Snap sees a positive surprise as quarterly revenue increases and daily active users reach 406 million

Snapchat parent Snap returned to revenue growth in the third quarter, surprising Wall Street. The company reported gains in daily active users (DAUs) while net losses widened due to restructuring costs related to layoffs. The company struck a sharp note on the advertising front, saying that “ad demand visibility remains limited” and pointing out that the war in the Middle East has halted spending on a number of brand-focused campaigns.

Revenue rose to $1.18 billion from $1.13 billion in the three months ended September, after falling in both the first and second quarters for the first time since the company’s initial public offering in 2017.

Net losses rose to $368 million from $359 million. A reduction in the AR Enterprise business, including a reduction in the global workforce of approximately 3%, resulted in restructuring costs of $18.6 million, primarily consisting of cash severance and stock-based compensation costs.

The number of daily active users increased by 12% year-on-year to 406 million. The company expects continued growth in the global community to drive DAUs to 410 million to 412 million in the fourth quarter.

The stock appeared all over the chart after the close, first higher, then lower, then flat. Executives will hold a conference call at 5:30 PM ET to discuss the numbers, which have been pretty mixed at Snap of late. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) fell to $40 million from $73 million in the year-ago quarter. Operating cash flow was $13 million versus $56 million. And free cash flow generated from street pricing was negative $61 million, compared to $18 million a year ago.

In advertising, Snap’s primary source of revenue, the company said it saw a pause in spending on a large number of primarily brand-related ad campaigns immediately after the outbreak of war in the Middle East, a headwind for sales last quarter .” ” .” to date. While some of these campaigns have now resumed and reduced some of the impact on our revenue, we continue to see new breaks and there remains a risk that these breaks will continue or worsen. ”

“Our revenue returned to positive growth in the third quarter, increasing 5% year-over-year and resulting in positive adjusted EBITDA as our reprioritized cost structure demonstrated the leverage of our business model,” said CEO, Evan Spiegel. “We are focused on improving our advertising platform to drive greater returns on investment for our advertising partners, and we are evolving our go-to-market efforts to better serve our partners and increase customer success.”

Highlights of this quarter include: Total time spent watching Spotlight increased more than 200% year-over-year; Introducing a new generative AI-powered feature called Dreams, which will allow Snapchatters to take generative AI selfies; More creators are publishing content on Snapchat, with nearly three times as many public stories in the US compared to Q3 2022. The company worked with the LA Rams around the Super Bowl and MTV to co-host the Video Music Awards and Live Nation at Lollapalooza Paris .

There is more to come…