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Snap Inc. Announces Third Quarter 2022 Financial Results

10/20/2022

Daily Active Users increased 19% year-over-year to 363 million

Revenue increased 6% year-over-year to $1,128 million

Operating cash flow was $56 million and Free Cash Flow was $18 million

SANTA MONICA, Calif.--(BUSINESS WIRE)-- Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended September 30, 2022.

"This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality," said Evan Spiegel, CEO. "The growth of our community to 363 million daily active users, an increase of 19% year-over-year, continues to expand our long-term opportunity as we navigate this volatile macroeconomic environment."

Snap Inc. also announced today its board of directors has authorized a stock repurchase program of up to $500 million of its Class A common stock. Repurchases of the Class A common stock may be made on a discretionary basis from time to time, either through open market transactions (including through Rule 10b5-1 trading plans) or through privately negotiated transactions in accordance with applicable securities laws. The timing and actual number of shares repurchased will depend on a variety of factors, including stock price, trading volume, market and economic conditions, and other general business considerations. Repurchases under the program have been authorized for the next 12 months but the program may be modified, suspended, or terminated at any time.

The goal of the program is to utilize the company’s strong balance sheet to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture.

Repurchases under this program will be funded from existing cash and cash equivalents. As of September 30, 2022, Snap had $4.4 billion in cash, cash equivalents, and marketable securities.

Q3 2022 Financial Summary

  • Revenue increased 6% to $1,128 million, compared to the prior year.
  • Net loss was $360 million, including restructuring charges of $155 million, compared to $72 million in the prior year.
  • Adjusted EBITDA was $73 million, compared to $174 million in the prior year.
  • Operating cash flow was $56 million, compared to $72 million in the prior year.
  • Free Cash Flow was $18 million, compared to $52 million in the prior year.

 

Three Months Ended
September 30,

 

 

Percent

 

 

Nine Months Ended
September 30,

 

 

Percent

 

 

2022

 

 

2021

 

 

Change

 

 

2022

 

 

2021

 

 

Change

 

(Unaudited)

(in thousands, except per share amounts)

 

 

 

 

 

Revenue

$

1,128,476

 

 

$

1,067,471

 

 

 

6

%

 

$

3,302,112

 

 

$

2,819,163

 

 

 

17

%

Operating loss

$

(435,242

)

 

$

(180,824

)

 

 

(141

)%

 

$

(1,107,709

)

 

$

(676,942

)

 

 

(64

)%

Net loss

$

(359,502

)

 

$

(71,959

)

 

 

(400

)%

 

$

(1,141,193

)

 

$

(510,505

)

 

 

(124

)%

Adjusted EBITDA(1)

$

72,640

 

 

$

174,199

 

 

 

(58

)%

 

$

144,298

 

 

$

289,893

 

 

 

(50

)%

Net cash provided by (used in) operating activities

$

55,945

 

 

$

71,552

 

 

 

(22

)%

 

$

59,323

 

 

$

107,352

 

 

 

(45

)%

Free Cash Flow(2)

$

18,109

 

 

$

51,716

 

 

 

(65

)%

 

$

(23,058

)

 

$

62,042

 

 

 

(137

)%

Diluted net loss per share attributable to common stockholders

$

(0.22

)

 

$

(0.05

)

 

 

(347

)%

 

$

(0.70

)

 

$

(0.33

)

 

 

(113

)%

Non-GAAP diluted net income (loss) per share(3)

$

0.08

 

 

$

0.17

 

 

 

(52

)%

 

$

0.04

 

 

$

0.27

 

 

 

(86

)%

Common shares outstanding plus shares underlying stock-based awards

 

1,700,640

 

 

 

1,697,879

 

 

 

0

%

 

 

1,700,640

 

 

 

1,697,879

 

 

 

0

%

(1)

See page 11 for reconciliation of net loss to Adjusted EBITDA. In the third quarter of 2022, we initiated a strategic reprioritization plan, which included a reduction of our global employee headcount by approximately 20%. Restructuring charges in the third quarter of 2022 were $154.6 million, composed primarily of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, and contract termination charges.

(2)

See page 11 for reconciliation of net cash provided by (used in) operating activities to Free Cash Flow.

(3)

See page 12 for reconciliation of diluted net loss per share to non-GAAP diluted net income (loss) per share.

