Snap Inc. Reports First Quarter 2017 Results

05/10/17

Snap Inc. Reports First Quarter 2017 Results

VENICE, Calif.--(BUSINESS WIRE)-- Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended March 31, 2017.

First Quarter 2017 Financial Highlights:

  Three Months Ended March 31,   Percent
  2017       2016   Change
(dollars in thousands)
(Unaudited)(NM = Not Meaningful)
Revenue $ 149,648 $ 38,798 286 %
Net loss(1) $ (2,208,837 ) $ (104,576 )

NM

 

Adjusted EBITDA(2) $ (188,243 ) $ (93,234 ) 102 %
 
Other Financial Highlights
Cash, cash equivalents, and marketable securities $ 3,242,556 $ 987,368
Cash used in operating activities $ (154,997 ) $ (92,541 )
Free Cash Flow(3) $ (172,990 ) $ (104,993 )
Capital expenditures $ (17,993 ) $ (12,452 )
 

(1)

 

Net loss for Q1 2017 includes $2.0 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 122 million in Q1 2016 to 166 million in Q1 2017, an increase of 36% year-over-year. DAUs increased 5% quarter-over-quarter, from 158 million in Q4 2016.
  • Average revenue per user (ARPU)(2) – ARPU was $0.90 in Q1 2017, an increase of 181% over Q1 2016 when ARPU was $0.32. ARPU decreased 14% over Q4 2016 when ARPU was $1.05.
  • Hosting costs per DAU – Hosting costs per DAU were $0.60 in Q1 2017, as compared to $0.52 in Q1 2016 and $0.72 in Q4 2016.
  • Capital expenditures – Capital expenditures were $18.0 million in Q1 2017, as compared to $12.5 million in Q1 2016 and $20.4 million in Q4 2016.

(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 1:30 p.m. Pacific / 4:30 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 believe that both Adjusted EBITDA and Free Cash Flow 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 the non-GAAP measures of Adjusted EBITDA and Free Cash Flow 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 March 31,
  2017       2016  
Revenue $ 149,648 $ 38,798
Costs and expenses:
Cost of revenue 163,358 75,773
Research and development 805,848 28,098
Sales and marketing 219,733 14,737
General and administrative   1,174,476     24,011  
Total costs and expenses   2,363,415     142,619  
Loss from operations (2,213,767 ) (103,821 )
Interest income 2,424 359
Interest expense (695 )
Other income (expense), net   187     (993 )
Loss before income taxes (2,211,851 ) (104,455 )
Income tax benefit (expense)   3,014     (121 )
Net loss $ (2,208,837 ) $ (104,576 )
Net loss per share attributable to Class A, Class B, and Class C common stockholders:
Basic $ (2.31 ) $ (0.14 )
Diluted $ (2.31 ) $ (0.14 )
 
SNAP INC.
CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

 
  March 31,   December 31,
  2017     2016  
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 1,427,114 $ 150,121
Marketable securities 1,815,442 837,247
Accounts receivable, net of allowance 147,677 162,659
Prepaid expenses and other current assets   72,973     29,958  
Total current assets 3,463,206 1,179,985
Property and equipment, net 116,132 100,585
Intangible assets, net 79,781 75,982
Goodwill 332,205 319,137
Other assets   50,453     47,103  
Total assets $ 4,041,777   $ 1,722,792  
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $ 13,849 $ 8,419
Accrued expenses and other current liabilities   228,436     148,325  
Total current liabilities 242,285 156,744
Other liabilities   63,974     47,134  
Total liabilities   306,259     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 March 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 March 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 March 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 March 31, 2017 and December 31, 2016, respectively. No shares and 215,888 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively. 2
Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 681,994 shares issued and outstanding at March 31, 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, 280,968 shares issued and outstanding at March 31, 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 March 31, 2017, and 260,888 shares authorized and no shares issued and outstanding at December 31, 2016. 2
Additional paid-in capital 7,157,585 2,728,823
Accumulated other comprehensive income (loss) (1,635 ) (2,057 )
Accumulated deficit   (3,420,444 )   (1,207,862 )
Total stockholders’ equity   3,735,518     1,518,914  
Total liabilities and stockholders’ equity $ 4,041,777   $ 1,722,792  
 
