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Snap (SNAP) Q3 Loss Narrows, Sequential DAU Decline Continues

Snap Inc . SNAP reported third-quarter 2018 loss of 12 cents per share, narrower than both the Zacks Consensus Estimate and year-ago quarter's loss of 14 cents.

Revenues surged 43.2% from the year-ago quarter to $297.7 million, better than the consensus mark of $283 million.

Geographically, revenues from North America (69.7% of revenues) increased 24% year over year to $207.5 million. Revenues from Europe (17%) soared 85% to $50.5 million. Rest of the World (ROW) revenues were $39.7 million compared with $13.4 million in the year-ago quarter.

Top-Line Details

Snap Ad impressions grew 278% year over year, while price per ad impression dropped 61% in the quarter. Of total Snap Ads, 85% were bought programmatically. Programmatic advertising revenues soared 485% year over year and 34% sequentially.

Snap's Daily Active Users (DAU) increased 5% year over year but decreased 1% sequentially to 186 million. North America DAU was 79 million, up 3% year over year but down 1.3% sequentially. Management attributed the sequential decline to lower usage of the Snapchat application by Android users, primarily due to the redesign.

Europe DAU was 59 million, up 4% year over year but down 3.3% sequentially. Rest of the World (ROW) DAU was 47 million, up 8% year over year but unchanged sequentially

Snap Inc. Price, Consensus and EPS Surprise

Snap Inc. Price, Consensus and EPS Surprise | Snap Inc. Quote

Average revenues per user (ARPU) rallied 37% year over year and 14% sequentially to $1.60. North America, Europe and ROW ARPUs increased 20%, 78% and 175%, respectively.

Management expects DAU to fall sequentially in the fourth quarter. However, Snap expects it to increase in 2019, driven by its initiatives to attract users above 34 years and the launch of the new Android rewrite "Mushroom."

In the quarter, 21 unique shows in Discover reached a monthly audience of more than 10 million. Management stated that average user spending time on Snapchat on a daily basis was more than 30 minutes in the quarter.

Snap announced partner curated Our Stories and added more than 25 media partners, including CNN, Overtime and Hearst to increase the volume and variety of its content on Discover.

Snap also extended its partnership with Comcast's CMCSA NBCUniversal, which will now produce content in 2019. Moreover, Viacom VIAB will create 10 new Snap Original Shows and at least 500 episodes of its shows will be available to snapchat audience.

Snap is also improving shopping experience of its users through the Snapchat camera by partnering with Amazon AMZN .

Moreover, the company continues to add features to the Ad Manager solution, including video views, consideration objectives (website visits and app installs) and conversion objectives (in-app purchases). These are helping the company offer improved performance that is driving advertising clients Return on Investment (ROI).

New Product Details

During the quarter, Snap announced two products - Product Catalogs and Collection Ads - for e-commerce advertisers.

Product catalogs allow advertisers to upload their standard product catalog and quickly generate a product catalog in the form of a Story Ad.

Collection Ads enables users to interact with four products in a single Snap Ad. Management stated that the product helped in improving engagement rate of eBay EBAY by five times compared to normal Snap Ads, during the test phase.

The company launched Snap Original Shows and debut serialized Shows, its first batch of exclusive scripted Shows and documentary series. Snap also introduced Commercials in the quarter. These are 6-second, non-skippable ads that appear only within premium content, including 12 new Snap Original Shows.

Snap Pixel, which helps advertisers measure the cross-device impact of their campaigns, grew more than 230 million purchase events in the third quarter, up from 70 million in the previous quarter. Moreover, Snap introduced new automated audience creation capabilities for the Snap Pixel. This allows advertisers to automatically generate audiences on various events measured by the Snap Pixel.

Further, Snap expanded the availability of goal-based bidding for conversions to all advertisers. The company is focusing on augmented reality (AR) marketing and added 'attachments' to its self-serve AR buying tools

Snap also launched Nico and Veronica, two new styles of Spectacles. Both designs come in black-on-black with polarized lenses.

Balance Sheet and Cash Flow

Snap ended the quarter with cash, cash equivalents and marketable securities of $1.41 billion, down from $1.57 billion as of Jun 30, 2018.

During the quarter, Snap used approximately $132.5 million of cash, which is an improvement of $67 million sequentially. Free cash outflow was $158.8 million, which is an improvement of $75 million sequentially.

Guidance

For the fourth quarter, Snap expects revenues between $355 million and $380 million, reflecting growth of 24-33%.

Adjusted EBITDA loss is expected to be between $75 million and $100 million compared with loss of $159 million reported in the year-ago quarter.

Zacks Rank

Snap currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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