What happened

Shares of Snap (NYSE:SNAP) have gotten demolished today, down by 20% as of 12:30 p.m. EDT, after the company reported disappointing first-quarter earnings results. The controversial redesign of the core Snapchat app has taken its toll.

So what

Revenue in the first quarter rose 54% to $230.7 million, which led to a non-GAAP net loss of $0.17 per share. That top line was well below the consensus estimate of $244.5 million in sales, while the bottom-line result was in line with the Street's expectations. Adjusted EBITDA was negative $217.9 million, and Snap burned through $232 million in operating cash flow.

Spectacles 2 on a beach

Snap is still pushing into hardware with Spectacles 2. Image source: Snap.

Perhaps most importantly, daily active user (DAU) growth fell to its lowest rate ever, increasing just 2% sequentially to 191 million. That's a stark reversal from the strong DAU growth that the company posted in the fourth quarter, and attributable to the redesign.

Now what

In prepared remarks, CEO Evan Spiegel acknowledged the adverse impact, saying, "Our redesign created some headwinds in our revenue this quarter by disrupting user behavior and creating some apprehension among our advertising partners." Chief Strategy Officer Imran Khan blamed some of the negative media coverage, suggesting that the negativity influenced advertiser purchasing decisions.

Last week, the company had started testing a new version of the redesign that largely reversed some of the changes. That news rattled investors, as it suggested that the redesign was already weighing on the business. With Snap reporting dismal results in the first quarter, investors are now getting confirmation that the new interface is indeed hurting engagement and ad spending.

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