Snap Sees Upside Surprise As Quarterly Revenue Rises & Daily Active Users Hit 406 Million

Snapchat parent Snap returned to revenue growth in the third quarter, surprising Wall Street, and clocked gains in daily active users (DAUs), as net losses widened on a restructuring charge amid layoffs. The company hit a dour note on the ad front, saying “forward visibility of advertising demand remains limited” and noting that the Mideast war has paused spending by some brand-oriented campaings.

Revenue rose to $1.18 billion from $1.13 billion for the three months ended in September after falling in both the first and second quarters for the first time since the company went public in 2017.

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Net losses widened to $368 million from $359 million. A wind down of its AR Enterprise business, which included a reduction of our global employee headcount by approximately 3% led to restructuring charges of $18.6 million, composed primarily of cash severance and stock-based compensation expenses.

Daily active users increased 12% year-over-year to 406 million. The company anticipates continued growth in its global community will lead to DAUs rising to between 410 and 412 million in the fourth quarter.

The stock has been all over the map after hours, first popping higher, then lower then flat. Execs are hosting a conference call at 5:30 ET to discuss the numbers, which have been pretty mixed at Snap lately. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $40 million dropped from $73 million in the year-earlier quarter. Operating cash flow was $13 million versus $56 million. And the free cash flow the Street prizes was a negative $61 million compared to $18 million the prior year.

On advertising, Snap’s main revenue source, the company said it “observed pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war in the Middle East, and this has been a headwind to revenue quarter-to-date. While some of these campaigns have now resumed, and the impact on our revenue has partially diminished, we continue to observe new pauses and the risk that these pauses could persist or increase in magnitude remains.”

“Our revenue returned to positive growth in Q3, increasing 5% year-over-year and flowing through to positive adjusted EBITDA as our reprioritized cost structure demonstrated the leverage in our business model,” said CEO Evan Spiegel. “We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success.”

Highlights of the quater include: total time spent watching Spotlight increased over 200% year-over-year; launch of a new Generative AI-powered feature called Dreams, which lets Snapchatters create generative AI selfies; more creators posting content to Snapchat, with nearly three times more public Stories posted in the US compared to Q3 2022. The company partnered with the LA Rams aroudn the Super Bowl and MTV around the Video Music Awards and Live Nation on Lollapalooza Paris.

More to come..

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