 

Q3 2022 Summary & Key Highlights

We grew and deepened our engagement with our community:

  • DAUs were 363 million in Q3 2022, an increase of 57 million, or 19% year-over-year.
  • DAUs increased sequentially and year-over-year in each of North America, Europe, and Rest of World.
  • Total time spent watching Spotlight content grew 55% year-over-year.
  • Daily average time spent for Snapchatters 35 and older watching Shows and publisher content increased by more than 40% year-over-year.
  • We expanded Snapchat for Web, making it available to our entire community to stay connected with friends and family when they’re at their computers.
  • We introduced Snapchat’s Family Center, a new tool to help parents gain insight into who their teens are chatting with on Snapchat while protecting their privacy.
  • We introduced our new Lock Screen Widget, available now with iOS16, which makes conversations with friends accessible with one tap from the lock screen.
  • We launched Snapchat Sounds Creator Fund, providing monthly grants designed to recognize emerging, independent artists for the critical role they play in driving video creations, inspiring internet trends, and defining cultural moments.
  • We announced the inaugural class of our Black Creator Accelerator, our first accelerator program designed to support and spotlight emerging Black creators on their journey to make content creation a full-time career.

We are focused on expanding and diversifying our revenue growth:

  • Snapchat+, our subscription service for exclusive, experimental, and pre-release features, reached over 1.5 million paying subscribers in Q3 and is now offered in over 170 countries.
  • We joined Walmart Connect as an Innovation Partner, enabling advertisers to reach our large and engaged audience through our video and augmented reality ad formats.
  • Clothing retailer American Eagle, leveraged catalog-powered Shopping Lenses that allowed Snapchatters to engage with and even purchase individual items in augmented reality, driving more than 11 million impressions with an average playtime of nearly 30 seconds.
  • Furniture retailer Skeidar developed a Lens where Snapchatters could explore different types of outdoor garden furniture in AR, resulting in an increase of +21 points in brand favorability and +14 points in action intent, which in turn drove a 14x increase in return on ad spend.
  • We continued investing in Dynamic Ads for Commerce and Travel, focusing on catalog onboarding experience improvements, machine learning improvements in ranking and delivery, and ad format updates that improve outcomes for advertisers.
  • We continued investments in ranking and optimization to deliver measurable business outcomes to advertisers. We rolled out more than 15 new machine learning models, which improved performance, pricing, and conversion rate of App and Web-related bidding goals.
  • We improved Snap Pixel performance and Conversions API (CAPI) coverage and the quality of server-to-server integrations by collaborating closely with customers and starting a program focused on our enterprise clients.
  • We launched the capability to execute 2-layered Lift tests, which enables advertisers to measure aggregate ROI while simultaneously running A/B testing. We also improved in-app survey sample collection, which enables brand advertisers to more confidently measure the returns of their brand campaigns.
  • We invested in our cross-border solutions which enable global advertisers to improve the personalization of ads for Snapchatters through multi-language ad sets and new first party location targeting options.

We invested in our augmented reality platform:

  • We unveiled several new features and capabilities in our latest Lens Studio release, including Spatial Persistence, Two Hands Tracking, Voice ML’s Question Answering Service, and Face Occlusion.
  • We made significant strides in the expansion and testing of our AR creation suite, and we have now onboarded over 15 new beta partners who are already designing Shopping Lenses created with our AR Image technology.
  • To kick off the LA Rams season, we partnered with the LA Rams and SoFi Stadium to bring Snapchat Lenses to arena screens through a unique Camera Kit integration that applies AR experiences within the venue and broadcast environments, in 4K and real time.
  • In celebration of Vogue’s 130th anniversary, we collaborated on several custom-built AR experiences for Snapchat x Vogue World in New York, leveraging our latest Snap AR technology, including sky segmentation and surface tracking, to heighten the realism of the effects.
  • To celebrate HBO’s premiere of House of the Dragon, we worked with Lens Creators around the world to build custom Landmarkers that brought the show’s dragons off the TV and into the sky.
  • We partnered with the German government to raise awareness about the climate crisis and the overwhelming amount of plastic waste produced each year by launching two new AR Lenses that help give the Snapchat community a voice on this important topic.

Financial Guidance

Given uncertainties related to the operating environment, we are not providing our expectations for revenue or adjusted EBITDA for the fourth quarter of 2022.

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 non-cash or non-recurring items impacting net income (loss) from time to time.

A Daily Active User (DAU) is defined as a registered Snapchat user who opens the Snapchat application 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.

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 Snapchat user who opens the Snapchat application 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.

