Snap Inc. Posts Q1 User And Revenue Surge As COVID-19 Provides Tailwind


Snapchat parent Snap Inc. delivered better-than-expected revenue in the first quarter, but slightly undershot Wall Street analysts’ forecast for earnings (or lack thereof).

Total revenue came in at $462.5 million, a 44% gain from the same quarter a year ago. The company had projected quarterly revenue of $450 million to $470 million, higher than analysts’ consensus for $431 million.

Snap recorded a loss of eight cents a share, which was wider than analysts’ expectation of a 7-cent loss, but it marked an improvement from a year ago, when the loss was 10 cents.

The number of daily active users (DAUs) climbed to 229 million, which was ahead of internal guidance and a 20% leap from the same period a year ago. Snap finished 2019 with 218 million DAUs.

On April 1, the company had pointed to a dramatic rise in usage of its social platform during the coronavirus lockdown, with group chats and communication between friends both hitting all-time highs. In a blog post, the company said usage was “surpassing our typical peaks on Christmas or major holidays.”

More than 4 billion “snaps” were created each day during the first quarter, the company said.

Shares in Snap jumped 18% in after-hours trading after closing the day at $12.44.

“Our product has never been more important in people‚Äôs lives, especially for helping close friends and family stay together emotionally while they are separated physically,” CEO Evan Spiegel said in prepared remarks released with the numbers. “We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays.”

Communication with friends, the company said, increased by more than 30% in the last week of March compared to the last week of January, with more than a 50% increase in some larger markets.

One data point that will interest Hollywood partners of Snap as well as brand marketers is the fact that view time among users aged 35 and up doubled in the quarter compared with the same period in 2019. Pre-sold attractions like Comedy Central’s The Daily Show are helping broaden the reach of Snapchat beyond its teen and Gen Z core.

Advertising appeared to deliver meaningful revenue in the period, with upfront commitments doubling in 2020 compared with 2019. Twitter and Facebook have seen short-term declines in advertising, though most Wall Street and Madison Avenue analysts expect digital platforms to rebound more quickly than traditional ones in a recovery scenario. Peter Naylor, who headed up advertising at Hulu for more than six years, joined Snap this month as head of sales.

Spiegel noted that ad revenue posted stronger gains in January and February before slowing in March as advertisers pulled back amid the virus-prompted economic collapse. “These high growth rates in the beginning of the quarter reflect our investments in our audience, ad products, and optimization, and give us confidence in our ability to grow revenue over the long term,” he said.

The outlook for the medium- to long-term as businesses recover from the effects of the virus and a battered economy is unclear, Spiegel conceded. But he argued that Snapchat’s young users will help “accelerate the digital transformation” and “jumpstart” an economic comeback.

“We are beginning to see the light at the end of the tunnel in terms of the immediate health crisis, with
the curve flattening in many cities and countries,” Spiegel said. “The next chapter will be figuring out what the new normal will look like, both from a logistical perspective as well as in regard to the physical and mental well-being of our team. The third chapter will be the recovery, which we expect may be very fast for some businesses and much slower for others, and we are committed to helping our partners as we navigate this uncertain journey together.”

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