Snap Inc. Announces Second Quarter 2021 Financial Results

Daily Active Users increased 23% year-over-year to 293 million

Revenue increased 116% year-over-year to $982 million

Net loss improved 53% and Adjusted EBITDA improved 223% year-over-year

Snap Inc. (NYSE: SNAP) today announced financial results for the quarter ended June 30, 2021.

Financial Highlights

• Revenue increased 116% to $982 million in Q2 2021, compared to the prior year.
• Net loss improved 53% to $(152) million in Q2 2021, compared to the prior year.
• Adjusted EBITDA improved 223% to $117 million in Q2 2021, compared to the prior year.
• Operating cash flow was $(101) million in Q2 2021, compared to $(67) million in the prior year.
• Free Cash Flow was $(116) million in Q2 2021, compared to $(82) million in the prior year.
• Common shares outstanding plus shares underlying stock-based awards totaled 1,681 million at June 30, 2021, compared to 1,616 million one year ago.

“Our second quarter results reflect the broad-based strength of our business, as we grew both revenue and daily active users at the highest rates we have achieved in the past four years,” said Evan Spiegel, CEO. “We are pleased by the progress our team is making with the development of our augmented reality platform, and we are energized by the many opportunities to grow our community and business around the world.”

Q2 2021 Summary & Key Highlights

We have an active, engaged community:

• DAUs were 293 million in Q2 2021, an increase of 55 million, or 23%, 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.

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

• We improved several try-on capabilities with Lens Studio 4.0, including multi-person 3D body mesh, advanced cloth simulation, and a new visual effects editor for more realistic Lenses.
• We released TrueSize technology to improve eyewear sizing and wrist tracking technology for accurate watch try-ons.
• We introduced several new categories for Scan, including fashion and food, which is already used by more than 170 million Snapchatters every month to identify dog breeds and plants, discover recipes, and shop for clothing.
• We introduced Camera Shortcuts, an easy way for Snapchatters to find the most relevant camera mode, Lens, or even curated soundtrack, right from the Camera screen.
• We introduced Connected Lenses, enabling Snapchatters in different locations to interact with each other through AR.

We invested in our content offerings:

• We aired eight new and renewed Snap Originals, including Swae Meets World, a documentary featuring American musician Swae Lee as he prepares to launch a solo album.
• We launched a record 177 new international Discover Channels, including 36 in the UK and 24 in India, one of which is a partnership with Sony Pictures Network to launch five Shows.
• Spotlight daily active users grew 49%, average daily content submissions more than tripled, and daily time spent per user in the US grew by over 60% quarter-over-quarter.
• We released Spotlight on the Web, a destination to view Spotlight Snaps from a browser without a Snapchat account, and also allow Creators to upload content submissions directly from their desktop.
• We announced new monetization opportunities for Spotlight Creators through Gifting with Snap Tokens, enabling Creators to build personal connections with their fans.

We expanded our partner and developer ecosystem:

• We announced Camera Kit partnerships with Disney, Viber, and Bumble, bringing our Camera and AR capabilities into their applications.
• We announced Snap Kit integrations with YouTube and YouTube Music, allowing users to share YouTube videos to the Snapchat Camera.
• We announced a Bitmoji for Games partnership with Unity, allowing Unity developers to bring 3D Bitmoji avatars into their player experience.
• We released Sticker Kit, which includes over 34 million Bitmojis, Stickers, and GIFs that can be integrated into partner applications.
• We announced Layers, a new feature for the Snap Map enabling Snapchatters to find personalized experiences from select partners right from the Map, such as surfacing saved Memories across the Map and showing nearby restaurants and events.

We strengthened our capabilities to drive improved outcomes for advertisers:

• We rolled out Public Profiles for businesses, allowing any business to create a profile on Snapchat showcasing their Lenses, Highlights, Stories, and shoppable products.
• We announced an integration with Salesforce, allowing brands to leverage their first-party data to reach Snapchatters with relevant ads.
• We launched the Creator Marketplace within our self-serve Ads Manager, connecting advertisers with certified Lens Creators and facilitating the AR development process.
• We introduced API Lenses, which enables businesses to automatically import up-to-date product inventory into AR Lenses without additional work.

Financial Guidance

The following forward-looking statements reflect our expectations for the third quarter of 2021 as of July 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.”

Q3 2021 Outlook

• Revenue is estimated to increase approximately 58% to 60% year-over-year, resulting in estimated revenue between $1,070 million and $1,085 million, compared to $679 million in Q3 2020.
• Adjusted EBITDA is estimated to be between $100 million and $120 million, compared to $56 million in Q3 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 periodic report 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 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 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: