☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2023
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
________to________
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Delaware | 45-5452795 | |||||
(State or other jurisdiction of
| (I.R.S. Employer
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Class A Common Stock, par value $0.00001 per share | SNAP | New York Stock Exchange |
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☒ | Large accelerated filer | ☐ | Accelerated filer | ||||||||
☐ | |||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||
☐ | |||||||||||
| Emerging growth company |
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Class | Number of Shares Outstanding | |||||
Class A common stock, $0.00001 par value |
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Class B common stock, $0.00001 par value |
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Class C common stock, $0.00001 par value | 231,626,943 shares outstanding as of |
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•our financial performance, including our revenues, cost of revenues, operating expenses, and our ability to attain and sustain profitability; |
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•our ability to generate and sustain positive cash flow; |
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•our ability to attract and retain users and partners; |
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•our ability to attract and retain advertisers; |
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•our ability to compete effectively with existing competitors and new market entrants; |
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•our ability to effectively manage our growth and future expenses; |
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•our ability to comply with modified or new laws, regulations, and executive actions applying to our business; |
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•our ability to maintain, protect, and enhance our intellectual property; |
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•our ability to successfully expand in our existing market segments and penetrate new market segments; |
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•our ability to attract and retain qualified team members and key personnel; |
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•our ability to repay outstanding debt; |
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•future acquisitions of or investments in complementary companies, products, services, or technologies; and |
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3
we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our websites.
In the past we have relied on third-party analytics providers to calculate our metrics, but today we rely primarily on our analytics platform that we developed and operate.
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
Cash flows from operating activities |
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| Cash flows from operating activities | ||||||||||||||||||||||
Net loss | $ | (422,067 | ) |
| $ | (151,664 | ) |
| $ | (781,691 | ) |
| $ | (438,546 | ) | Net loss | $ | (328,674) | $ | (359,624) | ||||||||||||||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||||||
Depreciation and amortization |
| 79,291 |
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|
| 28,270 |
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|
| 117,391 |
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|
| 51,768 |
| Depreciation and amortization | 35,220 | 38,100 | ||||||||||||||||||||
Stock-based compensation |
| 318,810 |
|
|
| 256,600 |
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|
| 594,254 |
|
|
| 493,673 |
| Stock-based compensation | 314,931 | 275,444 | ||||||||||||||||||||
Amortization of debt issuance costs |
| 1,780 |
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|
| 1,148 |
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|
| 3,193 |
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|
| 2,192 |
| Amortization of debt issuance costs | 1,836 | 1,413 | ||||||||||||||||||||
Losses (gains) on debt and equity securities, net |
| 12,210 |
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|
| (79,940 | ) |
|
| 91,337 |
|
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| (102,451 | ) | Losses (gains) on debt and equity securities, net | (10,833) | 79,127 | ||||||||||||||||||||
Other |
| 3,079 |
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|
| 34,856 |
|
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| 4,204 |
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|
| 41,685 |
| Other | (10,396) | 1,125 | ||||||||||||||||||||
Change in operating assets and liabilities, net of effect of acquisitions: |
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| Change in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||||||||||||
Accounts receivable, net of allowance |
| (81,001 | ) |
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| (174,452 | ) |
|
| 45,026 |
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| (45,136 | ) | Accounts receivable, net of allowance | 288,373 | 126,027 | ||||||||||||||||||||
Prepaid expenses and other current assets |
| (11,980 | ) |
|
| 1,065 |
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| (39,158 | ) |
|
| (11,371 | ) | Prepaid expenses and other current assets | (13,204) | (27,178) | ||||||||||||||||||||
Operating lease right-of-use assets |
| 18,299 |
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|
| 12,549 |
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|
| 35,283 |
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|
| 23,747 |
| Operating lease right-of-use assets | 17,658 | 16,984 | ||||||||||||||||||||
Other assets |
| (7,230 | ) |
|
| (338 | ) |
|
| (7,538 | ) |
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| (1,236 | ) | Other assets | 850 | (308) | ||||||||||||||||||||
Accounts payable |
| (3,919 | ) |
|
| (50,159 | ) |
|
| 51,061 |
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|
| 6,346 |
| Accounts payable | (36,972) | 54,980 | ||||||||||||||||||||
Accrued expenses and other current liabilities |
| (14,392 | ) |
|
| 27,690 |
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| (77,220 | ) |
|
| 33,039 |
| Accrued expenses and other current liabilities | (90,191) | (62,828) | ||||||||||||||||||||
Operating lease liabilities |
| (16,499 | ) |
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| (8,059 | ) |
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| (34,315 | ) |
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| (21,354 | ) | Operating lease liabilities | (18,550) | (17,816) | ||||||||||||||||||||
Other liabilities |
| (462 | ) |
|
| 1,348 |
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| 1,551 |
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| 3,444 |
| Other liabilities | 1,054 | 2,013 | ||||||||||||||||||||
Net cash provided by (used in) operating activities |
| (124,081 | ) |
|
| (101,086 | ) |
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| 3,378 |
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| 35,800 |
| Net cash provided by (used in) operating activities | 151,102 | 127,459 | ||||||||||||||||||||
Cash flows from investing activities |
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| Cash flows from investing activities | ||||||||||||||||||||||
Purchases of property and equipment |
| (23,370 | ) |
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| (14,623 | ) |
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| (44,545 | ) |
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| (25,474 | ) | Purchases of property and equipment | (47,630) | (21,175) | ||||||||||||||||||||
Purchases of strategic investments |
| (6,200 | ) |
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| (31,425 | ) |
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| (6,350 | ) |
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| (32,775 | ) | Purchases of strategic investments | (4,480) | (150) | ||||||||||||||||||||
Sales of strategic investments |
| 63,276 |
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| 36,250 |
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| 63,276 |
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| 36,435 |
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Cash paid for acquisitions, net of cash acquired |
| (11,220 | ) |
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| (30,304 | ) |
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| (12,008 | ) |
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| (139,216 | ) | Cash paid for acquisitions, net of cash acquired | — | (788) | ||||||||||||||||||||
Purchases of marketable securities |
| (568,055 | ) |
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| (764,371 | ) |
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| (1,910,436 | ) |
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| (1,287,590 | ) | Purchases of marketable securities | (874,053) | (1,342,381) | ||||||||||||||||||||
Sales of marketable securities |
| 2,982 |
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| 239,500 |
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| 12,759 |
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| 347,556 |
| Sales of marketable securities | 5,351 | 9,777 | ||||||||||||||||||||
Maturities of marketable securities |
| 554,026 |
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|
| 696,892 |
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|
| 896,571 |
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|
| 1,513,823 |
| Maturities of marketable securities | 924,323 | 342,545 | ||||||||||||||||||||
Other |
| — |
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| (50 | ) |
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| (5,493 | ) |
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| (335 | ) | Other | 2,327 | (5,493) | ||||||||||||||||||||
Net cash provided by (used in) investing activities |
| 11,439 |
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|
| 131,869 |
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|
| (1,006,226 | ) |
|
| 412,424 |
| Net cash provided by (used in) investing activities | 5,838 | (1,017,665) | ||||||||||||||||||||
Cash flows from financing activities |
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| Cash flows from financing activities | ||||||||||||||||||||||
Proceeds from issuance of convertible notes, net of issuance costs |
| — |
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|
| 1,137,227 |
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| 1,483,500 |
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| 1,137,227 |
| Proceeds from issuance of convertible notes, net of issuance costs | — | 1,483,500 | ||||||||||||||||||||
Purchase of capped calls |
| — |
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| (86,825 | ) |
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| (177,000 | ) |
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| (86,825 | ) | Purchase of capped calls | — | (177,000) | ||||||||||||||||||||
Proceeds from the exercise of stock options |
| 1,388 |
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| 3,257 |
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| 3,654 |
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|
| 7,710 |
| Proceeds from the exercise of stock options | 29 | 2,266 | ||||||||||||||||||||
Payments of debt issuance costs |
| (3,006 | ) |
|
| — |
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|
| (3,006 | ) |
|
| — |
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Deferred payments for acquisitions | Deferred payments for acquisitions | (2,028) | — | |||||||||||||||||||||||||||||||||||
Net cash provided by (used in) financing activities |
| (1,618 | ) |
|
| 1,053,659 |
|
|
| 1,307,148 |
|
|
| 1,058,112 |
| Net cash provided by (used in) financing activities | (1,999) | 1,308,766 | ||||||||||||||||||||
Change in cash, cash equivalents, and restricted cash |
| (114,260 | ) |
|
| 1,084,442 |
|
|
| 304,300 |
|
|
| 1,506,336 |
| Change in cash, cash equivalents, and restricted cash | 154,941 | 418,560 | ||||||||||||||||||||
Cash, cash equivalents, and restricted cash, beginning of period |
| 2,413,283 |
|
|
| 968,437 |
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|
| 1,994,723 |
|
|
| 546,543 |
| Cash, cash equivalents, and restricted cash, beginning of period | 1,423,776 | 1,994,723 | ||||||||||||||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 2,299,023 |
|
| $ | 2,052,879 |
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| $ | 2,299,023 |
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| $ | 2,052,879 |
| Cash, cash equivalents, and restricted cash, end of period | $ | 1,578,717 | $ | 2,413,283 | ||||||||||||||||||
Supplemental disclosures |
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| Supplemental disclosures | ||||||||||||||||||||||
Cash paid for income taxes, net | $ | 4,848 |
|
| $ | 3,280 |
|
| $ | 7,484 |
|
| $ | 14,288 |
| Cash paid for income taxes, net | $ | 17,003 | $ | 2,636 | ||||||||||||||||||
Cash paid for interest | $ | 551 |
|
| $ | 1,614 |
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| $ | 4,005 |
|
| $ | 6,741 |
| Cash paid for interest | $ | 4,421 | $ | 3,454 |
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
Revenue | $ | 1,110,909 |
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| $ | 982,108 |
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| $ | 2,173,636 |
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| $ | 1,751,692 |
| Revenue | $ | 988,608 | $ | 1,062,727 | ||||||||||||||||||
Costs and expenses: |
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| Costs and expenses: | ||||||||||||||||||||||
Cost of revenue |
| 446,377 |
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|
| 445,021 |
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|
| 867,274 |
|
|
| 857,622 |
| Cost of revenue | 439,986 | 420,897 | ||||||||||||||||||||
Research and development |
| 505,037 |
|
|
| 370,671 |
|
|
| 960,600 |
|
|
| 719,251 |
| Research and development | 455,112 | 455,563 | ||||||||||||||||||||
Sales and marketing |
| 311,374 |
|
|
| 179,724 |
|
|
| 553,260 |
|
|
| 330,010 |
| Sales and marketing | 268,433 | 241,886 | ||||||||||||||||||||
General and administrative |
| 249,061 |
|
|
| 179,204 |
|
|
| 464,969 |
|
|
| 340,927 |
| General and administrative | 190,341 | 215,908 | ||||||||||||||||||||
Total costs and expenses |
| 1,511,849 |
|
|
| 1,174,620 |
|
|
| 2,846,103 |
|
|
| 2,247,810 |
| Total costs and expenses | 1,353,872 | 1,334,254 | ||||||||||||||||||||
Operating loss |
| (400,940 | ) |
|
| (192,512 | ) |
|
| (672,467 | ) |
|
| (496,118 | ) | Operating loss | (365,264) | (271,527) | ||||||||||||||||||||
Interest income |
| 8,331 |
|
|
| 1,251 |
|
|
| 11,454 |
|
|
| 2,388 |
| Interest income | 37,948 | 3,123 | ||||||||||||||||||||
Interest expense |
| (5,549 | ) |
|
| (4,564 | ) |
|
| (10,722 | ) |
|
| (9,595 | ) | Interest expense | (5,885) | (5,173) | ||||||||||||||||||||
Other income (expense), net |
| (16,910 | ) |
|
| 42,282 |
|
|
| (94,447 | ) |
|
| 64,340 |
| Other income (expense), net | 11,372 | (77,537) | ||||||||||||||||||||
Loss before income taxes |
| (415,068 | ) |
|
| (153,543 | ) |
|
| (766,182 | ) |
|
| (438,985 | ) | Loss before income taxes | (321,829) | (351,114) | ||||||||||||||||||||
Income tax benefit (expense) |
| (6,999 | ) |
|
| 1,879 |
|
|
| (15,509 | ) |
|
| 439 |
| Income tax benefit (expense) | (6,845) | (8,510) | ||||||||||||||||||||
Net loss | $ | (422,067 | ) |
| $ | (151,664 | ) |
| $ | (781,691 | ) |
| $ | (438,546 | ) | Net loss | $ | (328,674) | $ | (359,624) | ||||||||||||||||||
Net loss per share attributable to Class A, Class B, and Class C common stockholders (Note 3): |
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| Net loss per share attributable to Class A, Class B, and Class C common stockholders (Note 3): | ||||||||||||||||||||||
Basic | $ | (0.26 | ) |
| $ | (0.10 | ) |
| $ | (0.48 | ) |
| $ | (0.29 | ) | Basic | $ | (0.21) | $ | (0.22) | ||||||||||||||||||
Diluted | $ | (0.26 | ) |
| $ | (0.10 | ) |
| $ | (0.48 | ) |
| $ | (0.29 | ) | Diluted | $ | (0.21) | $ | (0.22) | ||||||||||||||||||
Weighted average shares used in computation of net loss per share: |
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| Weighted average shares used in computation of net loss per share: | ||||||||||||||||||||||
Basic |
| 1,632,140 |
| �� |
| 1,547,234 |
|
|
| 1,625,663 |
|
|
| 1,524,560 |
| Basic | 1,581,370 | 1,619,113 | ||||||||||||||||||||
Diluted |
| 1,632,140 |
|
|
| 1,547,234 |
|
|
| 1,625,663 |
|
|
| 1,524,560 |
| Diluted | 1,581,370 | 1,619,113 |
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
Net loss | $ | (422,067 | ) |
| $ | (151,664 | ) |
| $ | (781,691 | ) |
| $ | (438,546 | ) | Net loss | $ | (328,674) | $ | (359,624) | ||||||||||||||||||
Other comprehensive income (loss), net of tax |
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| Other comprehensive income (loss), net of tax | ||||||||||||||||||||||
Unrealized gain (loss) on marketable securities, net of tax |
| (5,332 | ) |
|
| (258 | ) |
|
| (12,024 | ) |
|
| (142 | ) | Unrealized gain (loss) on marketable securities, net of tax | 9,395 | (6,692) | ||||||||||||||||||||
Foreign currency translation |
| (10,498 | ) |
|
| 2,195 |
|
|
| (13,340 | ) |
|
| (7,374 | ) | Foreign currency translation | 2,915 | (2,842) | ||||||||||||||||||||
Total other comprehensive income (loss), net of tax |
| (15,830 | ) |
|
| 1,937 |
|
|
| (25,364 | ) |
|
| (7,516 | ) | Total other comprehensive income (loss), net of tax | 12,310 | (9,534) | ||||||||||||||||||||
Total comprehensive loss | $ | (437,897 | ) |
| $ | (149,727 | ) |
| $ | (807,055 | ) |
| $ | (446,062 | ) | Total comprehensive loss | $ | (316,364) | $ | (369,158) |
| June 30, 2022 |
|
| December 31, 2021 |
| March 31, 2023 | December 31, 2022 | ||||||||||||
| (unaudited) |
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| (unaudited) | ||||||||||||
Assets |
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| Assets | |||||||||||
Current assets |
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| Current assets | |||||||||||
Cash and cash equivalents | $ | 2,298,122 |
|
| $ | 1,993,809 |
| Cash and cash equivalents | $ | 1,578,528 | $ | 1,423,121 | |||||||
Marketable securities |
| 2,574,354 |
|
|
| 1,699,076 |
| Marketable securities | 2,524,904 | 2,516,003 | |||||||||
Accounts receivable, net of allowance |
| 1,015,607 |
|
|
| 1,068,873 |
| Accounts receivable, net of allowance | 892,511 | 1,183,092 | |||||||||
Prepaid expenses and other current assets |
| 127,151 |
|
|
| 92,244 |
| Prepaid expenses and other current assets | 146,973 | 134,431 | |||||||||
Total current assets |
| 6,015,234 |
|
|
| 4,854,002 |
| Total current assets | 5,142,916 | 5,256,647 | |||||||||
Property and equipment, net |
| 232,476 |
|
|
| 202,644 |
| Property and equipment, net | 303,022 | 271,777 | |||||||||
Operating lease right-of-use assets |
| 416,169 |
|
|
| 322,252 |
| Operating lease right-of-use assets | 355,062 | 370,952 | |||||||||
Intangible assets, net |
| 234,261 |
|
|
| 277,654 |
| Intangible assets, net | 186,724 | 204,480 | |||||||||
Goodwill |
| 1,634,085 |
|
|
| 1,588,452 |
| Goodwill | 1,649,097 | 1,646,120 | |||||||||
Other assets |
| 258,566 |
|
|
| 291,302 |
| Other assets | 251,569 | 279,562 | |||||||||
Total assets | $ | 8,790,791 |
|
| $ | 7,536,306 |
| Total assets | $ | 7,888,390 | $ | 8,029,538 | |||||||
Liabilities and Stockholders’ Equity |
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| Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities |
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| Current liabilities | |||||||||||
Accounts payable | $ | 184,146 |
|
| $ | 125,282 |
| Accounts payable | $ | 141,800 | $ | 181,774 | |||||||
Operating lease liabilities |
| 48,978 |
|
|
| 52,396 |
| Operating lease liabilities | 50,787 | 46,485 | |||||||||
Accrued expenses and other current liabilities |
| 830,843 |
|
|
| 674,108 |
| Accrued expenses and other current liabilities | 898,897 | 987,340 | |||||||||
Total current liabilities |
| 1,063,967 |
|
|
| 851,786 |
| Total current liabilities | 1,091,484 | 1,215,599 | |||||||||
Convertible senior notes, net |
| 3,739,092 |
|
|
| 2,253,087 |
| Convertible senior notes, net | 3,744,237 | 3,742,520 | |||||||||
Operating lease liabilities, noncurrent |
| 416,501 |
|
|
| 325,509 |
| Operating lease liabilities, noncurrent | 368,526 | 386,271 | |||||||||
Other liabilities |
| 127,472 |
|
|
| 315,756 |
| Other liabilities | 105,703 | 104,450 | |||||||||
Total liabilities |
| 5,347,032 |
|
|
| 3,746,138 |
| Total liabilities | 5,309,950 | 5,448,840 | |||||||||
Commitments and contingencies (Note 8) |
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|
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| Commitments and contingencies (Note 8) | |||||||||||
Stockholders’ equity |
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| Stockholders’ equity | |||||||||||
Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 1,390,709 shares issued and outstanding at June 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 June 30, 2022, and 700,000 shares authorized, 22,769 shares issued and outstanding at December 31, 2021. |
| — |
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| — |
| ||||||||||||
Class C voting common stock, $0.00001 par value. 260,888 shares authorized, 231,627 shares issued and outstanding at June 30, 2022, and 260,888 shares authorized, 231,627 shares issued and outstanding at December 31, 2021. |
| 2 |
|
|
| 2 |
| ||||||||||||
Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 1,391,998 shares issued, 1,341,056 shares outstanding at March 31, 2023, and 3,000,000 shares authorized, 1,371,242 shares issued, 1,319,930 shares outstanding at December 31, 2022. | Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 1,391,998 shares issued, 1,341,056 shares outstanding at March 31, 2023, and 3,000,000 shares authorized, 1,371,242 shares issued, 1,319,930 shares outstanding at December 31, 2022. | 13 | 13 | ||||||||||||||||
Class B voting common stock, $0.00001 par value. 700,000 shares authorized, 22,522 shares issued and outstanding at March 31, 2023, and 700,000 shares authorized, 22,529 shares issued and outstanding at December 31, 2022. | Class B voting common stock, $0.00001 par value. 700,000 shares authorized, 22,522 shares issued and outstanding at March 31, 2023, and 700,000 shares authorized, 22,529 shares issued and outstanding at December 31, 2022. | — | — | ||||||||||||||||
