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Electric vehicle hopeful Faraday Future has had no shortage of drama—from alleged securities law violations to boardroom shake-ups—on its long and circuitous path to actually producing a car. And though the Gardena-based company looked to have turned a corner by recently announcing plans to launch its first vehicle later this year, Faraday’s quarterly earnings report this week revealed that demand for that car has underwhelmed—to say the least.
Among the business updates and organizational changes disclosed in its first-quarter earnings release on Monday, the company tucked in one startling number: 401. That’s the number of paid pre-orders that Faraday said it had received for its first production vehicle, the FF 91, as of March 31.
The paltry number is especially interesting given the context of the automaker’s rocky history. Earlier this year, the publicly traded company found itself in hot water with the Securities and Exchange Commission, which is now investigating allegedly inaccurate and misleading statements made by Faraday to investors. Those statements, according to an internal review by the company, include misrepresenting how many pre-orders it had received for the FF 91: Originally, Faraday reported more than 14,000 reservations on its books, but it later emerged that an overwhelming bulk of those pre-orders were unpaid—with only a few hundred actual, paid deposits on the vehicles. (What’s more, nearly 80% of those pre-orders were allegedly from a single, undisclosed company that may have been an affiliate of Faraday’s, according to a blistering report by short-selling firm J Capital.)
Faraday’s earnings report also highlighted first-quarter developments including leadership moves, production partnerships and its unveiling of the first production-intent FF 91. The company noted that it had received a dealer and distributor license from the state of California that should allow Faraday to sell vehicles online anywhere in the U.S. It also signed a lease for a showroom in Beverly Hills, and is currently on the search for a second such location in the U.S. Additionally, Faraday Future’s second car, the FF 81, will be produced in South Korea in partnership with auto manufacturer Myoung Shin, with production slated to begin in 2024.
In terms of financials, Faraday reported an operating loss of approximately $149 million in the first quarter—up from a loss of $19 million in the same period last year. The company has $706 million in total assets on its balance sheet, including $276 million in cash. Faraday’s stock closed Wednesday’s trading at $3 per share—down roughly 50% since the start of this year.
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Snap added millions of new users last quarter — its largest increase in years — beating Wall Street expectations of growth and revenue.
Riding a wave of increased digital ad-spending and the pandemic's ongoing limitation of leisure activities, Snap added 16 million users and pulled in $911 million in revenue in the fourth quarter of 2020.
Despite the growth, share prices plummeted as much as 11% in after-hours trading on a lower-than-expected profit forecast for the first quarter of 2021. Analysts had expected a first-quarter profit projection of around $19 million, but Snap reported an anticipated EBITDA loss of between $50 million and $70 million.
Explaining the underwhelming forecast, Snap Chief Financial Officer Derek Anderson pointed to temporary advertising pauses in the first two weeks of January following the U.S. Capitol riot and uncertainty stemming from Apple's upcoming iOS privacy rule-changes, which are slated to take effect late in the first quarter and could depress ad spending. But, he pointed out that the number of advertisers on Snapchat doubled in the fourth quarter over the previous year and that a continuation of recent momentum could change the first-quarter outlook.
Over 90% of the U.S. Gen Z population watched Snap's curated content in the fourth quarter, the company said, and more than 200 million users engage with Snap's AR every day on average.
Snap's global daily active users climbed to 265 million, its largest increase since the second quarter of 2016. That beat consensus Wall Street expectations by about 7 million. Overall revenues of $911 million also beat analyst forecasts of around $856 million.
Meanwhile, the company made $3.44 per user globally, which lags competitor Facebook by nearly $7. That gap has given analysts reason to believe that Snap has plenty of room to further monetize its user base.
Snap has said it offers advertisers innovative opportunities to reach a coveted younger demographic via its AR "lens" technology and Discovery content platform. The company has recently partnered with brands like Gucci and Champs Sports to enable "virtual try-ons" as retailers increasingly look to tech to adapt to the post-pandemic world.
"We've seen a lot of acceleration in demand for AR advertising and it's a trend we don't see going backwards," said Chief Business Officer Jeremi Gorman, pointing to Snap's plans to invest "heavily" in making it easier for advertisers to build lenses via Snap's lens studio.
In addition to AR and content, Snap has also been ramping up its gaming division, which could provide further revenue expansion through both advertising and in-app purchases. It continues to look to its Maps feature as a future moneymaker as well. Noting that they are used by 200 million users, CEO Evan Spiegel said Maps offers a "substantial revenue opportunity" from small- and medium-sized local businesses, particularly once the pandemic subsides.
Entering Thursday, Snap's share price had climbed 260% over the previous year.
