The crisis of Snap, the company that owns the Snapchat social network, worsens.
The company has presented its closing results for 2022 on Tuesday and almost all of it is bad news.
Losses practically doubled, going from 488 million dollars in 2021 to 1,430 million dollars in 2022 (about 1,315 million euros at current exchange rates).
Revenues were stagnant in the fourth quarter of last year, with declines in much of it.
The company calculates that it will suffer a quarterly drop in revenue in the current period, the first in its history.
In its earnings release, the company founded and run by Evan Spiegel says that due to "uncertainties related to the operating environment," it is not publishing its revenue or adjusted gross operating profit expectations for the first quarter of 2023. However, in a letter to shareholders, the company is quite explicit.
“We have seen a year-over-year decline in revenue of approximately 7% so far this quarter.
According to our internal forecasts, revenue will be between -10% and -2% year-on-year in the first quarter.”
When it went public in 2017, Snap was an exponentially growing company.
That growth was losing steam, but it was still maintaining a good pace at the beginning of 2022. Now it has stopped dead and a drop begins that it is difficult to know if it will be temporary or a sign of exhaustion of the network itself.
Spiegel already warned that things were looking ugly in a message at the end of the first quarter: "The macroeconomic environment has deteriorated more and faster than we had anticipated when we gave our quarterly forecasts last month," he said then.
"Our revenues (...) grow more slowly than we expected," he explains, adding that it is likely that they will remain below the lower limit that they had managed in their range of forecasts.
The head of Snap called for responsibility with the expense and announced that the hiring of personnel would stop.
The shares of the social network that is based mainly on photographs sank on the stock market.
From stopping hiring to starting to lay off employees there was only one step.
Snap announced in August a 20% cut in the workforce and the cancellation of some of its projects as part of a broad restructuring plan for the company.
The company led the first wave of layoffs from tech companies.
While it was growing strongly, it did not pay much attention to costs, but when the change in consumer habits after the pandemic and the slowdown in digital advertising reduced the first line of the income statement, it began to adjust costs.
So far, it hasn't done him much good.
Revenue only grew 0.1% in the fourth quarter to $1.297 billion, despite the company saying on October 20 that quarter-to-date growth was still 9%.
Operating losses multiplied by 11, up to 287 million.
If in the last quarter of 2021 it achieved a net profit of 22 million, in 2022 it had net losses of 288 million.
With this, despite the fact that in the year revenues increased by 12% (up to 4,602 million dollars), operating losses doubled (up to 1,395 million) and net losses tripled.
The restructuring expenses of 189 million have weighed, but the losses would have skyrocketed equally without them.
The company focuses on the 17% year-on-year growth in daily active users, up to 375 million, on the two million paying subscribers of Snapchat+, on its initiatives to find new sources of income and on the development of augmented reality .
It's also growing its most comparable service to TikTok, called Spotlight.
At the same time, he expects cost-saving initiatives to allow adjusted gross operating income to balance this quarter.
Evan Spiegel has exposed his priorities in the conference with analysts this Tuesday: “2022 has been a difficult year for our business, as we continue to be affected by macroeconomic headwinds, changes in platform policy [in apparent reference to Apple's privacy measures that have weighed down advertising on social networks] and increased competition [especially with TikTok and Instagram].
We have taken steps to refocus our investments in support of our three strategic priorities: growing our community and deepening their engagement with our products, accelerating and diversifying our revenue growth, and investing in the future of augmented reality."
Shares tumbled on Tuesday in off-market trading.
In the last year they have lost two thirds of their value.