Snap's stock jumps 17% after its Q4 beats Wall Street's expectations

Stephanie Keith/Getty ImagesSnap CEO Evan Spiegel.
  • Snap on Tuesday reported fourth-quarter results that beat analysts’ revenue and bottom-line expectations.
  • But it said its first-quarter revenue could be lighter than Wall Street predicted.
  • Investors still cheered the results, sending its stock up nearly 18% in after-hours trading.
  • The company said its daily active-user count stabilised in the period after two quarters of decline.

Snap’s holiday quarter beat Wall Street’s forecasts, a rare bit of good news for the struggling company.

The company topped analysts’ revenue and bottom-line expectations. Better yet, it announced that its number of daily active users, which had fallen in the two previous quarters, stayed steady during the period.

The company said its first-quarter sales may be below Wall Street’s forecasts, but investors cheered the report anyway. In recent after-hours trading, Snap’s stock was up $US1.26, or 17.9%, to $US8.30 a share.

“Although 2018 was challenging in many ways, we are proud of the significant changes we have made to strengthen our company and grow our business over the long-term,” company CEO Evan Spiegel said in prepared remarks Snap released before its conference call with investors and analysts. “We are excited for the year ahead, and we are confident that we are well positioned as we enter the new year,” he added.

Here’s what Snap reported and how it compared with Wall Street’s expectations and the company’s results a year ago:

  • Fourth-quarter (Q4) revenue: $US389.8 million. Analysts were looking for $US377.48 million. In the fourth quarter of 2017, Snap posted sales of $US285.69 million.
  • Q4 earnings per share (EPS): A loss of $US0.14. Wall Street was expecting a loss of $US0.19 a share. In the same period a year earlier, the company lost $US0.28 a share.
  • First-quarter (Q1) revenue (guidance): Between $US285 million and $US310 million. Analysts predicted $US306.28 million. In the first quarter last year, Snap saw sales of $US230.67 million.
  • Q1 EPS: The company didn’t offer a per-share earnings forecast, but said it expected to post an adjusted loss before interest, taxes, depreciation, and amortization (adjusted EBITDA) of between $US140 million and $US165 million. Analysts were expecting adjusted EBITDA loss of $US166.57 million in the period and a net loss of $US0.24 a share. In the same period a year ago, the company lost $US0.30 a share.

In the quarter, the company’s Snapchat app had 186 million daily active users. That was down from the 187 million it had in the fourth quarter of 2017. But the number was the same as it had in the third quarter of last year, marking the first time in three quarters that Snap’s daily user count hadn’t fallen.

Snap is rolling out an updated Android app

The number of daily Snapchat users on iPhones actually rose in the period from both the third quarter and the fourth quarter of 2017, the company said, although it didn’t break out those numbers. Snap has had particular trouble with its Android app, which apparently wiped out the user gains from its iPhone one.

The company has been testing a rebuilt version of its Android app, Spiegel said in his prepared remarks. Snap already released the updated app to a “small percentage” of its users, he said.

“We look forward to providing an improved Android experience to more devices and regions over time,” Spiegel said.

Snap saw another big outflow of cash in the fourth quarter. Its free cash flow, which is the cash generated or used up in operations after the amount spent on capital expenditures, was in the red by $US149 million. That was an improvement from the third quarter, when it burned through $US159 million in free cash, but it meant that the company saw a free cash outflow of $US810 million last year, down only slightly from the $US819 million in burned through last year.

The company ended the year with $US1.3 billion in cash and marketable securities, down from more than $US2 billion a year earlier.

Snap has had trouble almost since its debut on the public markets. Before its report, its stock was down nearly 50% over the previous year and had fallen even further from its initial public offering price two years ago. It has lost numerous executives, most recently Tim Stone, the company’s former chief financial officer, who is set to depart after Tuesday’s report.

The company’s stock closed regular trading Tuesday up $US0.09, or 1.3%, to $US7.02 a share.

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