A pull-back in ad spending amid a looming recession hit Snap’s earnings in Q4, and the company warned investors that it expected these challenges to continue at least through the beginning of 2023.
Revenue for the three months ended Dec. 31 was flat year-over-year and up 2% on a constant currency basis, but adjusted EBITDA was down 29%. The company had a net loss of $288 million USD, including a $34 million USD restructuring charge.
For the full year, revenue increased 12%, with a $1.43 billion USD loss, including a $189 million USD in restructuring charges. Adjusted EBITDA was down 39% and free cash flow was down 75%, though the company pointed out this is the third and second consecutive year, respectively, that these metrics have remained in the black.
In a letter to investors, Snap described both Q4 and the full year as “challenging,” though it has emerged with “a more focused cost structure” and a path to deliver profitability and positive free cash flow on lower growth. However, it warned that macroeconomic headwinds, platform policy changes and increased competition are expected to continue impacting its business through Q1.
The company also said it will soon introduce improvements and optimizations for its direct response platform that will be beneficial for both the company and advertisers in the long term, but may be “disruptive to auction dynamics in the near term,” especially when coupled with ad spend pullback. Thus far in the Q1, Snap has already seen a 7% decline in year-over-year revenue, a dip it expects to land between 2% and 10% by the end of the quarter.
It wasn’t all negative, however. Snap’s daily active users continued on their upward trajectory, reaching 375 million globally. While the bulk of that growth came from Europe and its Rest of the World segments, users in North America also grew by 3% through 2022. Snap also said that the Snapchat+ subscription service topped 2 million paying subscribers in Q4.
Revenue per user also hit $3.47 in Q4, the highest the metric has been throughout 2022, though it is still down year-over-year. Despite total spending being down, Snap also said the number of advertisers on Snapchat increased in Q4.
For advertisers, Snap also said that integrating new third-party partners has improved accessibility to its Conversions API, and it has continued to launch new commerce integrations. It also has new real-time automation and campaign management tools to drive more efficient performance for advertisers.
The company said that apparel, retail, ecommerce, restaurant and travel brands have also managed to perform particularly well on the platform, all of which grew year-over-year in Q4, especially among those that have on-boarded the company’s new privacy-focused measurement and attribution systems.