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 camera company. We believe that reinventing the camera represents our 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, our stock repurchase program, future 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, geo-political conflicts, and the COVID-19 pandemic, 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, publishers, and advertisers; competition and new market entrants; managing our international expansion and 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 and key personnel; our ability to repay outstanding debt; 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 Snap Inc.’s 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, the COVID-19 pandemic, 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 non-cash or non-recurring 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 non-cash or non-recurring 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.

SNAP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(359,502

)

 

$

(71,959

)

 

$

(1,141,193

)

 

$

(510,505

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

36,291

 

 

 

32,510

 

 

 

153,682

 

 

 

84,278

 

Stock-based compensation

 

342,959

 

 

 

300,898

 

 

 

937,213

 

 

 

794,571

 

Amortization of debt issuance costs

 

1,835

 

 

 

1,109

 

 

 

5,028

 

 

 

3,301

 

Losses (gains) on debt and equity securities, net

 

(75,778

)

 

 

(121,007

)

 

 

15,559

 

 

 

(223,527

)

Induced conversion expense related to convertible notes

 

 

 

 

4,536

 

 

 

 

 

 

41,538

 

Other

 

12,133

 

 

 

(732

)

 

 

16,337

 

 

 

4,019

 

Change in operating assets and liabilities, net of effect of

acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net of allowance

 

17,410

 

 

 

(132,908

)

 

 

62,436

 

 

 

(178,044

)

Prepaid expenses and other current assets

 

7,044

 

 

 

(4,191

)

 

 

(32,114

)

 

 

(15,562

)

Operating lease right-of-use assets

 

17,922

 

 

 

11,470

 

 

 

53,205

 

 

 

35,217

 

Other assets

 

(5,095

)

 

 

(4,204

)

 

 

(12,633

)

 

 

(5,440

)

Accounts payable

 

9,381

 

 

 

11,084

 

 

 

60,442

 

 

 

17,430

 

Accrued expenses and other current liabilities

 

60,036

 

 

 

56,687

 

 

 

(17,184

)

 

 

89,726

 

Operating lease liabilities

 

(12,116

)

 

 

(13,911

)

 

 

(46,431

)

 

 

(35,265

)

Other liabilities

 

3,425

 

 

 

2,170

 

 

 

4,976

 

 

 

5,615

 

Net cash provided by (used in) operating activities

 

55,945

 

 

 

71,552

 

 

 

59,323

 

 

 

107,352

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(37,836

)

 

 

(19,836

)

 

 

(82,381

)

 

 

(45,310

)

Purchases of strategic investments

 

(6,000

)

 

 

(735

)

 

 

(12,350

)

 

 

(33,510

)

Sales of strategic investments

 

 

 

 

 

 

 

63,276

 

 

 

36,435

 

Cash paid for acquisitions, net of cash acquired

 

(19,650

)

 

 

(37,375

)

 

 

(31,658

)

 

 

(176,591

)

Purchases of marketable securities

 

(821,830

)

 

 

(609,176

)

 

 

(2,732,266

)

 

 

(1,896,766

)

Sales of marketable securities

 

39,158

 

 

 

19,999

 

 

 

51,917

 

 

 

367,555

 

Maturities of marketable securities

 

923,871

 

 

 

492,921

 

 

 

1,820,442

 

 

 

2,006,744

 

Other

 

(12,648

)

 

 

(1,000

)

 

 

(18,141

)

 

 

(1,335

)

Net cash provided by (used in) investing activities

 

65,065

 

 

 

(155,202

)

 

 

(941,161

)

 

 

257,222

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible notes, net of issuance costs

 

 

 

 

 

 

 

1,483,500

 

 

 

1,137,227

 

Purchase of capped calls

 

 

 

 

 

 

 

(177,000

)

 

 

(86,825

)

Proceeds from the exercise of stock options

 

217

 

 

 

4,045

 

 

 

3,871

 

 

 

11,755

 

Payments of debt issuance costs

 

 

 

 

 

 

 

(3,006

)

 

 

 

Repurchases of Class A non-voting common stock

 

(500,513

)

 

 

 

 

 

(500,513

)

 

 

 

Net cash provided by (used in) financing activities

 

(500,296

)

 

 

4,045

 

 

 

806,852

 

 

 

1,062,157

 

Change in cash, cash equivalents, and restricted cash

 

(379,286

)

 

 

(79,605

)

 

 

(74,986

)

 

 

1,426,731

 

Cash, cash equivalents, and restricted cash, beginning of period

 

2,299,023

 

 

 

2,052,879

 

 

 

