Snap Inc. (NYSE: SNAP) today announced financial results for the
quarter and full year ended December 31, 2017.
Fourth Quarter and Full Year 2017 Financial Highlights:
Three Months Ended
December 31,
Percent Year Ended
December 31,
Percent 2017 2016 Change
2017 2016 Change (dollars in
thousands) (dollars in thousands) (Unaudited)
(NM =
Not Meaningful) (NM = Not Meaningful) Revenue $ 285,693
$ 165,682 72 % $ 824,949 $ 404,482 104 % Net loss(1)
$ (349,977 ) $ (169,945 ) 106 % $ (3,445,066 ) $ (514,643 ) NM
Adjusted EBITDA(2) $ (158,922 ) $ (152,284 ) 4 % $ (720,056 ) $
(459,243 ) 57 %
Other Financial Highlights Cash, cash
equivalents, and marketable securities $ 2,043,039 $ 987,368 Cash
used in operating activities $ (176,083 ) $ (167,728 ) $ (734,667 )
$ (611,245 ) Free Cash Flow(3) $ (197,295 ) $ (188,104 ) $ (819,185
) $ (677,686 ) Capital expenditures $ (21,212 ) $ (20,376 ) $
(84,518 ) $ (66,441 )
(1)
Net loss for the year ended December 31,
2017 includes $2.6 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 in March
2017.
(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) increased
8.9 million or 5% sequentially to 187 million, representing the
highest net adds since Q3 2016. DAUs increased 28.8 million or 18%
year-over-year.
- Revenue was $285.7 million in Q4 2017,
up 72% year-over-year and 37% sequentially, driven by auction
traction and seasonality. Full year revenue was $824.9 million, up
104% year-over-year.
- Average revenue per user (ARPU)(2) was
$1.53 in Q4 2017, up 46% year-over-year and 31% sequentially. Cost
of revenue per user (CoRPU)(3) was $1.02 in Q4 2017, up 5%
year-over-year and down 14% sequentially.
- Adjusted EBITDA loss was $(158.9)
million in Q4 2017, an increase of 4% year-over-year and an
improvement of 11% sequentially. Full year Adjusted EBITDA was
$(720.1) million and was $(459.2) million in 2016.
- Cash and marketable securities were
$2.0 billion at December 31, 2017. Cash management reduced Q4 2017
cash burn to $255 million, down 49% sequentially. Capital
expenditures remained modest in Q4 2017, given our capital light
business model, at $21.2 million compared to $20.4 million in Q4
2016 and $25.9 million in Q3 2017. Full year capital expenditures
were $84.5 million, less than $0.50 per DAU.
(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 average revenue per user, or
ARPU, as quarterly revenue divided by the average Daily Active
Users.
(3)
We define cost of revenue per user, or
CoRPU, as quarterly cost of 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 “believe,”
“could,” “potential,” “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 and profitability 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 maintain users and manage any future user growth,
litigation, 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, and our quarterly reports on Form
10-Q, which are available on the SEC’s website at www.sec.gov.
