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SNAP Q2 Earnings Decline Y/Y, Shares Fall on Low Ad Demand
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Snap (SNAP - Free Report) reported a loss of 2 cents per share for second-quarter 2022. The Zacks Consensus Estimate for loss was pegged at 18 cents per share. The company had reported earnings of 10 cents per share in the year-ago quarter.
Revenues increased 13.1% from the year-ago quarter’s levels to $1.11 billion but missed the Zacks Consensus Estimate by 2.5%.
Snap’s second-quarter 2022 top line benefited from user base expansion, despite slow revenue growth. Shares plunged 25% in the extended trading session on Jul 21 as the company stated that some advertisers continue to face supply-chain disruptions and labor shortages, and many others are contending with rising costs amid record inflation, which led to cutbacks in spending on advertising.
The company will significantly slow hiring, invest in its advertising business and find new sources of revenue in order to grow at a faster pace in the near term.
Daily active users (DAU) at the end of the reported quarter were 347 million, up 18.4% year over year. Snap added 54 million DAU on a year-over-year basis.
Geographically, revenues from North America (70.7% of revenues) increased 12% year over year to $785.7 million. Revenues from Europe (15.3%) increased 11.7% to $170.1 million. Rest of the World (“ROW”) revenues were $155.1 million, up 21.1% year over year.
The average revenue per user (“ARPU”) decreased 4.5% year over year to $3.20. On a year-over-year basis, North America and Europe ARPUs increased 7.6% and 1.5%, respectively, while ROW declined 10.3%.
North America DAU was 99 million, up 4.2% year over year. Europe DAU was 86 million, up 10.3% year over year. ROW DAU was 162 million at the end of the reported quarter, up 35% year over year.
Snap is benefiting from improved user engagement. Total time spent watching Spotlight content grew 59% year over year.
The daily average number of Snapchatters, aged 25 and older, engaging with shows and publisher content, increased more than 40% year over year.
In second-quarter 2022, the new Snap Originals, The Fight Inside, reached over 10 million viewers. This new Snap Original features Ryan Garcia and his struggles with mental health and professional boxing.
In second-quarter 2022, SNAP renewed its partnerships with the NFL, WNBA, and NBA with content deals covering Discover Shows, Spotlight Challenges, AR experiences, and Cameos.
Snap launched Lens Cloud, a collection of backend services that expands the types of AR experiences developers can create.
The company introduced the Snap 3D Asset Manager, a web content management platform for businesses to manage their 3D product catalog, facilitating the AR Lens creation process.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 0.2% year over year to $ 438 million.
Adjusted gross margin was 61% in the second quarter, compared with 55% in the year-ago period.
In second-quarter 2022, adjusted operating expenses were $665 million, up 55.7% year over year, reflecting Snap’s ongoing rate of investment in the business.
Sales and marketing expenses increased 58.2% year over year to $212 million, while general and administrative expenses increased 57.9% year over year to $199 million. Research and development expenses rose 52.7% year over year to $255 million
Adjusted EBITDA was $7.2 million, down 93.9% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2022, cash and cash equivalents and marketable securities were $4.9 billion compared with $5 billion as of Mar 31, 2022.
Operating cash outflow was $124 million in the second quarter compared with cash flow of $127 million in the year-ago quarter.
Free cash outflow was $147 million in the second quarter of 2022 compared with $106 million in the year-ago quarter.
Zacks Rank & Stocks to Consider
Snap currently carries a Zacks Rank #4 (Sell).
Snap’s shares tumbled 65.3% compared with the Zacks Computer and Technology sector’s decline of 39.7% in the year-to-date period.
Image: Bigstock
SNAP Q2 Earnings Decline Y/Y, Shares Fall on Low Ad Demand
Snap (SNAP - Free Report) reported a loss of 2 cents per share for second-quarter 2022. The Zacks Consensus Estimate for loss was pegged at 18 cents per share. The company had reported earnings of 10 cents per share in the year-ago quarter.
Revenues increased 13.1% from the year-ago quarter’s levels to $1.11 billion but missed the Zacks Consensus Estimate by 2.5%.
