Snap Inc. (NYSE: SNAP) today announced financial results for the
quarter ended June 30, 2017.
Second Quarter 2017 Financial Highlights:
Three Months Ended
June 30,
Percent Six Months Ended
June 30,
Percent 2017 2016 Change
2017 2016 Change (dollars in
thousands) (dollars in thousands) (Unaudited)
(NM =
Not Meaningful) (NM = Not Meaningful) Revenue $ 181,671
$ 71,798 153 % $ 331,319 $ 110,596 200 % Net loss(1)
$ (443,093 ) $ (115,894 ) NM $ (2,651,930 ) $ (220,470 ) NM
Adjusted EBITDA(2) $ (193,990 ) $ (105,121 ) 85 % $ (382,233 ) $
(198,355 ) 93 %
Other Financial Highlights Cash, cash
equivalents, and marketable securities $ 2,797,596 Cash used in
operating activities $ (209,574 ) $ (134,110 ) $ (364,571 ) $
(226,651 ) Free Cash Flow(3) $ (228,939 ) $ (150,531 ) $ (401,929 )
$ (255,524 ) Capital expenditures $ (19,365 ) $ (16,421 ) $ (37,358
) $ (28,873 )
(1)
Net loss for the six months ended June 30,
2017 includes $2.2 billion of stock-based compensation expense,
primarily due to the recognition of expense related to RSUs with a
performance condition satisfied on the effectiveness of the
registration statement for our initial public offering.
(2)
Adjusted EBITDA is defined as net income
(loss), excluding interest income; interest expense; other income
(expense) net; income tax benefit (expense); depreciation and
amortization; and stock-based compensation expense and related
payroll tax expense.
(3)
Free Cash Flow is defined as net cash used
in operating activities, reduced by purchases of property and
equipment.
Note: For adjustments and additional information regarding the
non-GAAP financial measures discussed, please see “Non-GAAP
Financial Measures” and “Reconciliation of GAAP to Non-GAAP
Financial Measures” below.
Operational Highlights
- Daily active users (DAU)(1) – DAUs grew
from 143 million in Q2 2016 to 173 million in Q2 2017, an increase
of 30.5 million or 21% year-over-year. DAUs increased 7.3 million
or 4% quarter-over-quarter, from 166 million in Q1 2017.
- Average revenue per user (ARPU)(2) –
ARPU was $1.05 in Q2 2017, an increase of 109% over Q2 2016 when
ARPU was $0.50. ARPU increased 16% over Q1 2017 when ARPU was
$0.90.
- Hosting costs per DAU – Hosting costs
per DAU were $0.61 in Q2 2017, as compared to $0.55 in Q2 2016 and
$0.60 in Q1 2017.
- Capital expenditures – Capital
expenditures were $19.4 million in Q2 2017, as compared to $16.4
million in Q2 2016 and $18.0 million in Q1 2017.
(1)
We define a Daily Active User, or DAU, as
a registered Snapchat user who opens the Snapchat application at
least once during a defined 24-hour period. We measure average
Daily Active Users for a particular quarter by calculating the
average Daily Active Users for that quarter.
(2)
We define ARPU as quarterly revenue
divided by the average Daily Active Users.
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.
Forward-Looking Statements
This press release contains “forward-looking” statements that
are based on our management’s beliefs and assumptions and on
information currently available to management. Forward-looking
statements include statements about expected financial metrics,
such as revenue, non-GAAP Adjusted EBITDA, capital expenditures,
and stock-based compensation, as well as non-financial metrics,
such as DAU and video views. They also include statements about our
possible or assumed business strategies, potential growth
opportunities, new products, and potential market
opportunities.
Forward-looking statements include all statements that are not
historical facts and can be identified by terms such as “believes,”
“continue,” “could,” “potential,” “remain,” “will,” “would” or
similar expressions and the negatives of those terms.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. These risks include, but are not
limited to, risks and uncertainties related to: our limited
operating history, our lack of significant revenue to date, our
ability to monetize our products, the highly competitive and
rapidly changing market for internet and advertising companies,
infrastructure costs, our ability to create new and innovative
products, our ability to manage any future user growth, and our
international expansion strategies. Additional risks and
uncertainties that could affect our financial results are included
in the section titled “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in
the final prospectus for our initial public offering, dated March
1, 2017, which is available on the SEC’s website at www.sec.gov.
Additional information will be made available in Snap Inc.’s
quarterly report on Form 10-Q 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. Except as
required by law, we assume no obligation to update these
forward-looking statements, or to update the reasons if actual
results differ materially from those anticipated in the
forward-looking statements.
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 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; and stock-based
compensation expense and related payroll tax expense. 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 Free Cash Flow, which
is defined as net cash 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 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; 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” below.
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.
