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SNAP's Q1 Earnings Increase Y/Y, Revenues Miss Estimates

Zacks Equity Research
·3-min read

Snap SNAP reported first-quarter 2023 earnings of 1 cent per share, beating the Zacks Consensus Estimate by 200% and increasing 150% year over year.

Revenues declined 7% year over year to $989 million and missed the Zacks Consensus Estimate by 1.84%.

Daily active users (DAU) at the end of the reported quarter were 383 million, up 15.4% year over year. Snap added 51 million DAU on a year-over-year basis.

Geographically, revenues from North America (64.7% of revenues) decreased 15.6% year over year to $640 million. Revenues from Europe (16%) decreased 2.5% to $158 million. Rest of the World (“ROW”) revenues were $191 million, up 34.5% year over year.

The average revenue per user (“ARPU”) decreased 19.4% year over year to $2.58. On a year-over-year basis, ARPUs of North America and Europe decreased 18% and 11.9%, respectively, while ROW ARPUs increased 5.3%.

Snap Inc. Price, Consensus and EPS Surprise

Snap Inc. Price, Consensus and EPS Surprise
Snap Inc. Price, Consensus and EPS Surprise

Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. Quote

User Engagement Improves in the First Quarter

North America DAU was 100 million, up 2% year over year. Europe DAU was 93 million, up 10.7% year over year and ROW DAU was 190 million at the end of the reported quarter, up 26.7% year over year.

In the first quarter, Snap added new deals with Canal+ in France, Telegraaf Mediahuis in the Netherlands, Rogers Sports & Media in Canada and BBC Studios and Formula 1 in the United Kingdom. Thirteen partners reached more than 50 million global viewers each in the first quarter.

The Snapchat+ subscription service reached more than 3 million paying subscribers in the first quarter. The company made considerable progress in diversifying revenues with Snapchat+, ARES and sponsored AR advertising.

The Snap Map is a personalized experience to view content, discover places and see what your friends are up to with the aim of increasing engagement. The Map is used by over 300 million Snapchatters on a monthly basis. Engagement with Place Story views increased 150% year over year.

Operating Details

In the quarter under review, the cost of revenues on a non-GAAP basis increased 5.3% year over year to $435 million.  

Adjusted operating expenses were $554 million, down 5.3% year over year.

Sales and marketing expenses increased 9% year over year to $206 million, while general and administrative expenses decreased 8.1% year over year to $148 million. Research and development expenses contracted 14.9% year over year to $200 million.

Adjusted EBITDA was $1 million, down 98.4% from the year-ago quarter.

Balance Sheet and Cash Flow

As of Mar 31, 2023, cash and cash equivalents and marketable securities were $4.1 billion compared with $3.9 billion as of Dec 31, 2022.

Operating cash flow was $151 million in the first quarter 2023 compared with cash flow of $127 million in the year-ago quarter.

Free cash flow was $103 million in the first quarter of 2023 compared with $78 million in the previous quarter.

Zacks Rank & Stocks to Consider

Snap currently carries a Zacks Rank #3 (Hold).

Snap’s shares tumbled 63.6% compared with the Zacks Computer and Technology sector’s decline of 6.8% in the past year.

Investors interested in the broader Zacks Computer & Technology sector can consider better-ranked stocks like Alight ALIT, Nice NICE and Enfusion ENFN. While Enfusion sports a Zacks Rank #1 (Strong Buy), both Alight and Nice carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alight shares have gained 3.1% in the past year. ALIT is set to report its first-quarter 2023 results on May 9.

Nice shares have declined 2.7% in the past year. NICE is set to report its first-quarter 2023 results on May 11.

Enfusion shares have declined 78.7% in the past year. ENFN is set to report its first-quarter 2023 results on May 9.

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