Well, that could’ve went a lot better. That’s the charitable way to describe Snap’s initial earnings call, following the release of its Q1 financials.
With the stock crashing 21 percent immediately following the release of the financial report, the call was an opportunity for Snap to assuage concerned investors and get them back on board. Unfortunately, that didn’t happen, with shares down 23 percent in after-hours trading following the call.
Here are TheWrap’s five key takeaways from it:
1. Less money per user
Average revenue per user, or ARPU, was down 14 percent from Q4 2016. This is a cardinal sin: Not only is user growth slowing, but Snap is also making less money off its somewhat plateauing audience.
2. What’s the deal with Spectacles?
Snap’s video-enabled glasses, Spectacles, launched to much fanfare and positive press last fall, but you wouldn’t know it from what CEO Evan Spiegel had to say. Spiegel said only five million snaps have ever been created using their camera-glasses; for comparison, he said more than three billion snaps are being created every day.
Sales were disappointing as well, with only $8 million in first-quarter sales — meaning about one in every 2,600 daily Snapchat users have bought a pair. To further drive home their niche status, Spiegel said they’re open to a partnership moving forward. Prepare to say hello to Ray-Ban Spectacles?
3. Confusing international outlook
Spiegel mentioned the company is excited about making a push for more international users and the overall growth of its Android adopters. But his comments were uneven; he later argued it’s more difficult for Snap to be used in “emerging markets” than Facebook because limited data coverage makes it hard for Snapchat users to use the app when they’re doing snap-able things. But anyone that’s travelled internationally knows this is a bogus answer — a Snapchat user can simply capture their picture or video, save it to their story, and have it uploaded once they find Wi-Fi.
4. Ad strategy?
Chief Strategy Officer Imran Khan said Snap is happy with the continued growth of its advertiser network, but offered little detail. Khan cited Universal doubling its investment in Snap ads as proof its strategy is working — although we don’t know what its investment is doubling from … Analysts looking to find out when the newfound ad revenue would be reflected in the balance sheet received no answer. At one point, Spiegel said “education” on behalf of advertisers would be instrumental in companies seeing the true value in placing their ad dollars in Snap.
5. Where’s the guidance?
There wasn’t much hope for Snap investors to cling to. The company didn’t provide any forward guidance, danced around several questions from analysts, and didn’t hint at any upcoming catalysts. If you’re investing in Snap in the near future, you’re betting on the company’s long run ability to right the ship and the understanding there are too many big partners for it to completely tank, and not anything you gleaned from their report or explanations.
Understandably, Snap’s young leadership had a rocky first call. But it’s something that cannot happen coming off the most talked about IPO of the year. Hearing from an experienced voice like Chairman Michael Lynton on the call could have helped stem Wall Street’s fear. And losing less than $2.2 billion in the quarter would’ve been even better.