Snap’s second-quarter 2022 top line benefited from user base expansion, despite slow revenue growth. Shares plunged 25% in the extended trading session on Jul 21 as the company stated that some advertisers continue to face supply-chain disruptions and labor shortages, and many others are contending with rising costs amid record inflation, which led to cutbacks in spending on advertising.
The company will significantly slow hiring, invest in its advertising business and find new sources of revenue in order to grow at a faster pace in the near term.
Daily active users (DAU) at the end of the reported quarter were 347 million, up 18.4% year over year. Snap added 54 million DAU on a year-over-year basis.
Geographically, revenues from North America (70.7% of revenues) increased 12% year over year to $785.7 million. Revenues from Europe (15.3%) increased 11.7% to $170.1 million. Rest of the World (“ROW”) revenues were $155.1 million, up 21.1% year over year.
The average revenue per user (“ARPU”) decreased 4.5% year over year to $3.20. On a year-over-year basis, North America and Europe ARPUs increased 7.6% and 1.5%, respectively, while ROW declined 10.3%.
Snap Inc. Price, Consensus and EPS Surprise
Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. Quote
User Engagement Improves in the Second Quarter
North America DAU was 99 million, up 4.2% year over year. Europe DAU was 86 million, up 10.3% year over year. ROW DAU was 162 million at the end of the reported quarter, up 35% year over year.
Snap is benefiting from improved user engagement. Total time spent watching Spotlight content grew 59% year over year.
The daily average number of Snapchatters, aged 25 and older, engaging with shows and publisher content, increased more than 40% year over year.
In second-quarter 2022, the new Snap Originals, The Fight Inside, reached over 10 million viewers. This new Snap Original features Ryan Garcia and his struggles with mental health and professional boxing.
In second-quarter 2022, SNAP renewed its partnerships with the NFL, WNBA, and NBA with content deals covering Discover Shows, Spotlight Challenges, AR experiences, and Cameos.
Snap launched Lens Cloud, a collection of backend services that expands the types of AR experiences developers can create.
The company introduced the Snap 3D Asset Manager, a web content management platform for businesses to manage their 3D product catalog, facilitating the AR Lens creation process.
Operating Details
In the quarter under review, the cost of revenues on a non-GAAP basis increased 0.2% year over year to $ 438 million.
Adjusted gross margin was 61% in the second quarter, compared with 55% in the year-ago period.
In second-quarter 2022, adjusted operating expenses were $665 million, up 55.7% year over year, reflecting Snap’s ongoing rate of investment in the business.
Sales and marketing expenses increased 58.2% year over year to $212 million, while general and administrative expenses increased 57.9% year over year to $199 million. Research and development expenses rose 52.7% year over year to $255 million
Adjusted EBITDA was $7.2 million, down 93.9% from the year-ago quarter.
Balance Sheet and Cash Flow
As of Jun 30, 2022, cash and cash equivalents and marketable securities were $4.9 billion compared with $5 billion as of Mar 31, 2022.
Operating cash outflow was $124 million in the second quarter compared with cash flow of $127 million in the year-ago quarter.
Free cash outflow was $147 million in the second quarter of 2022 compared with $106 million in the year-ago quarter.
Zacks Rank & Stocks to Consider
Snap currently carries a Zacks Rank #4 (Sell).
Snap’s shares tumbled 65.3% compared with the Zacks Computer and Technology sector’s decline of 39.7% in the year-to-date period.
Some better-ranked stocks in the Computer and Technology sector are Agilysys (AGYS - Free Report) , Fastly (FSLY - Free Report) and Aspen Technology (AZPN - 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.
Agilysys, Fastly and Aspen Technology are scheduled to report their quarterly results on Jul 26, Aug 3 and Aug 8, respectively.
The Zacks Consensus Estimate for Agilysis’ second-quarter 2022 earnings is pegged at 18 cents per share, unchanged in the past 30 days.
The Zacks Consensus Estimate for Fastly’s second-quarter 2022 earnings is pegged at a loss of 16 cents per share, down 1 cent over the past 30 days.
The Zacks Consensus Estimate for Aspen Technology’s second-quarter 2022 earnings is pegged at $2.20 per share, down 2.3% over the past 30 days.