SNAP, the parent company of popular multimedia messaging app Snapchat, reported strong financial results in its third quarter 2024 earnings call. CEO Evan Spiegel announced that the company achieved revenue of $1.37 billion, a 15% increase compared to the previous year, and the number of daily active users reached 443 million, a significant increase compared to the previous year.
The company’s revenue growth was driven by its direct response advertising business and Snapchat+ subscription service, with the number of active advertisers more than doubling year-over-year. Spiegel also highlighted the launch of new advertising products and the launch of the fifth generation of Spectacles, Snap‘s augmented reality glasses.
main points
- Snap’s third-quarter revenue increased 15% year-over-year to $1.37 billion, and daily active users increased to 443 million.
- The company’s direct response advertising grew 16%, while brand-focused advertising revenue decreased 1%.
- Adjusted EBITDA increased to $132 million and free cash flow reached $72 million.
- Snap has launched a new advertising product and expects fourth-quarter revenue to be between $1.51 billion and $1.56 billion.
- Approved new $500 million stock repurchase program
company outlook
- Snap expects fourth-quarter revenue to be between $1.51 billion and $1.56 billion, up 11% to 15% year-over-year.
- The company is focused on managing costs and improving monetization, most notably testing its new “Simple Snapchat” experience.
- Fourth quarter adjusted EBITDA expected to be between $210 million and $260 million
- Snap is prioritizing investments to drive growth and improve financial performance.
negative highlights
- Brand-focused advertising sales decreased by 1% compared to the previous year
- The company does not expect a significant recovery in brand advertising in the fourth quarter.
- Cost per install for app-installed products decreased by 24%, suggesting a potential decline in revenue for this segment
positive highlights
- Direct response advertising sales grew 16% compared to the previous year
- 7-0 Pixel purchase optimization increased by over 160%
- Number of active advertisers more than doubles year-over-year
What is lacking
- Snap reported a net loss of $153 million, an improvement from a loss of $368 million a year earlier.
Q&A Highlights
- Spiegel explained that he is proceeding cautiously with the Simple Snapchat transition to avoid monetization risks.
- The company is focused on improving user engagement and managing monetization dynamics.
- Anderson cited improved advertiser performance due to lower cost per install and cost per purchase.
- Snap is driving CAPI adoption for its small and medium-sized customers to improve performance signals and feedback loops.
- The fifth generation of Spectacles is in development, focused on building a strong developer ecosystem for lens experiences.
Snap continues to innovate in the augmented reality space and seeks to strengthen its position with new ad placements and product offerings. Despite challenges in the brand advertising segment, the company’s strong performance in direct response advertising and strategic focus on cost management and monetization are positive for its future outlook.
InvestingPro Insights
Snap’s recent financial performance is consistent with several key metrics and insights from InvestingPro. The company’s reported revenue of $1.37 billion, a 15% year-over-year increase, is reflected in InvestingPro data, showing revenue growth of 13.66% over the past 12 months as of the third quarter of 2024, reaching $5.17 billion. This growth trajectory is further supported by quarterly revenue growth of 15.48% in Q3 2024.
The InvestingPro tip emphasizes that Snap “operates with a moderate level of debt,” which is especially relevant to the company’s focus on improving cost management and monetization mentioned in the earnings call. This prudent financial management is critical to Snap’s ability to invest in growth initiatives while maintaining financial stability.
Another InvestingPro tip notes that Snap “has not been profitable over the past 12 months,” which is consistent with the $153 million net loss it reported in the third quarter. However, according to an additional InvestingPro tip, analysts are predicting that the company will achieve profitability this year. This optimistic outlook is consistent with Snap’s improved adjusted EBITDA of $132 million and the company’s expectations for fourth-quarter adjusted EBITDA of between $210 million and $260 million.
A price-to-book ratio of 8.81, as reported by InvestingPro, suggests that investors place a high value on Snap’s future growth potential despite its current profitability challenges. This assessment may have been influenced by Snap’s augmented reality innovation efforts and new advertising product development, which were highlighted in the earnings call.
For investors looking for a more comprehensive analysis, InvestingPro offers additional tips and indicators beyond those mentioned here. Actually 10 extra for snaps. InvestingPro tips provide a deeper understanding of a company’s financial health and market position.
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