Snap off to sluggish start

Growth struggles, including lower-than-expected active user volume, marked Snap’s first quarter as a public company.



The photo-based messaging company, which went public in early March, is growing — albeit slower than expected. For the quarter ended March 31, Snap’s daily active users (DAU) grew to 166 million from 122 million in the first quarter of 2016 — an increase of 36% year-over-year.



However, DAUs only increased 5% quarter-over-quarter, from 158 million in the fourth quarter of 2016. Snap defines DAUs as a registered Snapchat user who opens the app at least once during a defined 24-hour period.



Similarly, average revenue per user (ARPU) was $0.90 in the first quarter, an increase of 181% over the same period last year when these revenues were $0.32. However, ARPU decreased 14% since the fourth quarter of 2016 when the average revenue was $1.05. Snap measures its ARPU as quarterly revenue divided by the average DAUs.



Hosting costs per DAU were $0.60 of the quarter, as compared to $0.52 in for the same period last year, and $0.72 in the fourth quarter of 2016. Meanwhile, capital expenditures were $18.0 million compared to $12.5 million for the same quarter last year, and $20.4 million in the fourth quarter of 2016.



Overall, the company posted $149.6 million in revenue, which missed a Thomson Reuters consensus estimate of $158 million. These factors also impacted the company’s shares, which dropped more than 20% in pre-market trading on May 11.



Despite the rocky start, Snap’s CEO Nick Pinchuk remains positive, say-ing, “The first quarter has convincing confirmation of Snap’s ability to continue its trajectory of positive results, to overcome period-to-period variations from business-to-business to offset macroeconomic head-winds, and to still keep advancing along our runways for both growth and improvement.”