Snap Wins New Users in First Quarter, Sales Beat Estimates

(Bloomberg) -- Snap Inc. reported results that exceeded already high expectations, giving investors another reason to be optimistic for a revival of the social-media company.

The parent of photo-messaging app Snapchat said first-quarter sales rose 39 percent to $320 million and its loss narrowed. The Santa Monica, California-based company also saw more users join, compared with the previous quarter -- the first increase in that metric in four quarters.

The shares rose as much as 14 percent in extended trading before giving up much of those gains. The stock had already risen more than 100 percent this year and some analysts had warned it didn't have much more left to run.

Still, the results show efforts Chief Executive Officer Evan Spiegel has made over the past year are paying off. Earlier this month Snap announced a slew of new products and services, including an expanded advertising network, improved augmented reality and camera features, a new video-game service and original shows. Analysts cheered the news, which was seen as encouraging people to spend longer on the site.

A hot social app at the time of the company's IPO in 2017, Snapchat quickly lost its cachet among an audience of mostly teens and young adults after Facebook Inc. began copying the service's most popular features. After falling to a low in December, analysts began taking another look at Snap as user numbers stabilized in the fourth quarter.

In its earnings statement, Snap said a long-awaited redesign of the Android app has been fully rolled out, and Spiegel said the early results were "promising," with a 6 percent increase in the number of people sending snaps within the first week of upgrading, on lower-performing devices.

Snapchat rose to fame among teens and millennials with its disappearing texts, photo filters and marathon “streaking” sessions. The company said it has achieved “significant reach” among millenials and Gen-Z in the U.S., where its ads now can be viewed by more 13-34 year-olds than Instagram in the U.S. Such a following in that demographic is what sets Snap apart from peers, it said.

“These generations are unprecedented in size and spending power, are still in the process of developing their brand loyalties, and are difficult to engage on other platforms or with traditional advertising formats,” Spiegel said.

Snap still faces long-term uncertainties around the ability to significantly expand users and fend off competition, let alone turn a profit. It's also reeling from a string of executive departures and is still looking for a new chief financial officer.

Snap reported 190 million people used the app daily, compared with 186 million in the fourth quarter. There were 191 million daily active users in the same period last year.
The company's net loss narrowed from a year earlier to $310.4 million from $385.8 million. Excluding certain items, the loss was 10 cents a share, smaller than the 12 cents per share loss predicted by analysts.

Snap said second-quarter sales will be $335 million to $360 million, compared with an average analyst projection for revenue of $348 million, according to data compiled by Bloomberg.

To contact the reporters on this story: Krista Gmelich in New York at kgmelich1@bloomberg.net;Selina Wang in San Francisco at swang533@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack