Snap Posts Its First Full Year of Positive Cash Flow in 2021

Snap Inc. reported its financial results for the fourth quarter of 2021 and the full year, saying that it exceeded guidance across revenue, daily active users and adjusted EBIDTA (earnings before interest, taxes, debt and amortization), and it posted its first quarter of positive net income ($23 million) and its first full year of positive free cash flow ($223 million). Co-founder and CEO Evan Spiegel said in his prepared remarks, “Achieving positive free cash flow for the full year is an important milestone as we are increasingly able to self-fund our investments in the future, which positions us well to accelerate our vision for computing overlaid on the world through augmented reality.” Snap’s revenue rose 42% year over year in the fourth quarter, to $1.3 billion, and 64% for the full year, to $4.1 billion. The company cut its net loss for the year to $488 million, compared with $945 million in 2020. Snapchat finished 2021 with 319 million DAUs, adding 13 million of those in the fourth quarter and 54 million throughout the year, and marking its fifth consecutive quarter of year-over-year community growth of at least 20%. The company said DAUs increased sequentially and year-over-year in Europe, North America and Rest of World. Insider Intelligence principal analyst Jasmine Enberg said in a statement, “Snapchat is clearly not as prone to the ‘TikTok effect' as Meta, with strong daily active user growth in all regions, including North America. Even so, most growth came from Rest of World, and most of that likely from India, where TikTok remains banned.” On the advertising side, Snap said its first-party measurement solutions are now enabled for brands representing more than 75% of its direct-response revenue, and its rollout of multiformat delivery of ad creatives last November enables advertisers to use a single ad set across multiple ad formats, letting Snap optimize delivery. Chief business officer Jeremi Gorman and chief financial officer Derek Andersen both addressed Apple’s privacy-related iOS changes and supply chain disruptions in their prepared remarks. Gorman said that despite the obstacles, the company’s active advertiser count reached an all-time high, adding on the Apple effect, “Our sales team is working hard to help advertisers adapt to the new measurement paradigms brought about by Apple’s iOS privacy related changes. Our advertising partners that prefer to leverage lower funnel goals, such as in-application purchases, have been most impacted by these changes. We are seeing funnel goals where they have greater visibility, such as install or click. Advertisers that optimize via web-based goal-based bids, or GBBs, have been less impacted, given that many of them have adopted the Snap Pixel.” She continued, “Many of our advertisers have enabled both Apple’s SKAdNetwork, or SKAN, as well as our own first-party measurement solutions, which we broadly refer to as Advanced Conversions, or AC. While SKAN has benefits in its ability to report deduped results across multiple platforms, AC offers our performance advertisers much more flexibility and more advanced features. We continue to improve AC with features such as Estimated Conversions, which augments observed conversion data with real-time data to help in better decision making. Ultimately, first-party integrations allow us to build out measurement solutions based on advertiser input and directly connect to how our formats and targeting work, so that businesses have the most accurate view of return on investment. These allow us to preserve the privacy of our community while helping advertisers weather the disruption from platform changes.” Gorman concluded, “We believe it will take time to achieve broad enablement, utilization and full confidence in these measurement solutions among our advertiser base. However, we are pleased with the early progress we’ve made with many advertisers thus far, as these new solutions are now enabled for advertisers that represent more than 75% of our direct-response revenue.” Meanwhile, Andersen addressed the supply chain issues, saying, “The macro headwinds included supply chain disruptions and labor-related factors, which impacted our brand advertising business most directly, with the consumer packaged goods and restaurants sectors of the brand business being impacted most significantly. These headwinds, and their impact on growth rates for upper-funnel objectives commonly utilized as part of brand campaigns, such as impressions and views, were the largest contributors to the sequential decline in year-over-year growth in the fourth quarter. Excluding the restaurant and CPG sectors, revenue from our brand advertising business grew at approximately 49% year over year, indicating what we believe to be continued strong underlying momentum in areas not impacted by the supply chain and labor issues noted earlier.” Enberg noted, “Snapchat ended 2021 on a high note, exceeding our expectations for ad revenue. While supply chain issues and Apple’s recent privacy changes impacted its fourth-quarter growth in both brand and direct response advertising, it was buoyed by banner quarters in the early part of the year." AR lenses are at the core of the Snapchat experience, and the company said it made several improvements to its Lens Studio throughout the year, including its sounds library, real-world physics, world mesh and an application-programming interface library for real-time data. Lens creators gained the ability to add call-to-action links within their lenses, and Snap added Food Scan to its camera, tapping its visual recognition capabilities to understand different food and ingredients and provide recipe recommendations. Snap said the number of viewers of user-generated content hub Snapchat Spotlight who subscribe to creators they found via that surface doubled compared with the third quarter of 2021, and more than 20 Spotlight creators are also syndicating Shows on curated content destination Discover. The company added that 25 different Discover partners each reached more than 50 million unique Snapchatters worldwide during the fourth quarter, and it added over 160 new international Discover channels during the period. Spiegel said, “While we are hopeful that our community will in time return to the friends Story behaviors that we observed prior to the pandemic, we are focused on innovating on our content offerings to better serve our community today. With so many different types of content on Snapchat from friends, creators and media companies, we want to make it easier for Snapchatters to find what they want to watch, when they want to watch it. We're optimistic about the results we're seeing from early experiments, and we look forward to rolling out more product changes this year.” Finally, Andersen provided a preview of Snap’s 2022 outlook. “As we look forward to the first quarter of 2022, the operating environment remains challenging,” he said. “Many of the supply chain and labor-related headwinds our advertising partners faced in the fourth quarter remain challenges as we enter the first quarter. In addition, while we made significant progress in navigating the iOS platform changes in the fourth quarter, we believe that it will take at least a couple more quarters for our advertising partners to build full confidence in our new measurement solutions. Lastly, the prior-year comparisons are incrementally tougher as we enter 2022 with revenue growth having accelerated by four percentage points in the first quarter of 2021.”

Earnings Reports

Snap Posts Its First Full Year of Positive Cash Flow in 2021

Snapchat’s parent also marked its first quarter of positive net income in the fourth quarter

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