Snap Inc. (NYSE: SNAP) today announced financial results for the
quarter ended September 30, 2017.
Third Quarter 2017 Financial Highlights:
Three Months Ended Nine
Months Ended September 30, Percent September
30, Percent 2017 2016 Change
2017 2016 Change (dollars in
thousands) (dollars in thousands) (Unaudited)
(NM =
Not Meaningful) (NM = Not Meaningful) Revenue $
207,937 $ 128,204 62 % $ 539,256 $ 238,800 126 % Net loss(1) $
(443,159 ) $ (124,228 ) NM $ (3,095,089 ) $ (344,698 ) NM Adjusted
EBITDA(2) $ (178,901 ) $ (108,604 ) 65 % $ (561,134 ) $ (306,959 )
83 %
Other Financial Highlights Cash, cash
equivalents, and marketable securities $ 2,298,068 Cash used in
operating activities $ (194,013 ) $ (216,866 ) $ (558,584 ) $
(443,517 ) Free Cash Flow(3) $ (219,961 ) $ (234,058 ) $ (621,890 )
$ (489,582 ) Capital expenditures $ (25,948 ) $ (17,192 ) $ (63,306
) $ (46,065 ) (1) Net loss for the nine months ended
September 30, 2017 includes $2.5 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;
stock-based compensation expense and related payroll tax expense;
and certain other non-cash or non-recurring items impacting net
income (loss) from time to time, as described below. (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 153 million in Q3 2016 to 178 million in Q3 2017, an increase
of 25.2 million or 17% year-over-year. DAUs increased 4.5 million
or 3% quarter-over-quarter, from 173 million in Q2 2017.
- Average revenue per user (ARPU)(2) –
ARPU was $1.17 in Q3 2017, an increase of 39% over Q3 2016 when
ARPU was $0.84. ARPU increased 12% over Q2 2017 when ARPU was
$1.05.
- Hosting costs per DAU – Hosting costs
per DAU were $0.68 in Q3 2017, as compared to $0.64 in Q3 2016 and
$0.61 in Q2 2017.
- Capital expenditures – Capital
expenditures were $25.9 million in Q3 2017, as compared to $17.2
million in Q3 2016 and $19.4 million in Q2 2017.
- Excess inventory and related charges –
In Q3 2017, we recorded $39.9 million of charges related to
Spectacles inventory, primarily related to excess inventory
reserves and inventory purchase commitment cancellation
charges.
(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; stock-based compensation
expense and related payroll tax expense; and certain other non-cash
or non-recurring items impacting net income (loss) from time to
time, as described below. 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; certain other non-cash or non-recurring items
impacting net income (loss) from time to time; 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 Nine Months
Ended September 30, September 30, 2017
2016 2017 2016 Revenue $ 207,937
$ 128,204 $ 539,256 $ 238,800 Costs and expenses: Cost of revenue
210,710 127,780 526,216 298,310 Research and development 239,442
54,562 1,301,025 118,712 Sales and marketing 101,511 34,658 412,147
73,982 General and administrative 118,101
42,172 1,424,480 98,444 Total
costs and expenses 669,764 259,172
3,663,868 589,448 Loss from operations
(461,827 ) (130,968 ) (3,124,612 ) (350,648 ) Interest income 6,253
1,938 15,026 3,168 Interest expense (887 ) (648 ) (2,580 ) (648 )
Other income (expense), net 1,002 (1,421 )
1,975 (3,353 ) Loss before income taxes
(455,459 ) (131,099 ) (3,110,191 ) (351,481 ) Income tax benefit
(expense) 12,300 6,871 15,102
6,783 Net loss $ (443,159 ) $ (124,228 ) $
(3,095,089 ) $ (344,698 ) Net loss per share attributable to Class
A, Class B, and Class C common stockholders: Basic $ (0.36 ) $
(0.15 ) $ (2.71 ) $ (0.43 ) Diluted $ (0.36 ) $ (0.15 ) $ (2.71 ) $
(0.43 )
SNAP INC. CONSOLIDATED BALANCE
SHEETS
(In thousands, except per share
amounts)
September 30, December 31,
2017 2016 (Unaudited) Assets Current
assets Cash and cash equivalents $ 317,554 $ 150,121 Marketable
securities 1,980,514 837,247 Accounts receivable, net of allowance
194,971 162,659 Prepaid expenses and other current assets
54,692 29,958 Total current assets 2,547,731
1,179,985 Property and equipment, net 143,112 100,585 Intangible
assets, net 164,612 75,982 Goodwill 612,823 319,137 Other assets
