Comment by chollida1 | Hacker News Reader

Comment by chollida1 | Hacker News Reader

Personal notes from the earnings reports:

- ARPU $1.05 vs 50c y/y

- rev. $181.7m, est. $185.8m (range $154.0m-$206.0m)

- adj. loss/share 16c, est. loss 15c (loss range 8c-19c)

- Short interest is down to 28% of float, financing rate 3.5%, 2 days to cover

- daily active users (DAUs) rose to 173 million in the quarter ended June 30 from 143 million in the year-earlier quarter and 166 million in the previous quarter. Unfortunately this will be compared with Instagram Stories, now one year old, had more than 250 million users as of Aug. 2, up from about 250 million in June and 200 million in April.

- $5.4M IN `OTHER' REVENUE MOSTLY FROM SPECTACLES

They seem to continue to follow twitter in amazing product awful company meme.

They tell people to look at their non GAAP numbers and then continue to roll out poor non GAAP numbers.

On the holy shit scale of things:

- Stock-based compensation expense ($)2,237,149,000 for the year, that's not a typo!!!!!

- Snap’s revenue was up 153 percent from the same period last year, rising to $181 million. But the amount of money it lost also ballooned, growing about four fold to $443 million.

So they increased revenue by selling dollars for 90 cents. That's not too encouraging.

Their stock just touched $12 in the after markets. You've got to feel a bit for the employee's who were locked up due to earnings.

The Positive:

One positive note, could be that now that they have release their disappointing earnings, the shorts may cover, providing the stock abit of a bump over the next week to allow employee's a tail wind that they can sell their shares into.

- Every Snapchat daily user creates more than 20 messages

- Evan and Bobby have agreed not to sell anymore shares this year

- 250 million snaps are saved to Memories every day

> Stock-based compensation expense ($)2,237,149 for the year, that's not a typo!!!!!

Yep, to be clear that's in thousands of $. So $2.2 billion.

That includes a one-time $637 million RSU grant to the CEO immediately before the IPO, which was 3% of the company. The shares vested immediately at IPO and weren't subject to any continued service requirements.

I'm still struggling to put this number into context. Are they grossly overpaying rank-and-file engineers? Or are there just a lot of players elbow-deep in the cookie jar?

Take this with a grain of salt, but I heard that some new hires at Snapchat were getting $400k+ in equity, so that might be one of the reasons why it's so high.

There were some datapoints on /r/cscareerquestions of $320k of RSUs for new grads starting last year. Although the vesting schedule was 10%, 20%, 30%, 40%.

$320k/4 years sounds doesn't sound ridiculous -- probably on par with Google or FB.

I work at Google Seattle and that seems very high to me but I could just be getting paid less than others. I was an industry hire though

You are definitely paid less or are junior (IC4?). $80k/yr equity is pretty par at this level.

I dont know what IC4 means but I'm an L3? Note also that I'm in Seattle which pays less than Mountain View

IC3 === L3

and as you are in eng it's sometimes called T3

For a new grad that does sound kinda ridiculous. Stock is how you retain good performers, but new grads are usually unknown quantities.

Google was offering $200k over four years to some new grads a few years ago. By not ridiculous I mean compared to the market rates.

Stock is also how you align incentives with the company's interests. That is important for top talent and new grads.

I've heard second-hand reports of larger ones than that, but the vesting was a pain and, well, it wouldn't be worth as much today already. Maybe not the most attractive time to take that bet.

I don't have the experience to judge either, but I found it fascinating what some of the early employees made according to The Information:

> Early employees have stakes larger than many investors, executives and board members. Two early engineers have stakes worth at least $288 million, according to data from 2014 obtained by The Information. It’s possible the two hold even more, because some employees have received additional stock grants since that time. [...] Also doing well was chief strategy officer Imran Khan, whose stock and stock award holdings were worth $374 million at the opening price, according to securities filings.

> Other early employees, such as ad operations executive Philippe Browning, have stakes exceeding $100 million, according to the data. Engineering head Timothy Sehn and hardware chief Steven Horowitz have stakes exceeding $150 million, according to public filings.

it could be related to the large number of acquisitions they've made in the past year or two. a lot of those could have been for equity rather than cash

Well, they had 600 employees as of Dec. 31, 2015. They paid them 65.1 million shares from April 2015 - Dec. 2015, which is an average of 108,500 shares per employee. Using the $17 IPO price, that's an average 2015 compensation of $1.8 million per employee that year.

