LOS ANGELES — Snapchat's parent is having a rough start to its life as a public company.
In its first financial results since its IPO, Snap reported first-quarter revenue of $149.6 million, up 286% year over year, but well short of the $158 million in sales projected by analysts polled by S&P Global Market Intelligence.
Losses ballooned to $2.2 billion, up from $104.6 million in the year ago quarter, due to one-time charges from the IPO and taxes, the Venice, Calif. company said.
Investors were not happy. Snap (SNAP) sank 23% to $17.57 in after hours trading. If it opens at these levels Thursday, it will mark a low point in its young career as a public company. In March, it launched the biggest U.S. tech IPO since Alibaba more than two years earlier, raising $3.4 billion and surging 44% after pricing at $17, helped in part by demand from young investors that form its core users.
That IPO tempted some analysts to predict a flood of IPOs from other well-funded start-ups, many of which had retained their private status for far longer than in past tech boom cycles.
On Wednesday, the uncomfortable nature of public quarterly earnings reports was on display.
Shares fell more during the conference call as the company told investors it wouldn't offer any financial guidance and shrugged off a question about the elephant in the room — the larger, profitable Facebook's unrelenting copying of its features.
Snap co-founder and CEO Evan Spiegel, when asked about Facebook, said imitation is the sincerest form of flattery.
"If you want to be a creative company, you have to get comfortable that people will copy your stuff," he said. "Just because Yahoo has a search box doesn’t make it Google."
The big question for investors on Snap — best known for the app that overlays disappearing photos and videos with graphics — was whether it could hold onto users and advertisers as Facebook and its Instagram and Messenger units copied many of its popular features.
Snap said its daily active users surged 36% to 166 million in the first quarter, between the 7 million to 9 million new users that analysts expected. That was the smallest user growth Snap had ever seen in a quarter.
Leading into Wednesday, many investors wondered if Spiegel would show up to the call, or leave it to other execs. Not only was he was there, but to most questions, even when they were addressed to others, he took them. "He definitely wanted to assert himself," says Eric Kim, a managing partner for Goodwater Capital, a Silicon Valley investment firm.
And Spiegel was quite outspoken.
Asked why Snap targets the young 18-25 user group, he said they're "more interested in trying out new tech," products, and then told a story of how to he tried to convince his grandmother years ago to switch to e-mail, but that she still preferred talking on the phone. "The 25+ demo works for us."
Kim called it a "rough" debut for Snap, by missing estimates for earnings, revenues and user growth. "That's why the stock acted the way it did. Investors excepted a beat on at least one of those."
The bottom line--Snap has a "lot of work to do," says Kim.