Snap User Growth Stalls, but Company Posts Record Q4 Revenue

Company stock rockets 19 percent on strong sales, narrower losses

Last Updated: February 6, 2019 @ 9:36 AM

Snapchat didn’t gain any daily users during the fourth quarter of 2018, but Wall Street doesn’t seem to mind at first blush, with Snap shares increasing nearly 20 percent after it posted record sales, running past analyst estimates in the process.

The company reported $390 million in revenue — a 36 percent year-over-year increase — and a loss of 4 cents per share. Analysts had anticipated the company would bring in $378 million in sales and report a loss of 7 cents per share.

Snapchat user growth stalled at 186 million daily users, but that marked an improvement from the company’s previous two quarters, when it lost 5 million DAUs behind a much-maligned app redesign. Snapchat had 187 million users at the beginning of 2018.

Wall Street responded kindly to its user stabilization, with Snap shares jumping 19 percent in early after-hours trading, hitting $8.40 per share.

Snap chief Evan Spiegel, in the company’s note to shareholders, said it’s “substantially closer to achieving profitability” as the company has increased sales while keeping its cost structure flat for several quarters.

“In 2018, we focused on building a foundation to scale the business over the long-term by driving sustainable product innovation, scaling our advertising platform, and hiring the leadership team that will help us achieve our future goals,” Spiegel said. “We ended the year with user engagement stabilizing and have started rolling out the new version of our Android application to a small percentage of our community.”

While user growth was flat, Snapchat is continuing to grab more money from its existing audience. Snap reported $2.09 in average revenue per user — a 30 percent increase from the previous quarter. That would indicate the company is doing better at connecting advertisers with its users, something that hasn’t always been easy. Spiegel told analysts in 2017 Snap’s “big issue” with advertisers was “education” — or showing why it was a platform they should use.

Another bright spot for Snap: it’s losing less money. Snap’s net loss was $192 million, compared to the same time last year, when it lost $350 million.

Snap’s alarming trend of having several high-level executives leave the company last year has continued into 2019, with CFO Tim Stone leaving the company in January after only eight months on the job. The company named Lara Sweet, its chief accounting officer, as interim CFO soon after and continues to look for Stone’s permanent replacement. Stone’s exit added to Snap’s growing list of executives that have left the company in the last year. Imran Khan, the company’s former chief strategist, stepped down in September; Nick Bell, Snap’s head of content, later exited in November.

Former Huffington Post CEO Jared Grusd joined as Snap’s new chief strategist during Q4, along with its new chief business officer Jeremi Gorman, the former head of global ad sales at Amazon.

Snap posted better-than-expected revenue when it reported its third quarter earnings back in October, a triumph that was offset by losing another 2 million DAUs. Weeks later, Snap was subpoenaed by the U.S. Justice Department and Securities and Exchange Commission for potentially misleading investors before its March 2017 initial public offering by downplaying the threat of Instagram, its chief competition. The company’s stock price dropped about 15 percent between late October and the end of the year, but has enjoyed a healthy run in recent weeks, pushing it back to about $7 per share heading into Tuesday afternoon — right where it was three months prior.

The company will hold a conference call to discuss its financials at 5:00 p.m. ET.