![]() ![]() If not, it’s a lesson learned about why taking cash is the only way to go when selling a business. I hope the Wave Optics shareholders who got Snap stock in the first payment have already sold. It’s a challenging goal in today’s bearish environment. If it doesn’t, it’s got more than $5 billion in cash and marketable securities on its balance sheet to complete the terms of the acquisition. The company could have fulfilled the $238.4 million payment by issuing 2.54 million shares instead of 17.94 million it would h ave to issue at current prices.įortunately, Snap’s still got another year to see if it can’t get its share price back to where it was when the deal was struck. Imagine if Snap’s stock had gone up 75% over the past year instead of down. That something was the second payment’s variable structure. Wave Optics likely wouldn’t have agreed to the deal’s structure if they thought Snap’s long-term trajectory was poor.Īs TechCrunch’ s Ingrid Lunden pointed out when the deal was announced a year ago in May, it was “Snap’s biggest acquisition to date in terms of valuation.” Wave Optics had to give up something in return to get the premium valuation. These numbers I’ve mentioned will take a step back in the second quarter, which is unfortunate for former Wave Optics shareholders. That’s five consecutive quarters with increasing adjusted EBITDA. Lastly, the company’s TTM adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) over the past six quarters have increased by 1,412%, from $45.2 million in Q4 2020 to $682.9 million in Q1 2022. If Snap could ever figure out how to accelerate its growth outside North America, the profit potential is significant. North America accounted for 72% of its TTM sales in the first quarter. In Q4 2020, its North American TTM revenue accounted for 71% overall. Sure, the non-GAAP loss of $39.3 million compared to a $2.6 million profit a year ago doesn’t look so hot, but as long as it’s generating more cash than it needs to keep the lights on and the business running, it’s been heading in the right direction.įurthermore, since Q4 2020, it’s grown its TTM sales by 76%, from $2.5 billion to $4.4 billion in Q1 2022. It now has two consecutive quarters with positive TTM FCF. As a result, its trailing 12 months (TTM) FCF was $203.3 million, 314% higher than a year earlier. The SNAP Stock Financials Aren’t That BadĪs the company pointed out in its Q1 2022 press release, it was the third consecutive quarter with positive free cash flow (FCF). But, of course, Spiegel’s latest comments suggest things could get worse before they get better. The company’s underlying financials aren’t all that bad from where I sit. Apple’s (NASDAQ: AAPL) iOS privacy changes haven’t helped. ![]() In addition, during its April conference call, CEO Evan Spiegel said that the first quarter’s ad environment was challenging and unlikely to get better in the second quarter. Its 18% DAU growth rate was 200 basis points less than its growth in Q4 2021 and 400 basis points less than Q1 2021. However, investors weren’t all that impressed by its results. Its daily active users (DAUs) increased 18% year-over-year to 332 million, beating its projection of 329 million at the midpoint of its guidance. I thought its first-quarter results weren’t too bad, even though it missed analyst estimates. Monday’s announcement puts that in jeopardy. What it can do is continue delivering growth. Snap can’t do anything about investor uneasiness. We’ve got a global economy facing high inflation, a brutal war, Covid-19 and supply chain issues that have cut margins, making it impossible for investors to get excited about stocks. I don’t think there’s any doubt that the markets will continue to suffer. That’s unfortunate for Wave Optics’ former shareholders, some of whom are likely still holding SNAP stock at highly discounted levels thanks to a slowdown in Snap’s business. At current prices, one would expect that the company would almost certainly choose the cash component for the second payment. SNAP stock has l ost 75% of its value over the past year. It can be in cash, stock, or a combination of both by May 2023. ![]() It’s Snap’s choice how the remaining $238.4 million is paid out. Snap also paid out $13.7 million in upfront cash. Of the $510.4 million in actual consideration - $31.4 million as compensation for future employment services of Wave Optics’ staff - $252 million was for upfront stock ($53.62 a share). The SNAP Stock Portion of Deal Now Highly Doubtful ![]()
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