SNAP Beats on Q4 Earnings and Revenues, Issues Upbeat Outlook

Snap SNAP reported fourth-quarter 2024 earnings of 16 cents per share, which beat the Zacks Consensus Estimate by 14.29% and increased 100% from the year-ago quarter. SNAP stock jumped more than 5% in pre-market trading.Revenues increased 14.4% year over year to $1.55 billion and beat the Zacks Consensus Estimate by 0.55%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Geographically, revenues from North America (62.2% of total revenues) rose 7.7% year over year to $968.9 million. Revenues from Europe (18.4% of revenues) jumped 20.5% to $287.03 million. Revenues from Rest of the World (ROW) were $301.3 million, up 34.8% year over year.The average revenue per user (ARPU) increased 4.6% year over year to $3.44. On a year-over-year basis, the ARPU of North America, Europe and ROW climbed 8.6%, 16.1% and 15.5%, respectively.Snap Inc. Price, Consensus and EPS Surprise Snap Inc. price-consensus-eps-surprise-chart | Snap Inc. QuoteSteady User Engagement of SNAP Aids Q4 SalesIn the fourth quarter, Snap launched new Bitmoji stickers, showcasing the latest trends for Snapchatters to react and express themselves visually. The company announced new location sharing features in Family Center, Snap’s in-app hub for parental tools and resources, making it easier than ever for families to stay connected while out and about.The results of these initiatives are reflected in Snap’s global community reaching 453 million daily active users (DAU) in the fourth quarter, up 9.4% year over year. Snap added 10 million DAU on a quarter-over-quarter basis. North America’s DAU was 100 million, flat year over year. Europe’s DAU was 99 million, up 3.1% year over year. ROW’s DAU was 254 million at the end of the reported quarter, which jumped 16.5% year over year.More than one billion Snaps were shared publicly on Snapchat every month in the reported quarter from the community, creators and media partners. Snap continued to support and grow the number of creators in the Snap Star program, which led to a more than 40% year-over-year increase in the number of creators posting content on Snapchat in the fourth quarter.In the fourth quarter, global time spent watching content grew year over year, driven primarily by strong growth in total time spent watching Spotlight.Augmented Reality Efforts Drive User Growth of SNAPAdoption of the company’s augmented reality (AR) lenses have been strong. More than 400 million Snapchatters engaged with new Gen AI Lenses over four billion times in the fourth quarter. Snap launched its first-ever Pre-Generated AI Lens, a groundbreaking update that significantly reduces GPU utilization during generation.The company also launched its first branded Dreams AI Lens with partners like Uber Eats and Match Group MTCH-owned Tinder, and the immersive experience led to increased engagement compared to standard Lenses.Lens Studio has now been downloaded more than one million times. The number of Snaps with Lenses that our community posted on Snapchat in the fourth quarter increased 49% year over year and the number of Snaps with Lenses sent between friends and family rose 40% year over year.Snap also announced a new unified Monetization Program for creators that allows eligible creators to monetize Spotlight videos, building on the Stories Revenue Share Program that helps creators monetize their Stories. More than 200 million Spotlight videos have been created this year, featuring Lenses made by our talented community of Lens Creators.Snapchat+ reached 14 million subscribers in the quarter. Snap launched new and early access Snapchat+ features, including Footsteps, which helps Snapchatters keep track of the places they’ve visited on the Snap Map and new app themes and custom backgrounds.SNAP Builds the Next Generation AR OS for SpectaclesSnap launched a new version of Snap OS, which includes new Lenses that showcase the power of the Spectacles camera and SnapML, as well as platform features and capabilities to better build and experiment.The company introduced new first-party Lenses that help the community learn how to play piano through interactive courses and practice soccer shots through SnapML tracking models, and games that can be played with family and friends. Developers have already built advanced Lenses for Snap OS that help the community master the art of calligraphy, make better shots in pool, and turn outdoor walks into interactive adventures. Snap introduced more than a dozen new developer tools, including an Image Spatialization API that leverages generative AI to convert 2D images into 3D, and Spectacles Sync Kit, an improved framework that makes it easier for developers to build shared AR experiences with a new Typescript package.Snap expanded Spectacles’ availability beyond the United States to developers in six new countries: Austria, France, Germany, Italy, Netherlands and Spain. The company also announced Challenge Tags, a new way for Snap AR developers to be rewarded for their creativity by submitting Lenses, which are judged on their originality, technical excellence and theme focus.To ensure Spectacles is accessible to students, teachers and staff from colleges and universities across the world, Snap introduced educational pricing and a special student discount for a subscription fee of $49.50 or €55 a month.Improved Efforts of SNAP Toward Ad Revenue GenerationAdvertising revenues were $1.41 billion, up 10% year over year, driven primarily by growth from DR advertising revenues, which increased 14% year over year. Brand-oriented advertising revenues were down 1% year over year due to continued weakness that is concentrated among a relatively small group of large clients focused largely in North America.Snap has made significant enhancements to its Lead Generation product, including ad ranking model improvements, new creative customization, and integrations with preferred CRM partners. As a result, in the fourth quarter, Snap saw a 6x increase year over year in the number of leads that were generated for advertisers, while decreasing cost-per-lead by more than 40% on average.Snap has long struggled against larger competitors like Facebook and Instagram owner Meta Platforms META and peers like Pinterest PINS. To better compete in the fourth quarter, Snap began testing two new ad placements, Sponsored Snaps and Promoted Places, designed to help advertisers engage with the Snapchat community in unique and impactful ways. Sponsored Snaps enable advertisers to connect visually with Snapchatters, delivering incremental reach and helping brands leave a lasting impression. The initial results have been promising with Sponsored Snaps, delivering more than 50 million impressions on average in the United States to Snapchatters 18 or older, making it the largest single-day reach product.Promoted Places enable businesses to use the Snap Map to highlight sponsored locations, encouraging Snapchatters to discover new places, engage with Place Profiles and visit those locations in real life.In the fourth quarter, Sponsored Snaps and Promoted Places grew the number of unique Snapchatters reached by advertising partners, delivering a 30% increase in reach on average in the United States.Operating DetailsAdjusted cost of revenues increased 8.7% year over year to $668.9 million.  In the quarter under review, adjusted operating expenses were $612.4 million, up 4.4% year over year. Sales and marketing expenses decreased 3.9% year over year to $185.1 million, while general and administrative expenses jumped 17.4% year over year to $197.6 million. Research and development expenses rose 1.7% year over year to $229.7 million.Adjusted EBITDA was $276 million, up 73.4% from the year-ago quarter, reflecting higher revenues and operating expense discipline.Balance Sheet and Cash FlowAs of Dec. 31, 2024, cash and cash equivalents and marketable securities were $3.37 billion compared with $3.2 billion as of Sept. 30, 2024.Operating cash flow was $231 million compared with $165 million in the prior year.Free cash flow was $182 million compared with $111 million reported in the year-ago quarter.GuidanceFor first-quarter 2025, Snap expects total revenues between $1.325 billion and $1.36 billion. Adjusted EBITDA is expected between $40 million and $75 million. DAU is projected to be 459 million in the first quarter.SNAP currently carries a Zacks Rank #3 (Hold). 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