By Adam Fraser
Snapchat started life as a listed company in a very turbulent fashion, disappointing the market with its first quarter, second quarter and third quarter results, with the share price falling below its much-hyped IPO level.
However, it seems to have somewhat turned a corner with its latest Q4 results, with the share price increasing 26% in after-hours trading after the results release.
If you want to dive into the details, you can check the detailed financials, investor presentation and press release, around the quarterly numbers. If you want a quick summary, here are 10 key takeaways from the Q4 2017 results:
- Daily Active Users (DAUs) grew to 187m from 178m in the prior quarter (a healthy 5.1% growth) and 159m a year ago (18.4% growth).
- Average revenue per user was US$1.53, compared to $1.17 a last quarter and $1.05 a year ago. While this is well below the levels achieved by Facebook of over $6, the rate of growth in the quarter was impressive.
- Revenue for the quarter was US$286m, compared to $208m last quarter (a massive 37.5% increase in a single quarter) and $166m a year ago (72.3% increase).
- The user and revenue growth was above the level expected by the market, leading to the positive response in the share price.
- While the net loss reduced on the prior quarter, it remained a staggering $350m for the quarter versus $443m in the prior quarter.
- Instagram Stories and WhatsApp Status now have 300m users, illustrating the impact competitors have had in imitating key aspects of Snapchat’s originally unique offering.
- USA DAUs were 80m, representing 43% of global users – a ratio that has been broadly consistent for the past 12 months. Snapchat will have been encouraged that absolute user numbers grew in all regions; USA, Europe and Rest of World.
- USA however drove 77% of global revenues, showing the more rapid advertiser adoption in the company’s home location, compared to the rest of the globe.
- Capital expenditure for the quarter was $21m, a decrease from $26m in the prior quarter.
- Adjusted EBITDA (removing the impact of stock based compensation) was a loss of US$159m for the quarter, slightly lower than the prior quarter.
“Our work during 2017 is proof that we aren’t afraid to make big changes for the long-term success of our business,” CEO Evan Spiegel said during the investor conference call on Tuesday.
Snapchat has recently shifted from a direct advertising sales model to an auction-based bidding system (a la Google) for selling advertising. The benefits of this are starting to flow, boosting the number of ads featured in its app by four times the amount from the same time last year, with 90 percent of ads now coming from programmatic systems, according to the company.
Snap’s user growth was driven partly by users of its Android app, which it has been increasingly emphasising. The company noted the retention rate of new Android users grew by nearly 20% compared to the prior year, meaning that Android users who tried Snapchat were generally more likely to become DAUs.
Management credibility improved somewhat, despite last quarters debacle with the $40m loss on unsold Spectacles.
The results were encouraging, however, Snapchat is by no means out of the woods. Its loyal, engaged millennial audience remains highly attractive to marketers, while it is attempting to broaden its appeal to the older demographic. However, competition from Facebook and Instagram is fierce, its IP is easily imitated, and the financial losses remain astounding for a company with a market cap of $22bn. Only time will tell if it can remain a viable and independent listed company.