Snap Inc. Announces Third Quarter 2019 Financial Results

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Snap Inc. Announces Third Quarter 2019 Financial Results

Snap (NYSE:SNAP)
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Daily Active Users increased 13% year-over-year to 210 million

Revenue increased 50% year-over-year to $446 million

Operating cash flow improved 43% year-over-year to $(76) million

Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended September 30, 2019.

Financial Highlights

  • Operating cash flow improved by $56 million to $(76) million in Q3 2019, compared to the prior year.
  • Free Cash Flow improved by $75 million to $(84) million in Q3 2019, compared to the prior year.
  • Common shares outstanding plus shares underlying stock-based awards totaled 1,565 million at September 30, 2019, compared with 1,476 million one year ago.
  • Revenue increased 50% to $446 million in Q3 2019, compared to the prior year.
  • Net loss improved $98 million to $(227) million in Q3 2019, compared to the prior year.
  • Adjusted EBITDA improved $96 million to $(42) million in Q3 2019, compared to the prior year.

“We delivered strong results this quarter, and we are pleased that the investments we have made are continuing to drive the growth of our community and our business,” said Evan Spiegel, CEO. “We are a high growth business, with strong operating leverage, a clear path to profitability, a distinct vision for the future, and the ability to invest over the long term. We are excited about executing on the many opportunities in front of us.”

 

Three Months Ended September 30,

 

 

Percent

 

 

Nine Months Ended September 30,

 

 

Percent

 

 

2019

 

 

2018

 

 

Change

 

 

2019

 

 

2018

 

 

Change

 

(Unaudited)

(in thousands, except per share amounts)

 

Cash used in operating activities

$

(76,149

)

 

$

(132,543

)

 

 

(43

)%

 

$

(238,116

)

 

$

(563,870

)

 

 

(58

)%

Free Cash Flow

$

(84,087

)

 

$

(158,828

)

 

 

47

%

 

$

(265,501

)

 

$

(661,371

)

 

 

60

%

Common shares outstanding plus shares underlying stock-based awards

 

1,565,208

 

 

 

1,476,019

 

 

 

6

%

 

 

1,565,208

 

 

 

1,476,019

 

 

 

6

%

Operating loss

$

(228,853

)

 

$

(323,371

)

 

 

(29

)%

 

$

(849,732

)

 

$

(1,073,743

)

 

 

(21

)%

Revenue

$

446,199

 

 

$

297,695

 

 

 

50

%

 

$

1,154,646

 

 

$

790,624

 

 

 

46

%

Net loss

$

(227,375

)

 

$

(325,148

)

 

 

(30

)%

 

$

(792,956

)

 

$

(1,064,243

)

 

 

(25

)%

Adjusted EBITDA

$

(42,375

)

 

$

(138,377

)

 

 

69

%

 

$

(244,537

)

 

$

(525,274

)

 

 

53

%

Diluted net loss per share attributable to common shareholders

$

(0.16

)

 

$

(0.25

)

 

 

(34

)%

 

$

(0.58

)

 

$

(0.83

)

 

 

(30

)%

Non-GAAP diluted net loss per share

$

(0.04

)

 

$

(0.12

)

 

 

(67

)%

 

$

(0.20

)

 

$

(0.43

)

 

 

(55

)%

Q3 2019 Summary & Key Highlights

We added 7 million Daily Active Users in the third quarter and saw increased engagement across key metrics:

  • DAUs were 210 million in Q3 2019, compared to 203 million in Q2 2019 and 186 million in Q3 2018.
  • DAUs were up sequentially and year-over-year in each of North America, Europe, and Rest of World.
  • DAUs were up sequentially and year-over-year on each of iOS and Android platforms.

We continue to invest in our Discover platform, with a particular focus on building a sustainable premium content ecosystem:

  • Total daily time spent by Snapchatters watching Discover increased by 40% year-over-year.
  • In Q3 2019, more than 100 Discover channels reached a monthly audience of over 10 million viewers.
  • Our new horror-thriller Snap Original “Dead of Night” has reached over 14 million unique viewers since its premiere in September.
  • In Q3 2019, we added over 50 new channels internationally across 8 markets, and time spent on premium content internationally increased by more than 55% year-over-year.

