Joe Kennedy - President and CEO: I think the simple answer to that is yes, I think there is exactly that synergy between the ad supported hardware business, and as we effectively monetize the advertisement which means a little bit more advertising load obviously still dramatically less than 13 minutes of advertising on traditional radio, but it does motivate those people who are particularly sensitive to advertising, to say that Pandora is a great value proposition for $399 a month or $26 a year and I think it's synergistic, and we even view it as an element of personalization the experience. You can personalize your experience and have it supported by advertising or you can personalize your experience and have no ads.
Operator: Jordan Rohan, Stifel Nicolaus.
Jordan Rohan - Stifel Nicolaus: My question is a little bit more on the listening caps. In particular I'm interested on the P&L impact and I know this may just be a scenario analysis at this point because it's still early. But when you think about this on the mobile listening caps, do you expect more of an increase in revenues due to the extra dollar a month or a $3.99 a month if we go to Pandora One, more of a decrease in cost due to a change in user behavior for the heaviest users or some combination of both. Which is going to be the dominant factor and is that already in your guidance to some degree for revenues and profitability for fiscal '14?
Mike Herring - CFO: That's a very new initiative that we just launched and you're exactly right, we don't know exactly how we'll play out in terms of curtailing listener hours to the long end of the tail and thus reducing costs. We are driving additional revenue options like subscriptions or the $0.99 extended listening feature that's also available. Since this March, it was launched on March 1st, it's really – we are in the first month of impact. Because it's new from that perspective, we don't have a major impact from that in our projections and as that plays out, we will adjust our guidance accordingly.
Operator: John Blackledge, Cowen and Company.
John Blackledge - Cowen and Company: A couple of questions, of this 4% of the users listening over 40 hours per month, just wondering how many hours that cohort group is listening to on average. Then secondly, the sales people that you are hiring in the local markets, are they being picked off from terrestrial radio companies in those markets or from other local oriented advertisers like TV or outdoor?
Mike Herring - CFO: Well just to address the first question, our users that exceed that 40 hour per month listener obviously are listening much higher than our average users per month, which is about 20 hours. So there's a disproportionate percentage that is applicable to that 4% related to the number of listener hours.
Joe Kennedy - President and CEO: In terms of the sales force, overwhelmingly the highest we're making in the local basis are coming from broadcast radio companies. Our focus is on hiring the best people with experience in that market. We found a lot of people, we're just tremendously excited about bringing to the market a product that has target ability, measurability and interactivity something that they've never been or able to offer to those buyers before in combined with the scale of being effectively larger than any broadcast radio station in the market. So you see lots of people here with backgrounds from Clear Channel, (indiscernible) and CBS et cetera.
Operator: (Daniel Schindler, Bank of America).
Daniel Schindler - Bank of America: Just looking at your desktop ad monetization, it's been declining all year and it declines on a year-over-year basis seem to be moderating. But is that a trend we should expect to level off somewhere near these levels or and what is causing that trend other than a lack of focus on the desktop?
Mike Herring - CFO: I think we are identifying really what we're seeing is we emphasize the selling of mobile advertising within our sales force both from an audio and a display perspective. That's just taking the emphasis away from the web side and that is driven mostly because that's where the opportunity is for sales people where it's a much, much higher level of inventory available for sale and therefore they – and we like to monetize that aggressively. That is in often case our first priority and so it's causing that kind of fluctuation in the web RPM. We don’t expect it to continue in any specific trajectory but rather probably flatten out about where it is today.
Operator: Peter Stabler, Wells Fargo Securities.
Peter Stabler - Wells Fargo Securities: Joe, could you talk a little bit about the demo splits that are garnering the most interest among your radio sales force and any information you could give us on how your audience splits? You told us that Pandora is the largest station in any particular market, but buyers are really looking at demo splits, average quarter hour ratings and weekly (KIMs) when they pull their rankers. So if you could give us a sense of whether it's 18, 24, 25, 35 where the greatest demand is coming in. That would be very helpful.
Joe Kennedy - President and CEO: The radio advertisers historically really focus the vast majority of their spending on the 25 to 54 age group, and so in terms of those traditional radio budgets that's where we're seeing the spend. The good news is that's where the bulk of our listenership is, so there's no fundamental issue there and we can bring in terms of if you break it down to those demos, our position in the marketplace, again, in terms of the ratings, the scale, the share that we bring is very compelling to radio advertisers.
Operator: James Marsh, Piper Jaffray.
James Marsh - Piper Jaffray: Two quick questions here. One I was hoping you could give us an update on the progress on (IRFA). I guess, during hearing in the fourth quarter, it sound like that was moving towards kind of comprehensive reform, and then recently there is some adaption of legislation, the Local Radio Freedom Act. Is there anything the green from that? I mean, it seems like (IRFA) is trying to comprehensive reform and then Local Radio Freedom Act seems to be kind of a sign of solidarity that kind of protect terrestrial. Does this make it more difficult to get (IRFA) through in your mind?
Joe Kennedy - President and CEO: I don't think so. I mean, I think the RFA is a resolution that's been introduced to divest my knowledge. I think in every session of Congress for the last, at least for the last couple. I think as you said, I think Congress persons and their staff who are in leading positions in the House Judiciary Committee continue to believe that royalty is an area in need of comprehensive reform. Reform, the goal of which would be a win for listeners a win for artists and win for innovative services, and we look forward to continuing to support their efforts to address those issues and achieve that end.
Operator: Martin Pyykkonen, Wedge Partners.
