Snap Inc. Announces First Quarter 2024 Financial Results

First quarter revenue increased 21% year-over-year to $1,195 million

Daily Active Users increased 10% year-over-year to 422 million

First quarter operating cash flow of $88 million and Free Cash Flow of $38 million

Snap Inc. (NYSE:SNAP) today announced financial results for the quarter ended March 31, 2024.

"The value we provide our community and advertising partners has translated into improved financial performance," said Evan Spiegel, CEO. "Our large, growing, and hard-to-reach community, brand-safe environment, and full-funnel advertising solutions have made us an increasingly important partner for businesses of all sizes."

Q1 2024 Financial Summary

• Revenue was $1,195 million, compared to $989 million in the prior year, an increase of 21% year-over-year.
• Net loss was $305 million, compared to $329 million in the prior year.
• Adjusted EBITDA was $46 million, compared to $1 million in the prior year.
• Operating cash flow was $88 million, compared to $151 million in the prior year.
• Free Cash Flow was $38 million, compared to $103 million in the prior year.

Q1 2024 Summary & Key Highlights

We grew and deepened our engagement with our community:

• DAUs were 422 million in Q1 2024, an increase of 39 million, or 10%, year-over-year.
• Total time spent watching Spotlight content increased more than 125% year-over-year.
• The growth in the Snap Star program has been an important driver of engagement in North America, with total time spent watching Stories from Snap Stars growing more than 55% year-over-year in North America.
• We onboarded over 1,500 Snap Stars in Q1, which has helped generate quarter-over-quarter growth in Story posts, Spotlight posts, and Stories time spent for Snap Stars globally.
• We introduced new tools to help our community make more creative Snaps, including new Creative Templates, the ability to post longer videos, and access to AI-powered AR Lens creation.

We are focused on accelerating and diversifying our revenue growth:

• Snapchat+ subscribers more than tripled year-over-year, surpassing 9 million subscribers in Q1.
• The number of small and medium sized advertisers on Snapchat increased 85% year-over-year.
• Ongoing momentum with our 7-0 Pixel Purchase optimization model led to a more than 75% increase in purchase related conversions year-over-year.
• We launched a new and improved version of Conversions API (CAPI) available to all advertisers that offers easier set up with reduced integration times.
• We partnered with Snowflake to enable advertisers to easily implement our CAPI solutions without needing to build a bespoke back-end integration.
• Our improvements to CAPI and improved collaboration with advertisers has resulted in CAPI integrations growing approximately 300% year-over-year in Q1 2024.
• We launched Sponsored AR Filters, our new AR ad offering that expands advertisers' reach via the Snapchat Camera and enables Snapchatters to overlay sponsored AR content on their Snaps after a photo or video is captured.
• We announced partnerships with Traackr, Lumen Research, OMD, Amplified Intelligence, and Fospha to empower advertisers with more campaign tools and insights.
• We announced two new brand safety solutions for advertisers: a third-party measurement product in partnership with Integral Ad Science, a leading global media measurement and optimization platform, to provide advertisers with increased transparency across their Snapchat campaigns, and a first-party tool that allows advertisers greater control over where their ads appear.

We invested in our augmented reality platform:

• We continue to invest in Generative AI models and automation for the creation of ML and AI Lenses, which contributed to the number of ML and AI Lenses viewed by Snapchatters increasing by more than 50% year-over-year.
• We invested in relationship-centered AR Formats that drove outsized sharing among US Snapchatters including "Friend Lenses" that feature friends in Quizzes and other experiences, and "Q&A Lenses" that prompt Snapchatters to send fun text and image responses to their Friends.
• We implemented an improved AR Carousel ranking model that refreshes AR lenses more frequently, making it easier to discover new Lenses, driving a more than 50% increase in the number of new Lenses seen in the carousel by Snapchatters since launch.
• We integrated a new AI Assistant in Lens Studio that answers developer questions based on our documentation and tutorials to guide developers and help build Lenses more easily.
• We launched a new Compression tool in Lens Studio to easily reduce the size of assets and optimize Lenses in order to improve the Lens creation experience on Snapchat.
• We launched an Animation Curve Editor in Lens Studio, a new interface for developers to edit animations inside Lens Studio — the first of many foundational animation tools coming soon.
• At Super Bowl LVIII, the NFL integrated Snapchat's Camera Kit technology at Allegiant Stadium in Las Vegas — the first time a Super Bowl host stadium has integrated our technology.

