Snap shares slump after debut earnings miss forecasts

Snap fell short of Wall Street’s expectations in its first quarterly results as a public company, sending its shares tumbling by almost a quarter in value in after-hours trading to hit a new low.

The maker of the Snapchat app reported revenue growth of 286 per cent to $149.6m but analysts had been expecting almost $10m more than that. Losses were also wider than forecasts.

Daily active users, which have been a cause of concern as Facebook and Instagram copied many of Snapchat’s features, were up 36 per cent year on year to 166m. Investors, however, were looking for 167m-170m.

Evan Spiegel, Snap’s chief executive, opened his first earnings briefing call since March’s initial public offering by saying that the company had focused during the quarter on the performance and quality of its Android app, as well as automating its advertising business.

“Overall I feel we have executed well on our priorities for this quarter,” he said, pointing to an increase in new users from Android smartphones and growth in overall time spent in the app, driven by new features such as search.

“These improvements helped drive a significant increase in engagement,” Mr Spiegel said, with 3bn snaps created every day, up from 2.5bn in the third quarter of last year. “We still have a lot of work to do but we are excited by the amount of progress we have made in a short time.”

Snap’s average revenue per user — a metric the Los Angeles-based company has encouraged investors to focus on as it grows its nascent advertising business — was 90c, up 181 per cent year on year and a little better than some analysts were expecting. Arpu for the three months to March was down 14 per cent from the fourth quarter’s $1.05, because the holiday sales season is typically stronger for advertising.

Analysts are not expecting Snap to post a profit until 2019 at the earliest. Net losses for the quarter were $2.2bn, much of that due to one-off IPO costs and stock-based compensation. Even after adjusting for that, losses before interest, taxation, depreciation and amortisation were still deeper than analysts anticipated at $188.2m. Capital expenditures jumped from $12.4m to $18m year on year.

Shares in Snap were volatile in after-hours trading but fell as much as 24 per cent to $17.50. At March’s IPO, Snap stock was priced at $17 and topped $24 on its first day of trading.