1,994,723

 

 

 

546,543

 

Cash, cash equivalents, and restricted cash, end of period

$

1,919,737

 

 

$

1,973,274

 

 

$

1,919,737

 

 

$

1,973,274

 

Supplemental disclosures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for income taxes, net

$

1,482

 

 

$

1,940

 

 

$

8,966

 

 

$

16,228

 

Cash paid for interest

$

4,186

 

 

$

3,508

 

 

$

8,191

 

 

$

10,249

 

SNAP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

$

1,128,476

 

 

$

1,067,471

 

 

$

3,302,112

 

 

$

2,819,163

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

466,757

 

 

 

443,473

 

 

 

1,334,031

 

 

 

1,301,095

 

Research and development

 

564,258

 

 

 

412,021

 

 

 

1,524,858

 

 

 

1,131,272

 

Sales and marketing

 

270,336

 

 

 

217,526

 

 

 

823,596

 

 

 

547,536

 

General and administrative

 

262,367

 

 

 

175,275

 

 

 

727,336

 

 

 

516,202

 

Total costs and expenses

 

1,563,718

 

 

 

1,248,295

 

 

 

4,409,821

 

 

 

3,496,105

 

Operating loss

 

(435,242

)

 

 

(180,824

)

 

 

(1,107,709

)

 

 

(676,942

)

Interest income

 

18,445

 

 

 

1,257

 

 

 

29,899

 

 

 

3,645

 

Interest expense

 

(5,425

)

 

 

(4,031

)

 

 

(16,147

)

 

 

(13,626

)

Other income (expense), net

 

71,961

 

 

 

112,631

 

 

 

(22,486

)

 

 

176,971

 

Loss before income taxes

 

(350,261

)

 

 

(70,967

)

 

 

(1,116,443

)

 

 

(509,952

)

Income tax benefit (expense)

 

(9,241

)

 

 

(992

)

 

 

(24,750

)

 

 

(553

)

Net loss

$

(359,502

)

 

$

(71,959

)

 

$

(1,141,193

)

 

$

(510,505

)

Net loss per share attributable to Class A, Class B, and Class C common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.22

)

 

$

(0.05

)

 

$

(0.70

)

 

$

(0.33

)

Diluted

$

(0.22

)

 

$

(0.05

)

 

$

(0.70

)

 

$

(0.33

)

Weighted average shares used in computation of net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

1,608,523

 

 

 

1,580,966

 

 

 

1,619,885

 

 

 

1,543,568

 

Diluted

 

1,608,523

 

 

 

1,580,966

 

 

 

1,619,885

 

 

 

1,543,568

 

SNAP INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

 

 

September 30,
2022

 

 

December 31,
2021

 

 

 

(unaudited)

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

1,918,845

 

 

$

1,993,809

 

 

Marketable securities

 

2,510,107

 

 

 

1,699,076

 

 

Accounts receivable, net of allowance

 

992,747

 

 

 

1,068,873

 

 

Prepaid expenses and other current assets

 

115,973

 

 

 

92,244

 

 

Total current assets

 

5,537,672

 

 

 

4,854,002

 

 

Property and equipment, net

 

240,752

 

 

 

202,644

 

 

Operating lease right-of-use assets

 

383,037

 

 

 

322,252

 

 

Intangible assets, net

 

229,128

 

 

 

277,654

 

 

Goodwill

 

1,632,796

 

 

 

1,588,452

 

 

Other assets

 

261,809

 

 

 

291,302

 

 

Total assets

$

8,285,194

 

 

$

7,536,306

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

$

188,605

 

 

$

125,282

 

 

Operating lease liabilities

 

57,913

 

 

 

52,396

 

 

Accrued expenses and other current liabilities

 

893,414

 

 

 

674,108

 

 

Total current liabilities

 

1,139,932

 

 

 

851,786

 

 

Convertible senior notes, net

 

3,740,804

 

 

 

2,253,087

 

 

Operating lease liabilities, noncurrent

 

384,495

 

 

 

325,509

 

 

Other liabilities

 

119,701

 

 

 

315,756

 

 

Total liabilities

 

5,384,932

 

 

 

3,746,138

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Class A non-voting common stock, $0.00001 par value. 3,000,000 shares

authorized, 1,402,916 shares issued, 1,351,604 shares outstanding at September

30, 2022, and 3,000,000 shares authorized, 1,364,887 shares issued and

outstanding at December 31, 2021.