SNAP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 
  Three Months Ended March 31,
  2017       2016  
Cash flows from operating activities
Net loss $ (2,208,837 ) $ (104,576 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 12,450 5,049
Stock-based compensation 1,992,121 5,538
Deferred income taxes (1,488 )
Other 1,892 961
Change in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable, net of allowance 13,444 (7,161 )
Prepaid expenses and other current assets (43,436 ) (5,848 )
Other assets 2,715 (1,572 )
Accounts payable 5,619 47
Accrued expenses and other current liabilities 69,204 13,997
Other liabilities   1,319     1,024  
Net cash used in operating activities   (154,997 )   (92,541 )
Cash flows from investing activities
Purchases of property and equipment (17,993 ) (12,452 )
Purchases of intangible assets (562 )
Non-marketable investments (625 ) (2,173 )
Cash paid for acquisitions, net of cash acquired (18,013 ) (50,936 )
Issuance of notes receivable from officers/stockholders (15,000 )
Purchases of marketable securities (1,423,214 ) (140,045 )
Maturities of marketable securities 445,047
Change in restricted cash       (4,300 )
Net cash used in investing activities   (1,014,798 )   (225,468 )
Cash flows from financing activities
Proceeds from the exercise of stock options 594
Stock repurchases from employees for minimum tax withholdings (206,579 )
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 192,186
Payments of initial public offering issuance costs   (5,024 )    
Net cash provided by financing activities   2,446,788     192,186  
Change in cash and cash equivalents 1,276,993 (125,823 )
Cash and cash equivalents, beginning of period   150,121     640,810  
Cash and cash equivalents, end of period $ 1,427,114   $ 514,987  
Supplemental disclosures
Cash paid for income taxes $ 3,545 $ 4
Supplemental disclosures of non-cash activities
Issuance of Class B common stock related to acquisitions $ $ 13,097
Purchase consideration liabilities related to acquisitions $ 1,901 $ 6,028
Construction in progress related to financing lease obligations $ 257 $ 404
Net change in accounts payable and accrued expenses and other current liabilities related to property and equipment additions $ (4,355 ) $ 1,921
 
SNAP INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, unaudited)

 
  Three Months Ended March 31,
  2017       2016  
Adjusted EBITDA reconciliation:
Net loss $ (2,208,837 ) $ (104,576 )
Add (deduct):
Interest income (2,424 ) (359 )
Interest expense 695
Other (income) expense, net (187 ) 993
Income tax (benefit) expense (3,014 ) 121
Depreciation and amortization(1) 12,450 5,049
Stock-based compensation expense(2) 1,992,121 5,538
Payroll tax expense related to stock-based compensation   20,953      
Adjusted EBITDA $ (188,243 ) $ (93,234 )
 
 
(1) Total depreciation and amortization expense by function:
Three Months Ended March 31,
  2017     2016  
Depreciation and amortization expense:
Cost of revenue $ 1,669 $ 71
Research and development 5,755 3,611
Sales and marketing 2,600 150
General and administrative   2,426     1,217  
Total $ 12,450   $ 5,049  
 
(2) Total stock-based compensation and related payroll tax expense by function:
Three Months Ended March 31,
  2017     2016  
Stock-based compensation and related payroll tax expense:
Cost of revenue $ 20,026 $ 154
Research and development 722,129 2,648
Sales and marketing 160,942 775
General and administrative   1,109,977     1,961  
Total $ 2,013,074   $ 5,538  
 
 
Three Months Ended March 31,
  2017     2016  
Free Cash Flow reconciliation:
Net cash used in operating activities $ (154,997 ) $ (92,541 )
Less:
Purchases of property and equipment   (17,993 )   (12,452 )
Free Cash Flow $ (172,990 ) $ (104,993 )

Snap Inc.
Investors and Analysts:
ir@snap.com
or
Press:
press@snap.com

Source: Snap Inc.

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