Class C voting common stock, $0.00001 par value. 260,888 shares authorized, 231,627 shares issued and outstanding at March 31, 2023 and December 31, 2022. | Class C voting common stock, $0.00001 par value. 260,888 shares authorized, 231,627 shares issued and outstanding at March 31, 2023 and December 31, 2022. | 2 | 2 | ||||||||||||||||
Treasury stock, at cost. 50,942 and 51,312 shares of Class A non-voting common stock at March 31, 2023 and December 31, 2022, respectively. | Treasury stock, at cost. 50,942 and 51,312 shares of Class A non-voting common stock at March 31, 2023 and December 31, 2022, respectively. | (496,906) | (500,514) | ||||||||||||||||
Additional paid-in capital |
| 12,529,743 |
|
|
| 12,069,097 |
| Additional paid-in capital | 13,620,326 | 13,309,828 | |||||||||
Accumulated deficit | Accumulated deficit | (10,543,331) | (10,214,657) | ||||||||||||||||
Accumulated other comprehensive income (loss) |
| (19,843 | ) |
|
| 5,521 |
| Accumulated other comprehensive income (loss) | (1,664) | (13,974) | |||||||||
Accumulated deficit |
| (9,066,157 | ) |
|
| (8,284,466 | ) | ||||||||||||
Total stockholders’ equity |
| 3,443,759 |
|
|
| 3,790,168 |
| Total stockholders’ equity | 2,578,440 | 2,580,698 | |||||||||
Total liabilities and stockholders’ equity | $ | 8,790,791 |
|
| $ | 7,536,306 |
| Total liabilities and stockholders’ equity | $ | 7,888,390 | $ | 8,029,538 |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||
Class A non-voting common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Class A non-voting common stock | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| 1,378,259 |
|
| $ | 14 |
|
|
| 1,263,733 |
|
| $ | 13 |
|
|
| 1,364,887 |
|
| $ | 14 |
|
|
| 1,248,010 |
|
| $ | 12 |
| Balance, beginning of period | 1,319,930 | $ | 13 | 1,364,887 | $ | 14 | ||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with exercise of stock options under stock-based compensation plans |
| 100 |
|
|
| — |
|
|
| 235 |
|
|
| — |
|
|
| 260 |
|
|
| — |
|
|
| 548 |
|
|
| — |
| Shares issued in connection with exercise of stock options under stock-based compensation plans | 3 | — | 160 | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A non-voting common stock in connection with acquisitions |
| 159 |
|
|
| — |
|
|
| 5,733 |
|
|
| — |
|
|
| 1,277 |
|
|
| — |
|
|
| 5,733 |
|
|
| — |
| Issuance of Class A non-voting common stock in connection with acquisitions | — | — | 1,118 | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A non-voting common stock for vesting of restricted stock units and restricted stock awards, net |
| 12,148 |
|
|
| — |
|
|
| 13,375 |
|
|
| — |
|
|
| 24,144 |
|
|
| — |
|
|
| 28,724 |
|
|
| 1 |
| Issuance of Class A non-voting common stock for vesting of restricted stock units and restricted stock awards, net | 20,745 | — | 11,996 | — | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A non-voting common stock for the induced conversion related to convertible senior notes |
| — |
|
|
| — |
|
|
| 38,398 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38,398 |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Class B voting common stock to Class A non-voting common stock |
| 43 |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 141 |
|
|
| — |
|
|
| 64 |
|
|
| — |
| Conversion of Class B voting common stock to Class A non-voting common stock | 8 | — | 98 | — | ||||||||||||||||||||||||||||||||||||||||||
Reissuances of Class A non-voting common stock for vesting of restricted stock units | Reissuances of Class A non-voting common stock for vesting of restricted stock units | 370 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| 1,390,709 |
|
|
| 14 |
|
|
| 1,321,477 |
|
|
| 13 |
|
|
| 1,390,709 |
|
|
| 14 |
|
|
| 1,321,477 |
|
|
| 13 |
| Balance, end of period | 1,341,056 | 13 | 1,378,259 | 14 | ||||||||||||||||||||||||||||||||||||||||||
Class B voting common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Class B voting common stock | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| 22,677 |
|
|
| — |
|
|
| 23,640 |
|
|
| — |
|
|
| 22,769 |
|
|
| — |
|
|
| 23,696 |
|
|
| — |
| Balance, beginning of period | 22,529 | — | 22,769 | — | ||||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with exercise of stock options under stock-based compensation plans |
| 4 |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 10 |
|
|
| — |
|
|
| 8 |
|
|
| — |
| Shares issued in connection with exercise of stock options under stock-based compensation plans | 1 | — | 6 | — | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Class C voting common stock to Class B voting common stock |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Class B voting common stock to Class A non-voting common stock |
| (43 | ) |
|
| — |
|
|
| (3 | ) |
|
| — |
|
|
| (141 | ) |
|
| — |
|
|
| (64 | ) |
|
| — |
| Conversion of Class B voting common stock to Class A non-voting common stock | (8) | — | (98) | — | ||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| 22,638 |
|
|
| — |
|
|
| 23,640 |
|
|
| — |
|
|
| 22,638 |
|
|
| — |
|
|
| 23,640 |
|
|
| — |
| Balance, end of period | 22,522 | — | 22,677 | — | ||||||||||||||||||||||||||||||||||||||||||
Class C voting common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Class C voting common stock | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
| Balance, beginning of period | 231,627 | 2 | 231,627 | 2 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class C voting common stock for settlement of restricted stock units, net |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| Issuance of Class C voting common stock for settlement of restricted stock units, net | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Conversion of Class C voting common stock to Class B voting common stock |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period | Balance, end of period | 231,627 | 2 | 231,627 | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock | Treasury stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period | Balance, beginning of period | 51,312 | (500,514) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reissuances of Class A non-voting common stock for vesting of restricted stock units | Reissuances of Class A non-voting common stock for vesting of restricted stock units | (370) | 3,608 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
|
|
| 231,627 |
|
|
| 2 |
| Balance, end of period | 50,942 | (496,906) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional paid-in capital | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| — |
|
|
| 12,211,123 |
|
|
| — |
|
|
| 9,777,646 |
|
|
| — |
|
|
| 12,069,097 |
|
|
| — |
|
|
| 10,200,141 |
| Balance, beginning of period | — | 13,309,828 | — | 12,069,097 | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
| — |
|
|
| 317,224 |
|
|
| — |
|
|
| 255,931 |
|
|
| — |
|
|
| 589,944 |
|
|
| — |
|
|
| 493,004 |
| Stock-based compensation expense | — | 314,077 | — | 272,720 | ||||||||||||||||||||||||||||||||||||||||||
Shares issued in connection with exercise of stock options under stock-based compensation plans |
| — |
|
|
| 1,396 |
|
|
| — |
|
|
| 3,257 |
|
|
| — |
|
|
| 3,663 |
|
|
| — |
|
|
| 7,710 |
| Shares issued in connection with exercise of stock options under stock-based compensation plans | — | 29 | — | 2,267 | ||||||||||||||||||||||||||||||||||||||||||
Cumulative-effect adjustment from accounting changes |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (664,021 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A non-voting common stock in connection with acquisitions |
| — |
|
|
| — |
|
|
| — |
|
|
| 308,636 |
|
|
| — |
|
|
| 44,039 |
|
|
| — |
|
|
| 308,636 |
| Issuance of Class A non-voting common stock in connection with acquisitions | — | — | — | 44,039 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of Class A non-voting common stock for the induced conversion related to convertible senior notes |
| — |
|
|
| — |
|
|
| — |
|
|
| 870,551 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 870,551 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Purchase of capped calls |
| — |
|
|
| — |
|
|
| — |
|
|
| (86,825 | ) |
|
| — |
|
|
| (177,000 | ) |
|
| — |
|
|
| (86,825 | ) | Purchase of capped calls | — | — | — | (177,000) | ||||||||||||||||||||||||||||||||||||||||||
Reissuances of Class A non-voting common stock for vesting of restricted stock units | Reissuances of Class A non-voting common stock for vesting of restricted stock units | — | (3,608) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| — |
|
|
| 12,529,743 |
|
|
| — |
|
|
| 11,129,196 |
|
|
| — |
|
|
| 12,529,743 |
|
|
| — |
|
|
| 11,129,196 |
| Balance, end of period | — | 13,620,326 | — | 12,211,123 | ||||||||||||||||||||||||||||||||||||||||||
Accumulated deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated deficit | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| — |
|
|
| (8,644,090 | ) |
|
| — |
|
|
| (8,083,393 | ) |
|
| — |
|
|
| (8,284,466 | ) |
|
| — |
|
|
| (7,891,542 | ) | Balance, beginning of period | — | (10,214,657) | — | (8,284,466) | ||||||||||||||||||||||||||||||||||||||||||
Cumulative-effect adjustment from accounting changes |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 95,031 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| — |
|
|
| (422,067 | ) |
|
| — |
|
|
| (151,664 | ) |
|
| — |
|
|
| (781,691 | ) |
|
| — |
|
|
| (438,546 | ) | Net loss | — | (328,674) | — | (359,624) | ||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| — |
|
|
| (9,066,157 | ) |
|
| — |
|
|
| (8,235,057 | ) |
|
| — |
|
|
| (9,066,157 | ) |
|
| — |
|
|
| (8,235,057 | ) | Balance, end of period | — | (10,543,331) | — | (8,644,090) | ||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance, beginning of period |
| — |
|
|
| (4,013 | ) |
|
| — |
|
|
| 11,910 |
|
|
| — |
|
|
| 5,521 |
|
|
| — |
|
|
| 21,363 |
| Balance, beginning of period | — | (13,974) | — | 5,521 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of tax |
| — |
|
|
| (15,830 | ) |
|
| — |
|
|
| 1,937 |
|
|
| — |
|
|
| (25,364 | ) |
|
| — |
|
|
| (7,516 | ) | Other comprehensive income (loss), net of tax | — | 12,310 | — | (9,534) | ||||||||||||||||||||||||||||||||||||||||||
Balance, end of period |
| — |
|
|
| (19,843 | ) |
|
| — |
|
|
| 13,847 |
|
|
| — |
|
|
| (19,843 | ) |
|
| — |
|
|
| 13,847 |
| Balance, end of period | — | (1,664) | — | (4,013) | ||||||||||||||||||||||||||||||||||||||||||
Total stockholders’ equity |
| 1,644,974 |
|
| $ | 3,443,759 |
|
|
| 1,576,744 |
|
| $ | 2,908,001 |
|
|
| 1,644,974 |
|
| $ | 3,443,759 |
|
|
| 1,576,744 |
|
| $ | 2,908,001 |
| Total stockholders’ equity | 1,646,147 | $ | 2,578,440 | 1,632,563 | $ | 3,563,036 |
2023.
Recent Accounting Pronouncements
liabilities.
In November 2021,for the FASB issued ASU 2021-10,Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, which improves the transparency of government assistance received by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the
11
assistance on an entity's financial statements. The guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted. Effective January 1, 2022, we early adopted ASU 2021-10 on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under ASU 2021-08, an acquirer must recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. Effective January 1, 2022, we early adopted ASU 2021-08 on a prospective basis. The impact of adoption of this standard on our consolidated financial statements, including accounting policies, processes, and systems, was not material.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. Adoptioneffects of the standard requires using either a modified retrospective or a full retrospective approach. Effective January 1, 2021, we early adopted ASU 2020-06 using the modified retrospective approach. AdoptionFuture Stock Split as these triggering conditions have not been met.
12
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
| (in thousands) |
| |||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America (1) (2) | $ | 774,873 |
|
| $ | 656,484 |
|
| $ | 1,524,116 |
|
| $ | 1,187,847 |
|
Europe (3) |
| 174,945 |
|
|
| 167,045 |
|
|
| 334,021 |
|
|
| 296,163 |
|
Rest of world |
| 161,091 |
|
|
| 158,579 |
|
|
| 315,499 |
|
|
| 267,682 |
|
Total revenue | $ | 1,110,909 |
|
| $ | 982,108 |
|
| $ | 2,173,636 |
|
| $ | 1,751,692 |
|
|
|
|
|
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
North America (1) (2) | $ | 632,560 | $ | 749,243 | |||||||||||||||||||
Europe (3) | 155,615 | 159,076 | |||||||||||||||||||||
Rest of world | 200,433 | 154,408 | |||||||||||||||||||||
Total revenue | $ | 988,608 | $ | 1,062,727 |
|
|
13
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| (in thousands, except per share data) |
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Class A Common |
|
| Class B Common |
|
| Class C Common |
|
| Class A Common |
|
| Class B Common |
|
| Class C Common |
|
| Class A Common |
|
| Class B Common |
|
| Class C Common |
|
| Class A Common |
|
| Class B Common |
|
| Class C Common |
| Class A | Class B | Class C | Class A | Class B | Class C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Numerator: |
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|
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|
|
|
|
|
|
|
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|
|
|
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|
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|
|
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|
|
|
|
| Numerator: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss |
| $ | (356,314 | ) |
| $ | (5,855 | ) |
| $ | (59,898 | ) |
| $ | (126,642 | ) |
| $ | (2,317 | ) |
| $ | (22,705 | ) |
| $ | (659,409 | ) |
| $ | (10,905 | ) |
| $ | (111,377 | ) |
| $ | (365,112 | ) |
| $ | (6,805 | ) |
| $ | (66,629 | ) | Net loss | $ | (275,851) | $ | (4,681) | $ | (48,142) | $ | (303,132) | $ | (5,045) | $ | (51,447) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to common stockholders |
| $ | (356,314 | ) |
| $ | (5,855 | ) |
| $ | (59,898 | ) |
| $ | (126,642 | ) |
| $ | (2,317 | ) |
| $ | (22,705 | ) |
| $ | (659,409 | ) |
| $ | (10,905 | ) |
| $ | (111,377 | ) |
| $ | (365,112 | ) |
| $ | (6,805 | ) |
| $ | (66,629 | ) | Net loss attributable to common stockholders | $ | (275,851) | $ | (4,681) | $ | (48,142) | $ | (303,132) | $ | (5,045) | $ | (51,447) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denominator: |
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|
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|
|
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|
|
|
| Denominator: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
| Basic shares: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average common shares - Basic |
|
| 1,377,870 |
|
|
| 22,643 |
|
|
| 231,627 |
|
|
| 1,291,967 |
|
|
| 23,640 |
|
|
| 231,627 |
|
|
| 1,371,358 |
|
|
| 22,678 |
|
|
| 231,627 |
|
|
| 1,269,275 |
|
|
| 23,658 |
|
|
| 231,627 |
| Weighted-average common shares - Basic | 1,327,221 | 22,522 | 231,627 | 1,364,772 | 22,714 | 231,627 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted shares: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
| Diluted shares: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average common shares - Diluted |
|
| 1,377,870 |
|
|
| 22,643 |
|
|
| 231,627 |
|
|
| 1,291,967 |
|
|
| 23,640 |
|
|
| 231,627 |
|
|
| 1,371,358 |
|
|
| 22,678 |
|
|
| 231,627 |
|
|
| 1,269,275 |
|
|
| 23,658 |
|
|
| 231,627 |
| Weighted-average common shares - Diluted | 1,327,221 | 22,522 | 231,627 | 1,364,772 | 22,714 | 231,627 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic |
| $ | (0.26 | ) |
| $ | (0.26 | ) |
| $ | (0.26 | ) |
| $ | (0.10 | ) |
| $ | (0.10 | ) |
| $ | (0.10 | ) |
| $ | (0.48 | ) |
| $ | (0.48 | ) |
| $ | (0.48 | ) |
| $ | (0.29 | ) |
| $ | (0.29 | ) |
| $ | (0.29 | ) | Basic | $ | (0.21) | $ | (0.21) | $ | (0.21) | $ | (0.22) | $ | (0.22) | $ | (0.22) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted |
| $ | (0.26 | ) |
| $ | (0.26 | ) |
| $ | (0.26 | ) |
| $ | (0.10 | ) |
| $ | (0.10 | ) |
| $ | (0.10 | ) |
| $ | (0.48 | ) |
| $ | (0.48 | ) |
| $ | (0.48 | ) |
| $ | (0.29 | ) |
| $ | (0.29 | ) |
| $ | (0.29 | ) | Diluted | $ | (0.21) | $ | (0.21) | $ | (0.21) | $ | (0.22) | $ | (0.22) | $ | (0.22) |
|
| Three and Six Months Ended June 30, |
| Three Months Ended March 31, | |||||||||||||||
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||
|
| (in thousands) |
| (in thousands) | |||||||||||||||
Stock options |
|
| 4,022 |
|
|
| 5,066 |
| Stock options | 3,155 | 4,132 | ||||||||
Unvested RSUs and RSAs |
|
| 94,323 |
|
|
| 107,526 |
| Unvested RSUs and RSAs | 128,086 | 77,793 | ||||||||
Convertible Notes (if-converted) |
|
| 89,379 |
|
|
| 76,703 |
| Convertible Notes (if-converted) | 89,379 | 89,379 |
|
| Class A Outstanding |
|
| Weighted- Average Grant Date Fair Value |
| ||
|
| (in thousands, except per share data) |
| |||||
Unvested at December 31, 2021 |
|
| 86,180 |
|
| $ | 26.07 |
|
Granted |
|
| 39,762 |
|
| $ | 23.54 |
|
Vested |
|
| (25,744 | ) |
| $ | 20.44 |
|
Forfeited |
|
| (5,875 | ) |
| $ | 26.77 |
|
Unvested at June 30, 2022 |
|
| 94,323 |
|
| $ | 26.50 |
|
Class A Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
(in thousands, except per share data) | |||||||||||
Unvested at December 31, 2022 | 132,392 | $ | 18.28 | ||||||||
Granted | 23,045 | $ | 10.51 | ||||||||
Vested | (21,926) | $ | 16.70 | ||||||||
Forfeited | (5,425) | $ | 20.93 | ||||||||
Unvested at March 31, 2023 | 128,086 | $ | 17.04 |
|
| Class A Number of Shares |
|
| Class B Number of Shares |
|
| Weighted- Average Exercise Price |
|
| Weighted- Average Remaining Contractual Term (in years) |
|
| Aggregate Intrinsic Value(1) |
| ||||||||||||||||||||||||||||||||||
|
| (in thousands, except per share data) |
| Class A Number of Shares | Class B Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (1) | |||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2021 |
|
| 3,676 |
|
|
| 628 |
|
| $ | 10.59 |
|
|
| 4.19 |
|
| $ | 157,374 |
| |||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2022 | Outstanding at December 31, 2022 | 2,589 | 570 | $ | 9.68 | 4.05 | $ | 9,669 | |||||||||||||||||||||||||||||||||||||||||
Granted |
|
| — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | — |
| Granted | — | — | $ | — | ||||||||||||||||||||||||
Exercised |
|
| (260 | ) |
|
| (10 | ) |
| $ | 13.60 |
|
|
| — |
|
| $ | — |
| Exercised | (3) | (1) | $ | 7.66 | ||||||||||||||||||||||||
Forfeited |
|
| (12 | ) |
|
| — |
|
| $ | 20.50 |
|
|
| — |
|
| $ | — |
| Forfeited | — | — | $ | — | ||||||||||||||||||||||||
Outstanding at June 30, 2022 |
|
| 3,404 |
|
|
| 618 |
|
| $ | 10.36 |
|
|
| 3.64 |
|
| $ | 16,111 |
| |||||||||||||||||||||||||||||
Outstanding at March 31, 2023 | Outstanding at March 31, 2023 | 2,586 | 569 | $ | 9.68 | 3.73 | $ | 12,359 |
(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of our Class A common stock as of March 31, 2023 and December 31, 2022, respectively. |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Cost of revenue | $ | 2,849 |
|
| $ | 2,847 |
|
| $ | 5,295 |
|
| $ | 5,503 |
| Cost of revenue | $ | 1,885 | $ | 2,446 | ||||||||||||||||||
Research and development |
| 221,650 |
|
|
| 174,491 |
|
|
| 404,516 |
|
|
| 338,284 |
| Research and development | 219,850 | 182,866 | ||||||||||||||||||||
Sales and marketing |
| 48,577 |
|
|
| 37,491 |
|
|
| 90,648 |
|
|
| 66,575 |
| Sales and marketing | 54,939 | 42,071 | ||||||||||||||||||||
General and administrative |
| 45,734 |
|
|
| 41,771 |
|
|
| 93,795 |
|
|
| 83,311 |
| General and administrative | 38,257 | 48,061 | ||||||||||||||||||||
Total | $ | 318,810 |
|
| $ | 256,600 |
|
| $ | 594,254 |
|
| $ | 493,673 |
| Total | $ | 314,931 | $ | 275,444 |
2022 Acquisitions
In
2021 Acquisitions
Wave Optics
In May 2021, we acquired Wave Optics Limited (“Wave Optics”), a display technology company that supplies light engines and diffractive waveguides for augmented reality displays. The total consideration was $541.8 million, of which $510.4 million represented purchase consideration and primarily consisted of 4.7 million shares of our Class A common stock with a fair value of $252.0 million, cash of $13.7 million, and a $238.4 million payable due no later than May 2023 in either cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election. The remaining $31.4 million of total consideration transferred represented compensation for future employment services.
The allocation of the total purchase consideration for this acquisition was as follows:
| Total |
| |
| (in thousands) |
| |
Trademarks | $ | 20,584 |
|
Technology |
| 77,118 |
|
Customer relationships |
| 32,708 |
|
Goodwill |
| 370,236 |
|
Net deferred tax liability |
| (3,313 | ) |
Other assets acquired and liabilities assumed, net |
| 13,111 |
|
Total | $ | 510,444 |
|
The goodwill amount represents synergies expected to be realized from the business combination and assembled workforce. The associated goodwill and intangible assets are not deductible for tax purposes.
Fit Analytics
In March 2021, we acquired Fit Analytics GmbH (“Fit Analytics”), a sizing technology company that powers solutions for retailers and brands, to grow our e-commerce and shopping offerings. The purchase consideration for Fit Analytics was $124.4 million, which primarily represented current and future cash consideration payments.
The allocation of the total purchase consideration for this acquisition was as follows:
| Total |
| |
| (in thousands) |
| |
Trademarks | $ | 800 |
|
Technology |
| 17,000 |
|
Customer relationships |
| 17,000 |
|
Goodwill |
| 88,132 |
|
Net deferred tax liability |
| (5,643 | ) |
Other assets acquired and liabilities assumed, net |
| 7,160 |
|
Total | $ | 124,449 |
|
The goodwill amount represents synergies expected to be realized from this business combination and assembled workforce. The associated goodwill and intangible assets are not deductible for tax purposes.
Other 2021 Acquisitions
For the year ended December 31, 2021, we completed other acquisitions to enhance our existing platform, technology, and workforce. The aggregate purchase consideration was $266.1 million, which included $139.5 million in cash, $93.7 million in shares of our Class A common stock, and $32.9 million recorded in other liabilities on the consolidated balance sheet.
The aggregate allocation of purchase consideration was as follows:
| Total |
| |
| (in thousands) |
| |
Technology | $ | 64,150 |
|
Customer relationships |
| 4,000 |
|
Goodwill |
| 203,482 |
|
Net deferred tax liability |
| (11,871 | ) |
Other assets acquired and liabilities assumed, net |
| 6,325 |
|
Total | $ | 266,086 |
|
The goodwill amount represents synergies related to our existing platform expected to be realized from the business acquisitions and assembled workforces. Of the acquired goodwill and intangible assets, $8.2 million is deductible for tax purposes.