Martin Pyykkonen - Wedge Partners: Two questions if I could. Number one on the kind of national versus local as you go forward, Joe. You mentioned lion share we are looking for hire wise come from broadcast. It's obviously more local I think. But mobile specific in terms of where you're at today in terms of a campaign basis, can you give us a sense to one way or other between national versus local and how that might if at all change as you go forward? I know you're not going to probably split over exact numbers, but is it a two-third, one-third, one or the other or greater. Again in terms of where the campaigns are focused. And then secondly, back to the systems and the integration, more in the marketing side for media buyers, is there a timeframe we could kind of scope out in terms of where again the lion share of those media buyers would be completely fluent both technically as well as the process of working with your own systems in terms of your current year if you can map that out a little bit.
Joe Kennedy - President and CEO: To your first question on the mix of our revenue national versus local, I'd say it's still our – the revenue that we are reporting to you is still very strongly national, that said the local component is significant and is growing as a percentage of the mix and obviously we see tremendous opportunity there. We actually continue to be very excited about the national opportunity, but obviously local is an initiative to really to start last year and that we are accelerating in terms of our market presence and as you allude to facilitated by the system integrations with STRATA and Mediaocean. As think as Mike alluded to before, in terms of trying to peg exactly how big is the impact of those system integrations and exactly when it's going to hit. It's hard for us to discern that, we are doing all of the right things in terms of the technology rolling out, the media planners and media buyers getting trained, we have sales people who are calling on them. We have a terrific story in terms of our share enrollment, and we know that’s all good news, but we ought to put specific magnitude and timing on that impact.
Operator: Jim Goss, Barrington Research.
James Goss - Barrington Research: Just got a couple. I'm thinking as you're trying to target specific demographics given the 8% share, which is really tremendous, still is less than summer probably developing and with regard to specific demographics are you able to offset that somewhat by the fact that your targeting does reach specific people in that demographic where the broader markets may be a little less specific?
Joe Kennedy - President and CEO: I think where I go with that Jim is that while (indiscernible) is due to target demographics as I said very focused on 25 to 54. First of all we've got a lot of listenership in those demos that people are looking for. But maybe the second part I'm not sure whether you are alluding to or not, is the key insight that, when you buy an ad on a broadcast radio station it's not as if all of the people in the demo all the people who listen to that radio station hear that ad. The only people who hear that ad are the people who are listening at that precise moment in time. The flipside the power of Internet radio in its unicast structure is that when you buy a demo in Pandora in say the New York market we can bring all of the listenership in that target demo to that advertising and so the what I'll call the effective reach of Pandora is dramatically higher than the reach of a single spot or even some combination of spots typically on a broadcast radio station.
Operator: Mike Hickey, NACM.
Michael Hickey - NACM: Joe, I was just curious if you could give us a little more data on your departure, I mean, definitely a surprise and I know I understand the recharge part, but it seems like you kind of hit an inflection point, you've worked those initiatives, really start to go mobile. So is this something you've been thinking about for a while or is it just, any more thoughts would be helpful? Also kind of what you are thinking about in terms of your successor or what attributes you would think would be key to that role.
Joe Kennedy - President and CEO: I wouldn't say that I've spent much of the last couple of years of the much – the past nine years thinking about when I would eventually move on. So this is pretty recent. I do think – I feel there's no perfect time to do this. I do feel good about the business. I think we've turned a corner in mobile monetization. We have positive trends in all of the parts of the business. We have a great plan for this year. We have a terrific team, only further enhanced with the addition of Mike. So you can't say that there's a perfect time for someone in my position to transition, but I think this year is a good time to do it. Again, I'd emphasize, I am going to be around for a while. I care passionately about this company and it will be a plan this year that I am excited to implement, and then hand the baton to someone who can take the Company to the next level after that and levels beyond that. My ambition has always been for this Company, my ambition is actually not defined by myself. I was telling the Company when I announced this, the true story that when I started almost 9 years ago, I made everybody who was in the Company at that time, just probably about 15 people, buy the book 'Built to Last' by Jim Collins because I said, hey, (what I'm) about is building enduring great companies and that's my ambition for this Company and I really just see my succession as part of that path to an enduring great company where I hand the baton to someone who is fantastic and continues the path forward to the tremendous opportunity that we have ahead.
Operator: Stephen Ju, Credit Suisse.
Stephen Ju - Credit Suisse: So Joe, anything you can share in terms of an average budget range that the incremental sales person hired can theoretically handle, and further if there's a meaningful delta between national and local sales people focus? And further, when you hire a salesperson from terrestrial radio, does the book of business that that person brings on board to Pandora generally end up matching what it was on terrestrial?
Joe Kennedy - President and CEO: Stephen, very tough question to answer, because we hire lots of different sales people who are addressing different markets and different segments of the market. The book of business for someone who calls on local advertisers is different from someone who is a national network radio seller, which is different from an interactive seller. So it's tough to develop an average for those. I think the key is, in every one of those cases we believe that the economics of the hire are good for the Company in a relatively short period of time in all cases must definitely paying back well within a year. In terms of the book of business compared to their predecessor company, again, I'm not particularly conversant in what they are bringing in. I think the opportunity we have as a Company is to get our fair share of the overall $15 billion radio ad market and that's what we're going after and we like the team that we have, the systems pieces are all coming together, we've got the scale, and that's exciting.
Dominic Paschel - VP, Corporate Finance and IR: Thank you, Joe. With that operator that will conclude today's call. Can you please take us back to Pandora?