We continue to invest in our augmented reality platform:

  • At the end of Q3 2019, over 600,000 Lenses had been created by our community through Lens Studio, up from 500,000 at the end of Q2 2019.
  • Now more than 15% of the Snaps sent every day with Lenses feature Lenses made by Snapchatters using Lens Studio, with top-performing Community Lenses reaching billions of views on Snapchat.

We continue to build on our Snap Games platform to better enhance the gaming experience for our large and engaged community:

  • In Q3 2019, we partnered with SYBO Games and launched a new multiplayer game called Subway Surfers Airtime, which was an exclusive release on Snapchat and an expansion of their hit franchise, Subway Surfers.

We continue to build and improve Snap Kit, our set of developer tools that allow our partners to bring Snapchat features into their services:

  • In September, over 100 million Snapchatters interacted with Snaps generated by our Creative Kit partner platforms.
  • We doubled the number of apps integrated with Snap Kit since Q1 2019.

We strengthened our ad platform products and capabilities to drive improved outcomes for advertisers:

  • We announced Dynamic Ads, which allows advertisers to automatically create ads in real-time based on product catalogs that can contain hundreds of thousands of products.
  • We announced that advertisers can now add swipe actions to their Commercials campaigns, allowing Snapchatters to swipe up to access a web page, view a long-form video, or view a Lens.
  • The maximum duration of Snap Ads has been extended to enable advertisers to tell more detailed brand stories through our video ad products.

Financial Guidance

The following forward-looking statements reflect our expectations for the fourth quarter of 2019 as of October 22, 2019, and are subject to substantial uncertainty. This guidance assumes, among other things, that no business acquisitions, investments, restructurings, or legal settlements are concluded in the quarter. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed below in “Forward-Looking Statements.”

Q4 2019 Outlook

  • Revenue is expected to be between $540 million and $560 million, compared to $390 million in Q4 2018.
  • Adjusted EBITDA is expected to be between breakeven and $20 million, compared to $(50) million in Q4 2018.

Conference Call Information

Snap Inc. will host a conference call to discuss the results at 2:00 p.m. Pacific / 5:00 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 the investor.snap.com and snap.com/news websites 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 and related payroll tax expense; 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.

Addressable reach is defined as the approximate number of Snapchat users that an ad could reach over a 28-day period in a given locality. When we calculate the percentage of a demographic group that can be reached, we do so by dividing addressable reach by relevant census figures. Addressable reach and age data are subject to limitations. For more information, see Snap’s SEC filings and businesshelp.snapchat.com.

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, business strategy and plans, user growth and engagement, product initiatives, and objectives of management for future operations, 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 that we believe may 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 lack of profitability to date; 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 and regulations; our ability to maintain, protect, and enhance our intellectual property; our ability to attract and retain qualified and key personnel; our ability to repay outstanding debt; and future acquisitions or investments, as well as risks, uncertainties, and other factors described in “Risk Factors” and elsewhere in our quarterly report on Form 10-Q for the quarter ended June 30, 2019 filed with the SEC, which is available on the SEC’s website at www.sec.gov. Additional information will be made available in Snap Inc.’s quarterly report on Form 10-Q for the quarter ended September 30, 2019 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, 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 and related payroll tax expense; 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 loss, which is defined as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and related payroll tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP net loss and weighted average diluted shares are then used to calculate non-GAAP diluted net 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,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(227,375

)

 

$

(325,148

)

 

$

(792,956

)

 

$

(1,064,243

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

20,646

 

 

 

24,898

 

 

 

66,625

 

 

 

68,966

 

Stock-based compensation

 

161,228

 

 

 

126,809

 

 

 

519,358

 

 

 

416,439

 

Deferred income taxes

 

170

 

 

 

(124

)

 

 

195

 

 

 

129

 

Lease exit charges

 

 

 

 

29,340

 

 

 

 

 

 

33,268

 

Gain on divestiture

 

 

 

 

 

 

 

(39,883

)

 

 

 

Amortization of debt discount and issuance costs

 

6,412

 

 

 