74,102 47,103 Total assets $ 3,542,380
$ 1,722,792
Liabilities and Stockholders’
Equity Current liabilities Accounts payable $ 15,207 $ 8,419
Accrued expenses and other current liabilities 280,957
148,325 Total current liabilities 296,164
156,744 Other liabilities 70,946 47,134
Total liabilities 367,110 203,878
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
September 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 September
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
September 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 September 30, 2017 and
December 31, 2016, respectively. No shares and 215,888 shares
issued and outstanding at September 30, 2017 and December 31, 2016,
respectively. — 2 Class A non-voting common stock, $0.00001 par
value. 3,000,000 shares authorized, 858,546 shares issued and
outstanding at September 30, 2017, and 1,500,000 shares authorized,
504,902 shares issued and outstanding at December 31, 2016. 9 5
Class B voting common stock, $0.00001 par value. 700,000 shares
authorized, 127,302 shares issued and outstanding at September 30,
2017, and 1,500,000 shares authorized, 31,469 shares issued and
outstanding at December 31, 2016. 1 — Class C voting common stock,
$0.00001 par value. 260,888 shares authorized, 215,888 shares
issued and outstanding at September 30, 2017, and 260,888 shares
authorized and no shares issued and outstanding at December 31,
2016. 2 — Additional paid-in capital 7,470,272 2,728,823
Accumulated other comprehensive income (loss) 11,682 (2,057 )
Accumulated deficit
(4,306,696
)
(1,207,862 ) Total stockholders’ equity 3,175,270
1,518,914 Total liabilities and stockholders’
equity $ 3,542,380 $ 1,722,792
SNAP
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended September 30,
2017 2016 Cash flows from operating
activities Net loss $ (3,095,089 ) $ (344,698 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 42,502 18,482 Stock-based
compensation 2,458,851 25,075 Deferred income taxes (14,397 )
(7,231 ) Excess inventory reserve and related asset impairment
21,997 — Other (3,714 ) (360 ) Change in operating assets and
liabilities, net of effect of acquisitions: Accounts receivable,
net of allowance (24,513 ) (78,488 ) Prepaid expenses and other
current assets (48,965 ) (14,926 ) Other assets (8,545 ) 450
Accounts payable 4,103 1,656 Accrued expenses and other current
liabilities 103,449 (45,475 ) Other liabilities 5,737
1,998 Net cash used in operating activities
(558,584 ) (443,517 )
Cash flows from investing
activities Purchases of property and equipment (63,306 )
(46,065 ) Purchases of intangible assets (8,025 ) (572 )
Non-marketable investments (7,530 ) (5,703 ) Cash paid for
acquisitions, net of cash acquired (352,407 ) (68,096 ) Issuance of
notes receivable from officers/stockholders — (15,000 ) Repayment
of notes receivables from officers/stockholders — 15,000 Purchases
of marketable securities (3,412,776 ) (1,358,295 ) Sales of
marketable securities 441,089 164,003 Maturities of marketable
securities 1,831,327 180,805 Change in restricted cash 9,899
(7,048 ) Net cash used in investing activities
(1,561,729 ) (1,140,971 )
Cash flows from financing
activities Proceeds from the exercise of stock options 6,855
576 Stock repurchases from employees for tax withholdings (367,234
) — Proceeds from issuance of Class A common stock in initial
public offering, net of underwriting commissions 2,657,797 —
Repurchase of Class B voting common stock and Series FP voting
preferred stock — (10,593 ) Proceeds from issuances of preferred
stock, net of issuance costs — 1,157,147 Borrowings from revolving
credit facility — 5,000 Principal payments on revolving credit
facility — (5,000 ) Payments of initial public offering issuance
costs (9,672 ) — Net cash provided by
financing activities 2,287,746 1,147,130
Change in cash and cash equivalents 167,433 (437,358 ) Cash
and cash equivalents, beginning of period 150,121
640,810 Cash and cash equivalents, end of period $
317,554 $ 203,452
