Snapchat maker Snap is the latest tech company to conduct layoffs with its newly announced plans for a 10% workforce reduction, the company said on Monday. The layoffs would impact roughly 500-plus employees, based on headcount figures Snap released in November 2023, when it saw small-scale layoffs of its then north of 5,000 employees.
The layoffs were announced in an SEC filing, where Snap explained the move was necessary to support its further growth.
“In order to best position our business to execute on our highest priorities, and to ensure we have the capacity to invest incrementally to support our growth over time, we have made the difficult decision to restructure our team,” the filing stated. “As a result, we currently estimate that we will incur pre-tax charges in the range of $55 million to $75 million, primarily consisting of severance and related costs, and other charges, of which $45 million to $55 million are expected to be future cash expenditures.”
Snap added the majority of those costs would be incurred in the first quarter of 2024, though local law and other factors may see some costs extending into Q2. The company is due to report its earnings after the market’s close on February 6.
“We are reorganizing our team to reduce hierarchy and promote in-person collaboration,” noted a Snap spokesperson in a statement provided to TechCrunch. “We are focused on supporting our departing team members and we are very grateful for their hard work and many contributions to Snap,” they added.
This second wave of layoffs in a matter of months follows a smaller headcount reduction late last year when Snap reorganized its product team, again with a focus on reducing layers and increasing decision-making speed, the company said at the time. Snap’s VP of Engineering, Nima Khajehnouri, also departed then, alongside fewer than 20 others in the product division. Snap last September shuttered its enterprise services division after less than a year. The company’s investments in hardware products, like Snap Spectacles and its Pixy drone, have also not paid off, with the latter discontinued and recently recalled over a fire risk.
In 2022, Snap cut 20% of staff amid a larger restructuring.
Snap’s stock price initially jumped after reporting its Q3 earnings in October, when it beat analysts’ estimates of both revenue and earnings per share, at $1.19 billion and 2 cents, ahead of estimates of $1.11 billion and a 4-cent loss. The company came in higher on user growth, as well, reporting 406 million global daily active users, above the 405.7 million expected. However, the company’s net loss had widened by 2% year-over-year to $368 million in the quarter.
Despite the earnings beat, Snap had cautioned investors that the ad market remained volatile, noting that it had seen some of its clients’ ad campaigns put on pause. The company has a 0.6% share of the global digital ad market, according to research provider Insider Intelligence. The firm estimates that Snap will make $4.12 billion in net worldwide ad revenue in 2024.
“The layoffs don’t bode well for the state of Snap’s business ahead of its Q4 2023 earnings,” said principal analyst Jasmine Enberg. “Meta’s blockbuster report is a tough act for Snap to follow, and Snap is likely trying to garner some goodwill with investors, who rewarded its competitor for its cost-cutting measures and its continued “do more with less” mantra going into 2024. We expect Snap to report a 2023 year-over-year ad revenue decline of 3.3%,” Enberg added.
As of Q3, Snap had 5,367 employees, per its Q3 press release.
Business Insider reported Snap’s layoffs began on Friday when several dozen staffers were let go ahead of a company-wide announcement. More job cuts were expected to come this week, the report said.
The Information says the layoffs include some senior staff, including director of content Sam Corrao Clanon; Ding Zhou, vice president of content engineering; and Konstantinos Papamiltiadis, vice president of platform partnerships.
Sarah Perez can be reached at sarahp@techcrunch.com or via Signal (415) 234-3994.
Source @TechCrunch
