Snap Inc. Announces Fourth Quarter and Full Year 2018 Financial Results

Fourth quarter revenue increased 36% to a record $390 million

Full year revenue increased 43% to $1.2 billion

Daily Active Users were flat sequentially at 186 million

SANTA MONICA, Calif.–(BUSINESS WIRE)–Snap Inc. (NYSE: SNAP) today announced financial results for the quarter
and full year ended December 31, 2018.

Financial Highlights

• Operating cash flow improved by $50 million to $(126) million in Q4
  2018, compared to the prior year.
• Free Cash Flow improved by $49 million to $(149) million in Q4 2018,
  compared to the prior year.
• Common shares outstanding plus shares underlying stock-based awards
  totaled 1,507 million at December 31, 2018, compared with 1,453
  million one year ago.
• Revenue increased 36% to a record $390 million in Q4 2018, compared to
  the prior year.
• Operating loss improved $166 million to $(195) million in Q4 2018,
  compared to the prior year.
• Net loss improved $158 million to $(192) million in Q4 2018, compared
  to the prior year.
• Adjusted EBITDA loss improved $109 million to $(50) million in Q4
  2018, compared to the prior year.

“In 2018, we focused on building a foundation to scale the business over
the long-term by driving sustainable product innovation, scaling our
advertising platform, and hiring the leadership team that will help us
achieve our future goals,” said Evan Spiegel, CEO. “We ended the year
with user engagement stabilizing and have started rolling out the new
version of our Android application to a small percentage of our
community. We are substantially closer to achieving profitability, as we
have maintained a relatively flat cost structure across the past five
quarters while growing full-year revenue 43 percent year-over-year.”

Q4 2018 Summary & Key Highlights

We ended the year stabilizing Daily Active Users and enhancing
engagement across key metrics:

• DAUs were 186 million in Q4 2018, compared to 187 million in Q4 2017
  and 186 million in Q3 2018.
• In Q4 2018, our iOS DAU increased both quarter-over-quarter and
  year-over-year, and average time spent on iOS grew faster during Q4
  2018 than during Q4 2017.
• We reached over 70% of the total 13- to 34-year-old U.S. population
  with premium mobile video ads on a monthly basis.
• On average, over 70% of users played with or viewed a Lens every
  day. Users played with or viewed Lenses 700 million times on New
  Year’s Eve, up nearly 40% year-over-year.

Our commitment to providing high-quality, made-for-mobile video
experiences across the Snapchat platform is yielding positive results:

• 30% more people are now watching Publisher Stories and Shows every day
  compared to last year, and each person is consuming more of these
  Stories per day on average.
• In Q4 2018, more than 60% of ESPN’s “SportsCenter” audience tuned in
  three or more times per week.
• “Dead Girls Detective Agency,” a new Snap Original Show produced by
  our joint venture with NBCUniversal, reached more than 14 million
  unique viewers, and over 40% of the users that completed the first
  episode went on to watch the entire season.
• Bitmoji Stories, a new cartoon starring Snapchatters and their
  friends, reached over 40 million viewers in December.
• NBC News announced that two thirds of the 25 to 35 million
  Snapchatters watching its Stay Tuned show represented a net new
  audience for them.

We strengthened our international content offerings:

• We increased the breadth and depth of our content across international
  markets including France, Germany, Ireland, Norway, the UK, India, and
  the Middle East.
• We saw success with localized partners such as Filter Copy in India
  and Layalina in the Middle East to reach audiences drawn to local,
  culturally relevant content.

We drove continued product innovation:

• We began to roll out our new Android application and early test
  results are promising, especially on less performant devices,
  including a 20% reduction in the average time it takes to open
  Snapchat.
• We expanded our augmented reality platform and launched Snap Camera,
  which lets people use their favorite Lenses when creating or streaming
  video on desktop and laptop computers.
• By the end of 2018, over 300,000 Lenses had been created by our
  community through Lens Studio, and those Lenses were viewed over 35
  billion times.
• We launched Lens Challenges, where users can participate in challenges
  in Lens Explorer by creating a Snap with a Lens that is themed to a
  particular song, dance, holiday, or event.
• We introduced Friendship Profiles, a collection of images, videos,
  messages, links, and more that users and friends have saved in Chat.
  Friendship Profiles make it easy to find favorite Memories and the
  important things that are saved over time in one place.

