Snap Inc. is Still Losing Money Every Quarter

Apr 23, 2019
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Today Snap Inc. released their earnings for Q1 2019 to investors, with stagnant userbase and still no timeline to make a profit.

Q1 2019 by the Numbers

In Q4 2018 Snap Inc. (NYSE:SNAP) claimed they would increase users this quarter from the newly designed Android application they developed that was released in Q1 2019. The app was claimed to open faster, take up less space and offer a superior user experience. The app launched April 8th which came after their quarter so whatever positive momentum they have will not be counted in these results.

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Snap has managed to tighten up their operations somewhat but is still plagued by the cost of infrastructure which is their biggest expense at $136 million this quarter. For the company to be successful, this expense needs to remain flat instead of scaling with additional users. Snap has not published its costs of revenue by region which would be very insightful into where their spending is occurring.

Highlights published from Snap are below:

  • Operating cash flow improved by $166 million to $(66) million in Q1 2019, compared to the prior year.
  • Free Cash Flow improved by $190 million to $(78) million in Q1 2019, compared to the prior year.
  • Common shares outstanding plus shares underlying stock-based awards totaled 1,544 million at March 31, 2019, compared with 1,457 million one year ago.
  • Revenue increased 39% to $320 million in Q1 2019, compared to the prior year.
  • Operating loss improved $76 million to $(316) million in Q1 2019, compared to the prior year.
  • Net loss improved $75 million to $(310) million in Q1 2019, compared to the prior year.
  • Adjusted EBITDA loss improved $94 million to $(123) million in Q1 2019, compared to the prior year.

Building Blocks for the Future

Despite years of losing money, there are some bright spots to consider for investors; the first is ARPU (average revenue per user), this number has risen from $1.21 to $1.68 globally. While userbase appears to be flat year over year the increase in revenue per user helped the company reduce its losses in that period. The next note is expenses have stayed relatively flat year over year, even with the redesign of both applications and the introduction of games, augmented reality, and Snap Kit.

 

 

Their expenses being flat with an increase in revenue is an excellent sign, but the userbase is why they are worth around $15 billion without coming close to turning a profit. The company is expected to lose between $150 million and $125 million next quarter, which although still an improvement from Q2 2018, is still not much progress compared to a loss of $169 million in that quarter. The company has been ambitious and creative in the past with features and even gimmicks like their spectacles, but their stagnation could hurt their image and relevance. The stock is up 4% in after-hours trading on the positive revenue news; we’ll keep you posted on further news around the company.

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