Earnings

Snap earnings: Users and revenue surge

Snap earnings: Users and revenue surge
  • Q1 revenue: $462 million (+44% YoY, -18% QoQ, vs. $431 million expected)
  • Q1 losses: -$305.9 million (-1.44% YoY, 27% QoQ) net
  • Q2 guidance: Snap is one of many companies not providing expectations for revenue for the second quarter of 2020.

The big number: Daily active users increased 20% year-over-year to 229 million, up by 11 million users and 5% from last quarter. That's the highest year-to-year growth in users since the second quarter of 2017. Thanks are owed in part to coronavirus. Investors liked the numbers, driving Snap shares up more than 20% in after-hours trading.

People are talking: "Our product has never been more important in people's lives, especially for helping close friends and family stay together emotionally while they are separated physically," said co-founder and CEO Evan Spiegel. "We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays."

Opportunities: Snap's investment in premium content and augmented reality has resonated with users. Over 75% of daily active users engage with AR every day on average, and more than half of the Gen Z population in the U.S. watches news content on Discover. "We were pleased to see that the total time spent with Discover content grew by more than 35% year-over-year," CFO Derek Andersen said. "Time spent with Shows, which includes scripted and unscripted series as well as daily news shows, more than doubled year-over-year in Q1."

The company also launched App Stories in late March. The feature allows users to share Stories on third-party apps.

Threats: Ad revenue per unit was down from $2.58 in Q4 2019 to $2.02 in Q1 2020. "The economic environment has become challenging for many of our advertising partners and this has had an impact on the rate of growth in our business," Andersen said. At the same time, operating expenses were $298 million in Q1, up 20% year-over-year.

The power struggle: Snap competes with companies like Twitter, Pinterest, Facebook and Google for ad money — the company's only source of revenue. The company seems to be faring well, for now: "While many advertising budgets declined due to COVID-19," Spiegel said. "We experienced high revenue growth rates in the first two months of the quarter, which offset our lower growth in March."

Hirsh Chitkara
Hirsh Chitkara (@ChitkaraHirsh) is a researcher at Protocol, based out of New York City. Before joining Protocol, he worked for Business Insider Intelligence, where he wrote about Big Tech, telecoms, workplace privacy, smart cities, and geopolitics. He also worked on the Strategy & Analytics team at the Cleveland Indians.

The way we work has fundamentally changed. COVID-19 upended business dealings and office work processes, putting into hyperdrive a move towards digital collaboration platforms that allow teams to streamline processes and communicate from anywhere. According to the International Data Corporation, the revenue for worldwide collaboration applications increased 32.9 percent from 2019 to 2020, reaching $22.6 billion; it's expected to become a $50.7 billion industry by 2025.

"While consumers and early adopter businesses had widely embraced collaborative applications prior to the pandemic, the market saw five years' worth of new users in the first six months of 2020," said Wayne Kurtzman, research director of social and collaboration at IDC. "This has cemented collaboration, at least to some extent, for every business, large and small."

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Kate Silver

Kate Silver is an award-winning reporter and editor with 15-plus years of journalism experience. Based in Chicago, she specializes in feature and business reporting. Kate's reporting has appeared in the Washington Post, The Chicago Tribune, The Atlantic's CityLab, Atlas Obscura, The Telegraph and many other outlets.

Hirsh Chitkara
Hirsh Chitkara (@ChitkaraHirsh) is a researcher at Protocol, based out of New York City. Before joining Protocol, he worked for Business Insider Intelligence, where he wrote about Big Tech, telecoms, workplace privacy, smart cities, and geopolitics. He also worked on the Strategy & Analytics team at the Cleveland Indians.

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