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Snap shares soared after CEO Evan Spiegel touted the company's highest Q3 growth rate since 2017. The outspoken executive used Tuesday's earnings call to highlight the social media platform's efforts to engage users "following the murders of George Floyd, Ahmaud Arbery and Breonna Taylor."
The upbeat earnings report sent its stock soaring 20% in after-hours trading.
The Santa Monica-based social media and camera company beat earnings expectations with revenue up 52% year over year in Q3 to $679 million. The company, which is still not profitable, trimmed losses this quarter to $200 million from $227 million the previous year.
With more people stuck at home during the pandemic, Snap saw daily active users grow 18% year-over-year to 249 million. The average number of Snaps created daily grew 25% in that time.
"Over the past year, as the changing public health landscape accelerates the adoption of digital products, we believe there is a large opportunity for us to further empower new behaviors, with AR, entertainment and commerce," Spiegel said.
Spiegel has not been afraid to wade into discussions around systemic racism, calling for tax reform and reparations over the summer in a lengthy memo to employees. On Tuesday, he said that the company responded to the summer protests over the deaths of Floyd, Arbery and Taylor, by publishing curated community stories "featuring powerful Snaps from our community, which ranged from breaking news about peaceful protests, to a dialogue about what it means to be living while Black in America."
He added the company is also providing a dedicated breaking news section for media partners like NBC News and ESPN.
Snap's chief financial officer, Derek Andersen, tempered expectations leading into Q4. While Q4 advertising demand has historically been bolstered by the holiday season, it's unclear if that will materialize this year, Andersen cautioned in prepared remarks. He said the company is also expecting year-over-year expense growth to be likely higher in Q4 than to date due to efforts to "double down" on existing momentum.
Snap had seen its stock rise significantly over the summer as the Trump administration zeroed in on competitor TikTok and threatened a ban on the China-owned viral-video company over national security concerns. Snap also launched its own TikTok rival, "Sounds on Snapchat," earlier this month, which lets users add music to their Snaps.
Snap also may have benefited from a boycott by major advertisers, which reduced ad spending by millions over the summer.
Spiegel acknowledged during Tuesday's earnings call that "the growing focus on brand safety and privacy, across the entire industry, places us in a unique position of strength, as we have invested in these areas from the beginning of our business."
"Snap's Q3 earnings results yet again confirm that 2020 is a good year for the platform," said digital marketing company Socialbakers' CEO Yuval Ben-Itzhak, who added that Snap's earnings reflect the fact that worldwide social media ad spend increased in Q3 by 56.4%.
Ben-Itzhak noted that mobile is also emerging as the first screen for users and user-generated content, which has fueled Snapchat's growth from the get go. New features like City Painter and Sounds, have shown its ability to innovate to be "a clear challenger to TikTok and Instagram Reels."
The company has added more than 180 new Discover channels in Q3, including those by Disney, ESPN, NBC, Viacom, CBS, the NBA and the NFL. It also grabbed onto 90s nostalgia among the over-30s crowd, holding a "Fresh Prince of Bel Air" cast reunion that was watched by more than 35 million.
"With people spending more time online as a result of the pandemic, Snapchat's premium content has proven to be a favorite with users and marketers alike," Ben-Itzhak said.
But marketing analytics firm eMarketer Principal Analyst Debra Aho Williamson said nearly all of Snap's gains come from outside of North America and Europe, and noted its otherwise "lackluster growth" is "not completely surprising" as the increase in users from an early "pandemic bump" abated and growth of new social media users have slowed.
Williamson attributed Snap's "outperformance" to its "rising stature as a direct-response advertising platform" as well as its unique offerings in AR and video advertising. The company has also benefited from an overall increase in ecommerce-related ad spending in digital media during the pandemic, Williamson said.
Spiegel said the adoption of augmented reality, which the company has heavily invested in, is happening "faster than we had previously anticipated."
The company said users created more than 1.5 million "Lenses" in Q3 as part of the platform's "Lens Studio," which allows users to create and share augmented reality lenses. Spiegel said Snapchatters play with Lenses six-times as often as they did last year.
Snap's AR overlays and machine learning capacity has, he said, let luxury brand Gucci leverage its tracking technology to "help people try on their latest sneakers and Snapchat and even buy them directly within the Lens." Spiegel noted that gaming and ecommerce companies in particular have "leaned in" as advertisers on the platform.
Snapchat is becoming increasingly popular among key-audience, Gen Z. Piper Sandler's fall 2020 survey ranked Snapchat as Gen Z's favorite social media platform while Instagram fell from No. 2 to No. 3 and TikTok moved up to No. 2. More than half of the U.S. Gen Z's population watched COVID-related news created by Snap's partners, Spiegel said.
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