Categories AlphaGraphs, Earnings, Technology

Redesign woes hurt Snap’s first quarter revenues

Snap’s first quarter results fail to impress investors. Revenue improved 54% to $230.6 million compared to last year, but missed analysts’ estimates by a huge margin. As a result, shares plunged 17% in the extended hours of trading. However, the company posted a loss of $0.17 per share on an adjusted basis, in line with Street estimates.

The silver lining in the quarter was ad revenues. Advertising revenues rose 62% touching $229 million. CFO Drew Vollero also cautioned investors that second quarter sales growth rate would be down considerably over the first quarter.

The number of users who are using the app on a daily basis reached 191 million, up 15% year-over-year. It’s important to note that the social media company saw a modest 2% sequential growth in the number of users, which clearly shows that the app redesign hasn’t gone down well with its users and also failed to add new users. However, Evan Spiegel commented that average time spent by users stood over 30 minutes per day, which hasn’t changed much, post the app redesign. He also added that the new design has improved the retention rates for old users.

Snapchat parent Snap Inc Q1 2018 Earnings Infographic
Snap Inc Q1 2018 Earnings Infograph

Snap’s average revenue per user (ARPU) increased 34% to $1.21, but dipped 21% compared to the preceding quarter. The sequential decrease was mainly due to redesign issues and seasonality, which hurt new user adoption.

Costs continue to increase for Snap. Cost of revenue per user (CoRPU) came in at $1.03, up 5% over the prior year period. Capital expenditures doubled to $36.3 million year-over-year mainly due to the planned relocation of all employees to Santa Monica.

Spiegel also added that a lot of design optimization work is needed for the Android app. He admitted that Android platform still isn’t performing up to the mark as the users are facing a lot of issues, especially post the redesign. Snap is hopeful of fixing all the issues and expected to provide an updated version by the third quarter. The company, which went public in March 2017, expects to grow in the low-double digits in the first half of this year, excluding one-time expenses.

The camera company is also focusing on beefing up its advertising tools. It’s focusing on bringing in more features to its publishing platform, offering customized tools to SMBs and big advertisers and analytics tools to gauge the effectiveness of the ads.

Snap’s shares have plunged nearly 48% since IPO and have decreased 4% this year. It’s worth noting that Snap plummeted 20% after announcing its quarterly results for the first time in May 2017.

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