 

 

 

6,412

 

 

 

 

Other

 

(1,245

)

 

 

8,608

 

 

 

(4,561

)

 

 

(679

)

Change in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net of allowance

 

(62,855

)

 

 

(18,834

)

 

 

(30,736

)

 

 

15,937

 

Prepaid expenses and other current assets

 

(490

)

 

 

(435

)

 

 

(4,980

)

 

 

(3,059

)

Operating lease right-of-use asset

 

35,633

 

 

 

 

 

 

57,254

 

 

 

 

Other assets

 

2,139

 

 

 

7,089

 

 

 

4,540

 

 

 

20,314

 

Accounts payable

 

4,220

 

 

 

2,084

 

 

 

28,319

 

 

 

(44,638

)

Accrued expenses and other current liabilities

 

23,243

 

 

 

14,841

 

 

 

16,655

 

 

 

(14,664

)

Operating lease liabilities

 

(36,008

)

 

 

 

 

 

(63,259

)

 

 

 

Other liabilities

 

(1,867

)

 

 

(1,671

)

 

 

(1,099

)

 

 

8,360

 

Net cash used in operating activities

 

(76,149

)

 

 

(132,543

)

 

 

(238,116

)

 

 

(563,870

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(7,938

)

 

 

(26,285

)

 

 

(27,385

)

 

 

(97,501

)

Sales of property and equipment

 

 

 

 

 

 

 

29

 

 

 

 

Proceeds from divestiture, net

 

 

 

 

 

 

 

73,796

 

 

 

 

Non-marketable investments

 

(1,050

)

 

 

(250

)

 

 

(3,750

)

 

 

(21,260

)

Purchases of marketable securities

 

(1,115,358

)

 

 

(444,369

)

 

 

(1,924,398

)

 

 

(1,318,467

)

Sales of marketable securities

 

24,948

 

 

 

 

 

 

102,437

 

 

 

45,007

 

Maturities of marketable securities

 

411,079

 

 

 

560,465

 

 

 

1,193,739

 

 

 

1,926,802

 

Other

 

 

 

 

 

 

 

1,000

 

 

 

(2,565

)

Net cash provided by (used in) investing activities

 

(688,319

)

 

 

89,561

 

 

 

(584,532

)

 

 

532,016

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible notes, net of issuance costs

 

1,251,848

 

 

 

 

 

 

1,251,848

 

 

 

 

Purchase of capped calls

 

(102,086

)

 

 

 

 

 

(102,086

)

 

 

 

Proceeds from the exercise of stock options

 

7,788

 

 

 

142

 

 

 

14,726

 

 

 

47,865

 

Stock repurchases from employees for tax withholdings

 

 

 

 

 

 

 

 

 

 

(551

)

Net cash provided by financing activities

 

1,157,550

 

 

 

142

 

 

 

1,164,488

 

 

 

47,314

 

Change in cash, cash equivalents, and restricted cash

 

393,082

 

 

 

(42,840

)

 

 

341,840

 

 

 

15,460

 

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

 

337,732

 

 

 

395,307

 

 

 

388,974

 

 

 

337,007

 

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

$

730,814

 

 

$

352,467

 

 

$

730,814

 

 

$

352,467

 

Supplemental disclosures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for income taxes, net

$

643

 

 

$

758

 

 

$

564

 

 

$

3,155

 

SNAP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

$

446,199

 

 

$

297,695

 

 

$

1,154,646

 

 

$

790,624

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

223,140

 

 

 

197,554

 

 

 

642,399

 

 

 

585,917

 

Research and development

 

211,599

 

 

 

203,510

 

 

 

663,983

 

 

 

607,742

 

Sales and marketing

 

123,240

 

 

 

97,552

 

 

 

332,626

 

 

 

301,350

 

General and administrative

 

117,073

 

 

 

122,450

 

 

 

365,370

 

 

 

369,358

 

Total costs and expenses

 

675,052

 

 

 

621,066

 

 

 

2,004,378

 

 

 

1,864,367

 

Operating loss

 

(228,853

)

 

 

(323,371

)

 

 

(849,732

)

 

 

(1,073,743

)

