Snap's (NYSE: SNAP) stock plummeted Tuesday following the release of its 1Q earnings report. The social media company finished down 14% during after-hours trading.
Snap failed substantially to meet analyst expectations one quarter after it published its first favorable earnings report yet. Its 4Q 2017 earnings report smashed analyst expectations when it delivered higher-than-expected user growth and revenue.
Here are five key takeaways from the company's 1Q 2018 earnings report: 1. Revenue failed to meet analyst expectations Snap generated $230.6 million, up 54% from last year’s first quarter but down from the expected amount of $244 million. Net losses came in at $385.7 million, or $0.17 per share. 2. Profitability remains a pipe dream—for now Snap co-founder and CEO Evan Spiegel really wants Snap to break even this year, as he told employees in a company-wide directive, according to The Information. However, that's not likely. Even though the company has shed a good chunk of its workforce recently—at least 220 workers, which translates to about 7% of its staff, per a March 30 SEC filing—its earnings confirm its distance from profitability, and such an ambitious goal would likely require aggressive cost-cutting measures. 3. Snap's redesign woes continue Snap began rolling out its redesign late last year to a lot of critical feedback about its confusing interface and interspersing Stories with users' personal messages. On the earnings call Tuesday, Spiegel admitted that the negative reception of the redesign negatively affected the company's revenues. Spiegel confirmed the company's plans on improving the redesign, but he held firm on the fact that some of the changes, such as separating professional content creators from friends, were key to the company's future.
"The redesign lays the foundation for the future of both or communications products and our media platform and we look forward to doubling down on both," Spiegel said. 4. User growth is dwindling Unsurprisingly, the Snapchat redesign didn't help the company pull in new users. In 1Q, Snap only secured 4 million new daily active users, again failing to meet analyst estimates, which predicted it would take on another 7 million. Last quarter, Snap added 9 million. In total, the company now has 191 million DAUs worldwide:
5. Don't expect Snap M&A activity to heat up soon On the earnings call, CFO Drew Vollero was asked about the company's acquisition plans, to which he responded that Snap would continue to focus more on acqui-hires: "The M&A here will be very opportunistic," Vollero said. "If we see the right thing at the right time at the right price we will go ahead and make that happen." Snap has closed 16 deals to date, per the PitchBook Platform, most recently acquiring adtech startup Metamarkets in November, one of seven acquisitions the company made last year.
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