Supplemental disclosures
Cash paid for income taxes $ 5,437 $ 4
Supplemental disclosures
of non-cash activities Issuance of Class B common stock related
to acquisitions $ — $ 96,145 Assumed equity awards in acquisitions
$ 3,911 $ — Purchase consideration liabilities related to
acquisitions $ 11,772 $ 17,042 Repurchase of Class B voting common
stock and Series FP voting preferred stock in exchange for notes
receivable from officers/stockholders $ — $ 13,500 Construction in
progress related to financing lease obligations $ 1,107 $ 1,024 Net
change in accounts payable and accrued expenses and other current
liabilities related to property and equipment additions $ (4,155 )
$ 2,395
SNAP INC. RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(In thousands, unaudited)
Three Months Ended Nine Months
Ended September 30, September 30, 2017
2016 2017 2016 Adjusted
EBITDA reconciliation: Net loss $ (443,159 ) $ (124,228 ) $
(3,095,089 ) $ (344,698 ) Add (deduct): Interest income (6,253 )
(1,938 ) (15,026 ) (3,168 ) Interest expense 887 648 2,580 648
Other (income) expense, net (1,002 ) 1,421 (1,975 ) 3,353 Income
tax (benefit) expense (12,300 ) (6,871 ) (15,102 ) (6,783 )
Depreciation and amortization(1) 17,467 7,437 42,502 18,482
Stock-based compensation expense(2) 221,702 14,795 2,458,851 25,075
Payroll tax expense related to stock-based compensation 3,890 132
22,258 132 Spectacles inventory-related charges(3) 39,867
— 39,867 —
Adjusted EBITDA $ (178,901 ) $ (108,604 ) $ (561,134 ) $ (306,959 )
(1) Total depreciation and amortization expense by function:
Three Months Ended Nine Months Ended
September 30, September 30, 2017
2016 2017 2016 Depreciation and
amortization expense: Cost of revenue $ 5,404 $ 778 $ 10,043 $ 947
Research and development 6,401 4,623 18,139 12,398 Sales and
marketing 2,820 394 7,009 780 General and administrative
2,842 1,642 7,311 4,357 Total $ 17,467 $ 7,437
$ 42,502 $ 18,482
(2) Total stock-based compensation and related payroll tax
expense by function:
Three Months Ended Nine Months
Ended September 30, September 30, 2017
2016 2017 2016 Stock-based
compensation and related payroll tax expense: Cost of revenue $
2,039 $ 128 $ 24,288 $ 410 Research and development 146,531 12,143
1,032,508 17,491 Sales and marketing 27,968 1,262 209,468 2,590
General and administrative 49,054 1,394
1,214,845 4,716 Total $ 225,592 $ 14,927 $ 2,481,109 $
25,207
(3) Spectacles inventory-related charges were primarily related
to excess inventory reserves and inventory purchase commitment
cancellation charges. These charges are non-recurring and not
reflective of underlying trends in our business.
SNAP INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (continued)
(In thousands, except per share amounts,
unaudited)
Three Months Ended Nine Months
Ended September 30, September 30, 2017
2016 2017 2016 Free Cash Flow
reconciliation: Net cash used in operating activities $
(194,013 ) $ (216,866 ) $ (558,584 ) $ (443,517 ) Less: Purchases
of property and equipment (25,948 ) (17,192 )
(63,306 ) (46,065 ) Free Cash Flow $ (219,961 ) $ (234,058 )
$ (621,890 ) $ (489,582 )
Three Months
Ended Nine Months Ended September 30,
September 30, 2017 2016 2017
2016 Non-GAAP Net Loss reconciliation: Net
loss $ (443,159 ) $ (124,228 ) $ (3,095,089 ) $ (344,698 )
Amortization of intangible assets 9,743 4,467 20,947 11,379
Stock-based compensation expense 221,702 14,795 2,458,851 25,075
Payroll tax expense related to stock-based compensation 3,890 132
22,258 132 Spectacles inventory-related charges 39,867 — 39,867 —
Income tax adjustments (123 ) — (2,313
) — Non-GAAP net loss $ (168,080 ) (104,834 )
(555,479 ) (308,112 ) Weighted-average common
shares - Diluted 1,232,993 832,401 1,140,004 798,660
Non-GAAP Diluted Net Loss Per Share reconciliation: Diluted
net loss per share $ (0.36 ) $ (0.15 ) $ (2.71 ) $ (0.43 ) Non-GAAP
adjustment to net loss 0.22 0.02
2.22 0.04 Non-GAAP diluted net loss per share
$ (0.14 ) $ (0.13 ) $ (0.49 ) $ (0.39 )
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