Additional information will be made available in Snap Inc.’s annual
report on Form 10-K 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
December 31,
Year Ended
December 31,
2017 2016 2017 2016
Revenue $ 285,693 $ 165,682 $ 824,949 $ 404,482 Costs and expenses:
Cost of revenue 191,246 153,350 717,462 451,660 Research and
development 233,838 64,964 1,534,863 183,676 Sales and marketing
110,458 50,389 522,605 124,371 General and administrative
111,115 66,716 1,535,595 165,160 Total costs
and expenses 646,657 335,419 4,310,525
924,867 Loss from operations (360,964 ) (169,737 ) (3,485,576 )
(520,385 ) Interest income 6,070 1,486 21,096 4,654 Interest
expense (876 ) (776 ) (3,456 ) (1,424 ) Other income (expense), net
2,553 (1,215 ) 4,528 (4,568 ) Loss
before income taxes (353,217 ) (170,242 ) (3,463,408 ) (521,723 )
Income tax benefit (expense) 3,240 297 18,342
7,080 Net loss $ (349,977 ) $ (169,945 ) $ (3,445,066 ) $
(514,643 ) Net loss per share attributable to Class A, Class B, and
Class C common stockholders: Basic $ (0.28 ) $ (0.20 ) $ (2.95 ) $
(0.64 ) Diluted $ (0.28 ) $ (0.20 ) $ (2.95 ) $ (0.64 )
SNAP INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts,
unaudited)
December 31, 2017 2016
Assets Current assets Cash and cash equivalents $ 334,063 $
150,121 Marketable securities 1,708,976 837,247 Accounts
receivable, net of allowance 279,473 162,659 Prepaid expenses and
other current assets 44,282 29,958 Total current
assets 2,366,794 1,179,985 Property and equipment, net 166,762
100,585 Intangible assets, net 166,473 75,982 Goodwill 639,882
319,137 Other assets 81,655 47,103 Total assets $
3,421,566 $ 1,722,792
Liabilities and Stockholders’ Equity
Current liabilities Accounts payable $ 71,194 $ 8,419 Accrued
expenses and other current liabilities 275,062
148,325 Total current liabilities 346,256 156,744 Other liabilities
82,983 47,134 Total liabilities 429,239
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 December 31, 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 December 31, 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 December 31, 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
December 31, 2017 and December 31, 2016, respectively. No shares
and 215,888 shares issued and outstanding at December 31, 2017 and
December 31, 2016, respectively. — 2 Class A non-voting common
stock, $0.00001 par value. 3,000,000 shares authorized, 883,022
shares issued and outstanding at December 31, 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, 122,564 shares issued and
outstanding at December 31, 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, 216,616 shares issued and outstanding at December 31,
2017, and 260,888 shares authorized and no shares issued and
outstanding at December 31, 2016. 2 — Additional paid-in capital
7,634,825 2,728,823 Accumulated other comprehensive income (loss)
14,157 (2,057 ) Accumulated deficit (4,656,667 )
(1,207,862 ) Total stockholders’ equity 2,992,327
1,518,914 Total liabilities and stockholders’ equity $ 3,421,566 $
1,722,792
SNAP INC. CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In thousands, unaudited)
Year Ended December 31,
2017 2016 Cash flows from operating
activities Net loss $ (3,445,066 ) $ (514,643 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 61,288 29,115 Stock-based
compensation 2,639,895 31,842 Deferred income taxes (17,490 )
(7,952 ) Excess inventory reserve and related asset impairment
21,997 — Other (6,356 ) 889 Change in operating assets and
liabilities, net of effect of acquisitions: Accounts receivable,
net of allowance (104,357 ) (118,434 ) Prepaid expenses and other
current assets (39,783 ) (20,521 ) Other assets (4,771 ) (5,064 )
Accounts payable 49,696 6,486 Accrued expenses and other current
liabilities 100,988 (19,728 ) Other liabilities 9,292
6,765 Net cash used in operating activities (734,667 )
(611,245 )
Cash flows from investing activities
Purchases of property and equipment (84,518 ) (66,441 ) Purchases
of intangible assets (8,107 ) (572 ) Non-marketable investments
(10,030 ) (6,513 ) Cash paid for acquisitions, net of cash acquired
(386,011 ) (104,001 ) Issuance of notes receivable from
officers/stockholders — (15,000 ) Repayment of notes receivables
from officers/stockholders — 15,000 Purchases of marketable
securities (3,862,637 ) (1,565,347 ) Sales of marketable securities