They had 1,859 employees by Dec. 31, 2016, and issued an additional 105 million shares in 2016, so that's an average of ~$960k per employee paid in 2016.

Those are averages, of course. But I think a lot of people made a lot of money this year.

I recall that Snapchat uses backloaded vesting (10/20/30/40), unlike most startups, so perhaps that explains why this figure seems unusually large. I don't necessarily understand the details of Black–Scholes but I think it allocates the expense according to the vesting schedule. So if I'm right, we're seeing the lion's share of those early grants (around 2012-2013).

Anyone want to chime in on how exactly this expense is calculated? I feel silly in that I don't even know if it's supposed to include the gain in value in the current reporting period, as opposed to just the FMV at grant date spread over the vesting period.

You won't need Black Scholes for these. Black Scholes is just a formula to estimate the value of a stock option. It doesn't say anything about when to allocate expenses, that's governed by GAAP accounting rules.

Under US GAAP, the value of stock-based compensation has to be recorded at the fair value at the date of grant, not date of vest. The date of vest is used to decide when the award shows up as an expense.

If a company is public, the value of an RSUs is probably just going to be the trading price. Snap's RSUs were a little more complicated because the grant dates of the pre-IPO awards were before the company was public, so they had to estimate the grant date fair value at the time using third party valuations, recent stock issuances to investors, and internal valuation techniques.

If you look at their initial SEC filing, Snap says it issued 169.9 million RSUs from April 2015 - December 2016, and estimated the values to range from $15.36 - $16.33. The weighted average value of those shares was $2.7 billion.

That's valuation. Now let's talk expense recognition. Those awards only show up in the income statement as an expense once they are expected to actually vest, after subtracting out expected forfeitures. That's why only about half of the $2.7 billion I mentioned above showed up so far in their financial statements so far. The rest of it will show up over the next three years.

He is going to have quite the tax bill this year :-)

If they'd increased revenue by selling dollars for 90 cents that only would have cost $10.9m, much cheaper than the $443m loss. Maybe they should try that next time.

Yes. How does 'snap' lose $443 million? How is that even possible given it's a simple iphone app (sure android too). The only explanation is piling cash into massive fires 24/7.

Well for starters they agreed to spend $400,000,000 a year with Google Cloud. On a quarterly basis they are giving Google more than half of their revenue.

It's quite an impressive amount. I wonder what it would have cost them to have their own hardware and a small team of engineers to run it. I'm guessing maybe 10% of that?

For starters, roughly $200 mil was spent on acquisitions.

That wouldn't be an expense though, unless they wrote it down. Nitpicking, I know. What's $200MM after all ;)

So basically their cost of revenue is going up? They need to spend more to earn every dollar this year compared to last year, which makes reporting their overall revenue feel very misleading!

I don't understand the shock at the stock-based comp expense. Surely a couple of million is a drop in the ocean. What have I missed?

That's actually in billions, typically in financial reports the 1000's are dropped to make the numbers easier to read,my fault. I've made this clear now.

Gotcha, thanks

that's over 2 BILLION.

If it isnt a typo... its 2bn. Not 2mm

$2.2 billion is 13.5% of the company, and that's just in new stock grants provided as compensation over the last six months.

No, it's for the year.

And the way I understand it, they took a one time charge during this year for all stock based compensation ever. So it's really all stock based compensation ever.

They did not hand out $2.2bn in stock in 6 months.

The $637 million (or $750 million depending on when/how you look at it) was definitely handed out specifically as a bonus for taking the company public:

https://www.recode.net/2017/2/2/14465646/evan-spiegel-snap-i...

Fair enough, I did some more digging.

$1.99 billion in stock-based compensation was recognized in the first 3 months of the year.

$637 million of that was given to the CEO according to his October 2016 employment contract, which all vested at IPO in March 2017.

Then there's the pre-IPO employee RSUs. Those typically are subject to 4 years of time vesting, as well as a performance requirement that triggered when the company IPOed.

$1.3 billion of those were recognized as of March 31 2017 because they met their performance vesting requirement (IPO-ing). Those were probably the shares that had already satisfied the time-vesting requirement.

The company still hasn't recognized an additional $1.3 billion in stock-based compensation that will be recognized on its financial statements over a weighted-average period of the next 3.1 years. Those were probably issued relatively recently since they haven't met their time vesting requirement yet.

Remember the Simpsons episode where the CEO of the Internet company invites everyone to treat themselves to some free shares?

Three zeros (a factor of 1000)

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