Snap loses second-quarter profit, gives no future guidance

Snap reported second-quarter revenue of $1.11 billion after the company previously warned it would not meet revenue expectations for the quarter.

The number of admissions marks a 13% year-over-year increase, down from previous guidance of 20-25%. Daily active users grew 18% year-over-year to 347 million.

The company did not provide revenue or EBITDA guidance for the third quarter due to “uncertainties related to the operating environment”. Snap shares fell 23 percent in after-hours trading on Thursday.

“While the continued growth of our community increases long-term opportunities for our business, our second-quarter financial results did not reflect our ambition,” said Evan Spiegel, CEO of Snap. “We are evolving our business and strategy to accelerate revenue growth, including innovating our products, investing heavily in our direct response advertising business and developing new revenue streams to help diversify our core growth.”

Part of this evolution includes “significantly reduced employment rates” as well as a review of other operating costs, as the company continues to invest in long-term sectors with a special focus on augmented reality.

“We are not satisfied with the results we are delivering despite opposition,” Spiegel said in a letter to investors.

Spiegel and his Snap co-founder Bobby Murphy have signed deals to serve as chief technology officer and chief executive officer until at least January 1, 2027. The duo will earn $1 each year and receive no equity compensation. The board of directors has agreed to split the shares if the Class A share price reaches $40 within the next 10 years, allowing co-founders to donate or sell additional Class A shares.

Snap also announced a $500 million stock buyback program, which the company says aims to “compensate” the company’s employees by issuing stock “as part of an overall compensation program designed to foster a culture of ownership.”

In May, Snap said in an SEC filing that as “the macroeconomic environment has deteriorated increasingly faster than expected,” the company will lose its low-cost revenue and adjusted EBITDA guidance. That same month, Spiegel told employees the company would cut hiring for the rest of the year, with a cap of 500 new hires, compared with 2,000 new hires in the last 12 months. A senior executive attributed the negative impact on Snap’s business to rising inflation, supply chain shortages, changes in platform policy and the war in Ukraine, according to the memo that reports. in the border.

In a letter to investors, Snap also discussed the impact of increased competition in advertising as platforms compete for the smallest overall ad pool in the industry. Snap saw revenue growth decline by 25 percentage points quarter-on-quarter and reported revenue slowing as the quarter progressed.

“We’re seeing these different headwinds pressuring the profits of different companies, and this is directly affecting the demand for advertising,” said Derek Andersen, the company’s chief financial officer.

Snap can be especially effective, respectively Andersen, because advertisers can scale up or down their campaigns on the platform. To increase ad revenue, Snap said it will improve ad measurement tools and continue to invest in ranking and personalization.

As the tech giants face an impending recession and share prices plummet (Snap’s shares are down more than 50% in the last six months), Snap is also experimenting with subscriptions as an addition to its boosted business. In late June, the company launched Snapchat+, a $3.99-per-month subscription offer that gives users access to new features. Earlier this week, ahead of the earnings, the company also launched a web version of its Snapchat app for subscribers, which allows users to send messages and make video calls on their computers.