Stock prices for Santa Monica-based Snap Inc. declined last week after the social media company posted its fourth-quarter results. While it reported revenue growth of 5% year over year and a better-than-expected increase in Snapchat’s daily active user count, it also forecasted a decline in revenue for the first quarter.
Snap’s stock also declined prior to the earnings release when, one day before the results were published, the company announced it would lay off approximately 10% of its staff.
Snap posted $1.4 billion of revenue for the fourth quarter, up about 14% from its third-quarter revenue of $1.2 billion. Citing an expected increase in marketing costs for the first quarter as well as restructuring costs from its upcoming layoffs, the company told investors that it expects only $1.1 billion of revenue this quarter. About 500 Snap employees will be laid off over the quarter.
According to the Employment Development Department’s Worker Adjustment and Retraining Notification data, this includes 122 individuals at Snap’s Santa Monica headquarters and 52 at its Palo Alto office. In the day following the earnings report’s release on Feb. 6, Snap’s stock fell 35%, from $17.45 per share to $11.41 per share. Snap shares closed at $11.10 on Feb. 8.
The company said it expects to incur about $55 million to $75 million of costs related to that restructuring, the majority of which it will occur in the first quarter of this year. Derek Andersen, chief financial officer of Snap, told investors that about 60% of its operating expenses are related to its staff. While the layoffs will reduce those expenses, he said that those cost savings will likely not be reflected until at least the second quarter.
“After restructuring on the operating expenses side and getting to a good size on our overall fixed-cash cost structure, it’s about being disciplined from here, which we expect to be able to do,” Andersen said. “The changes we made give us room to invest…
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