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SNAP Q3 Earnings Beat Estimates, User Growth Aids Top Line
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Snap (SNAP - Free Report) reported earnings of 17 cents per share for third-quarter 2021, which beat the Zacks Consensus Estimate by 183.3% and increased 1600% year over year.
Revenues jumped 57.3% from the year-ago quarter to $1.06 billion but missed the consensus mark by 2.04%.
Daily active users (DAU) at the end of the reported quarter were 306 million, marking an increase of 23% year over year. Snap added 57 million DAU on a year-over-year basis and 13 million sequentially.
Geographically, revenues from North America (73.7% of revenues) soared 59.6% year over year to $786.9 million. Revenues from Europe (14.3%) jumped 49.4% to $153.1 million. Rest of the World (ROW) revenues were $127.4 million, up 53.1% year over year.
The average revenue per user (ARPU) increased 27.8% year over year to $3.49. On a year-over-year basis, North America and Europe ARPUs increased 49.4% and 34.3%, respectively, while ROW improved 3.2%.
Snap’s third-quarter 2021 top-line growth benefited from increasing ARPU and user base growth.
However, Snap’s stock plunged 22% in extended trading on Oct 21. The company has been facing supply-chain issues and threat from privacy changes that Apple (AAPL - Free Report) implemented on its iOS platform earlier this year. The changes have made it more difficult for Snap’s advertising partners to measure and manage their ad campaigns for iOS.
Earlier this year Apple introduced a major privacy feature called App Tracking Transparency (ATT) that allowed users to choose to opt out of third-party app tracking. This means apps can no longer collect data about users from third parties and use that data to better target them with ads unless a user specifically gives the app permission to do so.
Shares of social media rivals Facebook and Twitter were each down nearly 7% in after-hours trading, following the release of Snap’s third quarter earnings, indicating that investors fear a similar impact on their financial results.
North America DAU increased 1 million sequentially to 96 million, up 6 million year over year. Europe DAU was 80 million, which increased 8 million on a year-over-year basis and 2 million on a sequential basis. ROW DAU was 130 million at the end of the reported quarter, up 43 million year over year and 10 million sequentially.
Snap is benefiting from improved user engagement. In March, over 125 million Snapchatters used Spotlight, its newest platform presenting the most entertaining Snaps from its community.
During the reported quarter, each of the 15 different Discover partners reached over 50 million unique Snapchatters.
Snap launched new Discover channels in 14 different countries, including 22 new channels each in India and the United Kingdom.
Besides, two of Snap’s new Snap Originals, Meme Mom and Honestly Loren, reached over 10 million viewers each in third-quarter 2021.
In the third quarter of 2021, Snap released 3D Bitmoji in Profiles, enabling Snapchatters to express themselves with a 3D version of their digital avatar. Over 170 million Snapchatters have engaged with their 3D Bitmoji Profile since launch.
The company also launched Birthday Mini, allowing Snapchatters to see their friends’ birthdays and send personalized greetings. It was used by more than 10 million Snapchatters in the first 21 days of its launch.
Camera and Augmented Reality (AR) Platform Gains Traction in Q3
In the third quarter of 2021, five of the new augmented reality Lenses driven by SnapML, the machine learning platform inLens Studio, generated more than 1 billion impressions each, achieving over 11 billion impressions in total.
The company featured nine new community try-on Lenses for Fashion Week, drawing inspiration from the unique trends within the major Fashion Week cities to showcase virtual outfits.
Snap also partnered with SignAll to introduce three AR Lenses, teaching Snapchatters how to fingerspell in American sign language.
In the third quarter, Snap announced the launch of Arcadia, its new global creative studio for branded AR, which will develop new technology and deliver impactful and effective AR experiences to brand and agency partners.
In addition to AR and content, Snap is also building new ways to empower creators, developers, brands, and others to improve the entire Snapchat experience.
In the third quarter of 2021, Snap launched the “Open Your Snapchat” marketing campaign, which invites both consumers and advertisers to experience augmented reality, unlocking hundreds of custom experiences localized to several different markets across the globe.
Thia Zacks Rank #2 (Buy) company also introduced Snapchat Trends for advertisers, which highlights popular keywords shared among the Snapchat community and helps advertisers better engage their audience. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Besides, Snap introduced Campaign Lab, allowing advertisers to track better and analyze their split tests to gain insights for future campaigns.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 50.5% year over year to $429 million. Infrastructure costs, content & developer partner costs, and advertising partner & other expenses increased 16.1%, 109.9% and 95%, respectively, on a year-over-year basis.
Gross margin on a non-GAAP basis improved 200 basis points to 60% in the third quarter 2021.
Operating expenses were $464 million, up 37.3% year over year. Sales and marketing expenses increased 40.5% year over year to $156 million, while general and administrative expenses increased 39.6% year over year to $127 million. Research and development expenses rose 34.8% year over year to $182 million
Adjusted EBITDA was $174.2 million compared with $56.4 million in the year-ago quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2021, cash and cash equivalents and marketable securities were $3.48 billion, compared with $3.47 billion as on Jun 30, 2021.
Net cash provided by operating activities was $71.5 million compared with $54.8 million used in the year-ago quarter and $101.1 million cash used in the previous quarter.
Free cash flow was $51.7 million against an outflow of $69.5 million reported in the year-ago quarter and cash flow of $115.7 million in the previous quarter.
Guidance
For the fourth quarter of 2021, revenues are expected between $1.165 billion and $1.205 billion. Adjusted EBITDA is estimated to be between $135 million and $175 million.