 

14

 

 

 

14

 

 

Class B voting common stock, $0.00001 par value. 700,000 shares authorized,

22,638 shares issued and outstanding at September 30, 2022, and 700,000 shares

authorized, 22,769 shares issued and outstanding at December 31, 2021.

 

 

 

 

 

 

Class C voting common stock, $0.00001 par value. 260,888 shares authorized,

231,627 shares issued and outstanding at September 30, 2022, and 260,888

shares authorized, 231,627 shares issued and outstanding at December 31, 2021.

 

2

 

 

 

2

 

 

Treasury stock, at cost. 51,312 shares of Class A non-voting common stock at

September 30, 2022.

 

(500,513

)

 

 

 

 

Additional paid-in capital

 

12,859,689

 

 

 

12,069,097

 

 

Accumulated deficit

 

(9,425,659

)

 

 

(8,284,466

)

 

Accumulated other comprehensive income (loss)

 

(33,271

)

 

 

5,521

 

 

Total stockholders’ equity

 

2,900,262

 

 

 

3,790,168

 

 

Total liabilities and stockholders’ equity

$

8,285,194

 

 

$

7,536,306

 

 

SNAP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Free Cash Flow reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

55,945

 

 

$

71,552

 

 

$

59,323

 

 

$

107,352

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(37,836

)

 

 

(19,836

)

 

 

(82,381

)

 

 

(45,310

)

Free Cash Flow

$

18,109

 

 

$

51,716

 

 

$

(23,058

)

 

$

62,042

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Adjusted EBITDA reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(359,502

)

 

$

(71,959

)

 

$

(1,141,193

)

 

$

(510,505

)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(18,445

)

 

 

(1,257

)

 

 

(29,899

)

 

 

(3,645

)

Interest expense

 

5,425

 

 

 

4,031

 

 

 

16,147

 

 

 

13,626

 

Other (income) expense, net

 

(71,961

)

 

 

(112,631

)

 

 

22,486

 

 

 

(176,971

)

Income tax (benefit) expense

 

9,241

 

 

 

992

 

 

 

24,750

 

 

 

553

 

Depreciation and amortization

 

34,068

 

 

 

32,510

 

 

 

151,459

 

 

 

84,278

 

Stock-based compensation expense

 

312,690

 

 

 

300,898

 

 

 

906,944

 

 

 

794,571

 

Payroll and other tax expense related to stock-based compensation

 

6,561

 

 

 

21,615

 

 

 

39,041

 

 

 

87,986

 

Restructuring charges (1)

 

154,563

 

 

 

 

 

 

154,563

 

 

 

 

Adjusted EBITDA

$

72,640

 

 

$

174,199

 

 

$

144,298

 

 

$

289,893

 

(1)

Restructuring charges in the third quarter of 2022 were composed primarily of severance and related charges of $91.1 million, stock-based compensation expense, lease exit and related charges, impairment charges, and contract termination charges. These charges are non-recurring and not reflective of underlying trends in our business.

Total depreciation and amortization expense by function:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Depreciation and amortization expense: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

5,548

 

 

$

4,876

 

 

$

16,121

 

 

$

14,879

 

Research and development

 

23,722

 

 

 

17,321

 

 

 

68,207

 

 

 

42,715

 

Sales and marketing

 

4,586

 

 

 

6,306

 

 

 

61,039

 

 

 

14,654

 

General and administrative

 

2,435

 

 

 

4,007

 

 

 

8,315

 

 

 

12,030

 

Total

$

36,291

 

 

$

32,510

 

 

$

153,682

 

 

$

84,278

 

(1)

Depreciation and amortization expense for the three and nine months ended September 30, 2022 includes restructuring charges.

SNAP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)

(in thousands, except per share amounts, unaudited)

 

Total stock-based compensation expense by function:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Stock-based compensation expense: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

2,745

 

 

$

9,132

 

 

$

8,040

 

 

$

14,635

 

Research and development

 

246,783

 

 

 

198,893

 

 

 

651,299

 

 

 

537,177

 

Sales and marketing

 

43,098

 

 

 

51,675

 

 

 

133,746

 

 

 

118,250

 

General and administrative

 

50,333

 

 

 

41,198

 

 

 

144,128

 

 

 

124,509

 

Total

$

342,959

 

 

$

300,898

 

 

$

937,213

 

 

$

794,571

 

(1)

Stock-based compensation expense for the three and nine months ended September 30, 2022 includes restructuring charges.

