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Snap Inc. (SNAP - Free Report) reported earnings of 22 cents per share for fourth-quarter 2021, which beat the Zacks Consensus Estimate by 144.44% and jumped at the same rate on a year-over-year basis. Revenues surged 42% from the year-ago quarter’s level to $1.3 billion, beating the consensus mark by 8.52%.

Daily active users (DAU) at the end of the reported quarter were 319 million, marking an increase of 20% year-over-year. Snap added 54 million DAU on a year-over-year basis.

Geographically, revenues from North America (71.8% of revenues) soared 41.4% year-over-year to $932.1 million. Revenues from Europe (16.1%) jumped 41.9% to $208.9 million. Rest of the World (ROW) revenues were $156.9 million, up 41.9% year-over-year.

The average revenue per user (ARPU) increased 18% year-over-year to $4.06. On a year-over-year basis, both North America and Europe ARPUs increased 33%, respectively, while ROW improved 1%. Snap’s fourth-quarter 2021 top-line growth benefited from an increasing ARPU and user base expansion.

Snap Inc. Price, Consensus and EPS Surprise

User Engagement Improves in Fourth Quarter

North America DAU was 97 million, up 6% year-over-year. Europe DAU was 82 million, up 11% year-over-year. ROW DAU was 140 million at the end of the reported quarter, up 41% year-over-year.

Snap is benefiting from improved user engagement. During the reported quarter, each of the 25 different Discover partners reached above 50 million unique Snapchatters, globally.

In fourth-quarter 2021, Snap added more than 160 international Discover channels and onboarded new partners, including Seven, One Entertainment Group in Germany, and Canal+ in France. Additionally, new Snap Originals “The Me and You Show” reached more than 50 million viewers in fourth-quarter 2021.

Snap launched its first two Snap Map Layers, Memories and Explore, which allow users to view their saved Snaps by location and explore the new ones around the world. These have been used more than 100 million times since the launch.

Operating Details

In the quarter review, the cost of revenues on a non-GAAP basis increased 16.5% year-over-year to $449.2 million. Adjusted gross margin was 66% in the reported quarter, compared with 59% in the year-ago quarter. Operating expenses were $530 million, up 44% year-over-year.

Sales and marketing expenses increased 52.4% year-over-year to $189 million, while general and administrative expenses rose 35.6% year-over-year to $141 million. Research and development expenses rose 41.1% year-over-year to $199 million. Adjusted EBITDA improved 97% from the year ago quarter’s level to $327 million.

Balance Sheet and Cash Flow

As of Dec. 31, 2021, cash and cash equivalents, and marketable securities were $3.68 billion compared with $3.47 billion as of Sept. 30, 2021. Operating cash flow was $186 million in the fourth quarter of 2021, compared with cash outflow of $53 million in the year-ago quarter. Free cash flow was $161 million in fourth-quarter 2021, compared with free cash outflow of $69 million in the year-ago quarter.

Guidance

For the first quarter of 2022, revenues are expected between $1,030 million and $1,080 million. Adjusted EBITDA is estimated to be approximately breakeven.

Zacks Rank & Stocks to Consider

Snap has recently carried a Zacks Rank #4 (Sell). Snap’s shares have tumbled 61.5% against the Zacks Computer and Technology sector’s return of 2.8% over the past year.

Better-ranked stocks in the same sector include Mandiant (MNDT - Free Report), Photronics (PLAB - Free Report), and Vocera Communications (VCRA - Free Report), all of which sport a Zacks Rank#1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

Mandiant shares have fallen 25.6% against the Zacks Computer and Technology sector’s return over the past year. The company is expected to report fourth-quarter 2021 results on Feb. 8, 2022.

Photronic’s shares have rallied 54.9% in the past year. The company is slated to report first-quarter fiscal 2022 results on Feb. 23, 2022.

Vocera Communications’ shares have returned 81.8% in the past year. The company is scheduled to report fourth-quarter 2021 results on Feb. 10, 2022.