6. Goodwill and Intangible Assets
| Goodwill |
| |
| (in thousands) |
| |
Balance as of December 31, 2021 | $ | 1,588,452 |
|
Goodwill acquired |
| 60,791 |
|
Foreign currency translation |
| (15,158 | ) |
Balance as of June 30, 2022 | $ | 1,634,085 |
|
Goodwill | |||||
(in thousands) | |||||
Balance as of December 31, 2022 | $ | 1,646,120 | |||
Goodwill acquired | — | ||||
Foreign currency translation | 2,977 | ||||
Balance as of March 31, 2023 | $ | 1,649,097 |
| As of June 30, 2022 |
| As of March 31, 2023 | |||||||||||||||||||||||||||||||||||
| Weighted- Average Remaining Useful Life - Years |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
| Weighted- Average Remaining Useful Life - Years | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||
| (in thousands, except years) |
| (in thousands, except years) | |||||||||||||||||||||||||||||||||||
Domain names |
| 4.4 |
|
| $ | 949 |
|
| $ | 462 |
|
| $ | 487 |
| Domain names | 3.8 | $ | 745 | $ | (497) | $ | 248 | |||||||||||||||
Trademarks |
| 1.7 |
|
|
| 800 |
|
|
| 344 |
|
|
| 456 |
| Trademarks | 1.0 | 800 | (544) | 256 | ||||||||||||||||||
Technology |
| 3.5 |
|
|
| 336,687 |
|
|
| 138,139 |
|
|
| 198,548 |
| Technology | 2.9 | 308,745 | (161,642) | 147,103 | ||||||||||||||||||
Customer relationships |
| 6.0 |
|
|
| 21,000 |
|
|
| 4,578 |
|
|
| 16,422 |
| Customer relationships | 5.7 | 21,000 | (7,672) | 13,328 | ||||||||||||||||||
Patents |
| 5.9 |
|
|
| 26,629 |
|
|
| 12,905 |
|
|
| 13,724 |
| Patents | 9.0 | 39,373 | (15,958) | 23,415 | ||||||||||||||||||
Other |
| 1.5 |
|
|
| 6,000 |
|
|
| 1,376 |
|
|
| 4,624 |
| Other | 0.8 | 6,000 | (3,626) | 2,374 | ||||||||||||||||||
|
|
|
|
| $ | 392,065 |
|
| $ | 157,804 |
|
| $ | 234,261 |
| $ | 376,663 | $ | (189,939) | $ | 186,724 |
| As of December 31, 2021 |
| |||||||||||||
| Weighted- Average Remaining Useful Life - Years |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net |
| ||||
| (in thousands except years) |
| |||||||||||||
Domain names |
| 4.6 |
|
| $ | 967 |
|
| $ | 365 |
|
| $ | 602 |
|
Trademarks |
| 4.3 |
|
|
| 21,384 |
|
|
| 2,613 |
|
|
| 18,771 |
|
Technology |
| 3.6 |
|
|
| 343,800 |
|
|
| 142,588 |
|
|
| 201,212 |
|
Customer relationships |
| 5.1 |
|
|
| 53,709 |
|
|
| 6,332 |
|
|
| 47,377 |
|
Patents |
| 4.0 |
|
|
| 21,195 |
|
|
| 11,503 |
|
|
| 9,692 |
|
|
|
|
|
| $ | 441,055 |
|
| $ | 163,401 |
|
| $ | 277,654 |
|
As of December 31, 2022 | |||||||||||||||||||||||
Weighted- Average Remaining Useful Life - Years | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
(in thousands, except years) | |||||||||||||||||||||||
Domain names | 4.0 | $ | 954 | $ | (690) | $ | 264 | ||||||||||||||||
Trademarks | 1.2 | 800 | (478) | 322 | |||||||||||||||||||
Technology | 3.1 | 340,375 | (178,427) | 161,948 | |||||||||||||||||||
Customer relationships | 5.7 | 21,000 | (6,641) | 14,359 | |||||||||||||||||||
Patents | 9.1 | 39,373 | (14,912) | 24,461 | |||||||||||||||||||
Other | 1.0 | $ | 6,000 | $ | (2,874) | $ | 3,126 | ||||||||||||||||
$ | 408,502 | $ | (204,022) | $ | 204,480 |
| Estimated Amortization |
| ||||||
| (in thousands) |
| Estimated Amortization | |||||
Remainder of 2022 | $ | 37,371 |
| |||||
2023 |
| 72,338 |
| |||||
(in thousands) | ||||||||
Remainder of 2023 | Remainder of 2023 | $ | 52,363 | |||||
2024 |
| 57,813 |
| 2024 | 57,177 | |||
2025 |
| 40,464 |
| 2025 | 41,102 | |||
2026 |
| 15,270 |
| 2026 | 16,673 | |||
2027 | 2027 | 7,293 | ||||||
Thereafter |
| 11,005 |
| Thereafter | 12,116 | |||
Total | $ | 234,261 |
| Total | $ | 186,724 |
18
We may redeem for cash all or any portion of the 2028 Notes, at our option, on or after March 5, 2025 if the last reported sale pricebased on certain circumstances.
|
|
|
|
|
|
On or after December 1, 2027, the 2028 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
Holders of the 2028 Notes who convert the 2028 Notes in connection with a make-whole fundamental change, as defined in the indenture governing the 2028 Notes, or in connection with a redemption are entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change, holders of the 2028 Notes may require us to repurchase all or a portion of the 2028 Notes at a price equal to 100% of the principal amount of 2028 Notes, plus any accrued and unpaid interest, if any.
We accounted for the issuance of the 2028 Notes as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives.
2027 Notes
19
Exchange Transactions
In 2021, we entered into various exchange agreements (collectively, the “Exchange Agreements”) with certain holders
The Exchange Agreements were accounted for as an induced conversion with the fair value of 0.7 million Exchange Shares, less accrued interest, recognized as an inducement expense in other income (expense), net in our consolidated statements of operations and included as an adjustment to reconcile net loss to net cash provided by (used in) operating activities in our consolidated statements of cash flows. Inducement expense for the three and six months ended June 30, 2021 was $37.0 million. Contents
20
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||||||||||||||
| 2025 Notes |
|
| 2026 Notes |
|
| 2027 Notes |
|
| 2028 Notes |
|
| 2025 Notes |
|
| 2026 Notes |
|
| 2027 Notes |
| |||||||
| (in thousands) |
| |||||||||||||||||||||||||
Principal | $ | 284,105 |
|
| $ | 838,484 |
|
| $ | 1,150,000 |
|
| $ | 1,500,000 |
|
| $ | 284,105 |
|
| $ | 838,493 |
|
| $ | 1,150,000 |
|
Unamortized debt issuance costs |
| (1,845 | ) |
|
| (5,342 | ) |
|
| (10,300 | ) |
|
| (16,010 | ) |
|
| (2,168 | ) |
|
| (5,982 | ) |
|
| (11,361 | ) |
Net carrying amount | $ | 282,260 |
|
| $ | 833,142 |
|
| $ | 1,139,700 |
|
| $ | 1,483,990 |
|
| $ | 281,937 |
|
| $ | 832,511 |
|
| $ | 1,138,639 |
|
As of March 31, 2023 | As of December 31, 2022 | ||||||||||||||||||||||||||||||||||
Principal | Unamortized Debt Issuance Costs | Net Carrying Amount | Principal | Unamortized Debt Issuance Costs | Net Carrying Amount | ||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||
2025 Notes | $ | 284,105 | $ | (1,360) | $ | 282,745 | $ | 284,105 | $ | (1,521) | $ | 282,584 | |||||||||||||||||||||||
2026 Notes | 838,482 | (4,375) | 834,107 | 838,482 | (4,698) | 833,784 | |||||||||||||||||||||||||||||
2027 Notes | 1,150,000 | (8,708) | 1,141,292 | 1,150,000 | (9,239) | 1,140,761 | |||||||||||||||||||||||||||||
2028 Notes | 1,500,000 | (13,907) | 1,486,093 | 1,500,000 | (14,609) | 1,485,391 | |||||||||||||||||||||||||||||
Total | $ | 3,772,587 | $ | (28,350) | $ | 3,744,237 | $ | 3,772,587 | $ | (30,067) | $ | 3,742,520 |
21
22
March 31, 2023.
We have various non-cancelable lease agreements for certain of our offices with original lease periods expiring between 2022 and 2042. Our lease terms may include options to extend or terminate the lease when it is reasonably certain we will exercise that option. Certain of the arrangements have free rent periods or escalating rent payment provisions.
Lease Cost
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Operating lease expense | $ | 28,830 |
|
| $ | 17,148 |
|
| $ | 52,456 |
|
| $ | 32,088 |
| Operating lease expense | $ | 25,003 | $ | 23,626 | ||||||||||||||||||
Sublease income |
| (191 | ) |
|
| (926 | ) |
|
| (864 | ) |
|
| (1,328 | ) | Sublease income | (222) | (673) | ||||||||||||||||||||
Total net lease costs | $ | 28,639 |
|
| $ | 16,222 |
|
| $ | 51,592 |
|
| $ | 30,760 |
| Total net lease costs | $ | 24,781 | $ | 22,953 |
Lease Term and Discount Rate
|
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | |||||||||||||||||||
|
|
|
|
| 2022 |
|
|
|
| 2021 |
| 2023 | 2022 | |||||||||||
Weighted-average remaining lease term |
|
|
|
|
| 6.9 |
|
|
|
|
| 7.1 |
| Weighted-average remaining lease term | 6.3 | 7.0 | ||||||||
Weighted-average discount rate |
|
|
|
|
| 4.9 | % |
|
|
| 5.2 | % | Weighted-average discount rate | 4.8 | % | 4.9 | % |
We use our incremental borrowing rate based on the information available at the lease commencement date to determine the present value of lease payments.
Maturity of Lease Liabilities
|
|
|
|
| Operating Leases |
| ||||||
|
|
|
|
| (in thousands) |
| Operating Leases | |||||
Remainder of 2022 |
|
|
|
| $ | 39,034 |
| |||||
2023 |
|
|
|
|
| 81,080 |
| |||||
(in thousands) | ||||||||||||
Remainder of 2023 | Remainder of 2023 | $ | 43,363 | |||||||||
2024 |
|
|
|
|
| 104,979 |
| 2024 | 103,048 | |||
2025 |
|
|
|
|
| 98,968 |
| 2025 | 99,141 | |||
2026 |
|
|
|
|
| 49,398 |
| 2026 | 52,311 | |||
2027 | 2027 | 37,418 | ||||||||||
Thereafter |
|
|
|
|
| 186,251 |
| Thereafter | 169,496 | |||
Total lease payments |
|
|
|
| $ | 559,710 |
| Total lease payments | $ | 504,777 | ||
Less: Imputed interest |
|
|
|
|
| (94,231 | ) | Less: Imputed interest | (85,464) | |||
Present value of lease liabilities |
|
|
|
| $ | 465,479 |
| Present value of lease liabilities | $ | 419,313 |
Other Information
10 years.
23
We
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Unrealized gains (losses) on investments in privately held companies still held at the reporting date, net | $ | 1,079 | $ | 13,255 | |||||||||||||||||||
In the second quarter of 2022, we reclassified a publicly traded strategic investment to marketable securities. See Note 11 for further information. The carrying value of this publicly traded company was $16.2 million as of June 30, 2022. We recognized unrealized losses on this investment of $25.9 million for the three months ended June 30, 2022. The realized gains on this investment for the three months ended June 30, 2022 were not material.
Unrealized and realized gains on all strategic investments are included within other income (expense), net on theour consolidated statements of operations and included as an adjustment to reconcile net loss to net cash provided by (used in) operating activities in our consolidated statements of cash flows. Strategic investments are included within other assets on theour consolidated balance sheets.
A
|
|
•Level 1: Quoted market prices in active markets for identical assets or liabilities. |
|
•Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. |
|
| June 30, 2022 |
| |||||||||||||
| Cost or Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Total Estimated Fair Value |
| ||||
| (in thousands) |
| |||||||||||||
Cash | $ | 2,159,196 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,159,196 |
|
Level 1 securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government securities |
| 1,669,624 |
|
|
| — |
|
|
| (11,465 | ) |
|
| 1,658,159 |
|
U.S. government agency securities |
| 112,858 |
|
|
| — |
|
|
| (202 | ) |
|
| 112,656 |
|
Publicly traded equity securities (1) |
| 113,392 |
|
|
| — |
|
|
| (34,081 | ) |
|
| 79,311 |
|
Level 2 securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
| 343,025 |
|
|
| 3 |
|
|
| (2,025 | ) |
|
| 341,003 |
|
Commercial paper |
| 361,369 |
|
|
| — |
|
|
| — |
|
|
| 361,369 |
|
Certificates of deposit |
| 160,785 |
|
|
| — |
|
|
| (3 | ) |
|
| 160,782 |
|
Total | $ | 4,920,249 |
|
| $ | 3 |
|
| $ | (47,776 | ) |
| $ | 4,872,476 |
|
(1) In the second quarter of 2022, we reclassified a strategic investment from Level 3 to Level 1 at its fair value using the
beginning-of-period approach, following the commencement of public market trading of the investment during the
period (which was subject to short-term lock-up restrictionsexcluding publicly traded equity securities, as of June 30, 2022). See Note 10 for further information.
| December 31, 2021 |
| March 31, 2023 | |||||||||||||||||||||||||||||||||||
| Cost or Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Total Estimated Fair Value |
| Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Total Estimated Fair Value | |||||||||||||||||||||||
| (in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Cash | $ | 1,966,966 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,966,966 |
| Cash | $ | 1,447,925 | $ | — | $ | — | $ | 1,447,925 | ||||||||||||||
Level 1 securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Level 1 securities: | ||||||||||||||||||||||
U.S. government securities |
| 811,092 |
|
|
| 1 |
|
|
| (1,454 | ) |
|
| 809,639 |
| U.S. government securities | 1,688,325 | 3,860 | (5,149) | 1,687,036 | ||||||||||||||||||
U.S. government agency securities |
| 77,409 |
|
|
| 1 |
|
|
| (8 | ) |
|
| 77,402 |
| U.S. government agency securities | 266,944 | 299 | (104) | 267,139 | ||||||||||||||||||
Publicly traded equity securities |
| 71,139 |
|
|
| 122,064 |
|
|
| — |
|
|
| 193,203 |
| |||||||||||||||||||||||
Level 2 securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Level 2 securities: | ||||||||||||||||||||||
Corporate debt securities |
| 143,124 |
|
|
| — |
|
|
| (207 | ) |
|
| 142,917 |
| Corporate debt securities | 246,814 | 309 | (789) | 246,334 | ||||||||||||||||||
Commercial paper |
| 422,328 |
|
|
| — |
|
|
| (1 | ) |
|
| 422,327 |
| Commercial paper | 203,080 | — | (6) | 203,074 | ||||||||||||||||||
Certificates of deposit |
| 80,431 |
|
|
| — |
|
|
| — |
|
|
| 80,431 |
| Certificates of deposit | 150,446 | — | — | 150,446 | ||||||||||||||||||
Total | $ | 3,572,489 |
|
| $ | 122,066 |
|
| $ | (1,670 | ) |
| $ | 3,692,885 |
| Total | $ | 4,003,534 | $ | 4,468 | $ | (6,048) | $ | 4,001,954 |
December 31, 2022 | |||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Total Estimated Fair Value | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cash | $ | 1,325,946 | $ | — | $ | — | $ | 1,325,946 | |||||||||||||||
Level 1 securities: | |||||||||||||||||||||||
U.S. government securities | 1,630,224 | 109 | (9,484) | 1,620,849 | |||||||||||||||||||
U.S. government agency securities | 175,269 | 19 | (188) | 175,100 | |||||||||||||||||||
Level 2 securities: | |||||||||||||||||||||||
Corporate debt securities | 309,942 | 32 | (1,462) | 308,512 | |||||||||||||||||||
Commercial paper | 290,589 | — | — | 290,589 | |||||||||||||||||||
Certificates of deposit | 157,965 | — | (1) | 157,964 | |||||||||||||||||||
Total | $ | 3,889,935 | $ | 160 | $ | (11,135) | $ | 3,878,960 |
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | ||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Gains (losses) recognized on publicly traded equity securities sold during the period, net | $ | 137 | $ | — | |||||||||||||||||||
Unrealized gains (losses) on publicly traded equity securities still held at the reporting date, net | 10,594 | (92,140) | |||||||||||||||||||||
Gains (losses) on publicly traded equity securities, net | $ | 10,731 | $ | (92,140) |
We
25
|
| Changes in Accumulated Other Comprehensive Income (Loss) by Component |
| ||||||||||||||||||||||||||
|
| Marketable Securities |
|
| Foreign Currency Translation |
|
| Total |
| Changes in Accumulated Other Comprehensive Income (Loss) by Component | |||||||||||||||||||
|
| (in thousands) |
| Marketable Securities | Foreign Currency Translation | Total | |||||||||||||||||||||||
Balance at December 31, 2021 |
| $ | (1,822 | ) |
| $ | 7,343 |
|
| $ | 5,521 |
| |||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||
Balance at December 31, 2022 | Balance at December 31, 2022 | $ | (11,129) | $ | (2,845) | $ | (13,974) | ||||||||||||||||||||||
OCI before reclassifications |
|
| (12,013 | ) |
|
| (13,340 | ) |
|
| (25,353 | ) | OCI before reclassifications | 9,393 | 2,915 | 12,308 | |||||||||||||
Amounts reclassified from AOCI (1) |
|
| (11 | ) |
|
| — |
|
|
| (11 | ) | Amounts reclassified from AOCI (1) | 2 | — | 2 | |||||||||||||
Net current period OCI |
|
| (12,024 | ) |
|
| (13,340 | ) |
|
| (25,364 | ) | Net current period OCI | 9,395 | 2,915 | 12,310 | |||||||||||||
Balance at June 30, 2022 |
| $ | (13,846 | ) |
| $ | (5,997 | ) |
| $ | (19,843 | ) | |||||||||||||||||
Balance at March 31, 2023 | Balance at March 31, 2023 | $ | (1,734) | $ | 70 | $ | (1,664) |
|
|
|
|
|
|
|
| |||||||||||
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| As of March 31, 2023 | As of December 31, 2022 | |||||||||||
| (in thousands) |
| (in thousands) | |||||||||||||||
Property and equipment, net: |
|
|
|
|
|
|
| Property and equipment, net: | ||||||||||
United States | $ | 198,638 |
|
| $ | 174,826 |
| United States | $ | 224,601 | $ | 214,857 | ||||||
United Kingdom | United Kingdom | 54,914 | 36,774 | |||||||||||||||
Rest of world (1) |
| 33,838 |
|
|
| 27,818 |
| Rest of world (1) | 23,507 | 20,146 | ||||||||
Total property and equipment, net | $ | 232,476 |
|
| $ | 202,644 |
| Total property and equipment, net | $ | 303,022 | $ | 271,777 |
|
|
15. Subsequent Events
In July 2022, our Board of Directors authorized a stock repurchase program of up to $500 million of our Class A common stock. Repurchasestotal property and equipment, net for any period presented.
|
|
•Daily Active Users, or DAUs, increased 15% year-over-year to 383 million in Q1 2023. |
|
|
|
|
|
•Total costs and expenses were $1,353.9 million in Q1 2023, compared to $1,334.3 million in Q1 2022. |
|
•Net loss was $328.7 million in Q1 2023, compared to $359.6 million in Q1 2022. |
|
•Diluted net loss per share was $(0.21) in Q1 2023, compared to $(0.22) in Q1 2022. |
|
•Adjusted EBITDA was $0.8 million in Q1 2023, compared to $64.5 million in Q1 2022. |
|
•Cash provided by operating activities was $151.1 million in Q1 2023, compared to $127.5 million in Q1 2022. |
|
|
|
Overview
Snap Inc. is a camera company.
their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations.
Quarterly Average Daily Active Users
(in millions)
|
| |||||||
Quarterly Average Daily Active Users (in millions) | ||||||||
Global |
YOY growth: | 20% | 17% | 18% | 22% | 22% | 23% | 23% | 20% | 18% | 18% | 19% | 17% | 15% |
North America (1) | Europe (2) |
|
YOY growth: | 10% | 9% | 7% | 6% | 5% | 6% | 7% | 6% | 5% | 4% | 4% | 3% | 3% | 14% | 12% | 10% | 10% | 9% | 10% | 11% | 11% | 10% | 10% | 11% | 12% | 10% |
Rest of World |
YOY growth: | 45 | % | 37 | % | 43 | % | 55 | % | 57 | % | 55 | % | 49 | % | 41 | % | 36 | % | 35 | % | 34 | % | 31 | % | 27 | % |
ARPU was $2.58 in the first quarter of 2023, compared to $3.20 in the secondfirst quarter of 2022, down from $3.35 in the second quarter of 2021.2022. For purposes of calculating ARPU, revenue by user geography is apportioned to each region based on a determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity. This differs from the presentation of our revenue by geography in the notes to our consolidated financial statements, where revenue is based on the billing address of the advertising customer.
Quarterly Average Revenue per User
|
|
|
|
30
Quarterly Average Revenue per User | ||||||||
Global |
North America (1) | Europe (2) |
Rest of World |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Revenue | $ | 1,110,909 |
|
| $ | 982,108 |
|
| $ | 2,173,636 |
|
| $ | 1,751,692 |
| Revenue | $ | 988,608 | $ | 1,062,727 | ||||||||||||||||||
Operating loss |
| (400,940 | ) |
|
| (192,512 | ) |
|
| (672,467 | ) |
|
| (496,118 | ) | Operating loss | $ | (365,264) | $ | (271,527) | ||||||||||||||||||
Net loss |
| (422,067 | ) |
|
| (151,664 | ) |
|
| (781,691 | ) |
|
| (438,546 | ) | Net loss | $ | (328,674) | $ | (359,624) | ||||||||||||||||||
Adjusted EBITDA(1) |
| 7,190 |
|
|
| 117,403 |
|
|
| 71,658 |
|
|
| 115,694 |
| |||||||||||||||||||||||
Adjusted EBITDA (1) | Adjusted EBITDA (1) | $ | 813 | $ | 64,468 |
(1) | For information on how we define and calculate Adjusted EBITDA, and a reconciliation of net loss to Adjusted EBITDA, see “Non-GAAP Financial Measures.” |
31
investments, marketable securities, and foreign currency transactions.