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Non-GAAP net income (loss) reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(359,502

)

 

$

(71,959

)

 

$

(1,141,193

)

 

$

(510,505

)

Amortization of intangible assets

 

18,701

 

 

 

18,148

 

 

 

105,340

 

 

 

42,956

 

Stock-based compensation expense

 

312,690

 

 

 

300,898

 

 

 

906,944

 

 

 

794,571

 

Payroll and other tax expense related to stock-based compensation

 

6,561

 

 

 

21,615

 

 

 

39,041

 

 

 

87,986

 

Restructuring charges

 

154,563

 

 

 

 

 

 

154,563

 

 

 

 

Income tax adjustments

 

(954

)

 

 

(208

)

 

 

(1,519

)

 

 

182

 

Non-GAAP net income (loss)

$

132,059

 

 

$

268,494

 

 

$

63,176

 

 

$

415,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares - Diluted

 

1,608,523

 

 

 

1,580,966

 

 

 

1,619,885

 

 

 

1,543,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted net income (loss) per share reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

$

(0.22

)

 

$

(0.05

)

 

$

(0.70

)

 

$

(0.33

)

Non-GAAP adjustment to net loss

 

0.30

 

 

 

0.22

 

 

 

0.74

 

 

 

0.60

 

Non-GAAP diluted net income (loss) per share

$

0.08

 

 

$

0.17

 

 

$

0.04

 

 

$

0.27

 

SNAP INC.

SUPPLEMENTAL FINANCIAL INFORMATION AND BUSINESS METRICS

(dollars and shares in thousands, except per user amounts, unaudited)

 

 

Q2 2021

 

 

Q3 2021

 

 

Q4 2021

 

 

Q1 2022

 

 

Q2 2022

 

 

Q3 2022

 

Cash Flows and Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

(101,086

)

 

$

71,552

 

 

$

185,528

 

 

$

127,459

 

 

$

(124,081

)

 

$

55,945

 

Net cash provided by (used in) operating activities - YoY (year-over-year)

 

(52

)%

 

 

231

%

 

 

453

%

 

 

(7

)%

 

 

23

%

 

 

(22

)%

Net cash provided by (used in) operating activities - TTM (trailing twelve months)

$

(71,573

)

 

$

54,807

 

 

$

292,880

 

 

$

283,453

 

 

$

260,458

 

 

$

244,851

 

Purchases of property and equipment

$

(14,623

)

 

$

(19,836

)

 

$

(24,565

)

 

$

(21,175

)

 

$

(23,370

)

 

$

(37,836

)

Purchases of property and equipment - YoY

 

(7

)%

 

 

35

%

 

 

49

%

 

 

95

%

 

 

60

%

 

 

91

%

Purchases of property and equipment - TTM

$

(56,648

)

 

$

(61,757

)

 

$

(69,875

)

 

$

(80,199

)

 

$

(88,946

)

 

$

(106,946

)

Free Cash Flow

$

(115,709

)

 

$

51,716

 

 

$

160,963

 

 

$

106,284

 

 

$

(147,451

)

 

$

18,109

 

Free Cash Flow - YoY

 

(41

)%

 

 

174

%

 

 

333

%

 

 

(16

)%

 

 

27

%

 

 

(65

)%

Free Cash Flow - TTM

$

(128,221

)

 

$

(6,950

)

 

$

223,005

 

 

$

203,254

 

 

$

171,512

 

 

$

137,905

 

Common shares outstanding

 

1,576,744

 

 

 

1,605,153

 

 

 

1,619,283

 

 

 

1,632,563

 

 

 

1,644,974

 

 

 

1,605,868

 

Common shares outstanding - YoY

 

8

%

 

 

8

%

 

 

8

%

 

 

7

%

 

 

4

%

 

 

0

%

Shares underlying stock-based awards

 

104,516

 

 

 

92,726

 

 

 

82,814

 

 

 

75,066

 

 

 

92,105

 

 

 

94,772

 

Shares underlying stock-based awards - YoY

 

(31

)%

 

 

(33

)%

 

 

(34

)%

 

 

(32

)%

 

 

(12

)%

 

 

2

%

Total common shares outstanding plus shares underlying stock-based awards

 

1,681,260

 

 

 

1,697,879

 

 

 

1,702,097

 

 

 

1,707,629

 

 

 

1,737,079

 

 

 

1,700,640

 

Total common shares outstanding plus shares underlying stock-based awards - YoY

 

4

%

 

 

5

%

 

 

4

%

 

 

5

%

 

 

3

%

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

982,108

 

 