Q2 2024 Outlook

As we enter Q2, we anticipate continued growth of our global community, and as a result, our Q2 guidance is built on the assumption that DAU will be approximately 431 million in Q2. We are focused on executing against our roadmap to deliver improvements to our DR advertising platform to drive improved results for our advertising partners and accelerate topline growth. Our Q2 guidance range for revenue is $1,225 million to $1,255 million, implying year-over-year revenue growth of 15% to 18%. Given the revenue range above, and our investment plans for the quarter ahead, we estimate that Adjusted EBITDA will be between $15 million and $45 million in Q2.

Conference Call Information

Snap Inc. will host a conference call to discuss the results at 2:30 p.m. Pacific / 5:30 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call.

Snap Inc. uses its websites (including snap.com and investor.snap.com) as means of disclosing material non-public information and for complying with its disclosure obligation under Regulation FD.

Definitions

Free Cash Flow is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment.

Common shares outstanding plus shares underlying stock-based awards includes common shares outstanding, restricted stock units, restricted stock awards, and outstanding stock options.

Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time.

A Daily Active User (DAU) is defined as a registered and logged-in Snapchat user who visits Snapchat through our applications or websites at least once during a defined 24-hour period. We calculate average DAUs for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter. At the beginning of the first quarter of 2024, we updated the definition of DAU to include web platform use. Incremental DAU from web platform use has not been material prior to this update or in the first quarter of 2024.

Average revenue per user (ARPU) is defined as quarterly revenue divided by the average DAUs.

A Monthly Active User (MAU) is defined as a registered and logged-in Snapchat user who visits Snapchat through our applications or websites at least once during the 30-day period ending on the calendar month-end. We calculate average Monthly Active Users for a particular quarter by calculating the average of the MAUs as of each calendar month-end in that quarter. At the beginning of the first quarter of 2024, we updated the definition of MAU to include web platform use. Incremental MAU from web platform use has not been material prior to this update or in the first quarter of 2024.

Note: For adjustments and additional information regarding the non-GAAP financial measures and other items discussed, please see "Non-GAAP Financial Measures," "Reconciliation of GAAP to Non-GAAP Financial Measures," and "Supplemental Financial Information and Business Metrics."

About Snap Inc.

Snap Inc. is a technology company. We believe the camera presents the greatest opportunity to improve the way people live and communicate. We contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together. For more information, visit snap.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release, including statements regarding guidance, our future results of operations or financial condition, future stock repurchase programs or stock dividends, business strategy and plans, user growth and engagement, product initiatives, objectives of management for future operations, and advertiser and partner offerings, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "going to," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. We caution you that the foregoing may not include all of the forward-looking statements made in this press release.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this press release primarily on our current expectations and projections about future events and trends, including our financial outlook, macroeconomic uncertainty, and geo-political conflicts, that we believe may continue to affect our business, financial condition, results of operations, and prospects. These forward-looking statements are subject to risks and uncertainties related to: our financial performance; our ability to attain and sustain profitability; our ability to generate and sustain positive cash flow; our ability to attract and retain users, partners, and advertisers; competition and new market entrants; managing our growth and future expenses; compliance with new laws, regulations, and executive actions; our ability to maintain, protect, and enhance our intellectual property; our ability to succeed in existing and new market segments; our ability to attract and retain qualified team members and key personnel; our ability to repay or refinance outstanding debt, or to access additional financing; future acquisitions, divestitures, or investments; and the potential adverse impact of climate change, natural disasters, health epidemics, macroeconomic conditions, and war or other armed conflict, as well as risks, uncertainties, and other factors described in "Risk Factors" and elsewhere in our most recent periodic report filed with the U.S. Securities and Exchange Commission, or SEC, which is available on the SEC's website at www.sec.gov. Additional information will be made available in our periodic report that will be filed with the SEC for the period covered by this press release and other filings that we make from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, including future developments related to geo-political conflicts and macroeconomic conditions, except as required by law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.

We use the non-GAAP financial measure of non-GAAP net income (loss), which is defined as net income (loss), excluding amortization of intangible assets; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; certain other items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP net income (loss) and weighted average diluted shares are then used to calculate non-GAAP diluted net income (loss) per share. Similar to Adjusted EBITDA, we believe these measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses we exclude in the measure.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see "Reconciliation of GAAP to Non-GAAP Financial Measures."

Snap Inc., "Snapchat," and our other registered and common law trade names, trademarks, and service marks are the property of Snap Inc. or our subsidiaries.

Total depreciation and amortization expense by function:

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