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statements of Operations Data: | ||||||||||||||||||||||
Revenue | $ | 1,110,909 |
|
| $ | 982,108 |
|
| $ | 2,173,636 |
|
| $ | 1,751,692 |
| Revenue | $ | 988,608 | $ | 1,062,727 | ||||||||||||||||||
Costs and expenses(1) (2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Costs and expenses (1) (2): | Costs and expenses (1) (2): | |||||||||||||||||||||||||||||||||||||
Cost of revenue |
| 446,377 |
|
|
| 445,021 |
|
|
| 867,274 |
|
|
| 857,622 |
| Cost of revenue | 439,986 | 420,897 | ||||||||||||||||||||
Research and development |
| 505,037 |
|
|
| 370,671 |
|
|
| 960,600 |
|
|
| 719,251 |
| Research and development | 455,112 | 455,563 | ||||||||||||||||||||
Sales and marketing |
| 311,374 |
|
|
| 179,724 |
|
|
| 553,260 |
|
|
| 330,010 |
| Sales and marketing | 268,433 | 241,886 | ||||||||||||||||||||
General and administrative |
| 249,061 |
|
|
| 179,204 |
|
|
| 464,969 |
|
|
| 340,927 |
| General and administrative | 190,341 | 215,908 | ||||||||||||||||||||
Total costs and expenses |
| 1,511,849 |
|
|
| 1,174,620 |
|
|
| 2,846,103 |
|
|
| 2,247,810 |
| Total costs and expenses | 1,353,872 | 1,334,254 | ||||||||||||||||||||
Operating loss |
| (400,940 | ) |
|
| (192,512 | ) |
|
| (672,467 | ) |
|
| (496,118 | ) | Operating loss | (365,264) | (271,527) | ||||||||||||||||||||
Interest income |
| 8,331 |
|
|
| 1,251 |
|
|
| 11,454 |
|
|
| 2,388 |
| Interest income | 37,948 | 3,123 | ||||||||||||||||||||
Interest expense |
| (5,549 | ) |
|
| (4,564 | ) |
|
| (10,722 | ) |
|
| (9,595 | ) | Interest expense | (5,885) | (5,173) | ||||||||||||||||||||
Other income (expense), net |
| (16,910 | ) |
|
| 42,282 |
|
|
| (94,447 | ) |
|
| 64,340 |
| Other income (expense), net | 11,372 | (77,537) | ||||||||||||||||||||
Loss before income taxes |
| (415,068 | ) |
|
| (153,543 | ) |
|
| (766,182 | ) |
|
| (438,985 | ) | Loss before income taxes | (321,829) | (351,114) | ||||||||||||||||||||
Income tax benefit (expense) |
| (6,999 | ) |
|
| 1,879 |
|
|
| (15,509 | ) |
|
| 439 |
| Income tax benefit (expense) | (6,845) | (8,510) | ||||||||||||||||||||
Net loss | $ | (422,067 | ) |
| $ | (151,664 | ) |
| $ | (781,691 | ) |
| $ | (438,546 | ) | Net loss | $ | (328,674) | $ | (359,624) | ||||||||||||||||||
Adjusted EBITDA(3) | $ | 7,190 |
|
| $ | 117,403 |
|
| $ | 71,658 |
|
| $ | 115,694 |
| |||||||||||||||||||||||
Adjusted EBITDA (3) | Adjusted EBITDA (3) | $ | 813 | $ | 64,468 |
(1) | Stock-based compensation expense included in the above line items: |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Stock-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based compensation expense: | ||||||||||||||||||||||
Cost of revenue | $ | 2,849 |
|
| $ | 2,847 |
|
| $ | 5,295 |
|
| $ | 5,503 |
| Cost of revenue | $ | 1,885 | $ | 2,446 | ||||||||||||||||||
Research and development |
| 221,650 |
|
|
| 174,491 |
|
|
| 404,516 |
|
|
| 338,284 |
| Research and development | 219,850 | 182,866 | ||||||||||||||||||||
Sales and marketing |
| 48,577 |
|
|
| 37,491 |
|
|
| 90,648 |
|
|
| 66,575 |
| Sales and marketing | 54,939 | 42,071 | ||||||||||||||||||||
General and administrative |
| 45,734 |
|
|
| 41,771 |
|
|
| 93,795 |
|
|
| 83,311 |
| General and administrative | 38,257 | 48,061 | ||||||||||||||||||||
Total | $ | 318,810 |
|
| $ | 256,600 |
|
| $ | 594,254 |
|
| $ | 493,673 |
| Total | $ | 314,931 | $ | 275,444 |
(2) | Depreciation and amortization expense included in the above line items: |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (in thousands) | |||||||||||||||||||||||||||||||||||
Depreciation and amortization expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization expense: | ||||||||||||||||||||||
Cost of revenue | $ | 5,061 |
|
| $ | 4,727 |
|
| $ | 10,573 |
|
| $ | 10,003 |
| Cost of revenue | $ | 3,226 | $ | 5,512 | ||||||||||||||||||
Research and development |
| 22,362 |
|
|
| 14,358 |
|
|
| 44,485 |
|
|
| 25,394 |
| Research and development | 24,139 | 22,123 | ||||||||||||||||||||
Sales and marketing |
| 49,061 |
|
|
| 5,162 |
|
|
| 56,453 |
|
|
| 8,348 |
| Sales and marketing | 5,073 | 7,392 | ||||||||||||||||||||
General and administrative |
| 2,807 |
|
|
| 4,023 |
|
|
| 5,880 |
|
|
| 8,023 |
| General and administrative | 2,782 | 3,073 | ||||||||||||||||||||
Total | $ | 79,291 |
|
| $ | 28,270 |
|
| $ | 117,391 |
|
| $ | 51,768 |
| Total | $ | 35,220 | $ | 38,100 |
(3) | See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP. |
33
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statements of Operations Data: | ||||||||||||||||||||||
Revenue |
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % | Revenue | 100 | % | 100 | % | ||||||||||||||||||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs and expenses: | ||||||||||||||||||||||
Cost of revenue |
| 40 |
|
|
| 45 |
|
|
| 40 |
|
|
| 49 |
| Cost of revenue | 45 | 40 | ||||||||||||||||||||
Research and development |
| 45 |
|
|
| 38 |
|
|
| 44 |
|
|
| 41 |
| Research and development | 46 | 43 | ||||||||||||||||||||
Sales and marketing |
| 28 |
|
|
| 18 |
|
|
| 25 |
|
|
| 19 |
| Sales and marketing | 27 | 23 | ||||||||||||||||||||
General and administrative |
| 22 |
|
|
| 18 |
|
|
| 21 |
|
|
| 19 |
| General and administrative | 19 | 20 | ||||||||||||||||||||
Total costs and expenses |
| 136 |
|
|
| 120 |
|
|
| 131 |
|
|
| 128 |
| Total costs and expenses | 137 | 126 | ||||||||||||||||||||
Operating loss |
| (36 | ) |
|
| (20 | ) |
|
| (31 | ) |
|
| (28 | ) | Operating loss | (37) | (26) | ||||||||||||||||||||
Interest income |
| 1 |
|
|
| — |
|
|
| 1 |
|
|
| — |
| Interest income | 4 | — | ||||||||||||||||||||
Interest expense |
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) | Interest expense | — | — | ||||||||||||||||||||
Other income (expense), net |
| (2 | ) |
|
| 4 |
|
|
| (4 | ) |
|
| 4 |
| Other income (expense), net | 1 | (7) | ||||||||||||||||||||
Loss before income taxes |
| (37 | ) |
|
| (16 | ) |
|
| (35 | ) |
|
| (25 | ) | Loss before income taxes | (32) | (33) | ||||||||||||||||||||
Income tax benefit (expense) |
| (1 | ) |
|
| — |
|
|
| (1 | ) |
|
| — |
| Income tax benefit (expense) | (1) | (1) | ||||||||||||||||||||
Net loss |
| (38 | )% |
|
| (16 | )% |
|
| (36 | )% |
|
| (25 | )% | Net loss | (33) | % | (34) | % |
For
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Revenue | $ | 1,110,909 |
|
| $ | 982,108 |
|
| $ | 2,173,636 |
|
| $ | 1,751,692 |
| Revenue | $ | 988,608 | $ | 1,062,727 | ||||||||||||||||||
Revenue as a dollar change |
|
|
|
| $ | 128,801 |
|
|
|
|
|
| $ | 421,944 |
| Revenue as a dollar change | $ | (74,119) | ||||||||||||||||||||
Revenue as a percentage change |
|
|
|
|
| 13 | % |
|
|
|
|
|
| 24 | % | Revenue as a percentage change | (7) | % |
demand.
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Cost of Revenue | $ | 446,377 |
|
| $ | 445,021 |
|
| $ | 867,274 |
|
| $ | 857,622 |
| Cost of Revenue | $ | 439,986 | $ | 420,897 | ||||||||||||||||||
Cost of Revenue as a dollar change |
|
|
|
| $ | 1,356 |
|
|
|
|
|
| $ | 9,652 |
| Cost of Revenue as a dollar change | $ | 19,089 | ||||||||||||||||||||
Cost of Revenue as a percentage change |
|
|
|
|
| 0 | % |
|
|
|
|
|
| 1 | % | Cost of Revenue as a percentage change | 5 | % |
34
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
|
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Research and Development Expenses | $ | 505,037 |
|
| $ | 370,671 |
|
| $ | 960,600 |
|
| $ | 719,251 |
|
| Research and Development Expenses | $ | 455,112 | $ | 455,563 | ||||||||||||||||||
Research and Development Expenses as a dollar change |
|
|
|
| $ | 134,366 |
|
|
|
|
|
| $ | 241,349 |
|
| Research and Development Expenses as a dollar change | $ | (451) | ||||||||||||||||||||
Research and Development Expenses as a percentage change |
|
|
|
|
| 36 | % |
|
|
|
|
|
| 34 | % |
| Research and Development Expenses as a percentage change | — | % |
expenses.
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
|
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Sales and Marketing Expenses | $ | 311,374 |
|
| $ | 179,724 |
|
| $ | 553,260 |
|
| $ | 330,010 |
|
| Sales and Marketing Expenses | $ | 268,433 | $ | 241,886 | ||||||||||||||||||
Sales and Marketing Expenses as a dollar change |
|
|
|
| $ | 131,650 |
|
|
|
|
|
| $ | 223,250 |
|
| Sales and Marketing Expenses as a dollar change | $ | 26,547 | ||||||||||||||||||||
Sales and Marketing Expenses as a percentage change |
|
|
|
|
| 73 | % |
|
|
|
|
|
| 68 | % |
| Sales and Marketing Expenses as a percentage change | 11 | % |
prior period.
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
|
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
General and Administrative Expenses | $ | 249,061 |
|
| $ | 179,204 |
|
| $ | 464,969 |
|
| $ | 340,927 |
|
| General and Administrative Expenses | $ | 190,341 | $ | 215,908 | ||||||||||||||||||
General and Administrative Expenses as a dollar change |
|
|
|
| $ | 69,857 |
|
|
|
|
|
| $ | 124,042 |
|
| General and Administrative Expenses as a dollar change | $ | (25,567) | ||||||||||||||||||||
General and Administrative Expenses as a percentage change |
|
|
|
|
| 39 | % |
|
|
|
|
|
| 36 | % |
| General and Administrative Expenses as a percentage change | (12) | % |
expense.
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| 2023 | 2022 | |||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| (dollars in thousands) | ||||||||||||||||||||||||||
| (dollars in thousands) |
|
| (NM = Not Meaningful) | |||||||||||||||||||||||||||||||||||
Interest Income | $ | 8,331 |
|
| $ | 1,251 |
|
| $ | 11,454 |
|
| $ | 2,388 |
|
| Interest Income | $ | 37,948 | $ | 3,123 | ||||||||||||||||||
Interest Income as a dollar change |
|
|
|
| $ | 7,080 |
|
|
|
|
|
| $ | 9,066 |
|
| Interest Income as a dollar change | $ | 34,825 | ||||||||||||||||||||
Interest Income as a percentage change |
|
|
|
|
| 566 | % |
|
|
|
|
|
| 380 | % |
| Interest Income as a percentage change | NM |
35
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
|
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Interest Expense | $ | (5,549 | ) |
| $ | (4,564 | ) |
| $ | (10,722 | ) |
| $ | (9,595 | ) |
| Interest Expense | $ | (5,885) | $ | (5,173) | ||||||||||||||||||
Interest Expense as a dollar change |
|
|
|
| $ | (985 | ) |
|
|
|
|
| $ | (1,127 | ) |
| Interest Expense as a dollar change | $ | (712) | ||||||||||||||||||||
Interest Expense as a percentage change |
|
|
|
|
| 22 | % |
|
|
|
|
|
| 12 | % |
| Interest Expense as a percentage change | 14 | % |
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 | 2022 | |||||||||||||||||||||||||
| (dollars in thousands) |
|
| (dollars in thousands) | |||||||||||||||||||||||||||||||||||
Other Income (Expense), Net | $ | (16,910 | ) |
| $ | 42,282 |
|
| $ | (94,447 | ) |
| $ | 64,340 |
|
| Other Income (Expense), Net | $ | 11,372 | $ | (77,537) | ||||||||||||||||||
Other Income (Expense), Net as a dollar change |
|
|
|
| $ | (59,192 | ) |
|
|
|
|
| $ | (158,787 | ) |
| Other Income (Expense), Net as a dollar change | $ | 88,909 | ||||||||||||||||||||
Other Income (Expense), Net as a percentage change |
|
|
|
|
| (140 | )% |
|
|
|
|
|
| (247 | )% |
| Other Income (Expense), Net as a percentage change | 115 | % |
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (dollars in thousands) Income Tax Benefit (Expense) $ (6,999 ) $ 1,879 $ (15,509 ) $ 439 Income Tax Benefit (Expense) as a dollar change $ (8,878 ) $ (15,948 ) Income Tax Benefit (Expense) as a percentage change (472 )% (3633 )% Effective Tax Rate (1.7 )% 1.2 % (2.0 )% 0.1 % Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (dollars in thousands) Net Loss $ (422,067 ) $ (151,664 ) $ (781,691 ) $ (438,546 ) Net Loss as a dollar change $ (270,403 ) $ (343,145 ) Net Loss as a percentage change (178 )% (78 )% Adjusted EBITDA $ 7,190 $ 117,403 $ 71,658 $ 115,694 Adjusted EBITDA as a dollar change $ (110,213 ) $ (44,036 ) Adjusted EBITDA as a percentage change 94 % 38 % general and administrative expenses. •Free Cash Flow does not reflect our future contractual commitments. •Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; •Adjusted EBITDA excludes stock-based compensation expense and payroll and other tax expense related to stock-based compensation, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (dollars in thousands) Free Cash Flow reconciliation: Net cash provided by (used in) operating activities $ (124,081 ) $ (101,086 ) $ 3,378 $ 35,800 Less: Purchases of property and equipment (23,370 ) (14,623 ) (44,545 ) (25,474 ) Free Cash Flow $ (147,451 ) $ (115,709 ) $ (41,167 ) $ 10,326 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (dollars in thousands) Adjusted EBITDA reconciliation: Net loss $ (422,067 ) $ (151,664 ) $ (781,691 ) $ (438,546 ) Add (deduct): Interest income (8,331 ) (1,251 ) (11,454 ) (2,388 ) Interest expense 5,549 4,564 10,722 9,595 Other (income) expense, net 16,910 (42,282 ) 94,447 (64,340 ) Income tax expense (benefit) 6,999 (1,879 ) 15,509 (439 ) Depreciation and amortization 79,291 28,270 117,391 51,768 Stock-based compensation expense 318,810 256,600 594,254 493,673 Payroll and other tax expense related to stock-based compensation 10,029 25,045 32,480 66,371 Adjusted EBITDA $ 7,190 $ 117,403 $ 71,658 $ 115,694 Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 (dollars in thousands) Net cash provided by (used in) operating activities $ (124,081 ) $ (101,086 ) $ 3,378 $ 35,800 Net cash provided by (used in) investing activities 11,439 131,869 (1,006,226 ) 412,424 Net cash provided by (used in) financing activities (1,618 ) 1,053,659 1,307,148 1,058,112 Change in cash, cash equivalents, and restricted cash $ (114,260 ) $ 1,084,442 $ 304,300 $ 1,506,336 Free Cash Flow (1) $ (147,451 ) $ (115,709 ) $ (41,167 ) $ 10,326 lawsuits vigorously, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business. negatively affected and may continue to negatively affect our operating results. In addition, our advertising business is seasonal, volatile, and cyclical, which could result in fluctuations in our quarterly revenues and operating results, including the expectations of our business prospects. •establishing more favorable relationships or pricing terms with one or more of our competitors; or and operations. Outside of Europe, other laws further regulate behavioral, interest-based, or targeted advertising, making certain online advertising activities more difficult and subject to additional scrutiny. For example, in the United States, the California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act of 2020, or CPRA, place additional requirements on the handling of personal data for us, our partners, and our advertisers, such as granting California residents the right to opt-out of a company’s sharing of personal data for certain advertising purposes in exchange for money or other valuable consideration. Other states have passed or are considering similar legislation. Moreover, individuals are also becoming increasingly aware of and resistant to the collection, use, and sharing of personal data in connection with advertising. Individuals are becoming more aware of options related to consent and other options to opt-out of such data processing, including through media attention about privacy and data protection. Some users have opted out of allowing Snap to join data from third party apps and websites with data from Snapchat for advertising purposes, which has negatively impacted our ability to collect certain user data and our advertising partners’ ability to deliver relevant content, all of which could negatively impact our business. decreased or may halt, decrease, or continue to decrease, temporarily or permanently, their advertising spending or may focus their advertising spending more on other platforms, all of which may result in decreased advertising revenue. Labor shortages, supply chain disruptions, inflation, and exacerbated. assets in Ukraine that may be at risk of destruction or theft. We have incurred, and will likely continue to incur, costs to support our team members and reorganize our operations to address these ongoing challenges. In addition, our management has spent significant time and attention on these and related events. The ongoing disruptions to our team members, our management, and our operations could seriously harm our business. additions related to new products. We believe this has not hindered our user growth or engagement, but that may be the result of a large portion of our user base being in a younger demographic and more willing to invest the time to learn to use our products most effectively. To the extent that future users, including those in older demographics, are less willing to invest the time to learn to use our products, and if we are unable to make our products easier to learn to use, our user growth or engagement could be affected, and our business could be harmed. We may also develop new products or initiatives that increase user engagement and costs without increasing revenue. For example, in 2016, we introduced Memories, our cloud storage service for Snaps, which increases our storage costs but does not currently generate revenue. vendor breaches. recorded by our servers and systems. But given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable. If advertisers, •we fail to attract sufficient advertisers to utilize our self-serve platform to make the best use of our advertising inventory; •advertisers do not continue to introduce engaging advertisements; •advertisers reduce their advertising on Snapchat; •we fail to maintain good relationships with advertisers or attract new advertisers, or demonstrate to advertisers the effectiveness of advertising on Snapchat; or •the content on Snapchat does not maintain or gain popularity. diminish our access to our technology infrastructure or regional networks, disrupting our services which could seriously harm our business and financial performance. no assurance that others will not offer products, brands, content, or concepts that are substantially similar to ours and compete with our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business. depend largely on our ability to continue to provide useful, novel, fun, reliable, trustworthy, and innovative products, which we may not do successfully. We may introduce new products, make changes to existing products and services, or require our users to agree to new terms of service related to new and existing products that users do not like, which may negatively affect our brand in the For example, in August 2022, we announced a plan to reduce our global employee headcount by approximately 20%. The headcount reduction is part of a broader strategic reprioritization by the company to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow. As a result of the strategic reprioritization, in the year ended December 31, 2022, we incurred pre-tax charges of $188.9 million, primarily consisting of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization. This headcount reduction and strategic reprioritization could disrupt our operations, adversely impact employee retention and morale, adversely impact our reputation as an employer, which could make it more difficult for us to retain existing employees and hire new employees in the future, distract management, and seriously harm our business. In addition, if our liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be seriously harmed. If a third party does not offer us a license to its intellectual property on commercially reasonable terms, or at all, we may be required to develop, acquire or license alternative, non-infringing technology, which could require significant time, effort, and expense, and may ultimately not be successful. Any of these events would adversely affect our business. enormous monetary damages in the aggregate even if the alleged per-user harm is small or non-existent. For example, in November 2020, a putative class filed an action against us in Illinois, alleging that we violated business. In the future, as our international operations increase, or more of our revenue agreements or operating expenses are denominated in currencies other than the U.S. dollar, these impacts may become material. In addition, as our international operations and sales continue to grow, we are subject to a variety of risks inherent in doing business internationally, including: technologies is unproven. In the future, we may not be able to find other suitable acquisition or investment candidates, and we may not be able to complete acquisitions or investments on favorable terms, if at all. Our previous and future acquisitions and investments may not achieve our goals, and any future acquisitions or investments we complete could be viewed negatively by users, advertisers, partners, or investors. In addition, if we fail to successfully close transactions, integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. For example, future or past business transactions could expose us we may choose to issue equity securities or borrow funds under our revolving credit facility. In such an event, we cannot assure you that we will be able to successfully match the proceeds of any such equity financing to the then to obtain these clearances or approvals on a timely basis, or at all, for future products. Any delay in, or failure to receive or maintain, clearance or approval for any products under development could prevent us from launching new products. We could seriously harm our business and the ability to sell our products if we experience any product problems requiring reporting to governmental authorities, if we fail to comply with applicable federal, state, or foreign agency regulations, or if we are subject to enforcement actions such as fines, civil penalties, injunctions, product recalls, or failure to obtain regulatory clearances or approvals. Risks Related to Credit and Financing In addition, our ability to draw on our Credit Facility relies on our lenders under that facility's continued operation and ability to fund. future profitability. to pay. our business. Taxing authorities may also determine that the manner in which we operate our business is not consistent with how we report our income, which could increase our effective tax rate and the amount of taxes we pay and seriously harm our business. In addition, our future income taxes could fluctuate because of earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. We are subject to regular review and audit by U.S. federal and state and foreign tax authorities. Any adverse outcome from a review or audit could seriously harm our business. In addition, determining our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements for such periods and may seriously harm our business. option. If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we may settle all or a portion of our conversion obligation in cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital and may seriously harm our business. takeover of us may trigger the requirement that we repurchase the Convertible Notes or increase the conversion rate, which could make it more costly for a third party to acquire us. The Indentures also prohibit us from engaging in a merger or acquisition unless, among other things, the surviving entity assumes our obligations under the Convertible Notes and the Indentures. These and other provisions in the Indentures could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders of the Convertible Notes or our stockholders. addition, we could become subject to investigations by the NYSE, the SEC, and other regulatory authorities, which could require additional financial and management resources. similar coverage. Incorporated by Reference Exhibit Number Description Schedule / Form File Number Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of Snap Inc. S-1 333-215866 3.2 February 2, 2017 3.2 Amendment No. 1 to the Amended and Restated Certificate of Incorporation of Snap Inc. 8-K 001-38017 3.1 July 21, 2022 10.1 Notice of Prepayment and Termination of Commitments, dated May 5, 2022. 10.2 31.1 31.2 32.1* 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). *The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. /s/ Derek Andersen Derek Andersen Chief Financial Officer (Principal Financial Officer) Date: /s/ Rebecca Morrow Rebecca Morrow Chief Accounting Officer (Principal Accounting Officer)expense,income, net for the three and six months ended June 30, 2022March 31, 2023 was $16.9 million and $94.4$11.4 million compared to other income,expense, net of $42.3 million and $64.3$77.5 million in the same periodsperiod in 2021.2022. Other income, net for the three months ended March 31, 2023 was primarily a result of $10.7 million total gains on publicly traded securities classified as marketable securities and $1.1 million unrealized gains on strategic investments. Other expense, net for the three months ended June 30,March 31, 2022 was primarily a result of a $63.9$92.1 million unrealized loss on publicly traded securities classified as marketable securities, offset by a $6.4$13.3 million unrealized gain and $45.9 million realized gain on strategic investments. Other income, net for the three months ended June 30, 2021 was primarily a result of a $52.1 million unrealized gain and a $27.8 million realized gain on strategic investments offset by induced conversion expense related to the Convertible Notes.Other expense, net for the six months ended June 30, 2022 was primarily a result of $156.0million unrealized loss on publicly traded securities classified as marketable securities, offset by a $19.7 million unrealized gain and a $45.9 million realized gain on strategic investments. Other income, net for the six months ended June 30, 2021 was primarily a result of a $75.4 million unrealized gain and a $27.8 million realized gain on strategic investments offset by induced conversion expense related to the Convertible Notes.Three Months Ended March 31, 2023 2022 (dollars in thousands) Income Tax Benefit (Expense) $ (6,845) $ (8,510) Income Tax Benefit (Expense) as a dollar change $ 1,665 Income Tax Benefit (Expense) as a percentage change 20 % Effective Tax Rate (2.1) % (2.4) % and six months ended June 30, 2022March 31, 2023 was $7.0$6.8 million and $15.5 million, respectively, compared to an income tax benefit of $1.9$8.5 million and $0.4 million, respectively, for the same periodsperiod in 2021. This change was primarily attributable to the partial valuation allowance releases on our deferred tax assets in the prior period due to deferred tax liabilities acquired in business acquisitions.2022. Our effective tax rate differs from the U.S. statutory tax rate primarily due to valuation allowances on our deferred tax assets as it is more likely than not that some or all of theour deferred tax assets will not be realized.Three Months Ended March 31, 2023 2022 (dollars in thousands) Net Loss $ (328,674) $ (359,624) Net Loss as a dollar change $ 30,950 Net Loss as a percentage change 9 % Adjusted EBITDA $ 813 $ 64,468 Adjusted EBITDA as a dollar change $ (63,655) Adjusted EBITDA as a percentage change (99) % and six months ended June 30, 2022March 31, 2023 was $422.1$328.7 million and $781.7 million, respectively, compared to $151.7$359.6 million and $438.5 million, respectively, for the same periodsperiod in 2021.2022. Adjusted EBITDA for the three and six months ended June 30, 2022March 31, 2023 was $7.2$0.8 million and $71.7 million, respectively, compared to $117.4$64.5 million and $115.7 million, respectively, for the same periodsperiod in 2021. These decreases2022. The decrease in Adjusted EBITDA were driven bywas attributable to decreased revenues and increased overall operatingcost of revenue and sales and marketing expenses, partially offset by higher revenue, stock-based compensation expense, depreciationdecreased research and amortization,development expenses and other (income) expense, net.Three Months Ended March 31, 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ 151,102 $ 127,459 Net cash provided by (used in) investing activities 5,838 (1,017,665) Net cash provided by (used in) financing activities (1,999) 1,308,766 Change in cash, cash equivalents, and restricted cash $ 154,941 $ 418,560 $ 103,472 $ 106,284 and 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.37•Free Cash Flow does not reflect our future contractual commitments.•Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;•Adjusted EBITDA excludes stock-based compensation expense and payroll and other tax expense related to stock-based compensation, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and•Adjusted EBITDA excludes income tax expense.Three Months Ended March 31, 2023 2022 (in thousands) Free Cash Flow reconciliation: Net cash provided by (used in) operating activities $ 151,102 $ 127,459 Less: Purchases of property and equipment (47,630) (21,175) Free Cash Flow $ 103,472 $ 106,284 Three Months Ended March 31, 2023 2022 (in thousands) Adjusted EBITDA reconciliation: Net loss $ (328,674) $ (359,624) Add (deduct): Interest income (37,948) (3,123) Interest expense 5,885 5,173 Other (income) expense, net (11,372) 77,537 Income tax (benefit) expense Income tax (benefit) expense 6,845 8,510 Depreciation and amortization 35,220 38,100 Stock-based compensation expense 314,931 275,444 Payroll and other tax expense related to stock-based compensation 15,926 22,451 Adjusted EBITDA $ 813 $ 64,468 Liquidity and Capital ResourcesCash, cash equivalents, and marketable securities were $4.9 billion as of June 30, 2022, primarily consisting of cash on deposit with banks and highly liquid investments in U.S. government and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper. Our primary source of liquidity is cash generated through financing activities. Our primary uses of cash include operating costs such as personnel-related costs and the infrastructure costs of the Snapchat application, facility-related capital spending, and acquisitions and investments. There are no known material subsequent events that could have a material impact on our cash or liquidity. We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position.In May 2022, we entered into a five-year senior unsecured revolving credit facility (“Credit Facility”) with certain lenders that allows us to borrow up to $1.05 billion to fund working capital and general corporate-purpose expenditures. The38prior revolving credit facility entered into in July 2016 (as amended) was terminated concurrently with the entry into the Credit Facility. Loans bear interest, at our option, at a rate equal to (i) a term secured overnight financing rate (“SOFR”) plus 0.75% or the base rate, if selected by us, for loans made in U.S. dollars, (ii) the Sterling overnight index average plus 0.7826% for loans made in Sterling, and (iii) foreign indices as stated in the credit agreement plus 0.75% for loans made in other permitted foreign currencies. The base rate is defined as the greatest of (i) the Wall Street Journal prime rate, (ii) the greater of the (a) federal funds rate and (b) the overnight bank funding rate, plus 0.50%, and (iii) the applicable SOFR for a period of one month (but not less than zero) plus 1.00. The Credit Facility also contains an annual commitment fee of 0.10% on the daily undrawn balance of the facility. As of June 30, 2022, we had $26.6 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.In February 2022, we entered into a purchase agreement for the sale of an aggregate of $1.5 billion principal amount of convertible senior notes due in 2028. The net proceeds from the issuance of the 2028 Notes were $1.31 billion, net of debt issuance costs and the 2028 Capped Call Transactions discussed further in Note 7. The 2028 Notes mature on March 1, 2028 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2028 Notes will not be eligible for optional conversion during the third quarter of 2022.In 2021, we entered into the Exchange Agreements with certain holders of the 2025 Notes and the 2026 Notes pursuant to which we exchanged approximately $715.9 million principal amount of the 2025 Notes and approximately $426.5 million principal amount of the 2026 Notes for aggregate consideration of approximately 52.4 million shares of Class A common stock.In April 2021, we entered into a purchase agreement for the sale of an aggregate of $1.15 billion principal amount of convertible senior notes due in 2027. The net proceeds from the issuance of the 2027 Notes were $1.05 billion, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 7. The 2027 Notes mature on May 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2027 Notes will not be eligible for optional conversion during the third quarter of 2022.In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025. The net proceeds from the issuance of the 2025 Notes were $888.6 million, net of debt issuance costs and the 2025 Capped Call Transactions discussed further in Note 7. The 2025 Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2025 Notes will not be eligible for optional conversion during the third quarter of 2022.In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026. The net proceeds from the issuance of the 2026 Notes were $1.15 billion, net of debt issuance costs and the 2026 Capped Call Transactions discussed further in Note 7. The 2026 Notes mature on August 1, 2026 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of June 30, 2022 and as a result, the 2026 Notes will not be eligible for optional conversion during the third quarter of 2022.We believe our existing cash balance is sufficient to fund our ongoing working capital, investing, and financing requirements for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts, the introduction of new features, products, and acquisitions, and continued user engagement. We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position.As of June 30, 2022, approximately 7% of our cash, cash equivalents, and marketable securities was held outside the United States. These amounts were primarily held in the United Kingdom and are utilized to fund our foreign operations. Cash held outside the United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of funds may result in additional tax liabilities. We believe our existing cash balance in the United States is sufficient to fund our working capital needs.39The following table sets forth the major components of our consolidated statements of cash flows for the periods presented:
Contingencies(1)For information on how we define and calculate Free Cash Flow and a reconciliation to net cash provided by (used in) operating activities to Free Cash Flow, see “Non-GAAP Financial Measures.”For Three and Six Months Ended June 30, 2022 and 2021Net Cash Provided by (Used in) Operating ActivitiesNet cash used in operating activities was $124.1 million in the three months ended June 30, 2022, as compared to net cash used in operations of $101.1 million in the three months ended June 30, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $318.8 million, depreciation and amortization expense of $79.3 million and losses on debt and equity securities, net of $12.2 million. Net cash used in operating activities for the three months ended June 30, 2022 was also driven by an increase in the accounts receivable balance of $81.0 million due to an increase in revenue in the period and a $14.4 million decrease in accrued expenses and other current liabilities, primarily due to the timing of payments.Net cash provided by operating activities was $3.4 million in the six months ended June 30, 2022, as compared to net cash provided by operating activities of $35.8 million in the six months ended June 30, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $594.3 million, depreciation and amortization expense of $117.4 million and losses on debt and equity securities, net of $91.3 million.Net Cash Provided by (Used in) Investing ActivitiesNet cash provided by investing activities was $11.4 million for the three months ended June 30, 2022, compared to net cash provided by investing activities of $131.9 million for the same period in 2021. Our investing activities in the three months ended June 30, 2022 primarily consisted of maturities of marketable securities of $544.0 million and sales of strategic investments of $63.3 million, partially offset by purchases of marketable securities of $568.1 million. Net cash provided by investing activities for the three months ended June 30, 2021 consisted of cash provided by sales and maturities of marketable securities of $936.4 million, partially offset by purchases of marketable securities of $764.4 million.Net cash used in investing activities was $1.0 billion for the six months ended June 30, 2022, compared to net cash provided by investing activities of $412.4 million for the same period in 2021. Our investing activities in the six months ended June 30, 2022 consisted mainly of purchases of marketable securities of $1.9 billion, partially offset by maturities of marketable securities of $896.6 million. Net cash provided by investing activities for the six months ended June 30, 2021 consisted of cash provided by sales and maturities of marketable securities of $1.9 billion, partially offset by purchases of marketable securities of $1.3 billion and cash paid for acquisitions of $139.2 million.Net Cash Provided by (Used in) Financing ActivitiesNet cash used in financing activities was $1.6 million for the three months ended June 30, 2022 and net cash provided by financing activities was $1.3 billion for the six months ended June 30, 2022, compared to net cash provided by financing activities of $1.1 billion and $1.1 billion for the same periods in 2021, respectively. Our financing activities for the three months ended June 30, 2022 were not material. Our financing activities for the six months ended June 30, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million. Our financing activities for the three and six months ended June 30, 2021 consisted primarily of net proceeds of $1.1 billion from the issuance of the 2027 Notes, offset by the purchase of the 2027 Capped Call Transactions of $86.8 million.Free Cash Flow40Free Cash Flow was $(147.5) million and $(41.2) million for the three and six months ended June 30, 2022, respectively, compared to ($115.7) million and $10.3 million for the three and six months ended June 30, 2021, respectively. Free Cash Flow in all periods was composed of net cash provided by (used in) operating activities, resulting primarily from net loss, adjusted for non-cash items as well as changes in working capital and other operating assets and liabilities. Free Cash Flow also included purchases of property and equipment of $23.4 million and $44.5 million for the three and six months ended June 30, 2022, respectively, compared to $14.6 million and $25.5 million for the three and six months ended June 30, 2021, respectively. See “Non-GAAP Financial Measures.”Contingencies$4.2$3.5 billion in commitments, as of June 30, 2022,March 31, 2023, primarily due within three years. For additional discussion on our leases see Note 9 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.Recent Accounting PronouncementsSee Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.and Quantitative Factors aboutDisclosures About Market Risk41$2.3$1.6 billion and $2.0$1.4 billion at June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. We had marketable securities totaling $2.6$2.5 billion and $1.7$2.5 billion at June 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Our cash and cash equivalents consist of cash in bank accounts and marketable securities consisting of U.S. government debt and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper. The primary objectives of our investment activities are to preserve principal and provide liquidity without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the relatively short-term nature of our investment portfolio, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio for the periods presented.June 30, 2022.March 31, 2023. We carry the 2028 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets. The 2028 Notes have a fixed interest rate; therefore, we have no financial statement risk associated with changes in interest rates with respect to the 2028 Notes. The fair value of the 2028 Notes changes when the market price of our stock fluctuates or market interest rates change.June 30, 2022.March 31, 2023. We carry the 2027 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets. The 2027 Notes do not bear regular interest; therefore, we have no financial statement risk associated with changes in interest rates with respect to the 2027 Notes. The fair value of the 2027 Notes changes when the market price of our stock fluctuates or market interest rates change.$0.3 billion$284.1 million remains outstanding as of June 30, 2022.March 31, 2023. We carry the 2025 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets. The 2025 Notes have a fixed interest rate; therefore, we have no financial statement risk associated with changes in interest rates with respect to the 2025 Notes. The fair value of the 2025 Notes changes when the market price of our stock fluctuates or market interest rates change.$0.8 billion$838.5 million remains outstanding as of June 30, 2022.March 31, 2023. We carry the 2026 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets. The 2026 Notes have a fixed interest rate; therefore, we have no financial statement risk associated with changes in interest rates with respect to the 2026 Notes. The fair value of the 2026 Notes changes when the market price of our stock fluctuates or market interest rates change.salesrevenue and operating expenses were predominately denominated in U.S. dollars. We therefore have not had material foreign currency risk associated with salesrevenue and cost-based activities. However, due to fluctuations in exchange rates, we have, and may in the future experience negative impacts to our revenue and operating expenses denominated in currencies other than the U.S. dollar. The functional currency of our material operating entities is the U.S. dollar.42June 30, 2022,March 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (a) reported within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.43United StatesU.S. District Court Central District of California. The lawsuit was purportedly brought on behalf of purchasers of our Class A common stock. The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s App Tracking Transparency framework would have on our business. Defendants seek monetary damages and other relief.this lawsuit,these lawsuits, and continue to defend the lawsuit vigorously.recentlyhave achieved profitability in certain periods, we have a history of operating losses and, as a result of our long-term focus, we may prioritize investments and expenses we believe are necessary for our long-term growth overhave made it more difficultcontinue to present issues for us to measurein measuring the effectiveness of advertisements on our services. Additionally, individuals are becoming increasingly resistant to the processing of personal data to deliver behavioral, interest-based, or targeted advertisements, and regulators are likewise scrutinizing such data processing activities, which could reduce the demand for our products and services and alternativethreaten our primary revenue stream. Alternative methods, willto the extent we can develop such methods in compliance with current or future privacy laws, mobile operating system requirements, and other requirements, may take time to develop and become more widelybe adopted by our advertisers, and may not be as effective as prior methods.44Ukraine.InUkraine. In addition, macro-economicmacroeconomic factors like labor shortages, supply chain disruptions, banking instability, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may also halt or decrease advertising spending, and harm our business.2. We have and expect to continue to expand organically and through acquisitions, including in international markets, which we may not be able to effectively manage or scale.3.operate our service and provide thetheir mobile operating systems and other services for our applications.applications and other core services, including our platform. If these partners do not provide their services as we expect, terminate their services, or change or interpret the terms of our agreements, or change the functionality of their mobile operating systems in ways that are adverse to us, our service may be interrupted and our product experience could be degraded, and these may harm our reputation, increase our costs, or make it harder for us to sustain profitability. Many other parts of our business depend on partners, including content partners and advertising partners, so our success depends on our ability to attract and retain these partners.5.45347383 million daily active users, or DAUs, on average in the quarter ended June 30, 2022.March 31, 2023. We view DAUs as a critical measure of our user engagement, and adding, maintaining, and engaging DAUs have been and will continue to be necessary. Our DAUs and DAU growth rate have declined in the past and they may decline in the future due to various factors, including as the size of our active user base increases, as we achieve higher market penetration rates, as we face continued competition for our users and their time, or if there are performance issues with our application.service. For example, in 2018, we believe our DAUs declined primarily due to changes in the design of our application and continued performance issues with the Android version of our application. In addition, as we achieve maximum market penetration rates among younger users in developed markets, future growth in DAUs will need to come from older users in those markets, developing markets, or users with Android mobile operating systems, which may not be possible or may be more difficult or time-consuming for us to achieve. While we may experience periods when our DAUs increase due to products and services with short-term popularity, or due to a lack of other events that compete for our users’ attention, we may not always be able to attract new users, retain existing users, or maintain or increase the frequency and duration of their engagement if current or potential new users do not perceive our products to be fun, engaging, and useful. In addition, because our products typically require high bandwidth data capabilities in order for users to benefit from all of the features and capabilities of our application, many of our users live in countries with high-end mobile device penetration and high bandwidth capacity cellular networks with large coverage areas. We therefore do not expect to experience rapid user growth or engagement in regions with either low smartphone penetration or a lack of well-established and high bandwidth capacity cellular networks. If our DAU growth rate slows or becomes stagnant, or we have a decline in DAUs, our●users engage more with competing products instead of ours;●•users engage more with competing products instead of ours;our competitors continue to mimic our products or improve on them;●•our competitors continue to mimic our products or improve on them;we fail to introduce new and exciting products and services or those we introduce or modify are poorly received;●•we fail to introduce new and exciting products and services or those we introduce or modify are poorly received;our products fail to operate effectively on the iOS or Android mobile operating systems;●•our products fail to operate effectively or compatibly on the iOS or Android mobile operating systems;we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones;46●we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products;●•we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones;we are unable to combat spam or other hostile or inappropriate usage on our products;●•we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products;there are changes in user sentiment about the quality or usefulness of our products in the short term, long term, or both;●there are concerns about the privacy implications, safety, or security of•we are unable to combat spam, bad actors, or other hostile or inappropriate usage on our products;●•there are changes in user sentiment about the quality or usefulness of our products in the short-term, long-term, or both;our content partners do not create content that is engaging, useful, or relevant to users;●•there are concerns about the privacy implications, safety, or security of our products and our processing of personal data;our content partners decide not to renew agreements or devote the resources to create engaging content, or do not provide content exclusively to us;●•our content partners do not create content that is engaging, useful, or relevant to users;advertisers and partners display ads that are untrue, offensive, or otherwise fail to follow our guidelines;●•our content partners decide not to renew agreements or devote the resources to create engaging content, or do not provide content exclusively to us;our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience;●•advertisers and partners display ads that are untrue, offensive, or otherwise fail to follow our guidelines;technical or other problems frustrate the user experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner;●•our products are subject to increased regulatory scrutiny or approvals, including from international privacy regulators (particularly in the EEA/UK), or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience;we fail to provide adequate service to users, advertisers, or partners;●•technical or other problems frustrate the user experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner;we do not provide a compelling user experience to entice users to use the Snapchat application on a daily basis, or our users don’t have the ability to make new friends to maximize the user experience;●•we fail to provide adequate service to users, advertisers, or partners;we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract;●•we do not provide a compelling user experience to entice users to use the Snapchat application on a daily basis, or our users don’t have the ability to make new friends to maximize the user experience;we do not maintain our brand image or our reputation is damaged; or●•we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract;our current or future products reduce user activity on Snapchat by making it easier for our users to interact directly with our partners.47control. In particular, anycontrol and which may be subject to future changes to the iOS or Android operating systems or application stores may impact the accessibility, speed, functionality, and other performance aspects of our products and features, and result in issues in the future from time to time.changes. In addition, the proposal or adoption of any laws, regulations, or initiatives that adversely affect the growth, popularity, or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and increase our cost of doing business. or what is commonly referred to as a “cloud” computing service. We currently run the vast majority of our computing on Google Cloud and AWS, have built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google and AWS, and our systems are not fully redundant on the two platforms. Any transition of the cloud services currently provided by either Google Cloud or AWS to the other platform or to another cloud provider would be difficult to implement and would cause us to incur significant time and expense. Given this, any significant disruption of or interference with our use of Google Cloud or AWS, whether temporary, regular, or prolonged, would negatively impact our operations and our business would be seriously harmed. If our users or partners are not able to access Snapchat or specific Snapchat features, or encounter difficulties in doing so, due to issues or disruptions with Google Cloud or AWS, we may lose users, partners, or advertising revenue. The level of service provided by Google Cloud and AWS or similar providers may also impact our users’, advertisers’, and partners’ usage of and satisfaction with Snapchat and could seriously harm our business and reputation. If Google Cloud, AWS, or similar providers experience interruptions inreputation if the level of service regularly or for a prolonged basis, or other similar issues, our business would be seriously harmed.decreases. Hosting costs also have and will continue to increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Google Cloud, AWS, or similar providers.48●discontinuing or limiting our access to its cloud platform;●•discontinuing or limiting our access to its cloud platform;increasing pricing terms;●•increasing pricing terms;terminating or seeking to terminate our contractual relationship altogether;●•terminating or seeking to terminate our contractual relationship altogether;establishing more favorable relationships or pricing terms with one or more of our competitors; or● its terms of service or other policies in a manner that impacts our ability to run our business and operations.Google and Amazon each has broad discretion to change and interpret its terms of service andor other policies with respectin a manner that impacts our ability to us, and those actions may be unfavorable to us. They may also alter how we are able to process data on their cloud platforms. If Google or Amazon makes changes or interpretations that are unfavorable to us,run our business could be seriously harmed.2020, and 2019,2020, advertising revenue accounted for approximately 99%, 99%, and 98%99% of total revenue, respectively. WeEven though we have introduced other revenue streams, including a subscription model, we still expect this trend to continue for the foreseeable future. Although we try to establish longer-term advertising commitments with advertisers, most advertisers do not have long-term advertising commitments with us, and our efforts to establish long-term commitments may not succeed.We are still early in developing our advertising business. productsadvertising solutions as experimental and unproven, or prefer certain of our products over others. Advertisers, including our customers who have devoted meaningful advertising budgets to our product, will not continue to do business with us if we do not deliver advertisements in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to other alternatives. As our business continues to develop, there may be new or existing advertisers or resellers, or advertisers or resellers from different geographic regions that contribute more significantly to our total revenue. Any economic or political instability, whether as a result of the macroeconomic climate, persisting effects of the COVID-19 pandemic, the conflict in Ukraine, the macro-economic climate, or otherwise, in a specific country or region may negatively impact the global or local economy, advertising ecosystem, our customers and their budgets with us, or our ability to forecast our advertising revenue, and our business would be seriously harmed. on our ability to collect and disclose data and metrics which our advertisers find useful would impede our ability to attract and retain advertisers. Regulators around the world are increasingly scrutinizing and regulating the collection, use, andinand the European Union, which went into effect in May 2018,United Kingdom’s GDPR, or UK GDPR, expanded the rights of individuals to control how their personal data is collected and processed, and placed restrictions on the use of personal data of younger minors. In addition, in the United States, the California Consumer Privacy Act, or CCPA, went into effect in January 2020, and the California Privacy Rights Act of 2020, or CPRA, which replaces the CCPA and goes into effect in January 2023, place additional requirements on the handlingThe processing of personal data for us, our partners, and our advertisers. The CCPA and CPRA also provide for civil penalties for violations, as well as a private rightpersonalized advertising under GDPR continues to be under increased scrutiny from European regulators, which includes ongoing regulatory action against large technology companies like ours, the outcomes of action for data breaches, which may increase the likelihood and cost of data breach litigation. The potential effects of these laws, including any related regulations, are far-reaching,be uncertain and evolving,subject to appeal. The upcoming European Digital Services Act, or DSA, which is expected to go into effect between July and may require usSeptember of 2023, prohibits targeted advertising to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply. Other state, federal, and foreign legislative and regulatory bodies have also implemented or may implement similar legislation regardingminors based on the handlingprofiling of personal data. For example, in the United States, Virginia enacted the Consumer Data Protection Act and Colorado enacted the Colorado Privacy Act, both of which take effect January 1, 2023 and may impose obligations similar to, more stringent than, or in conflict with those we may face under other data protection laws. Further, changesinformation in the European Union’s Electronic Communications Code, which became effective in December 2020,Union. Other European legislative proposals and present laws and regulations may result in the expanded applicability of the European Union’s ePrivacy Directive over parts ofalso apply to our services, requiring us to makeor our advertisers’ activities and require significant operational changes to how we processour business. For example, it is anticipated that the ePrivacy Regulation and store certain types of communications data of users innational implementing laws will replace the European Union,current national laws implementing the ePrivacy Directive, which could have a material impact on the availability of data we rely on to improve and personalize our products and features.49data.data by allowing users to more easily opt-out of tracking of activity across devices. Additionally, Google has announced that it will implement similar changes with respect to its Android operating system and major web browsers, like Firefox, Safari, and Chrome, mayhave or plan to make similar changes as well. TheseThe implemented changes have adversely affectedhad, and the announced or planned changes likely will have, an adverse effect on our targeting, measurement, and optimization capabilities, and in turn affected our ability to target advertisements and measure the effectiveness of advertisements on our services. This has resulted in, and in the future is likely to continue to result in, reduced demand and pricing for our advertising products and could seriously harm our business. The longer-term impact of these changes on the overall mobile advertising ecosystem, our competitors, our business, and the developers, partners, and advertisers within our community isremains uncertain, and depending on how we, our competitors, and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed. While we implementAny alternative solutions we implement are subject to rules and standards set by the owners of such mobile operating systems which may be unclear, change, or be interpreted in a manner adverse to us and require us to halt or change our solutions, any of which could seriously harm our business. In addition, if we are unable to mitigate these and future developments, and alternative solutions do not become widely adopted by our advertisers, then our targeting, measurement, and optimization capabilities will be materially and adversely affected, which would in turn continue to negatively impact our advertising revenue. Any adverse effects could be particularly material to us because we are still early in building our advertising business. Our advertising revenue could also be seriously harmed by many other factors, including:●diminished or stagnant growth, or a decline, in the total and regional number of DAUs on