$

1,067,471

 

 

$

1,297,885

 

 

$

1,062,727

 

 

$

1,110,909

 

 

$

1,128,476

 

Revenue - YoY

 

116

%

 

 

57

%

 

 

42

%

 

 

38

%

 

 

13

%

 

 

6

%

Revenue - TTM

$

3,341,682

 

 

$

3,730,485

 

 

$

4,117,048

 

 

$

4,410,191

 

 

$

4,538,992

 

 

$

4,599,997

 

Revenue by region(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

701,735

 

 

$

786,917

 

 

$

932,077

 

 

$

758,261

 

 

$

785,681

 

 

$

811,602

 

North America - YoY

 

129

%

 

 

60

%

 

 

41

%

 

 

37

%

 

 

12

%

 

 

3

%

North America - TTM

$

2,406,798

 

 

$

2,700,787

 

 

$

2,973,701

 

 

$

3,178,990

 

 

$

3,262,936

 

 

$

3,287,621

 

Europe

$

152,268

 

 

$

153,121

 

 

$

208,912

 

 

$

162,132

 

 

$

170,097

 

 

$

161,396

 

Europe - YoY

 

94

%

 

 

49

%

 

 

48

%

 

 

43

%

 

 

12

%

 

 

5

%

Europe - TTM

$

509,975

 

 

$

560,616

 

 

$

627,920

 

 

$

676,433

 

 

$

694,262

 

 

$

702,537

 

Rest of World

$

128,105

 

 

$

127,433

 

 

$

156,896

 

 

$

142,334

 

 

$

155,131

 

 

$

155,478

 

Rest of World - YoY

 

86

%

 

 

53

%

 

 

42

%

 

 

38

%

 

 

21

%

 

 

22

%

Rest of World - TTM

$

424,909

 

 

$

469,082

 

 

$

515,427

 

 

$

554,768

 

 

$

581,794

 

 

$

609,839

 

Operating loss

$

(192,512

)

 

$

(180,824

)

 

$

(25,127

)

 

$

(271,527

)

 

$

(400,940

)

 

$

(435,242

)

Operating loss - YoY

 

38

%

 

 

(8

)%

 

 

74

%

 

 

11

%

 

 

(108

)%

 

 

(141

)%

Operating loss - Margin

 

(20

)%

 

 

(17

)%

 

 

(2

)%

 

 

(26

)%

 

 

(36

)%

 

 

(39

)%

Operating loss - TTM

$

(761,218

)

 

$

(774,178

)

 

$

(702,069

)

 

$

(669,990

)

 

$

(878,418

)

 

$

(1,132,836

)

Net income (loss)

$

(151,664

)

 

$

(71,959

)

 

$

22,550

 

 

$

(359,624

)

 

$

(422,067

)

 

$

(359,502

)

Net income (loss) - YoY

 

53

%

 

 

64

%

 

 

120

%

 

 

(25

)%

 

 

(178

)%

 

 

(400

)%

Net income (loss) - TTM

$

(751,498

)

 

$

(623,604

)

 

$

(487,955

)

 

$

(560,697

)

 

$

(831,100

)

 

$

(1,118,643

)

Adjusted EBITDA

$

117,403

 

 

$

174,199

 

 

$

326,793

 

 

$

64,468

 

 

$

7,190

 

 

$

72,640

 

Adjusted EBITDA - YoY

 

223

%

 

 

209

%

 

 

97

%

 

 

3872

%

 

 

(94

)%

 

 

(58

)%

Adjusted EBITDA - Margin(2)

 

12

%

 

 

16

%

 

 

25

%

 

 

6

%

 

 

1

%

 

 

6

%

Adjusted EBITDA - TTM

$

337,664

 

 

$

455,502

 

 

$

616,686

 

 

$

682,863

 

 

$

572,650

 

 

$

471,091

 

(1)

Total revenue for geographic reporting is apportioned to each region based on our determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity. This allocation is consistent with how we determine ARPU.

(2)

We define Adjusted EBITDA margin as Adjusted EBITDA divided by GAAP revenue.

SNAP INC.

