Snap's Second-Quarter Revenue Growth Projections Pencil in Continued Expansion of User Base, Strong Advertiser Support

5:46AM ET 4/23/2021 MT Newswires
Snap (SNAP) has forecast faster sequential revenue growth in the second quarter as it sees no letting up in its user growth, but the social media giant expects business investments and pandemic-linked cost reversals to keep a lid on operating earnings.

The Santa Monica, California-based group guided to revenue growth 80% to 85% year-over-year to $820 million to $840 million in the second quarter, after posting a 66% surge in sales to $769.6 million in the three months ended March 31. Analysts polled by Capital IQ had projected $742.33 million for the first quarter and $827 million in the following three months.

The second-quarter sales outlook "reflects our best current estimate of the potential impact of anticipated disruptions associated with the iOS platform changes," according to a Capital IQ transcript of the company's earnings call after the market close on Thursday. Apple (AAPL) plans to turn off a user tracking device in a forthcoming software update, making the terrain harder for advertisers.

"More advertisers were active on our platform than ever as our active advertiser base approximately doubled year-over-year in [the first quarter]," Chief Business Officer Jeremi Gorman said on the call. "We have a large opportunity to gain share of the global digital ad market, which is $340 billion and growing."

Snap, which reported a 22% surge in daily active users to 280 million in the first quarter, anticipates the same level of growth in the April-June period to 290 million. That projection sets the company apart from the streaming giant Netflix's (NFLX) recent results, which showed that the explosive growth in its subscriber base last year off the back of the COVID-19 outbreak was cooling off.

Snap broke even on an adjusted earnings basis in the first quarter, after reporting an adjusted loss of $0.08 per share a year earlier, and also beat guidance for an adjusted loss of $0.05 per share.

It, however, reported an adjusted loss before interest, tax, depreciation and amortization of $2 million in the quarter just ended, and anticipates the same metric to be in the range of breakeven to a loss of $20 million in the second quarter.

"We intend to continue to invest in the long-term growth of our business, and we'll continue to support the launch of Spotlight with our $1 million per day creator fund to build on the momentum with this exciting new platform," Chief Financial Officer Derek Andersen said on the call.

Snap sees a path to adjusted operating earnings breakeven in the second quarter but is cognizant of a number of costs, including those related to travel and events that have been lower last year amid the coronavirus-related restrictions, that will likely reverse in the coming months.

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