Snapchat;●•diminished or stagnant growth, or a decline, in the total and regional number of DAUs on Snapchat;our inability to deliver advertisements to all of our users due to hardware, software, or network limitations;●•our inability to deliver advertisements to all of our users due to hardware, software, or network limitations;a decrease in the amount of time spent on Snapchat, a decrease in the amount of content that our users share, or decreases in usage of our Camera, Communication, Snap Map, Stories, and Spotlight platforms;●•a decrease in the amount of time spent on Snapchat, a decrease in the amount of content that our users share, or decreases in usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms;our inability to create new products that sustain or increase the value of our advertisements;●•our inability to create new products that sustain or increase the value of our advertisements;changes in our user demographics that make us less attractive to advertisers;●•changes in our user demographics that make us less attractive to advertisers;lack of ad creative availability by our advertising partners;●•lack of ad creative availability by our advertising partners;a decline in our available content, including if our content partners do not renew agreements, devote the resources to create engaging content, or provide content exclusively to us;●•a decline in our available content, including if our content partners do not renew agreements, devote the resources to create engaging content, or provide content exclusively to us;decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by us, our community, or partners;●•decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by us, our community, or partners;changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating systems, that demonstrate the value of our advertisements and other commercial content;●competitive developments or advertiser perception of the value of our products that change the rates we can charge for advertising or the volume of advertising on Snapchat;●•increases in resistance by users to our collecting, using, and sharing their personal data for advertising-related purposes;product changes or advertising inventory management decisions we may make that change the type, size, or frequency of advertisements displayed on Snapchat or the method used by advertisers to purchase advertisements;●•changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating systems, that demonstrate the value of our advertisements and other commercial content;adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, executive actions, or litigation;●•competitive developments or advertiser perception of the value of our products that change the rates we can charge for advertising or the volume of advertising on Snapchat;adverse media reports or other negative publicity involving us, our founders, our partners, or other companies in our industry segment;●•product changes or advertising inventory management decisions we may make that change the type, size, or frequency of advertisements displayed on Snapchat or the method used by advertisers to purchase advertisements;advertiser or user perception that content published by us, our users, or our partners is objectionable;●•adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, executive actions, or litigation regarding the collection, use, and sharing of personal data for certain advertising-related purposes;the degree to which users skip advertisements and therefore diminish the value of those advertisements to advertisers;●•adverse media reports or other negative publicity involving us, our founders, our partners, or other companies in our industry segment;changes in the way advertising is priced or its effectiveness is measured;●•advertiser or user perception that content published by us, our users, or our partners is objectionable;our inability, or perceived inability, to measure the effectiveness of our advertising or target the appropriate audience for advertisements;●•the degree to which users skip advertisements and therefore diminish the value of those advertisements to advertisers;our inability to collect and disclose data or access a user’s identifier for advertising or similar deterministic identifier that new and existing advertisers may find useful;●•changes in the way advertising is priced or its effectiveness is measured;difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines;50●volatility in the equity markets, which may reduce our advertisers’ capacity or desire for aggressive advertising spending towards growth; and●•our inability, or perceived inability, to measure the effectiveness of our advertising or target the appropriate audience for advertisements;the political, economic, and macro-economic climate and the status of the advertising industry in general, including impacts related to labor shortages, supply chain disruptions, inflation, and as a result of war, terrorism, or armed conflict, including Russia’s invasion of Ukraine.June 30, 2022,March 31, 2023, and Mr. Spiegel alone can exercise voting control over a majority of our outstanding capital stock. As a result, Mr. Spiegel and Mr. Murphy, or in many instances Mr. Spiegel acting alone, have the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of our directors and any merger, consolidation, or sale of all or substantially all of our assets.we announcedour board of directors approved the future declaration and payment of a special dividend of one share of Class A Common stock on each outstanding share of Snap’s common stock, which will be subject to certain triggering conditions. In the future, our board of directors may, from time to time, decide to issue additional special or regular stock dividends in the form of Class A common stock, and if we do so our co-founders’ control could be further prolonged. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support. Conversely, this concentrated control could allow our co-founders to consummate such a transaction that our other stockholders do not support. In addition, our co-founders may make long-term strategic investment decisions and take risks that may not be successful and may seriously harm our business.Health epidemics,had, and could in the futurepast and may continue to adversely impact our business. an adverse impact on our business, operations, and the markets and communities in which we and our partners, advertisers, and users operate.The global COVID-19 pandemic adversely impacted, and may continue to adversely impact, many aspects of our business.experienceexperienced downturns or uncertainty in their own business operations and revenue, because of the economic effects resulting from the spread of COVID-19 and the emergence of variants, they halted or51inflationbanking instability continue to cause logistical challenges, increased input costs, and inventory constraints, and liquidity uncertainty for our advertisers, which in turn may also halt or decrease advertising spending. Furthermore, a portion of our advertising revenue is related to in-person events or activities, such as sporting events, music festivals, and in-person learning, which were postponed, cancelled, or limited during the COVID-19 pandemic. While many in-person events and activities have returned, they have not done so at pre-pandemic levels and may continue to be adversely affected. In addition, the unpredictability of the persisting effects of the COVID-19 pandemic and other macroeconomic uncertainties may make it difficult to forecast our advertising revenue, and although we may benefit in the shorter term from changes in the current advertising landscape, any increases may not be indicative of longer-term trends.revenue. Any decline in advertising revenue or the collectability of our receivables could seriously harm our business.In response to the COVID-19 pandemic we implemented and continue a flexible work-from-home policy for substantially all of our team members, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we believe are in our best interests. While most of our operations have been effectively performed remotely, there is no guarantee that will continue, because our team is dispersed, many team members may have additional personal needs to attend to, and team members may become sick themselves and be unable to work. Decreased effectiveness of our team could adversely affect our results due to our inability to meet in person with potential advertisers, longer time periods to review and approve ads, longer time to respond to application performance issues or spam, extended timelines for product reviews and a corresponding reduction in innovation, or other decreases in productivity that could seriously harm our business. Furthermore, we may decide to postpone or cancel planned investments in our business in response to changes in our business asspread of COVID-19 or the emergence of variants, which may impact our user engagement and rate of innovation, either of which could seriously harm our business.As a resultpersisting effects of the COVID-19 pandemic, our partners and community who provide content or services to us may experience delays or interruptions in their ability to create content or provide services, if they are able to do so at all. Members of our community may also alter their usage of our products and services, particularly relative to prior periods, as COVID-19 mitigations are removed. A decrease in the amount or quality of content available on Snapchat, or an interruption in the services provided to us, could lead to a decline in user engagement, which could seriously harm our business.The effectsCOVID-19 pandemic on user engagement or growth are uncertain, and may lead to unpredictable resultsother risks described in the short term and long term, including shorter-term increases in user engagement or growth that may not be indicative of longer-term trends. If physical distancing requirements and shelter-in-place orders continue or are reactivated, and if fewer in-person activities take place, we may experience short-term and long-term disruption to user behavior and our business. We may also experience inconsistent or negative engagement as user behavior on our platform changes, including changes in user activity as a result of any physical distancing requirements and shelter-in-place orders. In addition, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particularthese risk factors may be difficult to assess or predict, the COVID-19 pandemic has resulted in, and may continue to result in, significant volatility and disruption of global financial markets, which could negatively affect our liquidity in the future.The global impact of COVID-19 continues to evolve, and we will continue to monitor the situation closely. Although the spread of COVID-19 may eventually be contained or mitigated, we do not yet know how businesses, advertisers, or our partners will operate in a post-COVID-19 environment. Our users may change how they use our products and services in an environment where the perceived risk of COVID-19 and regulations surrounding it have changed. There may be additional costs or impacts to our business and operations, including when we are able to return to our offices and resume in-person activities, travel, and events. In addition, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or if or when the global economy will fully recover. The ultimate impact of the COVID-19 pandemic or a similar health epidemic on our business, operations, or the global economy as a whole remains highly uncertain.Russia’s invasion ofthe conflict in Ukraine, could put our employees and partners at substantial risk, interrupt our operations, increase costs, create additional regulatory burdens, and have significant negative macro-economicmacroeconomic effects, any of which could seriously harm our business.Russia’s invasion ofthe conflict in Ukraine, have had, and will likely continue to have, a substantial effect on our business and operations. We have team members and their families in Ukraine who face52seenexperienced an increase in attempted cyberattacks on our products, systems, and networks, which we believe are related to the conflict. We may also face retaliatory attacks by governments, entities, or individuals who do not agree with our public expressions of support for Ukraine and our Ukrainian team members. Any such attack could cause disruption to our platform, systems, and networks, result in security breaches or data loss, damage our brand, or reduce demand for our services or advertising products. In addition, we may face significant costs (including legal and litigation costs) to prevent, correct, or remediate any such breaches. We may also be forced to expend additional resources monitoring our platform for evidence of disinformation or misuse in connection with the ongoing conflict. rapidly and we will monitor the situation closely. It is unclear how long the conflict will last and what the long-term outcome and impact will be.impact. On a macro-economicmacroeconomic level, the conflict in Ukraine has further disrupted trade, intensified problems in the global supply chain, and contributed to inflationary pressures. All of these factors may negatively impact the demand for advertising as companies face limited product availability, restricted sales opportunities, and condensed margins. In addition, advertisers may choose to pause advertising their products while the conflict dominates the news cycles and social media content. Any pause or reduction in advertising spending in connection with the conflict in Ukraine could negatively impact our revenue and harm our business.and the rewrite of our application for Android users in 2019, and our strategic reprioritization in 2022, or even a less significant change such as a refresh of the application or a feature change, is difficult to predict. Although we believe that these decisions will benefit the aggregate user experience and improve our financial performance over the long term, we may experience disruptions or declines in our DAUs or user activity broadly or concentrated on certain portions of our application. Product innovation is inherently volatile, and if new or enhanced products fail to engage our users, advertisers, or partners, or if we fail to give our users meaningful reasons to return to our application, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, any of which may seriously harm our business in the short term, long term,short-term, long-term, or both. Additionally, we frequently launch new products and the products that we launch may have technical issues that diminish the performance53and in July 2022, we launched Snapchat for Web, a browser-based product that brings Snapchat’s signature calling and ephemeral messaging capabilities to the web.web, and in February 2023, we launched My AI, an artificial intelligence powered chatbot. Such new lines of business, new products, and other initiatives may be costly, difficult to operate and monetize, increase product liability and litigation risk, and divert management’s attention, and there is no guarantee that they will be positively received by our community or provide positive returns on our investment. We frequently launch new products and the products that we launch may have technical issues that diminish the performance of our application. These performance issues or issues that we encounter in the future could impact our user engagement. In addition, new products or features that we launch may ultimately prove unsuccessful and may be eliminated in the future. In certain cases, new products that we develop may require regulatory approval prior to launch or may require us to comply with additional regulations or legislation.legislation, including laws that are rapidly changing. There is no guarantee that we will be able to obtain such regulatory approval, and our efforts to comply with these laws and regulations could be costly and divert management’s time and effort and may still not guarantee compliance.compliance. If we do not successfully develop new approaches to monetization or meet the expectations of our users or partners, we may not be able to maintain or grow our revenue as anticipated or recover any associated development costs, and our business could be seriously harmed.communication,visual messaging, content, games, and augmented reality. Our competitors range from smaller or newer companies to larger, more established companies such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Kakao, LINE, Meta (including Facebook, Instagram, and WhatsApp), Naver (including Snow), Pinterest, Tencent, and Twitter. Our competitors also include platforms that offer, or will offer, a variety of products, services, content, and online advertising offerings that compete or may compete with Snapchat features or offerings. For example, Instagram, a competing application owned by Meta, has incorporated many of our features, including a “stories” feature that largely mimics our Stories feature and may be directly competitive. Meta has introduced, and likely will continue to introduce, more private ephemeral products into its various platforms which mimic other aspects of Snapchat’s core use case. We also compete for users and their time, so we may lose users or their attention not only to companies that offer products and services that specifically compete with Snapchat features or offerings, but to companies with products or services that target or otherwise appeal to certain demographics, such as Discord or Roblox. Moreover, in emerging international markets, where mobile devices often lack large storage capabilities, we may compete with other applications for the limited space available on a user’s mobile device. We also face competition from traditional and online media businesses for advertising budgets. We compete broadly with the social media offerings of Alphabet, Apple, ByteDance, Meta, Pinterest, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries. As we introduce new products, as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition. In addition, ongoing changes to privacy laws and mobile operating systems have made it more difficult for us to target and measure advertisements effectively, and advertisers may prioritize the solutions of larger, more established companies. As a result, our competitors may, and in some cases will, acquire and engage users or generate advertising or other revenue at the expense of our own efforts, which would negatively affect our business.54●integrating competing social media platforms or features into products they control such as search engines, web browsers, advertising networks, or mobile device operating systems;●•integrating competing social media platforms or features into products they control such as search engines, web browsers, advertising networks, or mobile operating systems;making acquisitions for similar or complementary products or services; or●•making acquisitions for similar or complementary products or services; orimpeding Snapchat’s accessibility and usability by modifying existing hardware and software on which the Snapchat application operates.●the usefulness, novelty, performance, and reliability of our products compared to our competitors’ products;●•the usefulness, novelty, performance, and reliability of our products compared to our competitors’ products;the number and demographics of our DAUs;●•the number and demographics of our DAUs;the timing and market acceptance of our products, including developments and enhancements of our competitors’ products;●our ability to monetize•the timing and market acceptance of our products, including developments and enhancements of our competitors’ products;●•our ability to monetize our products;the availability of our products to users;●•the availability of our products to users;the effectiveness of our advertising and sales teams;●•the effectiveness of our advertising and sales teams;the effectiveness of our advertising products;●•the effectiveness of our advertising products;our ability to establish and maintain advertisers’ and partners’ interest in using Snapchat;●•our ability to establish and maintain advertisers’ and partners’ interest in using Snapchat;the frequency, relative prominence, and type of advertisements displayed on our application or by our competitors;●•the frequency, relative prominence, and type of advertisements displayed on our application or by our competitors;the effectiveness of our customer service and support efforts;●•the effectiveness of our customer service and support efforts;the effectiveness of our marketing activities;●•the effectiveness of our marketing activities;changes as a result of actual or proposed legislation, regulation, executive actions, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;●•changes as a result of actual or proposed legislation, regulation, executive actions, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;acquisitions or consolidation within our industry segment;●•acquisitions or consolidation within our industry segment;our ability to attract, retain, and motivate talented team members, particularly engineers, designers, and sales personnel;●•our ability to attract, retain, and motivate talented team members, particularly engineers, designers, and sales personnel;our ability to successfully acquire and integrate companies and assets;●•our ability to successfully acquire and integrate companies and assets;our ability to cost-effectively manage and scale our rapidly growing operations; and●•our ability to cost-effectively manage and scale our operations; andour reputation and brand strength relative to our competitors.55maintainattain and sustain profitability.June 30, 2022,March 31, 2023, we had an accumulated deficit of $9.1$10.5 billion and for the sixthree months ended June 30, 2022,experiencedhad a net loss of $422.1$328.7 million. We expect our operating expenses to increase in the future as we expand our operations. We may incur significant losses in the future for many reasons, including due to the other risks and uncertainties described in this report. Additionally, we may encounter unforeseen expenses, operating delays, or other unknown factors that may result in losses in future periods. If our revenue does not grow at a greater rate than our expenses, our business may be seriously harmed and we may not be able to attain and sustain profitability.addition, ifFebruary 2023, we chooseimplemented our return to no longer offeroffice plan that still encompasses a remote or hybrid approach, but requires greater in-office attendance. While we intend to continue offering flexible work environment,arrangements based on the different needs of teams across our company on a case-by-case basis, we may face more difficulty in hiring and retaining our workforce. workforce as a result of this shift to have greater in-office attendance. Further, labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, the ongoingpersisting effects of the COVID-19 pandemic and other macroeconomic uncertainties, and workforce participation rates. In addition, if our reputation were to be harmed, whether as a result of our strategic reprioritization in 2022, media, legislative, or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.reinventingusing the camera to improve the way that people live and communicate, which makes it difficult to effectively assess our future prospects. Accordingly, we believe that investors’ future perceptions and expectations, which can be idiosyncratic and vary widely, and which we do not control, will affect our stock price. For example, investors may believe our timing path, and adoptionpath to increased monetization will be faster or more effective than our current plans or that maythan actually taketakes place. You should consider our business and prospects in light of the many challenges we face, including the ones discussed in this report.56securityinformation technology systems or data is compromised or if our platform is subjected to attacks that frustrate or thwart our users’ ability to access our products and services, our users, advertisers, and partners may cut back on or stop using our products and services altogether, which could seriously harm our business.theour sensitive information, including information that our users, advertisers, and partners have shared with us, may be unsuccessful due to the actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance, or other factors. In addition,We and the third parties on which we rely may attemptbe subject to a variety of evolving threats, including social-engineering attacks (for example by fraudulently induceinducing employees, users, or advertisers to disclose information to gain access to our sensitive information, including data or our users’ or advertisers’ data. In a hybrid or remote working environment, wedata), malware, viruses, hacking, and our employees may be more susceptible to such attacks. If anyother threats. While certain of these eventsthreats have occurred in the past, they have become more prevalent and sophisticated in our industry, and may occur in the future. Because of our orprominence and value of our users’, advertisers’, or employees’ information could be accessed or disclosed improperly. We have previously suffered the loss of confidential information related to employee error and vendor breaches. Our Privacy Policy governs howsensitive data, we may use and share the information that our users have provided us. Some advertisers and partners may store informationbelieve that we share with them. Ifare an attractive target for these third parties fail to implement adequate data-security practices or fail to comply with our terms and policies, our users’ data may be improperly accessed or disclosed. And even if these third parties take allsorts of these steps, their networks may still suffer a breach, which could compromise our users’ data.Any incidents where our users’ or advertisers’ information is accessed without authorization, or is improperly used, or incidents that violate our Terms of Service or policies, could damage our reputation and our brand and diminish our competitive position. Governments and regulatory agencies may enact new disclosure requirements when a cybersecurity event occurs, bringing greater attention to such events and causing reputational damage. attacks.addition, affected users or government authorities could initiate legal or regulatory action against us over those incidents, which could be time-consuming and cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Maintaining the trust of our users is important to sustain our growth, retention, and user engagement. Concerns over our privacy practices, whether actual or unfounded, could damage our reputation and brand and deter users, advertisers, and partners from using our products and services. Any of these occurrences could seriously harm our business.Cyberattacks and cyberextortion incidentsparticular, severe ransomware attacks are becoming increasingly prevalent and severe.prevalent. To alleviate the financial, operational, and reputational impact of these attacks, it may be preferable to make extortion payments, but we may be unwilling or unable to do so, including, for example, if applicable laws or regulations prohibit such payments. And, even if we make such payments, cyber threat actors may still disclose data, engage in further extortion, or otherwise harm our systems or data. Similarly,Moreover, we permit a hybrid work environment, which has increased risks to our information technology systems and data, as our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.they do not containtheir systems or networks are free from exploitable defects or bugs that could result in a breach of or disruption to our platform, systems, and networks or the systems and networks of third parties that support us and our services. We are also reliant on third party and open source software that may contain bugs, vulnerabilities, or errors that could be exploited or disclosed before a patch or fix is available.attacks onsecurity incident experienced by us or our supply chainthird party partners could damage our reputation and our brand, and diminish our competitive position. Applicable privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly and the failure to comply with these legal requirements could lead to adverse consequences. Governments and regulatory agencies may also enact new disclosure requirements for cybersecurity events. In addition, affected users or software,government authorities could initiate legal or the perception that one has occurred,regulatory action against us, including class-action claims, investigations, penalties, and audits, which could be time-consuming and cause us to incur significant expense and liability or result in aorders or consent decrees forcing us to modify our business practices. We could also experience loss of our users’user or advertisers’advertiser confidence in the security of our platform, and damage to our brand, reduce the demand for our products and services, disrupt business operations, result in the exfiltration of employee, personal,additional reporting requirements or proprietary data, including source code, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations,oversight, restrictions on processing sensitive information, claims by our customerspartners or other relevant parties that we have failed to comply with contractual obligations or our policies, and seriously harm our business.57While we maintain a bug bounty programindemnification obligations. We could also spend material resources to assist us in identifying vulnerabilities in our products before they are launchedinvestigate or exploited by cyber threat actors, there is no guarantee that we will be able to discover all such threats to our service. Cyber threat actors have also increasedcorrect the complexity of their attempts to compromise user accounts, despite our defensesincident and