511,068 195,898 Maturities of marketable securities 2,483,225
532,690 Change in restricted cash 10,271 (7,048 ) Net
cash used in investing activities (1,346,739 )
(1,021,334 )
Cash flows from financing activities Proceeds
from the exercise of stock options 11,379 731 Stock repurchases
from employees for tax withholdings (394,156 ) — 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 costs (9,672 ) (5,395 )
Net cash provided by financing activities 2,265,348
1,141,890 Change in cash and cash equivalents 183,942 (490,689 )
Cash and cash equivalents, beginning of period 150,121
640,810 Cash and cash equivalents, end of period $ 334,063 $
150,121
Supplemental disclosures Cash paid for income taxes
$ 6,226 $ 1,686
Supplemental disclosures of non-cash
activities Issuance of Class B voting common stock related to
acquisitions $ — $ 96,145 Assumed equity awards in acquisitions $
3,911 $ — Purchase consideration liabilities related to
acquisitions $ 16,486 $ 21,085 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 $ 1,451 $ 1,789 Net
change in accounts payable and accrued expenses and other current
liabilities related to property and equipment additions $ 13,139 $
2,084 Deferred offering costs accrued, unpaid $ — $ 1,739
SNAP INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(In thousands, unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
Adjusted EBITDA reconciliation: Net loss $ (349,977 ) $
(169,945 ) $ (3,445,066 ) $ (514,643 ) Add (deduct): Interest
income (6,070 ) (1,486 ) (21,096 ) (4,654 ) Interest expense 876
776 3,456 1,424 Other (income) expense, net (2,553 ) 1,215 (4,528 )
4,568 Income tax (benefit) expense (3,240 ) (297 ) (18,342 ) (7,080
) Depreciation and amortization(1) 18,786 10,633 61,288 29,115
Stock-based compensation expense(2) 181,044 6,767 2,639,895 31,842
Payroll tax expense related to stock-based compensation 2,212 53
24,470 185 Spectacles inventory-related charges(3) —
— 39,867 — Adjusted EBITDA $ (158,922 ) $ (152,284 )
$ (720,056 ) $ (459,243 )
(1) Total depreciation and amortization expense by function:
Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017
2016 Depreciation and amortization expense: Cost of revenue
$ 5,179 $ 1,258 $ 15,222 $ 2,206 Research and development 6,937
5,357 25,076 17,755 Sales and marketing 3,441 2,395 10,450 3,175
General and administrative 3,229 1,623 10,540
5,979 Total $ 18,786 $ 10,633 $ 61,288 $ 29,115
(2) Total stock-based compensation and related payroll tax
expense by function:
Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017
2016 Stock-based compensation and related payroll tax
expense: Cost of revenue $ 2,230 $ 122 $ 26,518 $ 532 Research and
development 131,331 4,502 1,163,839 21,993 Sales and marketing
29,359 1,377 238,827 3,967 General and administrative 20,336
819 1,235,181 5,535 Total $ 183,256 $ 6,820 $
2,664,365 $ 32,027
(3) Spectacles inventory-related charges were primarily related
to excess inventory reserves and inventory purchase commitment
cancellation charges in the third quarter of 2017. 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
December 31,
Year Ended
December 31,
2017 2016 2017 2016 Free Cash
Flow reconciliation: Net cash used in operating activities $
(176,083 ) $ (167,728 ) $ (734,667 ) $ (611,245 ) Less: Purchases
of property and equipment (21,212 ) (20,376 )
(84,518 ) (66,441 ) Free Cash Flow $ (197,295 ) $ (188,104 )
$ (819,185 ) $ (677,686 )
Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016 Non-GAAP Net
Loss reconciliation: Net loss $ (349,977 ) $ (169,945 ) $
(3,445,066 ) $ (514,643 ) Amortization of intangible assets 10,607
4,849 31,454 16,228 Stock-based compensation expense 181,044 6,767
2,639,895 31,842 Payroll tax expense related to stock-based
compensation 2,212 53 24,470 185 Spectacles inventory-related
charges — — 39,867 — Income tax adjustments 60 —
(2,253 ) — Non-GAAP net loss $ (156,054 ) $ (158,276
) $ (711,633 ) $ (466,388 ) Weighted-average common shares -
Diluted 1,247,017 835,299 1,166,085 807,871
Non-GAAP
Diluted Net Loss Per Share reconciliation: Diluted net loss per
share $ (0.28 ) $ (0.20 ) $ (2.95 ) $ (0.64 ) Non-GAAP adjustment
to net loss 0.15 0.01 2.34 0.06
Non-GAAP diluted net loss per share $ (0.13 ) $ (0.19 ) $ (0.61 ) $
(0.58 )
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