Analysis: Snap Posts Losses in First Earnings Report Since IPO

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Following Snap Inc's (NYSE:SNAP) successful IPO in March, the first earnings call announced today (10 May) leaves a little to be desired. Opening on IPO day at USD$24 (£16.42), 41% above the USD$17 (£11.63) issue price in March, Snap promised big things, but the company's Q1 earnings report has caused a post-trading sell-off: closing the day's trading at USD$22.98 (£15.72), the announcement is continuing to drive that down, with an after-hours share price of USD$17.19 (£11.76) at time of writing. 

The camera company and owner of social media platform, Snapchat, posted Q1 2017 losses of USD$2.2bn (£1.5bn). This means a 2012% year-over-year increase; recognised as not meaningful. Adjusting for one-off, stock-based compensation expenses of approx. USD$2bn (£1.37bn), according to Snap's earnings report, Snap's losses equated to USD$209m (£143m). Adjusted EBITDA has been posted as USD$188m (£129m), representing a 102% increase on the loss recorded at the end of Q1 2016.

It's not all doom and gloom: the company saw the number of Daily Active Users (DAUs) increase 36% to 166 million year-over-year, and up 8 million on the previous quarter.

Snap is growing, but inevitably, it's not growing fast enough. In times when all eyes are on Google and Facebook for largely the wrong reasons, Snap has the opportunity to be the shining city upon the hill and expectations placed upon the tech giant are huge.

Despite strong operational growth year-over-year, with a 131% increase in average revenue per user (ARPU), as well as the DAU growth, a post-holiday slow down has likely caused a decline in performance since Q4 2016, with ARPU down 14% quarter-over-quarter and a decrease in the rate of DAU growth.

During the post-release conference call the outlook was, perhaps not surprisingly, positive, with a focus on user growth and engagement. Snapchat are targeting a complex audience that can't be easily engaged with through traditional media channels, such as TV and the average Snapchat usage time of 30 minutes per day , as well as the three billion daily snaps during Q1, reinforce Snapchat's focus.

It's not over for Snap yet; like many similar companies that have come before, there is the opportunity for it to stabilise financially. It may continue to run with losses per share at least for the near future, but don't write it off completely. Snap's forte lies in the ability to innovate and differentiate - if it can continue on that journey of capturing the attention of the notoriously disloyal 18-34 year-old markete, and start to throw a few stumbling blocks in the way of Facebook, the future might look brighter.

Q1 2017 Financial Highlights
(in thousands, unaudited)

March 31, 2017

March 31, 2016

Percent Change









Adjusted EBITDA




Q1 2017 Operational Highlights

Q1 2017

Q1 2016

Percent Change

Daily Active Users (DAU)




Average Revenue Per User (ARPU)