Interest income

 

10,317

 

 

 

7,011

 

 

 

25,579

 

 

 

19,715

 

Interest expense

 

(8,654

)

 

 

(919

)

 

 

(10,219

)

 

 

(2,783

)

Other income (expense), net

 

(1,481

)

 

 

(7,625

)

 

 

41,477

 

 

 

(4,533

)

Loss before income taxes

 

(228,671

)

 

 

(324,904

)

 

 

(792,895

)

 

 

(1,061,344

)

Income tax benefit (expense)

 

1,296

 

 

 

(244

)

 

 

(61

)

 

 

(2,899

)

Net loss

$

(227,375

)

 

$

(325,148

)

 

$

(792,956

)

 

$

(1,064,243

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.16

)

 

$

(0.25

)

 

$

(0.58

)

 

$

(0.83

)

Diluted

$

(0.16

)

 

$

(0.25

)

 

$

(0.58

)

 

$

(0.83

)

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

 

 

 

 

 

 

 

 

 

 

 

 

$

 

Basic

 

1,393,358

 

 

 

1,309,918

 

 

 

1,364,327

 

 

 

1,277,293

 

Diluted

 

1,393,358

 

 

 

1,309,918

 

 

 

1,364,327

 

 

 

1,277,293

 

SNAP INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

 

 

September 30,

2019

 

 

December 31, 2018

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

728,828

 

 

$

387,149

 

Marketable securities

 

1,531,902

 

 

 

891,914

 

Accounts receivable, net of allowance

 

374,090

 

 

 

354,965

 

Prepaid expenses and other current assets

 

42,243

 

 

 

41,900

 

Total current assets

 

2,677,063

 

 

 

1,675,928

 

Property and equipment, net

 

177,073

 

 

 

212,560

 

Operating lease right-of-use assets

 

250,225

 

 

 

 

Intangible assets, net

 

72,371

 

 

 

126,054

 

Goodwill

 

621,758

 

 

 

632,370

 

Other assets

 

65,882

 

 

 

67,194

 

Total assets

$

3,864,372

 

 

$

2,714,106

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

56,572

 

 

$

30,876

 

Operating lease liabilities

 

49,725

 

 

 

 

Accrued expenses and other current liabilities

 

262,766

 

 

 

261,815

 

Total current liabilities

 

369,063

 

 

 

292,691

 

Convertible senior notes, net

 

880,391

 

 

 

 

Operating lease liabilities, noncurrent

 

284,798

 

 

 

 

Other liabilities

 

5,705

 

 

 

110,416

 

Total liabilities

 

1,539,957

 

 

 

403,107

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

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

authorized, 999,304 shares issued and outstanding at December 31, 2018, and

3,000,000 shares authorized, 1,132,915 shares issued and outstanding

at September 30, 2019.

 

11

 

 

 

10

 

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

93,846 shares issued and outstanding at December 31, 2018, and 700,000 shares

authorized, 32,057 shares issued and outstanding at September 30, 2019.

 

 

 

 

1

 

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

224,611 shares issued and outstanding at December 31, 2018, and 260,888 shares

authorized, 229,564 shares issued and outstanding at September 30, 2019.

 

2

 

 

 

2

 

Additional paid-in capital

 

9,036,801

 

 

 

8,220,417

 

Accumulated other comprehensive income (loss)

 

(7,173

)

 

 

3,147

 

Accumulated deficit

 

(6,705,226

)

 

 

(5,912,578

)

Total stockholders’ equity

 

2,324,415

 

 

 

2,310,999

 

Total liabilities and stockholders’ equity

$

3,864,372

 

 

$

2,714,106

 

SNAP INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in thousands, unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Free Cash Flow reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

$

(76,149

)

 

$

(132,543

)

 

$

(238,116

)

 

$

(563,870

)

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

(7,938

)

 

 

(26,285

)

 

 

(27,385

)

 

 

(97,501

)

Free Cash Flow

$

(84,087

)

 

$

(158,828

)

 

$

(265,501

)

 

$

(661,371

)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Adjusted EBITDA reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(227,375

)

 

$

(325,148

)

 

$

(792,956

)

