<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="After struggling throughout most of 2018 in large part due to a controversial redesign that users hated, Snap (NYSE: SNAP) has seemingly regained its footing. The Snapchat parent just reported first-quarter earnings results, and they showed meaningful progress on a number of fronts. Snap is also trying its best to keep costs in check, which is helping it reduce its operating losses.” data-reactid=”11″>After struggling throughout most of 2018 in large part due to a controversial redesign that users hated, Snap (NYSE: SNAP) has seemingly regained its footing. The Snapchat parent just reported first-quarter earnings results, and they showed meaningful progress on a number of fronts. Snap is also trying its best to keep costs in check, which is helping it reduce its operating losses.
There’s still plenty of red ink, but things are getting better.
Image source: Snap.
Return to user growth
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Revenue in the first quarter jumped 39% to $320.4 million, while total costs and expenses rose just 2%. That allowed Snap to reduce its operating loss to $316.1 million. Net loss also shrank to $310.4 million, or $0.23 per share. On a non-GAAP basis, the company’s adjusted net loss narrowed to $130.9 million, or $0.10 per share.” data-reactid=”26″>Revenue in the first quarter jumped 39% to $320.4 million, while total costs and expenses rose just 2%. That allowed Snap to reduce its operating loss to $316.1 million. Net loss also shrank to $310.4 million, or $0.23 per share. On a non-GAAP basis, the company’s adjusted net loss narrowed to $130.9 million, or $0.10 per share.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Snap added 4 million daily active users (DAUs) during the quarter, the first time it has added users since Q1 2018. The user base had declined throughout the first half of 2018 before starting to stabilize, and Snap’s efforts to improve the performance of its Android app are now starting to pay off. CEO Evan Spiegel said in February that Android "is absolutely critical to our strategy," as most users in emerging markets are on that mobile platform.” data-reactid=”27″>Snap added 4 million daily active users (DAUs) during the quarter, the first time it has added users since Q1 2018. The user base had declined throughout the first half of 2018 before starting to stabilize, and Snap’s efforts to improve the performance of its Android app are now starting to pay off. CEO Evan Spiegel said in February that Android “is absolutely critical to our strategy,” as most users in emerging markets are on that mobile platform.
Data source: SEC filings. Chart by author.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content=""As of the end of Q1, our new Android application is available to everyone," Spiegel said on the conference call yesterday. "Compared to the prior version, it is 25% smaller, opens 20% faster on average, and is modularized to allow for efficient ongoing innovation. On some of the lowest-performing devices, this resulted in a 6% increase in the number of people sending Snaps within the first week of upgrading to the new Android build."” data-reactid=”40″>”As of the end of Q1, our new Android application is available to everyone,” Spiegel said on the conference call yesterday. “Compared to the prior version, it is 25% smaller, opens 20% faster on average, and is modularized to allow for efficient ongoing innovation. On some of the lowest-performing devices, this resulted in a 6% increase in the number of people sending Snaps within the first week of upgrading to the new Android build.”
Monetization is also improving, with average revenue per user (ARPU) jumping from $1.21 a year ago to $1.68 in the first quarter. As usual, North America is carrying the top line.
|
Region |
ARPU |
Revenue |
|---|---|---|
|
North America |
$2.81 |
$226 million |
|
Europe |
$0.77 |
$47 million |
|
Rest of world |
$0.97 |
$47 million |
|
Total |
$1.68 |
$320 million |
Data source: Snap.
Looking ahead
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Snap earlier this month announced that it was getting into the mobile gaming business, as well as launching an ad network that would let it place ads in third-party apps, expanding its reach even in the absence of user growth. These are long-term strategies that Snap hopes can help grow and diversify the advertising business.” data-reactid=”46″>Snap earlier this month announced that it was getting into the mobile gaming business, as well as launching an ad network that would let it place ads in third-party apps, expanding its reach even in the absence of user growth. These are long-term strategies that Snap hopes can help grow and diversify the advertising business.
“As far as the diversification of where we run our advertising, we’re very fortunate to continue to have these innovative areas such as games and the forthcoming Audience Network of course,” Chief Business Officer Jeremi Gorman said. “As we continue to grow DAU, there are more opportunities to show more ads, more Story ads, for instance.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For the second quarter, Snap's guidance calls for revenue of $335 million to $360 million, with adjusted EBITDA of negative $125 million to negative $150 million.” data-reactid=”52″>For the second quarter, Snap’s guidance calls for revenue of $335 million to $360 million, with adjusted EBITDA of negative $125 million to negative $150 million.
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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.” data-reactid=”61″>Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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