We created new products which drove greater monetization:

• Commercials, our 6-second non-skippable video ad, continued to perform
  well. The majority was transacted via our Premium Content Targeting
  tool, a part of our Self-Serve Platform for large brands and agencies.
• Collection Ads, which enable a business to showcase four products in a
  single Snap, drove over twice the return on ad spend versus our
  comparable formats in Q4 2018.
• We launched Product Catalogs, which offer a simple, scalable way for
  eCommerce businesses to use their websites to create Snap Ads.
• The Snap Pixel continued to see growth with over 600 million purchase
  events in Q4 2018 up from 230 million in Q3 2018.
• We made improvements to machine learning models for app installs and
  lower-funnel bidding events, which contributed to higher always-on
  revenue, showing that our commitment to performance advertisers is
  paying off.

We brought together an experienced leadership team to lead us through
the next important chapter of Snap:

• We welcomed several talented and experienced leaders from some of the
  world’s leading tech and media companies, including Jared Grusd, our
  Chief Strategy Officer, and Jeremi Gorman, our Chief Business Officer.
  Julie Henderson will be joining us shortly as our Chief Communications
  Officer.

Financial Guidance

The following forward-looking statements reflect our expectations for
the first quarter of 2019 as of February 5, 2019, and are subject to
substantial uncertainty. This guidance assumes, among other things, that
no business acquisitions, investments, restructurings, or legal
settlements are concluded in the quarter. Our results are based on
assumptions that we believe to be reasonable as of this date, but may be
materially affected by many factors, as discussed below in
“Forward-Looking Statements.”

Q1 2019 Outlook

• Revenue is expected to be between $285 million and $310 million, or
  grow between 24% and 34% compared to Q1 2018.
• Adjusted EBITDA is expected to be between $(165) million and $(140)
  million, compared to $(218) million in Q1 2018.

Conference Call Information

Snap Inc. will host a conference call to discuss the results at 2:00
p.m. Pacific / 5:00 p.m. Eastern today. The live audio webcast along
with supplemental information will be accessible at investor.snap.com. A
recording of the webcast will also be available following the conference
call.

Snap Inc. uses the investor.snap.com and snap.com/news websites as means
of disclosing material non-public information and for complying with its
disclosure obligation under Regulation FD.

Definitions

Free Cash Flow is defined as net cash provided by (used in) operating
activities, reduced by purchases of property and equipment.

Common shares outstanding plus shares underlying stock-based awards
includes common shares outstanding, restricted stock units, restricted
stock awards, and outstanding stock options.

Adjusted EBITDA is defined as net income (loss), excluding interest
income; interest expense; other income (expense) net; income tax benefit
(expense); depreciation and amortization; stock-based compensation
expense and related payroll tax expense; and certain other non-cash or
non-recurring items impacting net income (loss) from time to time.

A Daily Active User (DAU) is defined as a registered Snapchat user who
opens the Snapchat application at least once during a defined 24-hour
period. We calculate average DAUs for a particular quarter by adding the
number of DAUs on each day of that quarter and dividing that sum by the
number of days in that quarter.

Average revenue per user (ARPU) is defined as quarterly revenue divided
by the average DAUs.

A Monthly Active User (MAU) is defined as a registered Snapchat user who
opens the Snapchat application at least once during the 30-day period
ending on the calendar month-end. We calculate average Monthly Active
Users for a particular quarter by calculating the average of the MAUs as
of each calendar month-end in that quarter.

Note: For adjustments and additional information regarding the non-GAAP
financial measures and other items discussed, please see “Non-GAAP
Financial Measures,” “Reconciliation of GAAP to Non-GAAP Financial
Measures,” and “Supplemental Financial Information and Business Metrics.”

About Snap Inc.

Snap Inc. is a camera company. We believe that reinventing the camera
represents our greatest opportunity to improve the way people live and
communicate. We contribute to human progress by empowering people to
express themselves, live in the moment, learn about the world, and have
fun together. For more information, visit snap.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, or the
Securities Act, and Section 21E of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, about us and our industry that involve
substantial risks and uncertainties. All statements other than
statements of historical facts contained in this press release,
including statements regarding guidance, our future results of
operations or financial condition, business strategy and plans, user
growth and engagement, product initiatives, and objectives of management
for future operations, are forward-looking statements. In some cases,
you can identify forward-looking statements because they contain words
such as “anticipate,” “believe,” “contemplate,” “continue,” “could,”
“estimate,” “expect,” “going to,” “intend,” “may,” “plan,” “potential,”
“predict,” “project,” “should,” “target,” “will,” or “would” or the
negative of these words or other similar terms or expressions. We
caution you that the foregoing may not include all of the
forward-looking statements made in this press release.