SNAP INC. CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share amounts,
unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016
Revenue $ 181,671 $ 71,798 $ 331,319 $ 110,596 Costs and expenses:
Cost of revenue 152,148 94,757 315,506 170,530 Research and
development 255,735 36,052 1,061,583 64,150 Sales and marketing
90,903 24,587 310,636 39,324 General and administrative
131,903 32,261 1,306,379 56,272 Total costs
and expenses 630,689 187,657 2,994,104
330,276 Loss from operations (449,018 ) (115,859 ) (2,662,785 )
(219,680 ) Interest income 6,349 871 8,773 1,230 Interest expense
(998 ) — (1,693 ) — Other income (expense), net 786
(939 ) 973 (1,932 ) Loss before income taxes (442,881
) (115,927 ) (2,654,732 ) (220,382 ) Income tax benefit (expense)
(212 ) 33 2,802 (88 ) Net loss $
(443,093 ) $ (115,894 ) $ (2,651,930 ) $ (220,470 ) Net loss per
share attributable to Class A, Class B, and Class C common
stockholders: Basic $ (0.36 ) $ (0.14 ) $ (2.43 ) $ (0.28 ) Diluted
$ (0.36 ) $ (0.14 ) $ (2.43 ) $ (0.28 )
SNAP
INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except per share
amounts)
June 30,2017
December 31,2016
(Unaudited) Assets Current assets Cash and cash
equivalents $ 501,677 $ 150,121 Marketable securities 2,295,919
837,247 Accounts receivable, net of allowance 171,525 162,659
Prepaid expenses and other current assets 77,777
29,958 Total current assets 3,046,898 1,179,985 Property and
equipment, net 128,031 100,585 Intangible assets, net 136,005
75,982 Goodwill 502,825 319,137 Other assets 61,715
47,103 Total assets $ 3,875,474 $ 1,722,792
Liabilities and
Stockholders’ Equity Current liabilities Accounts payable $
17,770 $ 8,419 Accrued expenses and other current liabilities
240,539 148,325 Total current liabilities 258,309
156,744 Other liabilities 76,258 47,134 Total
liabilities 334,567 203,878 Commitments and
contingencies Stockholders’ equity Convertible voting preferred
stock, Series A, A-1, and B, $0.00001 par value. No shares and
146,962 shares authorized, issued, and outstanding at June 30, 2017
and December 31, 2016, respectively. Liquidation preference of
$95,175 at December 31, 2016. — 1 Convertible non-voting preferred
stock, Series C, $0.00001 par value. No shares and 16,000 shares
authorized, issued, and outstanding at June 30, 2017 and December
31, 2016, respectively. Liquidation preference of $54,543 at
December 31, 2016. — — Convertible non-voting preferred stock,
Series D, E, and F, $0.00001 par value. No shares and 83,851 shares
authorized, issued, and outstanding at June 30, 2017 and December
31, 2016, respectively. — 2 Series FP convertible voting preferred
stock, $0.00001 par value. No shares and 260,888 shares authorized
at June 30, 2017 and December 31, 2016, respectively. No shares and
215,888 shares issued and outstanding at June 30, 2017 and December
31, 2016, respectively. — 2 Class A non-voting common stock,
$0.00001 par value. 3,000,000 shares authorized, 682,588 shares
issued and outstanding at June 30, 2017, and 1,500,000 shares
authorized, 504,902 shares issued and outstanding at December 31,
2016. 7 5 Class B voting common stock, $0.00001 par value. 700,000
shares authorized, 281,526 shares issued and outstanding at June
30, 2017, and 1,500,000 shares authorized, 31,469 shares issued and
outstanding at December 31, 2016. 3 — Class C voting common stock,
$0.00001 par value. 260,888 shares authorized, 215,888 shares
issued and outstanding at June 30, 2017, and 260,888 shares
authorized and no shares issued and outstanding at December 31,
2016. 2 — Additional paid-in capital 7,400,842 2,728,823
Accumulated other comprehensive income (loss) 3,590 (2,057 )
Accumulated deficit (3,863,537 ) (1,207,862 ) Total
stockholders’ equity 3,540,907 1,518,914 Total
liabilities and stockholders’ equity $ 3,875,474 $ 1,722,792
SNAP INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands, unaudited)
Six Months Ended June 30, 2017
2016 Cash flows from operating activities Net loss $
(2,651,930 ) $ (220,470 ) Adjustments to reconcile net loss to net
cash used in operating activities: Depreciation and amortization
25,035 11,045 Stock-based compensation 2,237,149 10,280 Deferred
income taxes (1,765 ) (204 ) Other (1,672 ) 2,018 Change in
operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net of allowance (8,209 ) (24,042 ) Prepaid
expenses and other current assets (47,835 ) (8,236 ) Other assets
(10,108 ) (1,543 ) Accounts payable 9,317 (240 ) Accrued expenses
and other current liabilities 82,190 3,369 Other liabilities
