Snap Inc., the parent company of Snapchat, has recently announced its second quarter financial results. They just announced remarkable revenues – $1.34 billion. This number represents a 9% increase over last year. The company announced a massive net loss of $262.6 million for the quarter. In either case, this news caused ripples of fear among the investor and analyst communities.
Snap’s global daily active users have hit 469 million, which means the company is not susceptible to a lightning-fast loss of users. The company’s global average revenue per user (ARPU) is $2.87. This is an impressive figure and even more so considering its ability to continue to monetize the platform despite various headwinds. The bottom line fell short too with loss of reported earnings per share of 16 cents, and that helped sink the ship on investor sentiment.
Evan Spiegel, Snap’s CEO, acknowledged the challenges faced during this quarter but emphasized the company’s commitment to enhancing its operational structures. Snap’s adjusted EBITDA for the second quarter was $41 million. This number looks paltry when you look at the company’s massive net losses. Its guidance for the new third quarter adjusted EBITDA is between $110 million and $135 million. This narrow band is a positive sign that greater things may come.
Even more surprising is the fact that the company managed an astounding 64% year-over-year growth in its Other Revenue segment. With this surge, the total was $171 million in Q2. This growth was largely attributed to Snap’s new subscription service, Snapchat+, which is currently approaching 16 million subscribers. This service has in turn become a key part of Snap’s revenue strategy, diversifying their income streams away from just advertising.
Looking out into the third quarter, Snap is forecasting a modest 1% to 3% growth in its global daily active users. They estimate that figure will hit 476 million in the third quarter. The firm is forecasting revenue for this period to be between $1.475 billion and $1.505 billion. This rosy projection presupposes a happy kind of optimism, despite the significant losses incurred thus far.
In an official statement about Snap’s internal realignment, Spiegel framed the move as his vote of confidence for the leadership overhaul, which is intended to improve operational integrity.
“Our Chief Information Officer and Chief Information Security Officer will report to me and lead enterprise-wide foundational infrastructure and platform integrity,” – Evan Spiegel
This new leadership structure will allow teams to drive deeper accountability and ownership over the work. Doing so will inspire innovation on behalf of users and advertising partners. Spiegel once again emphasized the need to pivot with industry headwinds and keep user experience front and center.
As Snap navigates through these financial hurdles, analysts will be closely monitoring its ability to convert user engagement into consistent revenue growth while overcoming the operational challenges highlighted in recent earnings reports.