 

$

(1,064,243

)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

(10,317

)

 

 

(7,011

)

 

 

(25,579

)

 

 

(19,715

)

Interest expense

 

8,654

 

 

 

919

 

 

 

10,219

 

 

 

2,783

 

Other (income) expense, net

 

1,481

 

 

 

7,625

 

 

 

(41,477

)

 

 

4,533

 

Income tax (benefit) expense

 

(1,296

)

 

 

244

 

 

 

61

 

 

 

2,899

 

Depreciation and amortization

 

20,646

 

 

 

24,898

 

 

 

66,625

 

 

 

68,966

 

Stock-based compensation expense

 

161,228

 

 

 

126,809

 

 

 

519,358

 

 

 

416,439

 

Payroll tax expense related to stock-based compensation

 

4,604

 

 

 

3,947

 

 

 

19,212

 

 

 

19,912

 

Reduction in force charges(1)

 

 

 

 

 

 

 

 

 

 

9,884

 

Lease exit charges(2)

 

 

 

 

29,340

 

 

 

 

 

 

33,268

 

Adjusted EBITDA

$

(42,375

)

 

$

(138,377

)

 

$

(244,537

)

 

$

(525,274

)

(1)

Reduction in force charges in the first quarter of 2018 were related to a reduction in force plan impacting approximately 7% of our then global headcount, primarily in engineering and sales. The charges are composed primarily of severance expense and related payroll tax expense. These charges are non-recurring and not reflective of underlying trends in our business. Additionally, we recognized a stock-based compensation forfeiture benefit of $31.5 million, which is included in the stock-based compensation expense line item above.

 

 

(2)

Lease exit charges were related to our exit of various operating leases prior to the end of the contractual lease term, primarily as a result of moving to a centralized corporate office located in Santa Monica, California. We recorded a lease exit charge of $3.9 million in the second quarter of 2018. The charge reflects the present value of our remaining lease obligation on the cease use dates that occurred during the quarter, net of sublease income. These charges are non-recurring and not reflective of underlying trends in our business.

SNAP INC.

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

(in thousands, except per share amounts, unaudited)

 

Total depreciation and amortization expense by function:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Depreciation and amortization expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

4,580

 

 

$

5,582

 

 

$

16,368

 

 

$

16,394

 

Research and development

 

8,632

 

 

 

10,174

 

 

 

24,470

 

 

 

28,454

 

Sales and marketing

 

3,109

 

 

 

4,054

 

 

 

10,169

 

 

 

11,614

 

General and administrative

 

4,325

 

 

 

5,088

 

 

 

15,618

 

 

 

12,504

 

Total

$

20,646

 

 

$

24,898

 

 

$

66,625

 

 

$

68,966

 

Total stock-based compensation expense by function:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Stock-based compensation expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

1,332

 

 

$

1,368

 

 

$

4,967

 

 

$

3,111

 

Research and development

 

108,176

 

 

 

95,329

 

 

 

353,028

 

 

 

265,447

 

Sales and marketing

 

23,333

 

 

 

25,082

 

 

 

67,567

 

 

 

63,264

 

General and administrative

 

28,387

 

 

 

5,030

 

 

 

93,796

 

 

 

84,617

 

Total

$

161,228

 

 

$

126,809

 

 

$

519,358

 

 

$

416,439

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Non-GAAP net loss reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

$

(227,375

)

 

$

(325,148

)

 

$

(792,956

)

 

$

(1,064,243

)

Amortization of intangible assets

 

6,915

 

 

 

10,610

 

 

 

26,331

 

 

 

32,187

 

Stock-based compensation expense

 

161,228

 

 

 

126,809

 

 

 

519,358

 

 

 

416,439

 

Payroll tax expense related to stock-based compensation

 

4,604

 

 

 

3,947

 

 

 

19,212

 

 

 

19,912

 

Gain on divestiture

 

 

 

 

 

 

 

(39,883

)

 

 

 

Reduction in force charges

 

 

 

 

 

 

 

 

 

 

9,884

 

Lease exit charges

 

 

 

 

29,340

 

 

 

 

 

 

33,268

 

