- Revenue: $1.24 billion in Q2, up 16% year over year.
- Advertising Revenue: $1.13 billion, up 10% year over year.
- Direct Response Advertising Revenue: Increased 16% year over year.
- Other Revenue: Up 151% year over year to $105 million.
- Snapchat Plus Subscribers: Reached 11 million in Q2.
- Adjusted EBITDA: $55 million in Q2, up from negative $38 million in Q2 of the prior year.
- Net Loss: $249 million in Q2, compared to a net loss of $377 million in Q2 of the prior year.
- Free Cash Flow: Negative $73 million in Q2.
- Operating Cash Flow: Positive $244 million over the trailing 12 months.
- Daily Active Users (DAU): 432 million in Q2, an increase of 10 million quarter over quarter.
- North America DAU: 100 million, down less than 1% year over year.
- Europe DAU: 97 million, up from 96 million in the prior quarter.
- Rest of World DAU: 235 million, up from 226 million in the prior quarter.
- Global Time Spent Watching Content: Grew 25% year over year.
- Adjusted Gross Margin: 53% in Q2, up from 52% in the prior quarter.
- Adjusted Operating Expenses: $596 million in Q2, down 3% year over year.
- Full-Time Headcount: 4,719, down 11% year over year.
- Infrastructure Costs per DAU: $0.81 in Q2.
- Q3 Revenue Guidance: $1.335 billion to $1.375 billion, implying year-over-year growth of 12% to 16%.
- Q3 Adjusted EBITDA Guidance: $70 million to $100 million.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Snap Inc (SNAP, Financial) reached over 850 million monthly active users and 432 million daily active users.
- Revenue grew by 16% year over year, driven by the success of Snapchat Plus and direct response advertising.
- The number of active advertisers more than doubled year over year in Q2.
- Adjusted EBITDA was $55 million, up from a negative $38 million in Q2 of the prior year.
- Snapchat Plus subscription business reached over 11 million subscribers.
Negative Points
- Brand-oriented advertising revenue declined by 1% year over year due to weak demand from certain consumer discretionary verticals.
- North America daily active users saw a slight decline year over year.
- Infrastructure costs increased due to investments in machine learning and AI.
- Free cash flow was negative $73 million in Q2.
- Legal and regulatory costs increased, including a settlement with the State of California and a retroactive digital services tax from the Canadian government.
Q & A Highlights
Q: Could you talk a little bit about the advertising performance within the quarter, how the months progressed, and the impacts of the Olympics and political advertising in the US?
A: Derek Andersen, CFO: Direct-response (DR) advertising revenue increased 16% year over year in Q2, showing resilience and stability. The brand-oriented advertising revenue declined 1% year over year due to weak demand in certain consumer discretionary verticals. For Q3, we expect revenue growth of 12% to 16%, driven by strong performance from the DR business and contributions from Snapchat Plus. We have not assumed a significant rebound in the brand business for Q3.
Q: Can you speak to the drivers of advertiser growth count and whether there are any partner programs or reseller agreements contributing to that growth?
A: Evan Spiegel, CEO: The growth in small and medium-sized advertisers (SMBs) is a key driver of long-term revenue growth. Automation is crucial for these advertisers, and we have made improvements in campaign setup and creative optimization. Snap Promote, which allows advertisers to get started in-app, has been a significant driver of growth.
Q: How much visibility do you typically have over the brand side, and what can you do to improve the stickiness of brand spending?
A: Evan Spiegel, CEO: Driving performance for advertisers is crucial. We focus on full-funnel solutions that build brand awareness and improve conversion rates. For content engagement, we are combining stories and Spotlight to provide a better experience and leverage signals across both content types.
Q: Why is DR not growing more rapidly despite the progress made, and how much of a headwind is brand advertising in the Q3 guide?
A: Derek Andersen, CFO: The Q3 guide implies an 8% to 11% quarter-over-quarter improvement, which is strong historically. The DR business is performing well, and the guide reflects continued momentum in DR and Snapchat Plus. The brand business is not expected to see a significant rebound in Q3.
Q: Could you provide insights into the current stage of Spotlight monetization and its growth potential?
A: Evan Spiegel, CEO: Spotlight has shown significant growth in time spent and content submissions. We are focused on combining stories and Spotlight to improve content discovery and leverage signals across both content types. There is still a lot of headroom for growth in Spotlight.
Q: Is there any consideration to moving away from having the app open to the camera to something more monetizable like Spotlight?
A: Evan Spiegel, CEO: Opening to the camera is a unique part of the Snapchat experience, encouraging users to create and share with friends. It also serves as a top funnel for our augmented reality platform. However, we are exploring ways to simplify the Snapchat experience overall.
Q: What are your key investment priorities for the back half of this year and 2025?
A: Evan Spiegel, CEO: A major focus is on the small and medium-sized customer segment, leveraging our community scale and driving performance for advertisers. We aim to build a more resilient revenue base from a diversified customer base, supported by foundational improvements in machine learning models.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
