Snap Inc. Reports Second Quarter 2018 Results
Aug. 07, 2018
SANTA MONICA, Calif.--(BUSINESS WIRE)--Aug 7, 2018--Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended June 30, 2018.
Cash used in operating activities was $(199) million in Q2 2018, compared to cash used in operating activities of $(210) million in Q2 2017.
Free Cash Flow was $(234) million in Q2 2018, compared to $(229) million in Q2 2017.
Common shares outstanding plus shares underlying stock-based awards totaled 1.5 billion at June 30, 2018, compared with 1.4 billion one year ago.
Revenue increased 44% to $262 million in Q2 2018, compared to revenue of $182 million in Q2 2017.
Net loss decreased 20% to $(353) million in Q2 2018, compared to a net loss of $(443) million in Q2 2017.
Adjusted EBITDA loss decreased 13% to $(169) million in Q2 2018, compared to an Adjusted EBITDA loss of $(194) million in Q2 2017.
“We are excited by the progress we have been making and are optimistic about the opportunities ahead as we continue to invest in innovation,” said Evan Spiegel, Snap CEO and Co-Founder.
Business HighlightsDaily Active Users (DAU) increased 8% to 188 million in Q2 2018, compared to 173 million in Q2 2017, and decreased 2% in Q2 2018, compared to 191 million in Q1 2018. Average revenue per user (ARPU) increased 34% to $1.40 in Q2 2018, compared to $1.05 in Q2 2017. In Q2 2018, 11 Shows reached a monthly audience of over 10 million users, up from 7 in Q1 2018. We introduced Group Video Chat, which allows users to video chat with up to 16 friends at one time. We launched Snappables, new Lenses for sharing augmented reality experiences with one or many friends. Users can control Snappables using touch, motion, and facial expressions. We released a new version of Spectacles, which has a smaller profile and is water resistant. Users can record videos with improved audio as well as press and hold to take a photo. Snaps captured transfer to Snapchat in HD up to 4 times faster than the original version of Spectacles. We introduced Snap Kit (kit.snapchat.com) to help developers build products powered by features of Snapchat. We have partnered with companies such as Pandora and Tinder to make it possible for Snapchat features to be shared within each of their platforms and on Snapchat. Creative Kit helps developers integrate their own stickers, filters, links, and other highlights right into the Snapchat camera.Login Kit lets users unlock new features on Snapchat and other apps, or use their Snapchat account as a quick, secondary way to log in.Bitmoji Kit lets conversations come alive with Bitmoji stickers when messaging on other apps.Story Kit lets developers filter and embed publicly shared Snapchat Stories into their own apps and services. We introduced Lens Explorer, an easier way to discover and unlock thousands of Lenses built by Snapchat users around the world. Since we launched Lens Studio in late 2017, creators have submitted over 100,000 unique Lenses which have been viewed by Snapchat users over 3.5 billion times.
Advertising HighlightsWe transitioned our Story Ad product from our managed ecosystem to our programmatic auction. Snap Pixel, which helps advertisers measure the cross-device impact of their campaigns, is now available to all advertisers, regardless of size. Since beta launch in Q4 2017, Snap Pixel has measured more than 100 million purchase events, 70 million of which were recorded in Q2 2018 alone as we released Snap Pixel globally. We introduced updates to our self-serve platform to provide performance-focused advertisers with a full-suite of tools needed to optimize and measure their Snapchat campaigns. These updates include the ability to bid on goals such as web conversions, return on ad spend reporting, and conversion lift capabilities, effectively rounding out our Snap Pixel offering. We announced that advertisers can purchase Lens campaigns using our Reach & Frequency tool in Ads Manager. This means that all of our advertising formats – Snap Ads (including Story Ads) and Creative Tools (Lenses and Filters) – are now available programmatically. We launched two new initiatives to help our content creators monetize via our programmatic marketplace. We brought Commercials, a non-skippable 6-second Snap Ad that appears in Discover Shows, to Ads Manager. We also launched our Private Marketplace, which is an invite-only tool within Ads Manager that publishers can use to allow specific advertisers to target their content. We’ve provided more insights to advertisers by launching three new initiatives for campaign planning and analysis. Audience Insights help advertisers understand characteristics about Snap’s audience, which they can now better target with our Advanced Location Targeting, including location categories and point + radius, and then better understand their performance with Delivery Insights.
Free Cash Flow is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment.
Common shares outstanding plus shares underlying stock-based awards includes common shares outstanding, restricted stock units, and outstanding stock options.
Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.
A DAU is defined as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. We calculate average Daily Active Users for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter.
ARPU is defined as quarterly revenue divided by the average Daily Active Users.
A Monthly Active User (MAU) is defined as a registered Snapchat user who opens the Snapchat application at least once during the 30-day period ending on the calendar month-end. We calculate average Monthly Active Users for a particular quarter by calculating the average of the MAUs as of each calendar month-end in that quarter.
Note: For adjustments and additional information regarding the non-GAAP financial measures and other items discussed, please see “Non-GAAP Financial Measures,” “Reconciliation of GAAP to Non-GAAP Financial Measures,” and “Supplemental Financial Information and Business Metrics.”
The following forward-looking statements reflect our expectations for the third quarter of 2018 as of August 7, 2018, and are subject to substantial uncertainty. This guidance assumes, among other things, that no business acquisitions, investments, restructurings, or legal settlements are concluded in the quarter. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed below in “Forward-Looking Statements.”
Q3 2018 OutlookRevenue is expected to be between $265 million and $290 million, growth of between 27% and 39% compared to Q3 2017. Adjusted EBITDA loss is expected to be between $(185) million and $(160) million, compared to $(179) million in Q3 2017.
Conference Call Information
Snap Inc. will host a conference call to discuss the results at 2:00 p.m. Pacific / 5:00 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call.
Snap Inc. uses the investor.snap.com and snap.com/news websites as means of disclosing material non-public information and for complying with its disclosure obligation under Regulation FD.
About Snap Inc.
Snap Inc. is a camera company. We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate. We contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together. For more information, visit snap.com.
This press release contains “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include statements about guidance or expected financial metrics, such as revenue, non-GAAP Adjusted EBITDA, capital expenditures, and stock-based compensation, as well as non-financial metrics, such as DAU, MAU, and video views. They also include statements about our possible or assumed business strategies, potential growth opportunities, new products, and potential market opportunities.
Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “believe,” “could,” “expect,” “potential,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: our limited operating history, our lack of profitability to date, changes to our business model, our ability to monetize our products, the highly competitive and rapidly changing market for internet and advertising companies, user reception of changes to existing products, infrastructure costs, our ability to create new and innovative products, our ability to maintain users and manage any future user growth, litigation, and our international expansion strategies. Additional risks and uncertainties that could affect our financial results are included in the section titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our quarterly report on Form 10-Q for the quarter ended March 31, 2018, which is available on the SEC’s website at www.sec.gov. Additional information will be made available in Snap Inc.’s quarterly report on Form 10-Q for the quarter ended June 30, 2018 and other filings that we make from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
We use the non-GAAP financial measure of Non-GAAP Net Loss, which is defined as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and related payroll tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP Net Loss and weighted average diluted shares are then used to calculate Non-GAAP diluted net loss per share. Similar to Adjusted EBITDA, we believe these measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses we exclude in the measure.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see “Reconciliation of GAAP to Non-GAAP Financial Measures.”
Snap Inc., “Snapchat,” and our other registered and common law trade names, trademarks, and service marks are the property of Snap Inc. or our subsidiaries.
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