Income tax adjustments

 

200

 

 

 

(253

)

 

 

462

 

 

 

(372

)

Non-GAAP net loss

$

(54,428

)

 

$

(154,695

)

 

$

(267,476

)

 

$

(552,925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares - Diluted

 

1,393,358

 

 

 

1,309,918

 

 

 

1,364,327

 

 

 

1,277,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP diluted net loss per share reconciliation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net loss per share

$

(0.16

)

 

$

(0.25

)

 

$

(0.58

)

 

$

(0.83

)

Non-GAAP adjustment to net loss

 

0.12

 

 

 

0.13

 

 

 

0.38

 

 

 

0.40

 

Non-GAAP diluted net loss per share

$

(0.04

)

 

$

(0.12

)

 

$

(0.20

)

 

$

(0.43

)

SNAP INC.

SUPPLEMENTAL FINANCIAL INFORMATION AND BUSINESS METRICS

(dollars and shares in thousands, except as noted below, unaudited)

 

 

Q2 2018

 

 

Q3 2018

 

 

Q4 2018

 

 

Q1 2019

 

 

Q2 2019

 

 

Q3 2019

 

Cash Flows and Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

$

(199,346

)

 

$

(132,543

)

 

$

(126,054

)

 

$

(66,178

)

 

$

(95,789

)

 

$

(76,149

)

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

 

5

%

 

 

32

%

 

 

28

%

 

 

71

%

 

 

52

%

 

 

43

%

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

$

(801,423

)

 

$

(739,953

)

 

$

(689,924

)

 

$

(524,121

)

 

$

(420,564

)

 

$

(364,170

)

Purchases of property and equipment

$

(34,901

)

 

$

(26,285

)

 

$

(22,741

)

 

$

(11,814

)

 

$

(7,633

)

 

$

(7,938

)

Purchases of property and equipment - YoY

 

80

%

 

 

1

%

 

 

7

%

 

 

(67

)%

 

 

(78

)%

 

 

(70

)%

Purchases of property and equipment - TTM

$

(118,376

)

 

$

(118,713

)

 

$

(120,242

)

 

$

(95,741

)

 

$

(68,473

)

 

$

(50,126

)

Free Cash Flow

$

(234,247

)

 

$

(158,828

)

 

$

(148,795

)

 

$

(77,992

)

 

$

(103,422

)

 

$

(84,087

)

Free Cash Flow - YoY

 

(2

)%

 

 

28

%

 

 

25

%

 

 

71

%

 

 

56

%

 

 

47

%

Free Cash Flow - TTM

$

(919,799

)

 

$

(858,666

)

 

$

(810,166

)

 

$

(619,862

)

 

$

(489,037

)

 

$

(414,296

)

Common shares outstanding

 

1,273,163

 

 

 

1,291,217

 

 

 

1,317,760

 

 

 

1,334,931

 

 

 

1,372,149

 

 

 

1,389,395

 

Common shares outstanding - YoY

 

8

%

 

 

7

%

 

 

8

%

 

 

6

%

 

 

8

%

 

 

8

%

Shares underlying stock-based awards

 

205,595

 

 

 

184,802

 

 

 

188,863

 

 

 

209,055

 

 

 

180,585

 

 

 

175,813

 

Shares underlying stock-based awards - YoY

 

(19

)%

 

 

(23

)%

 

 

(18

)%

 

 

3

%

 

 

(12

)%

 

 

(5

)%

Total common shares outstanding plus shares underlying stock-based awards

 

1,478,758

 

 

 

1,476,019

 

 

 

1,506,623

 

 

 

1,543,986

 

 

 

1,552,734

 

 

 

1,565,208

 

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

 

3

%

 

 

2

%

 

 

4

%

 

 

6

%

 

 

5

%

 

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

262,263

 

 

$

297,695

 

 

$

389,822

 

 

$

320,426

 

 

$

388,021

 

 

$

446,199

 

Revenue - YoY

 

44

%

 

 

43

%

 

 

36

%

 

 

39

%

 

 

48

%

 

 

50

%

Revenue - TTM

$

986,559

 

 

$

1,076,317

 

 

$

1,180,446

 

