LOS ANGELES _ A drop-off in Snapchat's usage growth and a post-holiday pullback in advertiser spending offered troubling signs in Snap Inc.'s first quarterly earnings report, sparking a sell-off in after-hours trading that dropped shares to barely above the company's IPO price.
The Los Angeles tech company announced Wednesday that daily active users _ a key measurement followed by investors in social media companies _ rose to 166 million in the first quarter. Though a 36 percent increase from the same period last year, the growth pace has decelerated for four straight quarters. The raw increase of 8 million users did beat the 5 million user jump in the last quarter of 2016.
Snap generated $149.6 million in revenue during the first quarter, up 286 percent from last year's first quarter, but a potentially concerning slowdown compared to its best quarter to close 2016.
The company has yet to generate a profit as it relies on venture capital and proceeds from a $3.9 billion initial public offering _ the biggest in Southern California corporate history _ to fuel expansion into new services, products and countries. Snap aims to provide people with whimsical ways to take and share smartphone videos and then rope users into perusing ad-supported content from friends and media companies.
The March IPO pushed Snap's first-quarter losses to more than $2.2 billion. But excluding the IPO's one-time costs, mostly related to employee stock plans, Snap lost about $209 million.
Investors appeared to be frustrated with the results, sending shares of Snap down as much as 25 percent in after-hours trading.
The announcement marked the first major financial event for the 6-year-old firm since joining the New York Stock Exchange.
The financial results were expected to be closely watched by investors because Snap was the first to go public among several similarly aged, unprofitable tech startups valued at more than $10 billion. It's also a hotly debated stock because of Snap's refusal to grant new shareholders a vote in key decisions and its warnings about uneven user growth.
With 2,360 employees, hundreds of business partners and big-name rivals in Google and Facebook, how Snap performs can have wide ramifications in the media and technology industries.
Here's how the company fared in greater detail.
EXPECTATIONS VS. REALITY
Young, fast-growing companies such as Snap often can't predict how their business will change quarter to quarter. As a result, they don't provide data to set investor expectations about their likely performance. Financial analysts generate estimates to help investors gauge what's coming. But if the estimates are off, many investors could be in for disappointment.
SNAP SHARES IN AFTER-HOURS TRADING
Snap shares initially were priced at $17 in March before beginning trading at $24. They've gone as high as $29.44 and as low as $18.90 since then, closing Wednesday at $22.98 following a busy day of trading.
The company released its financial results after the closing, and shares lost as much as a quarter of their value in late trading, to $18.37 at the time of publication.
The decrease in price after Snap's announcement Wednesday suggests many investors were disappointed with the company's progress during the first quarter toward generating a profit.
EVAN SPIEGEL TAKES CENTER STAGE
Snap's secretive co-founder and chief executive, Evan Spiegel, had gone almost two years since a major public address. He finally took a shot Wednesday on a post-announcement conference call with financial analysts at stock brokerages.
Spiegel touted the company's newest features and its efforts to rectify issues that caused glitches and crashes of Snapchat's app for Android devices.
"We are pleased with the early results from performance and quality improvements, particularly on Android devices," Spiegel said.
He's expected to face questions about how Snapchat can hold onto users as Facebook's family of apps keeps copying its most popular features. During the first quarter alone, Facebook's Messenger and WhatsApp each launched a self-destructing video blog feature rivaling Snapchat's, Instagram gave users the option to share more images at once, and Facebook itself copied a series of photo-editing tools. During the same period, Snapchat released a novel video-search offering.
Facebook and outside research firms say some of the new, individual features have more users than all of Snapchat. For advertisers seeking a maximum audience, such data could make them less likely to spend money on Snapchat. Snap hasn't shared any usage data about its new search feature.
OTHER QUESTIONS ON THE MINDS OF INVESTORS:
_How is Snap monitoring the number of ads shown to users to ensure they aren't frustrated or turned away from the app entirely?
_How fast will Snap introduce software that makes it easier for advertisers to buy commercial time on Snapchat and provide more data to justify their buying decisions?
