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Snap Posts Record Quarterly Revenue, Loses Another 2 Million Users

Snapchat has now lost users in back-to-back quarters following its unpopular app redesign

Snap Inc. posting its best sales quarter ever wasn’t enough for Wall Street to overlook the exodus of another 2 million daily Snapchat users when the company reported its Q3 financials on Thursday afternoon.

Snap posted a loss of 12 cents per share and $298 million in revenue — setting a company sales record for a single quarter in the process. Both figures beat analyst forecasts of a loss of 14 cents per share and $283.2 million in revenue, according to Yahoo Finance estimates. Revenue increased 43 percent year over year.

But Snap is losing users just as it business is beginning to show signs of life.

Snapchat reported 186 million daily active users, marking the second straight quarter of declining daily user growth. Snap started the year with 187 million DAUs, but its much-maligned app redesign has stunted its progress. Compounding matters, Instagram, its chief rival, continues to flourish. Instagram Stories — the 24-hour pictures and video thread feature, essentially copied from Snapchat — now has 400 million daily users, more than twice Snapchat’s user base.

Wall Street appeared more focused on the user decline than Snap’s revenue growth at first, with Snap shares falling 3 percent in after-hours trading to $6.76 per share.

Snap reported $1.60 in average revenue per user, surpassing estimate of $1.52 ARPU — suggesting the company’s advertising is starting to pay off. Snap CEO Evan Spiegel told analysts last year the company’s “big issue” with advertisers was “education” — or showing why it was a platform they should use.

“We’re investing in long-term growth opportunities and driving operational efficiencies,” Tim Stone, Snap CFO, said in a statement accompanying earnings. “We achieved record revenue and strong bottom-line results this quarter and expect a record fourth quarter, as we continue to invest in innovation for our community and scale our business.”

The Los Angeles-based company slowed its burn rate during the third quarter, reporting negative free cash flow of $159 million. Snap posted $234 million in negative free cash flow last quarter.

Snap continued adding new content to its Discover page during the quarter, with 21 new shows debuting during the quarter. Snap said the shows reach a monthly audience of more than 10 million viewers. And its show with “Late Late Show” host James Corden — “James Corden’s Next James Corden” — added a measure of prestige, earning the company two Emmy awards. Snap announced earlier this month several new original shows are in the works, including projects from the Duplass Brothers and “Riverdale” writer Tessa Leigh Williams.

At the same time, Snap stock has been pummeled for the last three months, routinely hitting new all-time lows. The recent swoon added to an already lackluster year for the company, with Snap shares down 53 percent since the start of 2018.

Snap announced on Wednesday two major hires for the company, bringing on ex-Huffington Post chief Jared Grusd as its chief strategist, and hiring Jeremi Gorman, Amazon’s global head of advertising, as its chief business officer.

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