 

$

1,270,206

 

 

$

1,395,964

 

 

$

1,544,468

 

Revenue by region(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

177,410

 

 

$

207,477

 

 

$

268,858

 

 

$

225,705

 

 

$

260,017

 

 

$

316,028

 

North America - YoY

 

20

%

 

 

24

%

 

 

23

%

 

 

32

%

 

 

47

%

 

 

52

%

North America - TTM

$

734,599

 

 

$

774,769

 

 

$

824,233

 

 

$

879,450

 

 

$

962,057

 

 

$

1,070,608

 

Europe

$

40,241

 

 

$

50,478

 

 

$

62,470

 

 

$

47,448

 

 

$

60,633

 

 

$

68,553

 

Europe - YoY

 

82

%

 

 

85

%

 

 

56

%

 

 

45

%

 

 

51

%

 

 

36

%

Europe - TTM

$

140,200

 

 

$

163,416

 

 

$

185,910

 

 

$

200,637

 

 

$

221,029

 

 

$

239,104

 

Rest of World

$

44,612

 

 

$

39,740

 

 

$

58,495

 

 

$

47,273

 

 

$

67,374

 

 

$

61,618

 

Rest of World - YoY

 

272

%

 

 

197

%

 

 

122

%

 

 

72

%

 

 

51

%

 

 

55

%

Rest of World - TTM

$

111,761

 

 

$

138,133

 

 

$

170,305

 

 

$

190,120

 

 

$

212,882

 

 

$

234,760

 

Operating loss

$

(357,842

)

 

$

(323,371

)

 

$

(194,707

)

 

$

(316,061

)

 

$

(304,818

)

 

$

(228,853

)

Operating loss - YoY

 

20

%

 

 

30

%

 

 

46

%

 

 

19

%

 

 

15

%

 

 

29

%

Operating loss - Margin

 

(136

)%

 

 

(109

)%

 

 

(50

)%

 

 

(99

)%

 

 

(79

)%

 

 

(51

)%

Operating loss - TTM

$

(1,573,163

)

 

$

(1,434,707

)

 

$

(1,268,450

)

 

$

(1,191,981

)

 

$

(1,138,957

)

 

$

(1,044,439

)

Net loss

$

(353,310

)

 

$

(325,148

)

 

$

(191,668

)

 

$

(310,407

)

 

$

(255,174

)

 

$

(227,375

)

Net loss - YoY

 

(20

)%

 

 

(27

)%

 

 

(45

)%

 

 

(20

)%

 

 

(28

)%

 

 

(30

)%

Net loss - TTM

$

(1,532,231

)

 

$

(1,414,220

)

 

$

(1,255,911

)

 

$

(1,180,533

)

 

$

(1,082,397

)

 

$

(984,624

)

Adjusted EBITDA

$

(169,032

)

 

$

(138,377

)

 

 

(50,363

)

 

 

(123,449

)

 

 

(78,713

)

 

 

(42,375

)

Adjusted EBITDA - YoY

 

13

%

 

 

23

%

 

 

68

%

 

 

43

%

 

 

53

%

 

 

69

%

Adjusted EBITDA - Margin(2)

 

(64

)%

 

 

(46

)%

 

 

(13

)%

 

 

(39

)%

 

 

(20

)%

 

 

(9

)%

Adjusted EBITDA - TTM

$

(724,722

)

 

$

(684,198

)

 

$

(575,637

)

 

$

(481,221

)

 

$

(390,902

)

 

$

(294,900

)

(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 as noted below, unaudited)

 

 

Q2 2018

 

 

Q3 2018

 

 

Q4 2018

 

 

Q1 2019

 

 

Q2 2019

 

 

Q3 2019

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DAU (in millions)

 

188

 

 

 

186

 

 

 

186

 

 

 

190

 

 

 

203

 

 

 

210

 

DAU - YoY

 

8

%

 

 

5

%

 

 

(0

)%

 

 

(0

)%

 

 

8

%

 

 

13

%

DAU by region (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

80

 

 

 

79

 

 

 

79

 

 

 

80

 

 

 

83

 

 

 

84

 

North America - YoY

 

