Snap Inc. Announces First Quarter 2021 Financial Results

Daily Active Users increased 22% year-over-year to 280 million

Revenue increased 66% year-over-year to $770 million

Operating cash flow of $137 million and Free Cash Flow of $126 million

Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended March 31, 2021.

Financial Highlights

• Revenue increased 66% to $770 million in Q1 2021, compared to the prior year.
• Net loss and Adjusted EBITDA were $(287) million and $(2) million in Q1 2021, respectively, compared to $(306) million and $(81) million in the prior year, respectively.
• Operating cash flow improved by $131 million to $137 million in Q1 2021, compared to the prior year.
• Free Cash Flow improved by $131 million year-over-year to reach $126 million in Q1 2021, marking our first quarter of positive Free Cash Flow as a public company.
• Common shares outstanding plus shares underlying stock-based awards totaled 1,629 million at March 31, 2021, compared to 1,589 million one year ago.

“We began 2021 by achieving our highest year-over-year revenue and daily active user growth rates in over three years during the quarter, and delivering positive Free Cash Flow for the first time in Snap’s history as a public company,” said Evan Spiegel, CEO. “The strength of our business underscores our relentless focus on product innovation and is a testament to our team’s ability to execute well together over the long term.”

Q1 2021 Summary & Key Highlights

We have an active, engaged community:

• DAUs were 280 million in Q1 2021, an increase of 51 million, or 22%, year-over-year.
• DAUs increased sequentially and year-over-year in each of North America, Europe, and Rest of World.
• DAUs increased sequentially and year-over-year on both iOS and Android platforms.
• For the first time, the majority of our DAUs for the quarter were on the Android version of our application.

We invested and innovated in our content offerings:

• In March, over 125 million Snapchatters used Spotlight, our newest platform surfacing the most entertaining Snaps from our community.
• We launched Spotlight in three new countries--India, Mexico, and Brazil--making it live in a total of 14 countries.
• We launched a record 321 new channels in Q1 2021 with over 150 partners from 12 countries.
• Over 75 million Snapchatters watched beauty-related content each month on Discover in Q1 2021.
• Over 20 million viewers have watched “Ryan Doesn’t Know,” our new Snap Original starring Ryan Reynolds.
• We launched our first local market Snap Original, “Phone Swap”, in India.

We invested and innovated in our camera and augmented reality platforms:

• The number of Snapchatters engaging daily with our augmented reality Lenses grew more than 40% year-over-year in Q1 2021.
• Over 260 million Snapchatters engaged with Valentine’s Day Lenses over a two-week period.
• Lunar New Year Lenses reached over 125 million users.
• We released Lens Studio 3.4 with improved capabilities around hand tracking, 3D multi-body tracking, and full body segmentation and a new asset library of 3D models, materials, scripts, and presets to help creators build Lenses.
• On average, Lenses created by our community via Lens Studio accounted for more than 50% of daily Lens views.

We strengthened our capabilities to drive improved outcomes for advertisers:

• We partnered with the fitness company Sweat to launch a full body Lens to track body movement while exercising in order to recommend optimal form to Snapchatters.
• We partnered with Gucci to launch the first sponsored LiDAR Lens which projected a 3D camping site around the user to promote the The North Face x Gucci collaboration.
• We partnered with American Eagle to launch a sponsored Lens which displayed different types of American Eagle jeans in AR and included specific fits, washes, and the option to click to purchase.
• We announced a partnership with newspaper publisher Gannett, which will promote our advertising solutions to the company’s network of more than 100,000 small business advertisers across the US and Canada.
• In March, we acquired Fit Analytics, a sizing technology company that powers solutions for retailers and brands.

We expanded our partner ecosystem:

• We announced a partnership with Samsung, which will feature popular Snapchat Lenses in the native camera application on select new smartphones.
• We launched a multi-year partnership with digital music distributor DistroKid allowing artists who control their own music publishing to instantly distribute on Snapchat.
• We launched our largest Camera Kit integration to date with Moj, a leading short-video platform in India, giving Moj creators access to Snapchat’s Lens Carousel directly inside the Moj app.
• We launched Crazy Run in February as part of a multi-title partnership with game developer Gismart, and the game has already reached seven million players.

Financial Guidance

The following forward-looking statements reflect our expectations for the second quarter of 2021 as of April 22, 2021, and are subject to substantial uncertainty. This guidance assumes constant foreign currency rates, and 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.”

Q2 2021 Outlook

• Revenue is estimated to be between $820 million and $840 million, compared to $454 million in Q2 2020.
• Adjusted EBITDA is estimated to be between $(20) million and breakeven, compared to $(96) million in Q2 2020.

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 other payroll related 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.

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, and the impact of COVID-19 on our business and the economy as a whole, 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 and the ongoing 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 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, 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; and future acquisitions or investments, as well as risks, uncertainties, and other factors described in “Risk Factors” and elsewhere in our most recent annual report on Form 10-K for the year ended December 31, 2020 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 March 31, 2021 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 the COVID-19 pandemic, 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 other payroll related 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 other payroll related 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.

Total depreciation and amortization expense by function:

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