Snap Stock Plunges After User Growth & Revenue Miss Expectations

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A monitor displays Snap Inc. signage on the floor of the New York Stock Exchange (NYSE) in New York on Sept. 25, 2017. 

The parent company of the popular messaging app Snapchat saw shares fall by 17 percent, or $2.39, to $11.74 in after-hours trading.

Snapchat parent Snap on Tuesday posted first-quarter earnings with user growth and revenues that fell well short of an analyst forecast after a redesign and user backlash.

Snap reported its popular messaging app's daily active user base rose by 4 million users during the latest quarter, or 15 percent year-over-year, to reach 191 million in all. That missed on an analyst forecast of a 7 million user increase.

The revenue miss came during the first full quarter of Snapchat's latest redesign, which remains a work in progress, and revealed weakness in driving monetization. Snap recorded an adjusted loss of 17 cents per share and revenue of $230.6 million, compared to a year-earlier $149.6 million.

The adjusted per-share loss was in line with an analyst estimate of 17 cents, but Snap fell well short of a revenue forecast of $243.55 million by analysts. The company in a statement blamed the revenue miss on "seasonality and our redesign."

During an analyst call, Snap CEO Evan Spiegel defended the recent redesign, despite the volatility it has brought. "As we have mentioned on our past two earnings calls, a change this big to existing behavior comes with some disruption, especially given the high frequency of daily engagement of our community," he said.

"We are already starting to see early signs of stabilization among our iOS users as people get used to the changes, but still have a lot of work to do to optimize the new design, especially for our Android users," the exec added.

Snap, facing competition from Facebook-owned Instagram, lost 20 cents in the year-ago period. During the fourth quarter of fiscal 2017, Snap brought in nearly $286 million in revenue, up 72 percent from the same period the previous year, even as it lost 28 cents per share.

Snap added 8.9 million daily active users during the period, bringing its total base to 187 million.

With its latest app redesign, which drew poor reviews, Snap looked to separate publisher-produced content from user-generated content in an effort to streamline its functionality.

But Tuesday's revenue miss only underlined the poor rollout for the latest redesign, especially for young people who use Snapchat to message with their friends via an Android app now being rebuilt from scratch.

"We have been testing the rebuilt application internally and we have quite a bit more work to do before our expected launch in Q3 of this year. In the meantime, we are incorporating some of the new modular components like Discovery and the Friend Feed into the existing application, which we hope will improve performance in the near term," Spiegel told analysts.

Also during the conference call, Snap's chief strategy officer Imran Khan underlined disruption from the redesign for advertisers. "The rapid pace at which we changed the core product introduced increased volatility into our ads marketplace," he told analysts.

Khan added recent discussions with advertisers about the redesign had been "challenging."

This article was originally published by The Hollywood Reporter