7

%

 

 

3

%

 

 

(1

)%

 

 

(1

)%

 

 

3

%

 

 

6

%

Europe

 

61

 

 

 

59

 

 

 

60

 

 

 

61

 

 

 

64

 

 

 

65

 

Europe - YoY

 

7

%

 

 

4

%

 

 

(1

)%

 

 

(2

)%

 

 

5

%

 

 

9

%

Rest of World

 

47

 

 

 

47

 

 

 

47

 

 

 

49

 

 

 

56

 

 

 

61

 

Rest of World - YoY

 

12

%

 

 

8

%

 

 

1

%

 

 

2

%

 

 

21

%

 

 

28

%

ARPU

$

1.40

 

 

$

1.60

 

 

$

2.09

 

 

$

1.68

 

 

$

1.91

 

 

$

2.12

 

ARPU - YoY

 

34

%

 

 

37

%

 

 

37

%

 

 

39

%

 

 

37

%

 

 

33

%

ARPU by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

$

2.21

 

 

$

2.62

 

 

$

3.38

 

 

$

2.81

 

 

$

3.14

 

 

$

3.75

 

North America - YoY

 

12

%

 

 

20

%

 

 

23

%

 

 

34

%

 

 

42

%

 

 

43

%

Europe

$

0.66

 

 

$

0.85

 

 

$

1.04

 

 

$

0.77

 

 

$

0.95

 

 

$

1.05

 

Europe - YoY

 

70

%

 

 

78

%

 

 

57

%

 

 

47

%

 

 

43

%

 

 

24

%

Rest of World

$

0.96

 

 

$

0.84

 

 

$

1.24

 

 

$

0.97

 

 

$

1.20

 

 

$

1.01

 

Rest of World - YoY

 

233

%

 

 

175

%

 

 

120

%

 

 

68

%

 

 

25

%

 

 

21

%

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

 

2,879

 

 

 

2,903

 

 

 

2,884

 

 

 

2,818

 

 

 

2,734

 

 

 

2,908

 

Employees - YoY

 

10

%

 

 

(2

)%

 

 

(6

)%

 

 

(6

)%

 

 

(5

)%

 

 

0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

5,610

 

 

$

5,582

 

 

$

9,888

 

 

$

6,146

 

 

$

5,642

 

 

$

4,580

 

Research and development

 

9,489

 

 

 

10,174

 

 

 

4,547

 

 

 

8,650

 

 

 

7,188

 

 

 

8,632

 

Sales and marketing

 

3,991

 

 

 

4,054

 

 

 

3,475

 

 

 

4,015

 

 

 

3,045

 

 

 

3,109

 

General and administrative

 

3,424

 

 

 

5,088

 

 

 

4,772

 

 

 

4,508

 

 

 

6,785

 

 

 

4,325

 

Total

$

22,514

 

 

$

24,898

 

 

$

22,682

 

 

$

23,319

 

 

$

22,660

 

 

$

20,646

 

Depreciation and amortization expense - YoY

 

79

%

 

 

43

%

 

 

21

%

 

 

8

%

 

 

1

%

 

 

(17

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

$

1,467

 

 

$

1,368

 

 

$

1,283

 

 

$

1,849

 

 

$

1,786

 

 

$

1,332

 

Research and development

 

92,303

 

 

 

95,329

 

 

 

75,086

 

 

 

112,242

 

 

 

132,610

 

 

 

108,176

 

Sales and marketing

 

21,996

 

 

 

25,082

 

 

 

20,795

 

 

 

17,760

 

 

 

26,474

 

 

 

23,333

 

General and administrative

 

40,605

 

 

 

5,030

 

 

 

24,608

 

 

 

30,705

 

 

 

34,704

 

 

 

28,387

 

Total

$

156,371

 

 

$

126,809

 

 

$

121,772

 

 

$

162,556

 

 

$

195,574

 

 

$

161,228

 

Stock-based compensation expense - YoY

 

(36

)%

 

 

(43

)%

 

 

(33

)%

 

 

22

%

 

 

25

%

 

 

27

%

 

Investors and Analysts: ir@snap.com

Press: press@snap.com

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