Snap beats expectations, however the inventory falls on the slight forecast for the primary quarter


Evan Spiegel, CEO of SNAP Inc.

Stephen Desaulniers | CNBC

Snap's stock fell up to 10% in over-the-counter trading Thursday after the company reported its fourth quarter earnings despite exceeding Wall Street expectations for earnings, revenue and user growth. However, the company released an adjusted EBITDA forecast for the first quarter that was well below analysts' consensus expectations.

They reported the following:

Adjusted earnings per share: 9 cents compared to 7 cents per share forecast by RefinitivRevenue: $ 911 million Refinitiv forecast $ 857.4 millionGlobal Daily Active Users (DAUs): 265 million versus 257.79 million per FactSetAverage Revenue Per User (ARPU): $ 3.44 versus $ 3.34 forecast by FactSet

Snap expected the company to lose between $ 50 million and $ 70 million on an adjusted EBITDA basis in the first quarter, which Refinitiv said was way below analysts' consensus expectations for an adjusted EBITDA profit of $ 19.3 million remains behind.

The company's net loss decreased to $ 113 million, a decrease of more than 53% from a net loss of $ 241 million last year.

Snap reported 265 million daily active users, up more than 6% from the 249 million the company reported in October. That number is up nearly 22% compared to the 218 million daily users the company reported a year earlier.

Snap expects revenue to grow 56% to 60% year over year for the first quarter, Snap's chief financial officer Derek Andersen said in prepared remarks. The company also expects to hit around 275 million DAUs in the first quarter, Andersen said.

However, the company's first quarter performance could be affected by two key factors. Initially, Andersen noted that Snap experienced a two-week hiatus in ad request when brand advertisers paused campaigns in the aftermath of the January 6th Uprising in the U.S. Capitol.

"So we started the quarter slower than we would have otherwise expected," said Andersen in his prepared remarks.

In addition, Andersen warned that Apple's privacy changes in iOS 14, which are expected to take effect by the end of the first quarter, "pose another risk of disruption to demand." These changes could affect the ability of social media companies to target ads to users.

"It is not yet clear what the long-term impact these changes may have on the dynamics of our business, and it may not be clear for months or more after the changes are implemented," said Andersen in his prepared comments.

On the prize draw, Jeremi Gorman, Snap's chief business officer, said that while Apple's looming privacy changes could disrupt the company's advertising business, its decision to protect user privacy was in line with Snap's business.

"The reality is that we admire Apple and we believe that they are trying to do the right thing for their customers," Gorman said on a call with analysts.

Gorman added that Snap worked with Apple in preparing the changes, trained its advertisers, and made long-term investments to use more first-party data for advertising. In addition, the company plans to give advertisers more opportunities to make their products and services available to Snap users directly through Snapchat.

"Overall, we feel very well prepared for these changes, but changes in this ecosystem are usually disruptive and the outcome is uncertain," said Gorman.

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Katherine Clark