Snap Inc. SNAPreported loss per share of 17 cents, in line with the Zacks Consensus Estimate and narrower than the year-ago quarter’s loss of 20 cents.
The company reported revenues of $230.7 million, which grew 54.1% year over year but missed the consensus mark of $246.1 million.
Though revenues increased, the growth rate has come down significantly when compared with the past quarters.
Management expects growth to decelerate further in the second quarter owing to the pricing of both Snap Ads and Creative Tools. Moreover, increase in infrastructure costs due to tests and rollout of app updates will remain an overhang.
Quarter in Detail
Ad revenues of $281 million in the quarter grew 62% year over year but declined 19% sequentially. Revenues from other sources contributed the rest.
Strength in Snap Ad backed year-over-year improvement while the company’s Sponsored Creative Tools business was down. Snap Ad impressions, excluding Story Ads, grew 450% year over year while Snap's price per ad impression dropped 65% in the quarter. Of the total Snap Ads, 95% were bought programmatically during the quarter.
Moreover, Lens and Filter products were hurt by “negative market narrative.” Snap’s transition to a “programmatic, audience-based buy model” had a negative impact on average order value (AOV) for the products. Although the number of Lenses sold increased 16% year over year, its AOV declined 37%.
Snap’s international revenues (26% of total revenue) increased 14% year over year and 23% sequentially.
The company’s daily active users (DAU) and average revenue per user (ARPU) witnessed year-over-year improvement. DAU increased 15% year over year to 191 million, while ARPU improved 34% to $1.21.
Notably, on a sequential basis, DAU increased 2%. Weak performance in the Android market is a big headwind. The company expects to launch a redesigned Android application in the third quarter, by taking all technical glitches into consideration, in order to boost its popularity among Android users.
Snap’s costs per user (CoRPU) increased 5% year over year to $1.03. The company’s main cost, hosting costs per DAU, was 73 cents, 3 cents higher than the previous quarter.
Snap’s cost of revenues increased 20.4% to $196.8 million on a year-over-year basis driven by higher cost for Olympic content, redesign related infrastructural cost and hosting cost.
Per the company, operating expense (excluding exclude cost of revenue, stock-based compensation, and move to Santa Monica) declined 1% sequentially to $257 million.