You should not rely on forward-looking statements as predictions of
future events. We have based the forward-looking statements contained in
this press release primarily on our current expectations and projections
about future events and trends that we believe may affect our business,
financial condition, results of operations, and prospects. These
forward-looking statements are subject to risks and uncertainties
related to: our financial performance; our lack of profitability to
date; our ability to generate and sustain positive cash flow; our
ability to attract and retain users, publishers, and advertisers;
competition and new market entrants; managing our international
expansion and our growth and future expenses; compliance with new laws
and regulations; our ability to maintain, protect, and enhance our
intellectual property; our ability to attract and retain qualified and
key personnel; and future acquisitions or investments, as well as risks,
uncertainties, and other factors described in “Risk Factors” and
elsewhere in our most recent report on Form 10-Q filed with the SEC,
which is available on the SEC’s website at www.sec.gov.
Additional information will be made available in Snap Inc.’s annual
report on Form 10-K for the year ended December 31, 2018 and other
filings that we make from time to time with the SEC. In addition, any
forward-looking statements contained in this press release are based on
assumptions that we believe to be reasonable as of this date. We
undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date of this press release or
to reflect new information or the occurrence of unanticipated events,
except as required by law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared
and presented in accordance with GAAP, we use certain non-GAAP financial
measures, as described below, to understand and evaluate our core
operating performance. These non-GAAP financial measures, which may be
different than similarly titled measures used by other companies, are
presented to enhance investors’ overall understanding of our financial
performance and should not be considered a substitute for, or superior
to, the financial information prepared and presented in accordance with
GAAP.

We use the non-GAAP financial measure of Free Cash Flow, which is
defined as net cash provided by (used in) operating activities, reduced
by purchases of property and equipment. We believe Free Cash Flow is an
important liquidity measure of the cash that is available, after capital
expenditures, for operational expenses and investment in our business
and is a key financial indicator used by management. Additionally, we
believe that Free Cash Flow is an important measure since we use
third-party infrastructure partners to host our services and therefore
we do not incur significant capital expenditures to support revenue
generating activities. Free Cash Flow is useful to investors as a
liquidity measure because it measures our ability to generate or use
cash. Once our business needs and obligations are met, cash can be used
to maintain a strong balance sheet and invest in future growth.

We use the non-GAAP financial measure of Adjusted EBITDA, which is
defined as net income (loss); excluding interest income; interest
expense; other income (expense), net; income tax benefit (expense);
depreciation and amortization; stock-based compensation expense and
related payroll tax expense; and certain other non-cash or non-recurring
items impacting net income (loss) from time to time. We believe that
Adjusted EBITDA helps identify underlying trends in our business that
could otherwise be masked by the effect of the expenses that we exclude
in Adjusted EBITDA.

We use the non-GAAP financial measure of non-GAAP net loss, which is
defined as net income (loss); excluding amortization of intangible
assets; stock-based compensation expense and related payroll tax
expense; certain other non-cash or non-recurring items impacting net
income (loss) from time to time; and related income tax adjustments.
Non-GAAP net loss and weighted average diluted shares are then used to
calculate non-GAAP diluted net loss per share. Similar to Adjusted
EBITDA, we believe these measures help identify underlying trends in our
business that could otherwise be masked by the effect of the expenses we
exclude in the measure.

We believe that these non-GAAP financial measures provide useful
information about our financial performance, enhance the overall
understanding of our past performance and future prospects, and allow
for greater transparency with respect to key metrics used by our
management for financial and operational decision-making. We are
presenting these non-GAAP measures to assist investors in seeing our
financial performance through the eyes of management, and because we
believe that these measures provide an additional tool for investors to
use in comparing our core financial performance over multiple periods
with other companies in our industry.

For a reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measure, please see “Reconciliation
of GAAP to Non-GAAP Financial Measures.”

Snap Inc., “Snapchat,” and our other registered and common law trade
names, trademarks, and service marks are the property of Snap Inc. or
our subsidiaries.

Contacts

Investors and Analysts:
ir@snap.com

Press:
press@snap.com

Read full story here