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SNAP Q1 Earnings Miss Estimates, User Growth Aids Top Line

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Snap (SNAP - Free Report) reported a loss of 22 cents per share in first-quarter 2022, wider than the Zacks Consensus Estimate of a loss of 17 cents per share. The company had reported a loss of 19 cents per share in the year-ago quarter.

Revenues increased 38% from the year-ago quarter’s levels to $1.06 billion, in line with the Zacks Consensus Estimate.

Daily active users (DAU) at the end of the reported quarter were 332 million, up 18% year over year. Snap added 52 million DAU on a year-over-year basis.

Geographically, revenues from North America (71.4% of revenues) soared 37.1% year over year to $758.3 million. Revenues from Europe (15.3%) jumped 42.7% to $162.1 million. Rest of the World (ROW) revenues were $142.3 million, up 38.2% year over year.

The average revenue per user (ARPU) increased 17% year over year to $3.20. On a year-over-year basis, North America and Europe ARPUs increased 31%, respectively, while ROW inched up 2%.

Snap’s first-quarter 2022 top line benefited from increasing ARPU and user base expansion.

User Engagement Improves in the First Quarter

North America DAU was 98 million, up 5% year over year. Europe DAU was 84 million, up 10% year over year. ROW DAU was 150 million at the end of the reported quarter, up  36% year over year.

Snap is benefiting from improved user engagement. During the reported quarter, six Discover partners reached over 100 million global viewers each.

In first-quarter 2022, the new Snap Originals Breakwater reached over 10 million viewers.

The Snap Original ‘Breakwater’ is about a dystopian future caused by climate change that featured episodic AR Lenses in partnership with Verizon (VZ - Free Report) , helping Snapchatters to immerse themselves in the show.

At the end of 2020, Snap launched its first-ever 5G-enabled Landmarker Lens (a new tool for overlaying AR on the world) in partnership with Verizon. The Lens uses the company’s augmented reality technology and Verizon’s 5G Ultra Wideband capabilities.

In the reported quarter, Snap observed a 350% increase in the number of Spotlight submissions using creative tools or Lenses compared with the year-ago quarter’s levels.
In first-quarter 2022, Snapchatters opened Places from the Snap Map more than twice as much compared with first-quarter 2021 levels.

Snap Inc. Price, Consensus and EPS Surprise

 

Snap Inc. Price, Consensus and EPS Surprise

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

 

Operating Details

In the quarter under review, the cost of revenues on a non-GAAP basis increased 2% year over year to $ 420.9 million.  

Adjusted gross margin was 61% in the first quarter, up approximately14 percentage points year-over-year.

In first-quarter 2022, adjusted operating expenses were $586 million, up 60% year-over-year, reflecting Snap’s ongoing rate of investment in the business.

Sales and marketing expenses increased 61% year over year to $241.9 million, while general and administrative expenses increased 33.5% year over year to $215.9 million. Research and development expenses rose 30.7% year over year to $455.6 million

Adjusted EBITDA was $64 million against $(2) million in the year-ago quarter.

Balance Sheet and Cash Flow

As of Mar 31, 2022, cash and cash equivalents and marketable securities were $5 billion compared with $3.68 billion as of Dec 31, 2021.

Operating cash flow was $127 million in the fourth quarter compared with cash flow of $137 million in the year-ago quarter.

Free cash flow was $106 million in the first quarter of 2022 compared with $126 million in the year-ago quarter.

Guidance

For the second quarter of 2022, revenues are expected to be between 20% and 25%. Adjusted EBITDA is estimated to be between breakeven and $50 million.

Zacks Rank & Stocks to Consider

Snap currently carries a Zacks Rank #3 (Hold).

Snap’s shares tumbled 37.4% compared with the Zacks Computer and Technology sector’s return of 17.4% in the year-to-date period.

Some better-ranked stocks in the Computer and Technology sector include Apple (AAPL - Free Report) and Fastly (FSLY - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apple and Fastly are scheduled to report their quarterly results on Apr 28 and May 4, respectively.

The Zacks Consensus Estimate for Apple’s second-quarter 2022 earnings is pegged at $1.44 per share, up by a cent in the past 30 days.

The Zacks Consensus Estimate for Fastly’s first-quarter 2022 earnings is pegged at a loss of $0.14 per share, unchanged in the past 30 days.


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