In this Snapchat earnings call summary, we summarize key metrics and topics discussed on the Q4 2022 call, including:
- Earnings Call Summary
- Revenue Highlights
- Profitability
- New Initiatives
- Mergers & Acquisitions (M&A)
- Upcoming Product Launches
This earning call summary was partially done by our GPT-3 enabled earnings call assistant, which you can learn more about here.
Earnings Call Summary
Snap Inc. held its fourth quarter 2022 earnings conference call on Jan 31, 2023, with Chief Executive Officer and Co-Founder Evan Spiegel, Chief Operating Officer Jerry Hunter, and Chief Financial Officer Derek Andersen in attendance.
The call included both GAAP and non-GAAP measures, and the company reported that it has achieved its third consecutive year of adjusted EBITDA profitability and second consecutive year of positive free cash flow.
Snap Inc. is focused on three strategic priorities: growing its community and deepening their engagement with its products, accelerating and diversifying its revenue growth, and investing in the future of augmented reality.
The company is expecting some near-term headwinds to its revenue due to the current digital economy, but is confident in its long-term potential. Snap Inc. is also focused on controlling its financial destiny and managing any dilution that it experiences in the business.
The company is investing in its core chat experiences and is seeing growth in time per user and high-quality engagements and conversions.
Snap Inc. is also investing in its AR software and hardware to improve the way people live and communicate. Snap Inc. will be providing more information about its progress and plans at its upcoming Investors Day on February 16.
Revenue Highlights
This quarter, the company generated $4.6 billion in revenue, up 12% year-over-year. This growth was driven by direct response advertising, which is a critical way that many companies grow their businesses.
The company has made progress updating and improving their ad platform over the past year, investing in observability and measurement, improving engagement and conversion quality, and increasing the volume of monetization.
This quarter, the company's direct response business continued to grow, however, the most significant impact was the changes made to the ad platform. Overall, the company was able to generate a strong revenue this quarter.
Profitability
This quarter, Snap reported adjusted EBITDA profitability and positive free cash flow. They reported $1.3 billion in revenue for the quarter, which was flat year-over-year, and generated $4.6 billion of revenue for the full year, up 12% year-over-year.
Snap also reported $3.9 billion in cash and marketable securities, which is a strong balance sheet. They have made progress updating and improving their ad platform over the past year, which has helped them to remain on track to deliver the $500 million in cost reduction.
Overall, Snap has been able to remain profitable and generate positive free cash flow despite the challenging environment.
Industry Trends
This quarter, the digital economy has been facing a tough environment. Advertisers are managing their spend cautiously in order to react quickly to any changes in the environment. This has led to a disruption in the supply and demand environment, resulting in a 9% decline in eCPM.
Additionally, the re-architecting of the ad platform has had an impact on first quarter revenue. Lastly, the democratization of tools such as Lens Studio has enabled creators to build incredible things, which could have a positive impact on the industry in the long-term.
New Initiatives
This quarter, Snapchat made several new initiatives to improve their ad platform, user experience, and revenue growth. They improved their observability and measurability, expanded the testing of Spotlight, shipped changes to their in-app UI, improved their in-app Web View performance, updated their user ID graph, and reorganized their sales channel.
Snapchat has been expanding the testing of Spotlight and Lens Studio, which has enabled creators to build 3 million lenses. Finally, Snapchat has been investing in its three strategic priorities of growing its community, accelerating and diversifying its revenue growth, and investing in the future of augmented reality.
Additionally, they reprioritized their cost structure and removed $500 million from their cash cost structure. These initiatives are expected to help improve consideration, conversions, and attribution, as well as diversify their revenue growth.
Mergers & Acquistions (M&A)
This quarter, Snap Inc. did not announce any merger & acquisitions (M&A). However, they did focus on executing against their three strategic priorities of growing their community and deepening their engagement with their products, accelerating and diversifying their revenue growth, and investing in the future of augmented reality.
They also discussed their financial destiny going forward and making sure that they have the cash and cash flow to manage any dilution that they experience in the business. They have been active in doing this, and they look forward to sharing more about their progress at their upcoming Investors Day on February 16.
Upcoming Product Launches
During the call, Derek Andersen discussed the potential of the camera to improve the way people live and communicate. He mentioned that the company has made significant advances to their AR software and hardware, and that they are optimistic about some of the new products they have come up with around messaging.
He mentioned that the democratization of tools like Lens Studio has enabled creators to build incredible things, and that they are looking to expand the testing of Spotlight to become a meaningful portion of their overall content business. Finally, he mentioned that they are investing in the future of augmented reality, and that they look forward to sharing more about their progress in the months ahead.
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