SUPPLEMENTAL FINANCIAL INFORMATION AND BUSINESS METRICS (continued)

(dollars and shares in thousands, except per user amounts, unaudited)

 

 

Q2 2021

 

 

Q3 2021

 

 

Q4 2021

 

 

Q1 2022

 

 

Q2 2022

 

 

Q3 2022

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DAU (in millions)

 

293

 

 

 

306

 

 

 

319

 

 

 

332

 

 

 

347

 

 

 

363

 

DAU - YoY

 

23

%

 

 

23

%

 

 

20

%

 

 

18

%

 

 

18

%

 

 

19

%

DAU by region (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

95

 

 

 

96

 

 

 

97

 

 

 

98

 

 

 

99

 

 

 

100

 

North America - YoY

 

6

%

 

 

7

%

 

 

6

%

 

 

5

%

 

 

4

%

 

 

4

%

Europe

 

78

 

 

 

80

 

 

 

82

 

 

 

84

 

 

 

86

 

 

 

88

 

Europe - YoY

 

10

%

 

 

11

%

 

 

11

%

 

 

10

%

 

 

10

%

 

 

11

%

Rest of World

 

120

 

 

 

130

 

 

 

140

 

 

 

150

 

 

 

162

 

 

 

175

 

Rest of World - YoY

 

55

%

 

 

49

%

 

 

41

%

 

 

36

%

 

 

35

%

 

 

34

%

ARPU

$

3.35

 

 

$

3.49

 

 

$

4.06

 

 

$

3.20

 

 

$

3.20

 

 

$

3.11

 

ARPU - YoY

 

76

%

 

 

28

%

 

 

18

%

 

 

17

%

 

 

(4

)%

 

 

(11

)%

ARPU by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

7.37

 

 

$

8.20

 

 

$

9.58

 

 

$

7.77

 

 

$

7.93

 

 

$

8.13

 

North America - YoY

 

116

%

 

 

49

%

 

 

33

%

 

 

31

%

 

 

8

%

 

 

(1

)%

Europe

$

1.95

 

 

$

1.92

 

 

$

2.54

 

 

$

1.93

 

 

$

1.98

 

 

$

1.83

 

Europe - YoY

 

76

%

 

 

34

%

 

 

33

%

 

 

30

%

 

 

2

%

 

 

(5

)%

Rest of World

$

1.07

 

 

$

0.98

 

 

$

1.12

 

 

$

0.95

 

 

$

0.96

 

 

$

0.89

 

Rest of World - YoY

 

20

%

 

 

3

%

 

 

1

%

 

 

2

%

 

 

(11

)%

 

 

(9

)%

Employees (full-time; excludes part-time, contractors, and temporary personnel)

 

4,667

 

 

 

5,190

 

 

 

5,661

 

 

 

6,131

 

 

 

6,446

 

 

 

5,706

 

Employees - YoY

 

31

%

 

 

40

%

 

 

47

%

 

 

52

%

 

 

38

%

 

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

4,727

 

 

$

4,876

 

 

$

4,832

 

 

$

5,512

 

 

$

5,061

 

 

$

5,548

 

Research and development

 

14,358

 

 

 

17,321

 

 

 

19,444

 

 

 

22,123

 

 

 

22,362

 

 

 

23,722

 

Sales and marketing

 

5,162

 

 

 

6,306

 

 

 

7,118

 

 

 

7,392

 

 

 

49,061

 

 

 

4,586

 

General and administrative

 

4,023

 

 

 

4,007

 

 

 

3,469

 

 

 

3,073

 

 

 

2,807

 

 

 

2,435

 

Total

$

28,270

 

 

$

32,510

 

 

$

34,863

 

 

$

38,100

 

 

$

79,291

 

 

$

36,291

 

Depreciation and amortization expense - YoY

 

35

%

 

 

49

%

 

 

53

%

 

 

62

%

 

 

180

%

 

 

12

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

2,847

 

 

$

9,132

 

 

$

2,586

 

 

$

2,446

 

 

$

2,849

 

 

$

2,745

 

Research and development

 

174,491

 

 

 

198,893

 

 

 

202,953

 

 

 

182,866

 

 

 

221,650

 

 

 

246,783

 

Sales and marketing

 

37,491

 

 

 

51,675

 

 

 

45,991

 

 

 

42,071

 

 

 

48,577

 

 

 

43,098

 

General and administrative

 

41,771

 

 

 

41,198

 

 

 

46,034

 

 

 

48,061

 

 

 

45,734

 

 

 

50,333

 

Total

$

256,600

 

 

$

300,898

 

 

$

297,564

 

 

$

275,444

 

 

$

318,810

 

 

$

342,959

 

Stock-based compensation expense - YoY

 

38

%

 

 

57

%

 

 

35

%

 

 

16

%

 

 

24

%

 

 

14

%

 

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Source: Snap Inc.

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