Snap returns to revenue growth in 3Q after two periods of decline

US-based Snap, whose business is the social network Snapchat, has released its second-quarter earnings results.

Results

Snap's revenue grew 5.3% year-on-year.

North American revenue fell 3.1% year-on-year to $786.2 million. USD 788 MILLION. Analysts had expected $736.3 million in revenue. USD 778 MILLION.

Revenue from Europe rose 24% year-on-year to EUR 200.3 million. USD 176.2mn was expected from Europe. USD 176 MILLION.

Revenues from the rest of the world rose 30% year-on-year to EUR 202.1 million. USD 1.5 BILLION. Analysts had expected EUR 197.1 million. USD.

Adjusted EBITDA fell 45% year-on-year to USD 40.1 million. USD. Analysts had expected a loss of 64.2 million. USD.

Average revenue per user fell 5.8% year-over-year to USD 2.99 on expectations of USD 2.74.

The company reported negative free cash flow at $60.7 million. The company reported a positive free cash flow of USD 18.1 million, compared to USD 18.1 million last year. USD. Analysts were expecting positive cash flow of $92.1 million. USD.

Outlook

Snap expects to achieve revenue in the range of USD 1.32 billion to USD 1.38 billion in 4Q. Analysts were expecting USD 1.33 billion.

The company expects adjusted EBITDA to be in the range of $65 million to $105 million. THE COMPANY'S EBITDA IS EXPECTED TO BE USD 105 MILLION. Analysts were expecting $100.6 million. USD.

Snap forecasts the number of daily active users in the range of 410 million to 412 million. USD. Analysts were expecting 415.22 million. USD.

Word from the CEO

CEO Evan Spiegel said, "In the third quarter, our revenue returned to growth, specifically up 5% year-over-year. We are focused on improving our advertising platform to increase returns for our partners.

Analyst commentary

Analyst Thomas Champion of Piper Sandler said he sees 3Q as an improvement, but still sees margin and valuation issues. The analyst raised his 2024 revenue and EBITDA outlook but said the recovery is fragile.

Citi analyst Ronald Josey said, "The results show a return to growth in revenue and EBITDA earnings. Given the results and the outlook above forecasts, we expect the title to grow."

Analysts at Bloomberg Intelligence said, "Improved EBITDA earnings in 3Q were driven by cost reductions, while engagement and daily active user growth were in line with expectations.

Analysts at Vital Knowledge said the results were "OK" with pleasant surprises in revenue, EBITDA profit and monthly active users. This stock is extremely unpopular, but it looks like improvement is already lurking around the corner, with new advertising tools improving revenues while management keeps costs at bay. However, Snap is a grain of sand among online classifieds, and compared to companies like Meta, Alphabet, TikTok and Amazon, it's hard to see the potential for change."

Snap shares

Shares of Snap (SNAP) are up 3.3% to $10.03 in pre-market trading.