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Snap (SNAP - Free Report) reported fourth-quarter 2023 earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 14.29% but declined 42.9% year over year.
Revenues increased 4.7% year over year to $1.36 billion and missed the Zacks Consensus Estimate by 1.84%. The top-line growth was driven by the company’s focus on investing in direct-response business to deliver increased return on ad spend for advertising partners.
The brand-oriented advertising business declined 3% year over year, while the direct-response advertising business grew 3% year over year. Other revenues, which were driven primarily by Snapchat+, surged more than 200% year over year in the fourth quarter.
Daily active users (DAU) at the end of the reported quarter were 414 million, up 10.4% year over year. Snap added 39 million DAU on a year-over-year basis. Monthly active users (MAU) increased more than 8% year over year and surpassed 800 million in the fourth quarter.
Geographically, revenues from North America (66.1% of revenues) rose 2.2% year over year to $899.5 million. Revenues from Europe (17.5%) increased 9% to $238.3 million. Rest of the World (ROW) revenues were $223.5 million, up 11.3% year over year.
The average revenue per user (ARPU) decreased 5.2% year over year to $3.29. On a year-over-year basis, the ARPUs of North America and Europe increased 2.2% and 4.6%, respectively, while the ARPU of ROW decreased 6.4%.
North America’s DAU was 100 million, flat year over year. Europe’s DAU was 96 million, up 4.3% year over year and ROW’s DAU was 218 million at the end of the reported quarter, up 11.3% year over year.
In the fourth quarter, overall time spent watching content globally grew on a year-over-year basis, driven primarily by strong growth in total time spent watching Spotlight. Total time spent watching Spotlight content increased more than 175% year over year and the average MAU watching Spotlight increased more than 35% year over year.
More creators posted content to Snapchat, with total Public Stories posted by Snap Stars growing more than 125% year over year in fourth-quarter 2023 in the United States.
In the fourth quarter, Snap signed a new publisher deal with Spotify (SPOT - Free Report) in the United States, which will bring shorter-form highlights from Spotify’s podcasts to Spotlight and Stories.
Snap continued to diversify its revenue base with Snapchat+, which reached more than seven million subscribers in the reported quarter.
The company also announced new artificial intelligence (AI)-powered features for Snapchat+ subscribers, giving them the ability to enhance their Snaps and create as well as send AI-generated images based on a text prompt.
Operating Details
In the quarter under review, the adjusted cost of revenues increased 31.4% year over year to $615 million.
Adjusted operating expenses were $587 million, down 2% year over year.
Sales and marketing expenses decreased 11.1% year over year to $193 million, while general and administrative expenses increased 11.3% year over year to $168 million. Research and development expenses contracted 2.2% year over year to $226 million.
Adjusted EBITDA was $159.1 million, down 31.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2023, cash and cash equivalents and marketable securities were $3.5 billion compared with $3.6 billion as of Sep 30, 2023.
Operating cash flow was $164.5 million in the fourth quarter of 2023 compared with $125.2 million in the year-ago quarter.
Free cash flow was $110.85 million in the fourth quarter of 2023 compared with $78.36 million in the year-ago period.
The company repurchased 18.4 million shares at a cost of $189 million in the fourth quarter, reflecting an average share repurchase price of $10.28.
Zacks Rank & Stocks to Consider
Snap currently carries a Zacks Rank #3 (Hold).
Shares of SNAP have lost 29.6% against the Zacks Computer and Technology sector’s return of 5.9% in the year-to-date period.
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Arista Networks (ANET - Free Report) and Semtech (SMTC - Free Report) , sporting a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here. Shares of Arista Networks shares surged 110.5% in the past year. The long-term earnings growth rate for ANET is projected at 19.77%.
Shares of Semtech have lost 42.8% in the past year. The long-term earnings growth rate for SMTC is projected at 15%.
