The social network Snap is recording increasing sales again after several quarters of decline. Investors celebrated this and their shares reacted upwards on the stock market this Tuesday outside of normal trading hours, but then lost ground. The company has made it its mission to cool things down by warning that there are advertising campaigns that are being crippled by Israel’s war against Hamas in Gaza. The company, on the other hand, is still in the red.
“Immediately following the start of the war in the Middle East, we experienced pauses in spending on a large number of primarily brand-focused advertising campaigns, which weighed on revenue in the quarter to date,” Snap said in a statement. the earnings release for the third quarter. “Although some of these campaigns have already resumed and the impact on our sales has partially abated, we continue to see new pauses and there remains a risk that these pauses will continue or increase in magnitude,” he added.
The social network company Snapchat achieved sales of 1,188.5 million dollars (around 1,120 million euros at the current exchange rate) in the third quarter of the year, 5% more than in the same period last year. However, due to the negative development in the first half of the year, sales in the cumulative figures for the first nine months of the year still fell by 2%.
Furthermore, the company is unable to find the path to profitability. Its red numbers stood at $368 million in the third quarter, 2% more than in the same period of 2022. For the first nine months as a whole, losses narrowed by 6%, but still amount to $1,074 million. Operating results are also poor, with a sharp decline in gross operating profit of 45% in the quarter and 98% in the first nine months.
“Our third quarter revenue again increased 5% year-over-year, resulting in positive adjusted gross operating profit, as our new cost structure demonstrated the leverage of our business model,” noted in a statement from the company’s founder and CEO, Evan Spiegel . “We are focused on improving our advertising platform to deliver greater return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and increase customer success,” he added.
Although the business isn’t very advanced, the Santa Monica, California-based company still has a solid balance sheet with $3.6 billion in cash, equivalents and marketable securities. The company has announced a $500 million share repurchase plan to offset the dilution caused by issuing new shares to compensate employees.
When Snap went public in 2017, it was a company with exponential growth. This growth lost steam, but still managed to maintain a good pace at the start of 2022. Then it suddenly stopped and a decline began, indicating the exhaustion of the network itself. However, the company is ensuring that its user activity continues to grow strongly, and the improvement in revenue in the third quarter shows that it is capable of reversing the trend.
Snap wouldn’t officially provide guidance for the final quarter of the year, although it has shared its own internal forecasts with the market. “Due to the unpredictability of war, we believe it is unwise to provide formal guidance for the fourth quarter. Our internal forecast is based on a revenue range of between $1,320 million and $1,375 million, representing approximately 2% to 6% year-over-year revenue growth. Within this income range, we estimate that adjusted EBITDA will be between $65 million and $105 million,” he announced.
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