SNAP financial report: In Q3 2022, SNAP's revenue was US$1.13 billion, with a year-on-year growth rate of only 5.7%

Recently, the American social media SNAP released its third-quarter results. The financial report shows that SNAP's adjusted earnings per share were 8 cents, higher than the market's expected small loss or break-even. Revenue during the reporting period was $1.13 billion, lower than the market's expectation of $1.14 billion, and the year-on-year revenue growth rate was only 5.7%, which was the first time the company has fallen to single digits since its listing in 2017, and lower than the company's own forecast of 8% growth in August.

By region, North America and Europe's revenues were US$810 million and US$160 million, respectively, both lower than market expectations, with growth rates of 3.1% and 5.4%, respectively; revenues in other regions increased by 22% year-on-year to US$156 million, slightly higher than market expectations.

Although adjusted profit beat market expectations, SNAP's net loss soared 400% to $360 million, partly due to $155 million in restructuring charges.

Although the number of users continued to grow rapidly, the average revenue per user (ARPU) fell 11% to US$3.11, lower than the average analyst forecast of US$3.19.

In addition, SNAP again canceled its performance guidance for the next quarter. The company said:

Given the uncertainties associated with the operating environment, we are not providing our guidance for fourth quarter 2022 revenue or adjusted net income.

But the company said it has "forecasted fourth quarter revenue growth to be roughly flat year-over-year." Financial blog Zero Hedge believes this means SNAP's high-growth period may be over.

After the financial report was released, the company's stock price plummeted by nearly 26% after the market. The company's stock price has fallen by about 90% since its high point at the end of September 2021, and the decline so far this year has reached 77%.

The number of users maintained rapid growth, with more than 1.5 million paying users

In the third quarter, SNAP had 363 million daily active users worldwide, higher than the market expectation of 358.2 million, and a year-on-year growth rate of 19%. This shows that despite the difficulties in the business, the company is still able to attract users to use the service. However, the average revenue per user (ARPU) fell 11% to $3.11, lower than the average analyst forecast of $3.19.

The company said that its $3.99-per-month Snapchat+ subscription service, launched in June, has more than 1.5 million subscribers in the third quarter, and the service currently covers more than 170 countries and regions around the world.

SNAP CEO Evan Spiegel said:

This quarter, we took actions to further focus the business on three strategic priorities: growing our community and deepening user engagement with our products, re-accelerating and diversifying our revenue growth, and investing in augmented reality.

He said user growth "provides us with long-term opportunities in a volatile macroeconomic environment."

Affected by the US macroeconomic situation and Apple's privacy policy, SNAP's advertising business capacity has declined

Apple's 2021 privacy update to the iOS system remains an obstacle to SNAP's ability to track users, which has weakened its internet advertising business. Social media such as Meta's Facebook have also been hit by Apple's policy. Meta and Alphabet will release their latest quarterly reports next week.

In addition, the U.S. economic slowdown and the increased likelihood of a recession have also caused many advertisers to pause or reduce their advertising spending.

In a press release, SNAP stated:

We are finding that our advertising partners across many industries are reducing their marketing budgets, particularly in the face of a worsening operating environment, inflation-driven cost pressures and rising capital costs.

Affected by SNAP's financial report that fell short of market expectations, Meta, which also relies on Internet advertising revenue, fell by about 5% after the U.S. stock market closed. Google's parent company Alphabet turned to decline after the market closed, falling by more than 2%.

SNAP continues to cut programs in hopes of saving money

As part of its cost-cutting plan, Snap said it would shut down several expensive projects, including the Pixy drone, which it planned to sell for $230 each. Snap also ended production of its Snap Originals premium programming.

In August, SNAP announced it would lay off more than 1,000 employees, or about 20% of its 6,000-person workforce. Severance and related costs accounted for a large portion of restructuring charges during the reporting period.

As with the second quarter earnings release, SNAP's board of directors approved a stock repurchase program of up to $500 million. At the end of the third quarter, the company had $4.4 billion in cash, cash equivalents, and marketable securities.

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