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Snap (NYSE:SNAP) warned about its third-quarter revenue being below prior targets and confirmed it will cut 20% of its workforce. After initially selling off on rumors of the headcount reductions, investors liked the news, and shares are up 12% in pre-open trade Wednesday.
The social media company said it now sees year-over-year revenue growth for the third quarter of 2022 through August 29, 2022, of approximately 8%. This would equate to revenue of about $1.16 billion, versus the consensus of $1.07 billion.
The company further announced that it plans to reduce its global headcount by approximately 20% of its global full time employees. Snap said the cuts are part of a broader strategic reprioritization by the company to focus on its top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow.
Snap currently estimates that it will incur pre-tax charges in the range of $110 million to $175 million, primarily consisting of severance and related costs, contract termination costs, and other impairment charges, of which $95 million to $135 million are expected to be future cash expenditures. The majority of these costs are expected to be incurred during the third quarter of 2022.
In addition, CEO Evan Spiegel outlined a proposal to the board of directors to create the role of Chief Operating Officer in order to more closely align our engineering, ad product, and sales functions. Mr. Spiegel made a recommendation to the compensation committee of the board to nominate Jerry Hunter, Senior Vice President of Engineering, age 57, to the newly-created role of Chief Operating Officer.
Also, on August 26, 2022, Jeremi Gorman, Snap’s Chief Business Officer, notified the company that she will leave Snap to pursue a new opportunity.