detection mechanisms to prevent these account takeovers. User credentials may be obtained through breaches of non-Snap platforms and services, password stealing malware, social engineering, or other tactics and techniques and used to launch coordinated attacks. These attacks may involve using our service to spam or abuse other users, download user personal data, further compromise additional user accounts, or to compromise employee account credentials or social engineer employees into granting further access to our systems. If these cyber threat actors are successful or there is a perception that such an attack has occurred, we may be required to notify our users and regulators, and such attacks may disrupt our business operations and users’ access to the platform, harm other users, expose us to legal liabilities, and cause us to losefuture incidents. Maintaining the trust of our users.We also areusers is important to sustain our growth, retention, and user engagement. Concerns over our privacy and security practices, whether actual or may in the future be subject to many federal, state, local,unfounded, could damage our reputation and foreign lawsbrand and regulations, including those related to privacy, rightsdeter users, advertisers, and partners from using our products and services. Any of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner thatthese occurrences could seriously harm our business.In addition,December 2014, the U.S. Federal Trade Commission resolved an investigation into someour contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our earlyprivacy and security practices, by issuing a final order. That order requires, among other things, that we establish a robust privacy programsuch coverage will continue to govern how we treat user data. Duringbe available on commercially reasonable terms or at all, or that such coverage will pay future claims.20-year termloss of the order, we must complete biennial independent privacy audits. In addition, in June 2014, we entered into a 10-year assurance of discontinuance with the Attorney General of Maryland implementing similar practices, including measuressensitive information related to prevent minors under the age of 13 from creating accountsemployee error and providing annual compliance reports. Violating existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could seriously harm our business.of our user base for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally.globally that may require significant judgment and are subject to technical errors. For example, there may be individuals who have multiple Snapchat accounts, even though we forbid that in our Terms of Service and implement measures to detect and suppress that behavior. Our user metrics are also affected by technology on certain mobile devices that automatically runs in the background of our Snapchat application when another phone function is used, and this activity can cause our system to miscount the user metrics associated with such account.58or other demographic metrics, or measurements of advertising effectiveness to be accurate, representations of our user base, or if we discover material inaccuracies in our metrics, our reputation may be seriously harmed. Our advertisers and partners may also be less willing to allocate their budgets or resources to Snapchat, which could seriously harm our business. In addition, 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. This calculation may mask any individual days or months within the quarter that are significantly higher or lower than the quarterly average.Mobile malware, viruses, hacking and phishing attacks, spamming, and improperMobile malware, viruses, hacking, and phishing attacks have become more prevalent and sophisticated in our industry, have occurred on our systems inpast, and may occur on our systems in the future. Because of our prominence, we believetechnologies that we are an attractive target for these sorts of attacks. Although it is difficulthave developed to determine what, if any, harm may directly resultrepel spamming attacks will be able to eliminate all spam messages from an interruption or attack, any failure to detect such attack and maintain performance, reliability, security, and availability of our products and technical infrastructure to the satisfaction of our users may seriously harm our reputation and our ability to retain existing users and attract new users.In addition, spammersproducts. Spammers attempt to use our products to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make our products less user friendly. We cannot be certain that the technologies that we have developed to repel spamming attacks will be able to eliminate all spam messages from our products. Our actions to combat spam may also divert significant time and focus from improving our products. As a result of spamming activities, our users may use our products less or stop using them altogether, and result in continuing operational cost to us. and executive actions, rules, contractual obligations, policies, and other obligations regarding privacy, data protection, content, and other matters. Many of these laws, regulations, and executive actionsobligations are subject to change and uncertain interpretation, and our actual or perceived failure to comply with such obligations could result in investigations, claims, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, or other adverse consequences, any of which could seriously harm our business.Weandindustry standards, policies, contractual requirements, executive actions, that involve matters centraland other obligations relating to our business,privacy, security, and data protection. We also are or may in the future be subject to many federal, state, local, and foreign laws and regulations, including userthose related to privacy, security, rights of publicity, content, data protection, content, intellectual property, distribution, electronic contractshealth and other communications,safety, competition, protection of minors, consumer protection, taxation,employment, money transmission, import and online-payment services. Theseexport restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation.executiveregulatory/industry standards that govern privacy, security, online safety and data protection.particularly restrictivetransferred to the United States (and other countries they believe provide inadequate privacy protections) and increased the assessments required to do so. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border transfer laws, or adopt similar laws. We have attempted to structure our operations in countries outsidea manner designed to help us partially avoid some of these concerns (e.g., Snap Inc. receives Snapchat consumer data directly from European consumers and is directly subject to GDPR; a structure designed to seek to avoid any requirement for additional transfer protections under the GDPR in this context); however, we still transfer some data from the EEA and UK to the United States using currently legal mechanisms. Some of these mechanisms are subjectBoth inIf there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and abroad, these laws, regulations,penalties, the inability to transfer data and executive actions constantly evolve,work with partners, vendors and may be issuedother third parties, and injunctions against our processing or changed with limited advance notice. For example, an executive order undertransferring of personal data necessary to operate our business. Some European regulators have sought to restrict some companies’ data processing activities, including our competitors, from transferring certain personal data out of Europe for allegedly violating the prior U.S. administration was issued prohibiting certain transactions with a Chinese-owned company, with the prohibition becoming effective 45 days after the dateGDPR’s cross-border data transfer limitations, which would materially impact such companies’ and, if subject to similar restrictions, our, operations and revenues. Additionally, companies like us that transfer personal data outside of the order.In addition,EU to other jurisdictions, particularly to the application and interpretation of these laws, regulations, and executive actions are often uncertain, particularly in the new and rapidly evolving industry in which we operate. Because we store, process, and use data, some of which contains personal data, weUnited States, are subject to complexincreased scrutiny from regulators, individual litigants and evolving federal, state,activist groups.foreignprocedures. We expect to be designated as one of the “providers of very large online platforms” in 2023 and are therefore likely to be subject to significant compliance deadlines starting in the second half of 2023. Current national laws that implement the ePrivacy Directive are likely to be replaced or updated when the ePrivacy Regulation enters into force, which will significantly increase fines for non-compliance once in effect and could also have a material impact on the availability of data we rely on to improve and personalize our products and features. Moreover, the United Kingdom’s Age Appropriate Design Code, or UK AADC, and incoming Online Safety Bill focus on online safety and protection of children’s privacy online, both of which require us to change our services and incur costs to do so. Furthermore, the proposed EU AI Act related to artificial intelligence, or AI, could, if adopted, impose onerous obligations related to the use of AI-related systems and may require us to change our business practices to comply with such obligations. Moreover, in the EEA, the Collective Redress Directive (effective June 2023) will allow collective actions to be brought by a representative body against businesses if they breach legislation intended to protect EU consumers, including for data protection matters, which could increase our costs and liability in the EEA market.regardinggoverning privacy, security, online safety and data protection, which will increase the complexity of compliance and our costs and liabilities in these jurisdictions. India’s IT Rules, introduced in 2021, require large technology companies like ours to appropriately moderate online content and provide government agencies with access, and have ultimately led to a ban of certain platforms. India has also introduced a new comprehensive privacy and data protection law (Digital Personal Data Protection Bill) under which we will be required to meet GDPR style obligations for Indian consumer data. Australia’s recent Online Safety Act and existing Assistance and Access Act have similarly placed significant focus on appropriate moderation, take down and government access. Australia is working on updates to its Privacy Act 1988 and a new Privacy Legislation Amendment (Enhancing Online Privacy and Other Measures (Bill) 2021 (Online Privacy Bill) that will impose more stringent obligations on us and other matters. Many of thesesocial / technology companies. Other APAC countries also have privacy laws regulations, and executive actions are subject to change and uncertain interpretation, and could result in investigations, claims, changesthat apply to our business practices, increased costoperations, such as South Korea’s Personal Information Protection Law, Japan’s Act on the Protection of operations,Personal Information, and declines in user growth, retention, or engagement, any of which could seriously harm our business.59Several proposals have recently been adopted or are currently pending before, and we believe a number of investigations into other technology companies are currently being conducted by, federal, state, andSingapore’s Personal Data Protection Act. Other foreign legislative and regulatory bodies that could significantly affect our business. GDPR in the European Union, which went into effect in May 2018, placed new data protection obligations and restrictions on organizations and may require us to further change our policies and procedures. If we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be seriously harmed. In addition, the CCPA went into effect in January 2020 and the CPRA, which replaces the CCPA and goes into effect in January 2023, place additional requirements on the handling of personal data. The CCPA and CPRA also provide for civil penalties for violations, as well as a private right of action for data breaches, which may increase the likelihood and cost of data breach litigation. The potential effects of this or any other legislation, including any implementing regulations, are or may be far-reaching, uncertain, and evolving, and may require us, our partners, and advertisers to modify data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Other state, federal, and foreign legislative and regulatory bodiesAmericas have enacted or may enact (or update) similar legislation regarding the handling of personal data, or conduct additional investigations into specific companies or the industry as a whole that could alter the existing regulatory environment in a manner that would be adverse to us. ChangesFor example, these legislative updates or investigations could arise from Canada’s Personal Information Protection and Electronic Documents Act, and various related provincial laws, Canada’s Anti-Spam Legislation, and Brazil’s General Personal Data Protection Law, or LGPD.European Union’s Electronic Communications Code,future, standards with which became effectivewe are legally or contractually obligated to comply. Moreover, we may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We may also publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials, or statements are found to be deficient, lacking in December 2020,transparency, deceptive, unfair, or misrepresentative of our practices, we may resultbe subject to investigation, enforcement actions by regulators or other adverse consequences.expanded applicability of the European Union’s ePrivacy Directive over parts ofregulatory framework or enforcement actions – whether against us or our services, requiringcompetitors – could require us to make changesfundamentally change our business model.howhave failed, in our efforts to comply with our privacy, security, and data protection obligations. Moreover, despite our efforts, our personnel or third parties on whom we processrely may fail to comply with such obligations, which could negatively impact our business operations. If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with applicable privacy, security, or data protection obligations, we could face significant consequences, including but not limited to: government enforcement actions (such as investigations, claims, audits, penalties, etc.), litigation (including class action litigation), additional reporting requirements or oversight, bans on processing personal data, and store certain typesorders to destroy or not use personal data. Any of communications data of users in the European Union, whichthese events could have a material impactadverse effect on our business, including loss of users and advertisers, inability to process personal data or operate in certain jurisdictions, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm our business.availabilitypast been subject to enforcement actions, investigations, proceedings, orders, or various government inquiries regarding our data privacy and security practices and processing. For example, in December 2014, the U.S. Federal Trade Commission resolved an investigation into some of dataour early practices by issuing a final order. That order requires, among other things, that we rely onestablish a robust privacy program to improve and personalize our products and features. The U.K.’s Age Appropriate Design Code, or AADC, which focuses on online safety and protectiongovern how we treat user data. During the 20-year term of children’sthe order, we must complete biennial independent privacy online became effectiveaudits. In addition, in September 2021. NoncomplianceJune 2014, we entered into a 10-year assurance of discontinuance with the AADC may result in audits byAttorney General of Maryland implementing similar practices, including measures to prevent minors under the U.K.’s Information Commissioner Office,age of 13 from creating accounts and providing annual compliance reports. Violating existing or ICO, thefuture regulatory body set uporders or consent decrees could subject us to uphold information rights,substantial monetary fines and other EU regulators as noncompliance with the AADC may indicate noncompliance with the GDPR. The ICO continues to engage with industry leaders to interpret and maintain compliance with the AADC. Furthermore, in December 2018, the Australian government passed the Assistance and Access Bill 2018penalties that provides Australian law enforcement authorities with mechanisms to make requests for electronic communication, even if the data is end-to-end encrypted like somecould seriously harm our business.●our ability to maintain and grow our user base and user engagement;●•our ability to maintain and grow our user base and user engagement;the development and introduction of new or redesigned products or services by us or our competitors;●•the development and introduction of new or redesigned products or services by us or our competitors;the ability of our cloud service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service;●•the ability of our cloud service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service;our ability to attract and retain advertisers in a particular period;●•our ability to attract and retain advertisers in a particular period;seasonal or other fluctuations in spending by our advertisers and product usage by our users, each of which may change as our product offerings evolve or as our business grows or as a result of unpredictable events such as the COVID-19 pandemic, inflationary pressures, labor shortages, supply chain disruptions, or the conflict in Ukraine;●•seasonal or other fluctuations in spending by our advertisers and product usage by our users, each of which may change as our product offerings evolve or as our business grows or as a result of unpredictable events such as inflationary pressures, labor shortages, supply chain disruptions, banking instability, the persisting effects of the COVID-19 pandemic, or the conflict in Ukraine;the number of advertisements shown to users;●•restructuring or other charges and unexpected costs or other operating expenses;the pricing of our advertisements and other products;●•the number of advertisements shown to users;our ability to demonstrate to advertisers the effectiveness of our advertisements;●•the pricing of our advertisements and other products;the diversification and growth of revenue sources beyond current advertising;●•our ability to demonstrate to advertisers the effectiveness of our advertisements;increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive;●•the diversification and growth of revenue sources beyond current advertising;our ability to maintain operating margins, cash used in operating activities, and Free Cash Flow;●•increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive;our ability to accurately forecast consumer demand for our physical products and adequately manage inventory;
•our ability to maintain operating margins, cash provided by operating activities, and Free Cash Flow;●•our ability to accurately forecast consumer demand for our physical products and adequately manage inventory;system failures or breaches of security or privacy, and the costs associated with such breaches and remediations;●•system failures or security incidents, and the costs associated with such incidents and remediations;inaccessibility of Snapchat, or certain features within Snapchat, due to third-party or governmental actions;●•inaccessibility of Snapchat, or certain features within Snapchat, due to third-party or governmental actions;stock-based compensation expense;●•stock-based compensation expense;our ability to effectively incentivize our workforce;●•our ability to effectively incentivize our workforce;adverse litigation judgments, settlements, or other litigation-related costs, or product recalls;●•adverse litigation judgments, settlements, or other litigation-related costs, or product recalls;changes in the legislative or regulatory environment, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, enforcement by government regulators, including fines, orders, sanctions, or consent decrees, or the issuance of executive orders or other similar executive actions that may adversely affect our revenues or restrict our business;●•changes in the legislative or regulatory environment, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, enforcement by government regulators, including fines, orders, sanctions, or consent decrees, or the issuance of executive orders or other similar executive actions that may adversely affect our revenues or restrict our business;fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;●•new privacy, data protection, and security laws and other obligations and increased regulatory scrutiny on our or our competitors’ data processing activities and privacy and information security practices, which some of our competitors have already experienced, including through enforcement actions potentially resulting in large penalties or other severe sanctions and increased restrictions on the data processing activities and personal data transfers critical to the operation of our current business model;fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our balance sheet;●•fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;changes in our effective tax rate;●•fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our consolidated balance sheet;announcements by competitors of significant new products, licenses, or acquisitions;●our ability to make accurate accounting estimates and appropriately recognize revenue for our products for which there are no relevant comparable products;●•changes in our effective tax rate;our ability to meet minimum spending commitments in agreements with our infrastructure providers;●•announcements by competitors of significant new products, licenses, or acquisitions;changes in accounting standards, policies, guidance, interpretations, or principles;●•our ability to make accurate accounting estimates and appropriately recognize revenue for our products for which there are no relevant comparable products;the effect of war or other armed conflict on our workforce, operations, or the global economy; and●•our ability to meet minimum spending commitments in agreements with our infrastructure providers;changes in domestic and global business or macro-economic conditions, including as a result of the COVID-19 pandemic or the conflict in Ukraine, and resulting labor shortages, supply chain disruptions, and inflation.●we fail to increase or maintain DAUs;●•we fail to increase or maintain DAUs;our user growth outpaces our ability to monetize our users, including if we don’t attract sufficient advertisers or if our user growth occurs in markets that are not as monetizable;●•our user growth outpaces our ability to monetize our users, including if we don’t attract sufficient advertisers or if our user growth occurs in markets that are not as monetizable;we fail to increase or maintain the amount of time spent on Snapchat, the amount of content that our users share, or the usage of our Camera, Communication, Snap Map, Stories, and Spotlight platforms;●•we fail to increase or maintain the amount of time spent on Snapchat, the amount of content that our users share, or the usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms;partners do not create sufficient engaging content for users or renew their agreements with us;
•partners do not create sufficient engaging content for users or renew their agreements with us;●●●●●Russia’s invasion ofthe conflict in Ukraine, could damage or62SubstantiallyDuring the first quarternew enterprise resource planning, or ERP, system implementationfinancial systems and migrated our general ledger, consolidation, and planning processes onto the new system. In connection with this implementation, we modified the design and documentation of our internal control processes and procedures relating to the new system. As part of this implementation, we may experience difficulties in managing our existing systems and processes, which could disrupt our operations, the management of our finances, and the reporting of our financial results, which in turn, may result in our inability to manage the growth of our business and to accurately forecast and report our results, each of which could seriously harm our business.domain-name-protectiondomain-name protection laws to protect our proprietary rights. In the United States and internationally, we have filed various applications to protect aspects of our intellectual property, and we currently hold a number of issued patents, trademarks, and copyrights in multiple jurisdictions. In the future, we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, third parties may design around our proprietary rights or independently develop competing technology, and pending and future trademark, copyright, and patent applications may not be approved. Moreover, we cannot ensure that the claims of any granted patents will be sufficiently broad to protect our technology or platform and provide us with competitive advantages. Additionally, failure to comply with applicable procedural, documentary, fee payment, and other similar requirements could result in abandonment or lapse of the affected patent, trademark, or copyright application or registration.63In addition, we have contributedunder open-sourceor other intellectual property by users of open source software. While we employ practices designed to monitor our compliance with the licenses have made other technology we developed available under otherof third-party open licenses,source software and include open-sourceto avoid using the open source software in a manner that would put our products. From timevaluable proprietary source code at risk, there is a risk that we could have used, or may in the future use, open source software in a manner which could require us to time, we may face claims from third parties claiming ownershiprelease our proprietary source code to users of our software or demanding releaseto the public, require us to license our proprietary software for purposes of the open-source softwaremaking modifications or derivative works, or prohibit us from charging fees for the use of our proprietary software. This could result in loss of revenue, and allow our competitors to create similar offerings with lower development costs, and ultimately could result in a loss of our competitive advantages. Furthermore, there is an increasing number of open source software license types, almost none of which have been tested in a court of law, resulting in guidance regarding the proper legal interpretation of such licenses and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products. If we have developed using such software, which could includewere to receive a claim of non-compliance with the terms of any of our open source licenses, we may be required to publicly release certain portions of our proprietary source code or otherwise seekingexpend substantial time and resources to enforce the termsre-engineer some or all of the applicable open-source license. These claims could result in litigation and could require us to make our software, source code freely available,which may divert resources away from our product development efforts and, as a result, adversely affect our business. In addition, we could be required to seek licenses from third parties to continue offering our products for certain uses, or cease offering the products associated with such software, unless and until we can re-engineer them to avoid infringement, which may be very costly.ForeignRussia’s invasion ofthe conflict in Ukraine, may cause countries to target and restrict our operations, or to promote other companies’ products in place of ours. Any restriction on access to Snapchat due to foreign government actions or initiatives, or any withdrawal by us from certain countries or regions because of such actions or initiatives, or any increased competition due to actions and initiatives of foreign governments would adversely affect our DAUs, including by giving our competitors an opportunity to penetrate geographic markets that we cannot access or to which they previously did not have access. As a result, our user growth, retention, and engagement may be seriously harmed, and we may not be able to maintain or grow our revenue as anticipated and our business could be seriously harmed.64short term, long term,short-term, long-term, or both. Additionally, our partners’ actions may affect our brand if users do not appreciate what those partners do on Snapchat. We may also fail to adequately support the needs of our users, advertisers, or partners, which could erode confidence in our brand. