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SNAP Q2 Earnings Top Estimates, User Growth Drives Top Line

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Snap (SNAP - Free Report) reported second-quarter 2021 earnings of 10 cents per share, beating the Zacks Consensus Estimate of a loss of 2 cents per share. The company had reported adjusted loss of 9 cents per share in the year-ago quarter.

Revenues jumped 116.2% from the year-ago quarter to $982.1 million, surpassing the consensus mark by 17.1%. Snap’s second-quarter 2021 top-line growth benefited from increasing ARPU and user base growth.

Daily active users (DAU) at the end of the reported quarter were 293 million. Snap added 55 million DAU on a year-over-year basis and 13 million, sequentially.

North America DAU increased 2 million sequentially to 95 million, up 5 million year over year. Europe DAU was 78 million, which increased 7 million on a year-over-year basis and 1 million on a sequential basis. ROW DAU was 120 million at the end of the reported quarter, up 43 million year over year and 9 million sequentially.

Geographically, revenues from North America (71.5% of revenues) soared 128.8% year over year to $701.7 million. Revenues from Europe (15.5%) jumped 93.6% to $152.3 million. Rest of the World (ROW) revenues were $128.1 million, up 86.2% year over year.

Snap Inc. Price, Consensus and EPS Surprise

Snap Inc. Price, Consensus and EPS Surprise

Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. Quote


Average revenue per user (ARPU) increased 75.4% year over year to $3.35. On a year-over-year basis, North America, Europe and ROW ARPUs increased 116.8%, 77.3% and 20.2%, respectively.

Snap shares were up 17.2% in pre-market trading following the impressive second quarter results.

Camera and Augmented Reality (AR) Boosts Growth

Snap added multi-person 3D body mesh, advanced cloth simulation and a new visual effects editor for more realistic lenses in its Lens Studio 4.0.

The company introduced TrueSize technology to improve eyewear sizing and wrist tracking technology for accurate watch try-ons.

It launched new categories for Scan, including fashion and food. The company introduced Camera Shortcuts, which helps Snapchatters to find the most relevant camera mode, Lens, or even curated soundtrack, right from the Camera screen.

Snap introduced Connected Lenses, enabling Snapchatters in different locations to interact with each other through AR.

Snap’s Expanded Content Offerings: Key Catalyst

Snap streamed eight new and renewed Snap Originals. The company launched a record 177 new international Discover Channels, including 36 in the U.K. and 24 in India.

In the reported quarter, Spotlight daily active users grew 49%. Additionally, average daily content submissions more than tripled, and daily time spent per user in the United States grew by over 60% sequentially.

Snap released Spotlight on the Web, a destination to view Spotlight Snaps from a browser without a Snapchat account. This also enables Creators to upload content submissions directly from their desktop.

Snap inked partnerships with The Walt Disney (DIS - Free Report) , Viber and Bumble (BMBL - Free Report) that will bring Camera and AR capabilities into their applications. The company announced Snap Kit integrations with Alphabet’s (GOOGL - Free Report) YouTube and YouTube Music, allowing users to share YouTube videos to the Snapchat Camera.

Operating Details

In the quarter under review, the cost of revenues on a non-GAAP basis increased 79.8% year over year to $437 million. Infrastructure costs, content & developer partner costs, and advertising partner & other expense increased 11.7%, 295.7% and 124.2%, respectively, on a year-over-year basis.

Gross margin on a non-GAAP basis was 55% in the reported quarter compared with 47% in the year-ago quarter.

Operating expenses were $427 million, up 32.6% year over year. Sales and marketing expenses increased 34% year over year to $134 million, while general and administrative expenses increased 23.5% year over year to $126 million. Research and development expenses rose 39.2% year over year to $167 million.

Adjusted EBITDA was $117.4 million against a loss of $95.6 million in the year-ago quarter.

Balance Sheet and Cash Flow

As of Jun 30, 2021, cash and cash equivalents and marketable securities were $3.47 billion, compared with $2.55 billion as on Mar 31, 2021.

Net cash used in operating activities was $101.1 million compared with $66.6 million in the year-ago quarter and $136.8 million of cash flow from operations in the previous quarter.

Free cash outflow was $115.7 million against outflow of $82.3 million reported in the year-ago quarter and free cash flow of $126 million in the previous quarter.


For the third quarter of 2021, Snap expects revenues between $1.07 billion and $1.09 billion. The Zacks Rank #3 (Hold) stock expects adjusted EBITDA between $100 million and $120 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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