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SNAP's Q4 Earnings Surpass Estimates, Revenues Rise Y/Y
Snap (SNAP - Free Report) reported fourth-quarter 2023 earnings of 8 cents per share, which beat the Zacks Consensus Estimate by 14.29% but declined 42.9% year over year.
Revenues increased 4.7% year over year to $1.36 billion and missed the Zacks Consensus Estimate by 1.84%. The top-line growth was driven by the company’s focus on investing in direct-response business to deliver increased return on ad spend for advertising partners.
The brand-oriented advertising business declined 3% year over year, while the direct-response advertising business grew 3% year over year. Other revenues, which were driven primarily by Snapchat+, surged more than 200% year over year in the fourth quarter.
Daily active users (DAU) at the end of the reported quarter were 414 million, up 10.4% year over year. Snap added 39 million DAU on a year-over-year basis. Monthly active users (MAU) increased more than 8% year over year and surpassed 800 million in the fourth quarter.
Geographically, revenues from North America (66.1% of revenues) rose 2.2% year over year to $899.5 million. Revenues from Europe (17.5%) increased 9% to $238.3 million. Rest of the World (ROW) revenues were $223.5 million, up 11.3% year over year.
The average revenue per user (ARPU) decreased 5.2% year over year to $3.29. On a year-over-year basis, the ARPUs of North America and Europe increased 2.2% and 4.6%, respectively, while the ARPU of ROW decreased 6.4%.
Snap Inc. Price, Consensus and EPS Surprise
Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. Quote
User Engagement Improves in the Fourth Quarter
North America’s DAU was 100 million, flat year over year. Europe’s DAU was 96 million, up 4.3% year over year and ROW’s DAU was 218 million at the end of the reported quarter, up 11.3% year over year.
In the fourth quarter, overall time spent watching content globally grew on a year-over-year basis, driven primarily by strong growth in total time spent watching Spotlight. Total time spent watching Spotlight content increased more than 175% year over year and the average MAU watching Spotlight increased more than 35% year over year.
More creators posted content to Snapchat, with total Public Stories posted by Snap Stars growing more than 125% year over year in fourth-quarter 2023 in the United States.
In the fourth quarter, Snap signed a new publisher deal with Spotify (SPOT - Free Report) in the United States, which will bring shorter-form highlights from Spotify’s podcasts to Spotlight and Stories.
Snap continued to diversify its revenue base with Snapchat+, which reached more than seven million subscribers in the reported quarter.
The company also announced new artificial intelligence (AI)-powered features for Snapchat+ subscribers, giving them the ability to enhance their Snaps and create as well as send AI-generated images based on a text prompt.
Operating Details
In the quarter under review, the adjusted cost of revenues increased 31.4% year over year to $615 million.
Adjusted operating expenses were $587 million, down 2% year over year.
Sales and marketing expenses decreased 11.1% year over year to $193 million, while general and administrative expenses increased 11.3% year over year to $168 million. Research and development expenses contracted 2.2% year over year to $226 million.
Adjusted EBITDA was $159.1 million, down 31.8% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2023, cash and cash equivalents and marketable securities were $3.5 billion compared with $3.6 billion as of Sep 30, 2023.
Operating cash flow was $164.5 million in the fourth quarter of 2023 compared with $125.2 million in the year-ago quarter.
Free cash flow was $110.85 million in the fourth quarter of 2023 compared with $78.36 million in the year-ago period.
The company repurchased 18.4 million shares at a cost of $189 million in the fourth quarter, reflecting an average share repurchase price of $10.28.
Zacks Rank & Stocks to Consider
Snap currently carries a Zacks Rank #3 (Hold).
Shares of SNAP have lost 29.6% against the Zacks Computer and Technology sector’s return of 5.9% in the year-to-date period.
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Arista Networks (ANET - Free Report) and Semtech (SMTC - Free Report) , sporting a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Arista Networks shares surged 110.5% in the past year. The long-term earnings growth rate for ANET is projected at 19.77%.
Shares of Semtech have lost 42.8% in the past year. The long-term earnings growth rate for SMTC is projected at 15%.