Snap Q4 2021 Earnings Report Recap

^{Source: Predictions based on analysts' consensus from Visible Alpha}

Snap (SNAP) Financial Results: Analysis

Snap Inc. (SNAP) reported Q4 FY 2021 earnings that crushed analyst expectations. Adjusted earnings per share (EPS) rose 135% compared to the year-ago quarter, more than doubling analysts' estimates. Snap said that it was its first quarter of positive net income as a public company. Revenue expanded 42% year over year (YOY), topping analyst forecasts but slowing from the previous quarter's pace. Snap's average daily active users (DAUs) also came in above expectations.

The company's shares rose as much as 55% in extended trading. Over the past year, Snap's shares have provided a total return of -58.6%, well below the S&P 500's total return of 16.9%.

SNAP Daily Active Users

Snap's average DAUs rose 20% YOY, slowing from the previous quarter's pace of growth but still marking the fifth consecutive quarter of at least 20% growth. DAUs are defined as any registered Snapchat user who opens the Snapchat app at least once during a 24-hour period. Average DAUs for any specific quarter are calculated by summing the number of DAUs on each day of that quarter and dividing the total by the number of days in the quarter.

The metric provides a snapshot of the size of Snap's total user base. The bigger that user base is, the more attractive the platform is to advertisers, and the more Snap will be able to generate revenue from selling ad space.

SNAP Headwinds

Like other social media companies that generate revenue from selling ad space to marketers, Snap has had to adapt to the changes Apple Inc. (AAPL) made to its iOS early last year. Apple introduced a new app-tracking policy that requires apps to obtain permission from iPhone users before they can start tracking those users for ad-targeting purposes. Many users have since chosen not to be tracked, causing many advertisers to cut spending on advertising on social media platforms like Snap.

Snap's Chief Financial Officer (CFO) Derek Andersen said in prepared remarks that the company's direct response advertising team began to recover from the impact of Apple's iOS platform changes quicker than anticipated. The company's advertising partners also began to recover during the fourth quarter from the initial disruptions caused by the changes. However, Andersen noted that it will still likely take a couple more quarters before the company's advertising partners are fully confident in Snap's solutions to Apple's policy.

Andersen also cited supply chain disruptions and labor supply issues as challenges faced by its advertising partners in the fourth quarter, which are likely to persist into the first quarter of FY 2022.

SNAP Guidance

Snap offered revenue guidance for the first quarter of FY 2022. The company estimates that it will generate revenue between $1.0 billion and $1.1 billion in Q1. Snap's next earnings report (for Q1 FY 2022) is anticipated to be released on April 20, 2022.