Snap’s revenue beats estimates as user base stops shrinking

Snap Inc. is figuring out how to squeeze more revenue out of a stagnant user base.

The company, maker of the photo-messaging app Snapchat, reported $389.8 million in fourth-quarter sales, exceeding the $377.5 million average analysts’ estimate. Though Snap failed to add any new users since the prior period, the steady numbers are a victory considering that analysts projected the amount of people using Snapchat daily would shrink. The company said it’s “cautiously optimistic” that users will remain level again this quarter. The stock surged more than 20 percent in late trading.

Snap said it has been able to add more advertisers using its automated tools, increasing demand and therefore boosting prices for promotions on the mobile app. After a volatile year of executive departures, a redesign of the social-media platform that outraged some users, and problems with the Android version of Snapchat, Chief Executive Officer Evan Spiegel is trying to grow the still-unprofitable business into something more sustainable, he told investors Tuesday in remarks prepared for the earnings report.

“It’s better than expected, which is good, but certainly isn’t an indication that they’re out of the woods yet, either with users or with revenue,” said Debra Aho Williamson, an analyst with EMarketer. “Snapchat’s in a competitive marketplace — a really competitive marketplace,” she said, especially with Facebook Inc. and Alphabet Inc.’s Google, which dominate in mobile advertising. Facebook’s Instagram has also copied some of Snap’s most popular products, including the disappearing “stories” feature that Facebook says is the future of its advertising business.

Shares climbed as high as $8.63 in extended trading, after closing at $7.04 in New York. Santa Monica, California-based Snap has lost more than half its market value since a March 2017 initial public offering.

Spiegel’s prepared remarks focused on stability. He praised his new executive team, which lost its chief financial officer last month. Almost every top management position has turned over since the IPO.

In the fourth quarter, 186 million people used the app daily, Snap said in a statement. That’s down from 187 million in the same period a year earlier. Sales jumped 36 percent from the year-ago quarter’s $285.7 million. The company’s net loss in the recent period narrowed to $191.7 million, or 14 cents a share. Excluding certain items, the loss was 4 cents, smaller than the 8-cent per-share loss predicted by analysts.

Snap said first-quarter sales will be $285 million to $310 million, compared with an average analyst projection for revenue of $306.3 million, according to data compiled by Bloomberg.

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Snap’s revenue beats estimates as user base stops shrinking