Social Media Giants Go Zero For Three

After Facebook and Twitter struggled to impress investors during their own second-quarter earnings reports, it fell to Snap to change the market narrative forming around social media companies that growth was slowing and cost structures could rise.

It failed. Instead, Snap, the parent company of the popular Snapchat application, shed daily active users (DAUs) in its second quarter while losing buckets of money. The company attempted to compensate for that incredible miss by disclosing that it has 100 million monthly active users (MAUs) in Canada and the United States. The new metric, however, did not make up for the firm’s DAU decline from 191 to 188 million from the first quarter to the second.

Shares in the company fell on the news, although not as steeply as Facebook or Twitter’s after their own disappointing reports.

However, in the face of the decline was a set of financial results that bested expectations. The company lost an adjusted $0.14 per share, instead of an expected $0.17 adjusted per-share deficit. And the firm’s revenue of $262.3 million came in over expectations of $250.4 million. Per CNBC, the firm also beat revenue-per-user expectations.

There, however, the good news stops. Here are the lowlights:

• Snaps’s net loss was far greater than its revenue. The company lost $353.3 million against $262.3 million in top line.
• Snap’s operating cash flow of negative $199.3 million was nearly as large as the inverse of its revenue for the period. Its free cash flow came even closer at negative $234.2 million.
• Snap’s adjusted EBITDA, an incredibly massaged metric, was a staggering negative $169 million in the quarter.
• In the first half of 2018 compared to the first half of 2017, Snap’s operating cash flow got worse, as did its free cash flow. Its adjusted EBITDA also weakened.

Yucky.

To their credit, Facebook and Twitter both turned in strong net income results in the second quarter. Facebook was dinged over slowing user growth, and promises of lower, future operating margins. Twitter’s revenue beat and its meet on earnings per share weren’t enough to combat a falling MAU figure and slack guidance.

Both larger social companies, however, are in far better financial shape than Snap. As we reported going into Snap’s earnings report, that made the company an almost ironic last hope for public social companies in the quarter.

Zero for three. We’ll do this again in a few months.