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business may be seriously harmed.predominatelypredominantly operate. In connection with our international expansion and growth, we have also hired new team members in many of these markets. This international expansion may:●impede our ability to continuously monitor the performance of all of our team members;●•impede our ability to continuously monitor the performance of all of our team members;result in hiring of team members who may not yet fully understand our business, products, and culture; or●•result in hiring of team members who may not yet fully understand our business, products, and culture; orcause us to expand in markets that may lack the culture and infrastructure needed to adopt our products.asbecause we increase the number of ourhave team members internationally, we are exposed to political, social, and economic instability in additional countries and regions. For example, we have team members in Ukraine, and the current conflict and instability in the region has disrupted our operations and negatively impacted our team members and our business. any other products we may introduce in the future, may contain undetected software bugs, hardware errors, and other vulnerabilities. These bugs and errors can manifest in any number of ways in our products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products. We have a practice of rapidly updating our products and some errors in our products may be discovered only after a product has been released or shipped and used by users, and may in some cases be detected only under certain circumstances or after extended use. While we maintain an application security program designed to detect bugs and vulnerabilities in our products prior to their launch and a bug bounty program to allow security researchers to assist us in identifying vulnerabilities in our products before they are exploited by malicious threat actors, there is no guarantee that we will be able to discover every vulnerability or threat to our products. We may be unable to detect bugs, vulnerabilities or threats because no testing can reveal all bugs and vulnerabilities in highly technical and complex products that are constantly evolving, cyber threat actors are developing sophisticated and often undisclosed exploit development tools and techniques, and vulnerabilities in open source and third party software that may be included in our products are disclosed daily. Any errors, bugs, or vulnerabilities discovered in our products or code after release could damage our reputation, result in a security incident (and all the attendant risks), drive away users, lower revenue, and expose us to claims or regulatory investigations, any of which could seriously harm our business. Any errors, bugs, or vulnerabilities discovered in our code after release could damage our reputation, drive away users, lower revenue, and expose us to damages claims, any65or consent decrees, or settlements, may require us to change our policies or practices, subject us to substantial monetary fines or other penalties or sanctions, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal and other expenses, any of which could seriously harm our business.66Illinois’ Biometric Information Privacy Act, or BIPA,an Illinois statute concerning the handling of biometric data, which we settled. Other plaintiffs have chosen to pursue a strategy of joining with respectother plaintiffs to many Illinois usersbring a large number of Snapchatindividual claims, rather than pursuing a class action. For example, a sizable number of plaintiffs have sued us and other technology companies alleging that social platforms are addictive and harmful to minor users' mental health. Other plaintiffs have argued that we are liable to those usersshould be legally responsible for statutory damages. We compelled arbitration, which the court granted, dismissing the case and ordering the parties to arbitrate the matter; that ruling compelling arbitration was recently upheldfentanyl overdoses or poisoning, if communications about a drug transaction occurred on appeal. Some plaintiffs’ attorneys have also indicated a desire to initiate arbitrations against us, arguing that we violated BIPA, in some cases on behalf of large numbers of Illinois users. We believe we have meritorious defenses to these lawsuits and arbitrations and are actively engaged in resolving these matters, but an unfavorable outcome in these lawsuits or arbitrations could seriously harm our business. platform.themagainst such lawsuits is costly and can impose a significant burden on management and employees. We may also receive unfavorable preliminary, interim, or final rulings in the course of litigation. For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock. The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s App Tracking Transparency framework would have on our business. We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business.CDA.CDA, and some U.S. states have also enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections. For example, the CDA was amended in 2018, and the U.S. Congress and the Executive branch have proposed further changes or amendments each year since 2019, including among other things proposals that would narrow CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether. A case concerning the scope of CDA protection is currently pending before the U.S. Supreme Court; an eventual ruling in that case might narrow the judicial interpretation of the statute, exposing us to additional lawsuits and potential judgments that could seriously harm our business. Such changes could decrease or change our protections from liability for third-party content in the United States.In the future, asWe do not currently enter into foreign currency exchange contracts, which means our international operations increase, or more of our expenses are denominated in currencies other than the U.S. dollar, ourbusiness, financial condition, and operating results may be more greatly affectedimpacted by fluctuations in the exchange rates of the currencies in which we do67●political, social, and economic instability, including war and other armed conflicts;●•political, social, and economic instability, including war and other armed conflicts;risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, and unexpected changes in laws, regulatory requirements, and enforcement;●•risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection ofpotential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities;●fluctuations in currency exchange rates;
minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, and unexpected changes in laws, regulatory requirements, and enforcement;●higher levels of credit risk and payment fraud;●•potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities;complying with tax requirements of multiple jurisdictions;●•fluctuations in currency exchange rates;enhanced difficulties of integrating any foreign acquisitions;●•higher levels of credit risk and payment fraud;complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions, and termination requirements;●•complying with tax requirements of multiple jurisdictions;reduced protection for intellectual-property rights in some countries;●•enhanced difficulties of integrating any foreign acquisitions;difficulties in staffing and managing global operations and the increased travel, infrastructure, and compliance costs associated with multiple international locations;●•complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions, and termination requirements;regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash;●•reduced protection for intellectual-property rights in some countries;import and export restrictions and changes in trade regulation;●•difficulties in staffing and managing global operations and the increased travel, infrastructure, and compliance costs associated with multiple international locations;complying with statutory equity requirements;●•regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash;complying with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions; and●•import and export restrictions and changes in trade regulation;export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security, the Treasury Department’s Office of Foreign Assets Control, or other similar foreign regulatory bodies.difficult to comply with.complicate compliance efforts. While we continue to monitor these developments, the full effect of Brexit on our operations is uncertain and our business could be harmed by trade disputes or political differences between the United Kingdom and the European Union in the future.68June 30, 2022,March 31, 2023, we had recorded a total of $1.9$1.8 billion of goodwill and intangible assets, net related to our acquisitions. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such material charges may seriously harm our business.members.members and, where applicable, their employers. To fund the withholding and remittance obligations for equity awards, we have either used our existing cash or sold a portion of vested equity awards on behalf of our team members near the applicable settlement dates in an amount that is substantially equivalent to the number of shares of common stock that we would withhold in connection with these settlements. In the future, we may also sell equity on our behalf and use the proceeds to fund the withholding and remittance obligations for equity awards. Any of these methods may have an adverse effect on our financial condition.6970We have a remote or hybrid work environment, and intend to continue such an environment into the future, which may increase our costs and negatively impact our operations.During the COVID-19 pandemic most of our employees have been working in a remote or hybrid environment, and we intend to continue offering flexible work arrangements in the future, even after the COVID-19 pandemic subsides. While we have been largely successful in conducting most of our operations remotely, there is no guarantee that we will continue to be as effective under a remote or hybrid work structure into the future. In addition, we may incur significant costs to accommodate a hybrid environment, as we may need to expend resources to keep both an office environment and remote work environment available to our employees. A remote or hybrid environment may also make our systems and technology more susceptible to cyberattacks, viruses, and other intrusions as we will have a more distributed employee technology and network structure. Any such issues caused or amplified by a remote or hybrid work environment could increase our costs and negatively impact our operations.●require repayment of any outstanding amounts drawn on our Credit Facility;●•require repayment of any outstanding amounts drawn on our Credit Facility;terminate our Credit Facility; or●•terminate our Credit Facility; orrequire us to pay significant damages.
•require us to pay significant damages.in prior periods, and we may not maintain profitability.attain and sustain profitability in future periods. As a result, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, our credit rating, the condition of the capital markets, and other factors. To the extent we use available funds or draw on our Credit Facility, we may need to raise additional funds and we cannot assure investors that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our existing stockholders may experience dilution. In the event that we are unable to obtain additional financing on favorable terms, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business.or the Tax Act,which was enacted in December 2017, and significantly reformed the U.S. Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act lowered U.S. federal corporate income tax rates, changed the utilization of future net operating loss carryforwards, allowed for the expensing of certain capital expenditures, eliminated the option to currently deduct research and development expenditures and requires taxpayers to capitalize and amortize U.S.-based and non-U.S.-based research and development expenditures over five and fifteen years, respectively, and put into effect sweepingsignificant changes to U.S. taxation of international business activities. However,In August 2022, the current U.S. administration has indicatedInflation Reduction Act, or the IRA, was enacted, the provisions of which include a desireminimum tax equal to reform15% of the Code, includingadjusted financial statement income of certain large corporations, as well as a 1% excise tax on certain share buybacks by potentially increasing U.S. federal corporate incomepublic corporations that would be imposed on such corporations. It is possible that changes under the Tax Cuts and Jobs Act, the IRA or other tax rates, and it is currently unclear what, if any, changes to the Code will be enacted and how that may affectlegislation could increase our future tax liability, which could in turn adversely impact our business or the financial markets and the market price of our Class A common stock.TheIn addition, the Organisation for Economic Co-operation and Development, or the OECD, has been workingled international efforts to devise, and to implement on a proposal that may change how taxable presencepermanent basis, a two-pillar solution to address the tax challenges arising from the digitalization of the economy. Pillar One focuses on nexus and profit allocation, and Pillar Two provides for digital services is defineda global minimum effective corporate tax rate of 15%. Pillar One would apply to multinational enterprises with annual global revenue above 20 billion euros and resultprofitability above 10%, with the revenue threshold potentially reduced to 10 billion euros in the impositionfuture. Based on these thresholds, we currently expect to be outside the scope of taxes basedthe Pillar One proposals, though we anticipate that we will be subject to Pillar One in the future if our global revenue exceeds the Pillar One thresholds. In December 2021, the OECD published detailed rules that define the scope of the Pillar Two global minimum effective tax rate proposal. A number of countries, including the United Kingdom, are currently proposing or have enacted legislation to implement core elements of the Pillar Two proposal by the start of 2024, and the European Union has adopted a Council Directive which requires certain Pillar Two rules to be transposed into member states’ national laws from such time. Based on net incomeour current understanding of the minimum revenue thresholds contained in countries wherethe proposed Pillar Two rules, we expect that we may be within their scope and so their implementation could impact the amount of tax we have no physical presence.732021,2022, we had U.S. federal net operating loss carryforwards of approximately $7.5$7.4 billion and state net operating loss carryforwards of approximately $4.4$4.6 billion, as well as U.K. net operating loss carryforwards of approximately $3.2$3.6 billion. We also accumulated U.S. federal and state research tax credits of $476.6$691.5 million and $292.8$430.7 million, respectively, as of December 31, 2021.2022. Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. In the event that we experience one or more ownership changes as a result of future transactions in our stock, then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn.In the United States,loss carryforwardslosses arising in tax years beginning before January 1, 2018 can be carried forward to the earlier of the next subsequent twenty tax years or until such losses are fully utilized; net operating losses arising in tax years beginning after December 31, 2017 are not subject to the twenty-year limitation. In addition, for tax years beginning after December 31, 2020, our use of net operating losses arising in tax years beginning after December 31, 2017, may not exceed 80% of such year's taxable income. U.S. federal research tax credits can be carried forward indefinitely butto the earlier of the next subsequent twenty tax years or until such credits are fully utilized, and use of such carryforwards is limited to 80%thosetaxablenet income limitation and will continue to have a twenty-year carryforward period.tax liability for any given tax year. In the U.K., net operating loss carryforwards can be carried forward indefinitely; however, use of such carryforwards in a given year is generally limited to 50% of such year’s taxable income and may be subject to ownership change rules that restrict the use of net operating loss carryforwards.June 30, 2022,March 31, 2023, Mr. Spiegel and Mr. Murphy control over 99% of the voting power of our capital stock, and Mr. Spiegel alone may exercise voting control over our outstanding capital stock. Mr. Spiegel and Mr. Murphy voting together, or in many instances, Mr. Spiegel acting alone, will have control over all matters submitted to our stockholders for approval. In addition, because our Class A common stock carries no voting rights (except as required by Delaware law), the issuance of the Class A common stock in future offerings, in future stock-based acquisition transactions, or to fund employee equity incentive programs could prolong the duration of Mr. Spiegel’s and Mr. Murphy’s current relative ownership of our voting power and their ability to elect certain directors and to determine the outcome of all matters submitted to a vote of our stockholders. This concentrated control eliminates other stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely affected.74In addition,The S&P Dow Jones, another provider of widely followed stock indexes, has stated thatpreviously excluded companies with multiple share classes, will not be eligible for certain of their indexes.but recently reversed course to remove that exclusion. As a result, our Class A common stock is likely not eligible for stock indexes with these stock indexes.or similar restrictions. We cannot assure you that other stock indexes will not take a similar approach to FTSE Russell or S&P Dow Jones in the future. Exclusion from indexes could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected. Additionally, the exclusion of our Class A common stock from these indexes may limit the types of investors who invest in our Class A common stock and could make the trading price of our Class A common stock more volatile.20212022 that are customarily included in a proxy statement are instead included in our Annual Report, rather than a proxy statement.Report. But some information required in a proxy statement or information statement is not required in any other public filing. For example, we will not be required to comply with the proxy access rules or the “pay versus performance” disclosure rules under Section 14 of the Exchange Act. If we take any action in an extraordinary meeting of stockholders where the holders of Class A common stock are not entitled to vote, we will not be required to provide the information required under Section 14 of the Exchange Act. Nor will we be required to file a preliminary proxy statement under Section 14 of the Exchange Act. Since that information is also not required in a Form 10-K, holders of Class A common stock may not receive the information required under Section 14 of the Exchange Act with respect to extraordinary meetings of stockholders. In addition, we are not subject to the “say-on-pay” and “say-on-frequency” provisions of the Dodd–Frank Act. As a result, our stockholders do not have an opportunity to provide a non-binding vote on the compensation of our executive officers. Moreover, holders of our Class A common stock will be unable to bring matters before our annual meeting of stockholders or nominate directors at such meeting, nor can they submit stockholder proposals under Rule 14a-8 of the Exchange Act.75Shares of Class A common stock were sold in our IPO inFrom April 1, 2021 to March 2017 at a price of $17.00 per share. Since then,31, 2023, the trading price of our Class A common stock has ranged from $4.82$7.33 to $83.34 through June 30, 2022.$83.34. Declines or volatility in our trading price, including during the current economic downturn, could make it more difficult to attract and retain talent, adversely impact employee retention and morale, and has required, and may continue to require, us to issue more equity to incentivize team members which couldis likely to dilute stockholders. The market price of our Class A common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including:●actual or anticipated fluctuations in our user growth, retention, engagement, revenue, or other operating results;●•actual or anticipated fluctuations in our user growth, retention, engagement, revenue, or other operating results;variations between our actual operating results and the expectations of investors and the financial community;●•variations between our actual operating results and the expectations of investors and the financial community;the accuracy of our financial guidance or projections;●•the accuracy of our financial guidance or projections;any forward-looking financial or operating information we may provide, any changes in this information, or our failure to meet expectations based on this information;●•any forward-looking financial or operating information we may provide, any changes in this information, or our failure to meet expectations based on this information;actions of investors who initiate or maintain coverage of us, changes in financial estimates by any investors who follow our company, or our failure to meet these estimates or the expectations of investors;●•actions of investors who initiate or maintain coverage of us, changes in financial estimates by any investors who follow our company, or our failure to meet these estimates or the expectations of investors;whether our capital structure is viewed unfavorably, particularly our non-voting Class A common stock and the significant voting control of our co-founders;●additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if we issue shares to satisfy equity-related tax obligations;●•whether our capital structure is viewed unfavorably, particularly our non-voting Class A common stock and the significant voting control of our co-founders;stock repurchase programs undertaken by us;●•additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if we issue shares to satisfy equity-related tax obligations;announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;●•stock repurchase programs undertaken by us;announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or the level of user engagement;●•announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors;●•announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or the level of user engagement;price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, the COVID-19 pandemic, inflationary pressures, war, such as Russia’s invasion of Ukraine, armed conflict, incidents of terrorism, or responses to these events;●•changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors;lawsuits threatened or filed against us;●•price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, inflationary pressures, banking instability, war, armed conflict, including the conflict in Ukraine, incidents of terrorism, the persisting effects of the COVID-19 pandemic, or responses to these events;developments in new legislation and pending lawsuits, executive actions, or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and●•lawsuits threatened or filed against us;other events or factors, including those resulting from war, incidents of terrorism, pandemics, or responses to these events.us.ours. Often, their stock prices have fluctuated in ways unrelated or disproportionate to the companies’ operating performance. In the past, stockholders have filed securities class-action litigation following periods of market volatility. For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock. The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s ATT framework would have on our business. We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business. Any litigation could subject us to substantial costs, divert resources and the attention of management from our business, and seriously harm our business.ourany stock repurchase program undertaken by us and any failure to repurchase our Class A common stock after we have announced our intention to do so may negatively impact our stock price.In July 2022, our BoardDirectors authorized adirectors has in the past and may from time to time in the future authorize stock repurchase program of upprograms, pursuant to $500 million of our Class A common stock. Repurchaseswhich repurchases of Class A common stock may be made from time to time, either through open market transactions (including pre-set trading plans) or through other transactions in accordance with applicable securities laws.76Repurchases have been authorized for the next 12 months but the program Any repurchase programs may be modified, suspended, or terminated at any time. Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price.our stock repurchase program isprograms are intended to enhance long-term stockholder value, there is no assurance itthey will do so because the market price of our Class A common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of thisany such program.will reducereduces the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of theany stock repurchase program.2027,2027, respectively, holders of the applicable Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their77●our certificate of incorporation provides for a tri-class capital structure. As a result of this structure, Mr. Spiegel and Mr. Murphy control all stockholder decisions, and Mr. Spiegel alone may exercise voting control over our outstanding capital stock. This includes the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. This concentrated control could discourage others from initiating any potential merger, takeover, or other change-of-control transaction that other stockholders may view as beneficial. As noted above, the issuance of the Class A common stock dividend, and any future issuances of Class A common stock dividends, could have the effect of prolonging the influence of Mr. Spiegel and Mr. Murphy on the company;●•our certificate of incorporation provides for a tri-class capital structure. As a result of this structure, Mr. Spiegel and Mr. Murphy control all stockholder decisions, and Mr. Spiegel alone may exercise voting control over our outstanding capital stock. This includes the election of directors and significant corporate transactions, such as a merger or other sale of our company or our assets. This concentrated control could discourage others from initiating any potential merger, takeover, or other change-of-control transaction that other stockholders may view as beneficial. As noted above, the issuance of the Class A common stock dividend, and any future issuances of Class A common stock dividends, could have the effect of prolonging the influence of Mr. Spiegel and Mr. Murphy on the company;our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;●•our board of directors has the right to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect directors; and●•our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect directors; andour board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.78June 30, 2022,March 31, 2023, we had outstanding a total of 1.41.3 billion shares of Class A common stock, 22.622.5 million shares of Class B common stock, and 231.6 million shares of Class C common stock. In addition, as of June 30, 2022, 91.5March 31, 2023, 127.6 million shares of Class A common stock and 0.6 million shares of Class B common stock were subject to outstanding stock options and RSUs. As a result of our capital structure, holders who are not required to file reports under Section 16 of the Exchange Act are not obligated to disclose changes in ownership of our Class A common371.0365.4 million shares (including options exercisable and RSAs subject to forfeiture as of June 30, 2022)March 31, 2023) held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act. Our employees, other service providers, and directors are subject to our quarterly trading window closures. In addition, we have reserved shares for issuance under our equity incentive plans. We may also issue shares of our Class A common stock or securities convertible into our Class A common stock from time to time in connection with a financing, acquisition, investment, or otherwise. When these shares are issued and subsequently sold, it would be dilutive to existing stockholders and the trading price of our Class A common stock could decline.79By complying Failure to comply with public disclosure requirements, our business and financial condition arethese rules might also make it more visible, which we believe may result in increased threatened or actual litigation, including by competitors and other third parties. For example, in November 2021, we, and certainsubstantialobtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs and divert resources andto obtain the attention of management from our business and, if the claims are successful, our business could be seriously harmed. Even if the claims do not result in litigationsame or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources, impose large defense costs, and seriously harm our business. of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.●any derivative action or proceeding brought on our behalf;●•any derivative action or proceeding brought on our behalf;any action asserting a breach of fiduciary duty;●•any action asserting a breach of fiduciary duty;any action asserting a claim against us arising under the Delaware General Corporation Law, our certificate of incorporation, or our bylaws; and●•any action asserting a claim against us arising under the Delaware General Corporation Law, our certificate of incorporation, or our bylaws; andany action asserting a claim against us that is governed by the internal-affairs doctrine.of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.80During the three months ended June 30, 2022, we agreed to issue a total of 159,122 shares of our Class A common stock as consideration in connection with acquisitions, all in private transactions exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2), Regulation D or Regulation S under the Securities Act.None.
Changes to Executive Officers Cash CompensationIncorporated by Reference Exhibit
NumberDescription Schedule /
FormFile
NumberExhibit Filing Date 3.1 S-1 333-215866 3.2 February 2, 2017 3.2 8-K 001-38017 3.1 July 21, 2022 3.3 3.3 8-K/A 001-38017 3.1 August 8, 2022 3.4 3.4 8-K 001-38017 3.1 August 26, 2022 10.1 10.2 31.1 31.2 32.1* 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.SNAP INC.SNAP INC. Date: July 21, 2022April 27, 2023July 21, 2022