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SNAP Q3 Earnings Beat Estimates, User Growth Aids Top Line
Snap (SNAP - Free Report) reported earnings of 17 cents per share for third-quarter 2021, which beat the Zacks Consensus Estimate by 183.3% and increased 1600% year over year.
Revenues jumped 57.3% from the year-ago quarter to $1.06 billion but missed the consensus mark by 2.04%.
Daily active users (DAU) at the end of the reported quarter were 306 million, marking an increase of 23% year over year. Snap added 57 million DAU on a year-over-year basis and 13 million sequentially.
Geographically, revenues from North America (73.7% of revenues) soared 59.6% year over year to $786.9 million. Revenues from Europe (14.3%) jumped 49.4% to $153.1 million. Rest of the World (ROW) revenues were $127.4 million, up 53.1% year over year.
The average revenue per user (ARPU) increased 27.8% year over year to $3.49. On a year-over-year basis, North America and Europe ARPUs increased 49.4% and 34.3%, respectively, while ROW improved 3.2%.
Snap’s third-quarter 2021 top-line growth benefited from increasing ARPU and user base growth.
However, Snap’s stock plunged 22% in extended trading on Oct 21. The company has been facing supply-chain issues and threat from privacy changes that Apple (AAPL - Free Report) implemented on its iOS platform earlier this year. The changes have made it more difficult for Snap’s advertising partners to measure and manage their ad campaigns for iOS.
Earlier this year Apple introduced a major privacy feature called App Tracking Transparency (ATT) that allowed users to choose to opt out of third-party app tracking. This means apps can no longer collect data about users from third parties and use that data to better target them with ads unless a user specifically gives the app permission to do so.
Shares of social media rivals Facebook and Twitter were each down nearly 7% in after-hours trading, following the release of Snap’s third quarter earnings, indicating that investors fear a similar impact on their financial results.
Snap Inc. Price, Consensus and EPS Surprise
Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. Quote
User Engagement Improves in Q3
North America DAU increased 1 million sequentially to 96 million, up 6 million year over year. Europe DAU was 80 million, which increased 8 million on a year-over-year basis and 2 million on a sequential basis. ROW DAU was 130 million at the end of the reported quarter, up 43 million year over year and 10 million sequentially.
Snap is benefiting from improved user engagement. In March, over 125 million Snapchatters used Spotlight, its newest platform presenting the most entertaining Snaps from its community.
During the reported quarter, each of the 15 different Discover partners reached over 50 million unique Snapchatters.
Snap launched new Discover channels in 14 different countries, including 22 new channels each in India and the United Kingdom.
Besides, two of Snap’s new Snap Originals, Meme Mom and Honestly Loren, reached over 10 million viewers each in third-quarter 2021.
In the third quarter of 2021, Snap released 3D Bitmoji in Profiles, enabling Snapchatters to express themselves with a 3D version of their digital avatar. Over 170 million Snapchatters have engaged with their 3D Bitmoji Profile since launch.
The company also launched Birthday Mini, allowing Snapchatters to see their friends’ birthdays and send personalized greetings. It was used by more than 10 million Snapchatters in the first 21 days of its launch.
Camera and Augmented Reality (AR) Platform Gains Traction in Q3
In the third quarter of 2021, five of the new augmented reality Lenses driven by SnapML, the machine learning platform inLens Studio, generated more than 1 billion impressions each, achieving over 11 billion impressions in total.
The company featured nine new community try-on Lenses for Fashion Week, drawing inspiration from the unique trends within the major Fashion Week cities to showcase virtual outfits.
Snap also partnered with SignAll to introduce three AR Lenses, teaching Snapchatters how to fingerspell in American sign language.
In the third quarter, Snap announced the launch of Arcadia, its new global creative studio for branded AR, which will develop new technology and deliver impactful and effective AR experiences to brand and agency partners.
In addition to AR and content, Snap is also building new ways to empower creators, developers, brands, and others to improve the entire Snapchat experience.
In the third quarter of 2021, Snap launched the “Open Your Snapchat” marketing campaign, which invites both consumers and advertisers to experience augmented reality, unlocking hundreds of custom experiences localized to several different markets across the globe.
Thia Zacks Rank #2 (Buy) company also introduced Snapchat Trends for advertisers, which highlights popular keywords shared among the Snapchat community and helps advertisers better engage their audience. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Besides, Snap introduced Campaign Lab, allowing advertisers to track better and analyze their split tests to gain insights for future campaigns.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 50.5% year over year to $429 million. Infrastructure costs, content & developer partner costs, and advertising partner & other expenses increased 16.1%, 109.9% and 95%, respectively, on a year-over-year basis.
Gross margin on a non-GAAP basis improved 200 basis points to 60% in the third quarter 2021.
Operating expenses were $464 million, up 37.3% year over year. Sales and marketing expenses increased 40.5% year over year to $156 million, while general and administrative expenses increased 39.6% year over year to $127 million. Research and development expenses rose 34.8% year over year to $182 million
Adjusted EBITDA was $174.2 million compared with $56.4 million in the year-ago quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2021, cash and cash equivalents and marketable securities were $3.48 billion, compared with $3.47 billion as on Jun 30, 2021.
Net cash provided by operating activities was $71.5 million compared with $54.8 million used in the year-ago quarter and $101.1 million cash used in the previous quarter.
Free cash flow was $51.7 million against an outflow of $69.5 million reported in the year-ago quarter and cash flow of $115.7 million in the previous quarter.
Guidance
For the fourth quarter of 2021, revenues are expected between $1.165 billion and $1.205 billion. Adjusted EBITDA is estimated to be between $135 million and $175 million.