3,257 1,372 Net cash used in operating activities
(364,571 ) (226,651 )
Cash flows from investing
activities Purchases of property and equipment (37,358 )
(28,873 ) Purchases of intangible assets (7,720 ) (562 )
Non-marketable investments (7,530 ) (4,070 ) Cash paid for
acquisitions, net of cash acquired (224,176 ) (50,936 ) Issuance of
notes receivable from officers/stockholders — (15,000 ) Purchases
of marketable securities (2,742,370 ) (967,402 ) Sales of
marketable securities 237,095 79,075 Maturities of marketable
securities 1,047,479 9,500 Change in restricted cash 9,899
(5,068 ) Net cash used in investing activities
(1,724,681 ) (983,336 )
Cash flows from financing
activities Proceeds from the exercise of stock options 783 —
Stock repurchases from employees for tax withholdings (208,407 ) —
Proceeds from issuance of Class A common stock in initial public
offering, net of underwriting commissions 2,657,797 — Proceeds from
issuances of preferred stock, net of issuance costs — 1,157,147
Payments of initial public offering issuance costs (9,365 )
— Net cash provided by financing activities 2,440,808
1,157,147 Change in cash and cash equivalents 351,556
(52,840 ) Cash and cash equivalents, beginning of period
150,121 640,810 Cash and cash equivalents, end of period $
501,677 $ 587,970
Supplemental disclosures Cash paid for
income taxes $ 5,490 $ 4
Supplemental disclosures of non-cash
activities Issuance of Class B common stock related to
acquisitions $ — $ 13,097 Purchase consideration liabilities
related to acquisitions $ 11,242 $ 6,000 Construction in progress
related to financing lease obligations $ 683 $ 761 Net change in
accounts payable and accrued expenses and other current liabilities
related to property and equipment additions $ (3,743 ) $ (404 )
SNAP INC. RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In thousands, unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016
Adjusted EBITDA reconciliation: Net loss $ (443,093 ) $
(115,894 ) $ (2,651,930 ) $ (220,470 ) Add (deduct): Interest
income (6,349 ) (871 ) (8,773 ) (1,230 ) Interest expense 998 —
1,693 — Other (income) expense, net (786 ) 939 (973 ) 1,932 Income
tax (benefit) expense 212 (33 ) (2,802 ) 88 Depreciation and
amortization(1) 12,585 5,996 25,035 11,045 Stock-based compensation
expense(2) 245,028 4,742 2,237,149 10,280 Payroll tax expense
related to stock-based compensation (2,585 ) —
18,368 — Adjusted EBITDA $ (193,990 ) $ (105,121 ) $
(382,233 ) $ (198,355 )
(1) Total depreciation and amortization
expense by function:
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016 Depreciation
and amortization expense: Cost of revenue $ 2,970 $ 99 $ 4,639 $
169 Research and development 5,983 4,164 11,738 7,776 Sales and
marketing 1,589 236 4,189 386 General and administrative
2,043 1,497 4,469 2,714 Total $ 12,585
$ 5,996 $ 25,035 $ 11,045
(2) Total stock-based compensation and
related payroll tax expense by function:
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016 Stock-based
compensation and related payroll tax expense: Cost of revenue $
2,223 $ 128 $ 22,249 $ 282 Research and development 163,848 2,700
885,977 5,348 Sales and marketing 20,558 553 181,500 1,327 General
and administrative 55,814 1,361 1,165,791
3,323 Total $ 242,443 $ 4,742 $ 2,255,517 $ 10,280
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016 Free Cash Flow
reconciliation: Net cash used in operating activities $
(209,574 ) $ (134,110 ) $ (364,571 ) $ (226,651 ) Less: Purchases
of property and equipment (19,365 ) (16,421 )
(37,358 ) (28,873 ) Free Cash Flow $ (228,939 ) $ (150,531 )
$ (401,929 ) $ (255,524 )
SNAP INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(continued)
(In thousands, except per share amounts,
unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016
Non-GAAP Net Loss reconciliation: Net loss $ (443,093 ) $
(115,894 ) $ (2,651,930 ) $ (220,470 ) Amortization of intangible
assets 5,767 3,730 11,204 6,912 Stock-based compensation expense
245,028 4,742 2,237,149 10,280 Payroll tax expense related to
stock-based compensation (2,585 ) — 18,368 — Income tax adjustments
(623 ) — (2,190 ) — Non-GAAP net loss $
(195,506 ) (107,422 ) (387,399 ) (203,278 )
Weighted-average common shares - Diluted 1,223,443 806,379
1,090,751 781,604
Non-GAAP Diluted Net Loss Per Share
reconciliation: Diluted net loss per share $ (0.36 ) $ (0.14 )
$ (2.43 ) $ (0.28 ) Non-GAAP adjustment to net loss 0.20
0.01 2.07 0.02 Non-GAAP diluted net loss per
share $ (0.16 ) $ (0.13 ) $ (0.36 ) $ (0.26 )
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