| Basis of Presentation and Significant Accounting Policies | 2. Basis of Presentation and Significant Accounting Policies Basis of Presentation Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Our consolidated financial statements include the accounts of Reddit, Inc. and our wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Initial Public Offering On March 20, 2024, our initial public offering (“IPO”) was declared effective and our Class A common stock began trading on the New York Stock Exchange on March 21, 2024. On March 25, 2024, we completed our IPO in which we issued and sold 18,576,527 shares of Class A common stock, including 3,300,000 shares of Class A common stock pursuant to the underwriters’ exercise in full of their over-allotment option, and excluding 6,723,473 shares of Class A common stock sold in the IPO by certain of our existing stockholders, at a public offering price of $34.00 per share. We received net proceeds of $600.0 million after deducting underwriting discounts and commissions of $31.6 million. In connection with the closing of the IPO, all shares of our then-outstanding convertible preferred stock other than Series F-1 preferred stock automatically converted into an aggregate of 67,917,432 shares of Class B common stock and all then-outstanding shares of Series F-1 preferred stock automatically converted into 5,104,017 shares of Class A common stock. Following the IPO, we have three classes of authorized common stock — Class A common stock, Class B common stock, and Class C common stock. Certain of our restricted stock units granted to employees included both service-based and performance-based vesting conditions (“Double Trigger RSUs”). The performance condition related to these awards was satisfied upon the effectiveness of the IPO. Upon the effectiveness of the IPO, we recognized $534.7 million of stock-based compensation expense. To meet the related tax withholding requirements, we withheld 4,861,113 shares of the 10,502,390 shares of Class A common stock issued and 723,341 shares of the 1,347,456 shares of Class B common stock issued. Based on the IPO public offering price of $34.00 per share, the tax withholding obligation was $189.9 million. In connection with our IPO, we amended and restated our certificate of incorporation (“Restated Certificate”) which authorized 2,340,000,000 shares of capital stock, consisting of 2,000,000,000 shares of Class A common stock, 140,000,000 shares of Class B common stock, 100,000,000 shares of Class C common stock, and 100,000,000 shares of undesignated preferred stock. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Management’s estimates are based on historical information available as of the date of the consolidated financial statements and various other assumptions that we believe are reasonable under the circumstances. Actual results could differ materially from those estimates. Significant estimates relate primarily to determining the fair value of stock-based awards, the fair value of assets and liabilities assumed in business combinations, and the incremental borrowing rate used to determine operating lease right-of-use assets and lease liabilities. On an ongoing basis, management evaluates our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. Revenue Recognition We generate a majority of our revenue through the sale of advertising on our mobile applications and website. Other revenue consists of revenue from content licensing, Reddit Premium subscriptions, and products within our user economy. We determine revenue recognition by identifying the contract or contracts with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when, or as, we satisfy a performance obligation. For customer contracts that include multiple performance obligations, we identify each distinct performance obligation and determine the transaction price, which may include an estimation of variable consideration, subject to constraint. The transaction price is allocated to each performance obligation using the stand-alone selling price, which is generally based on the observable price of each good or service. Payments for revenue arrangements are due based on the contractually stated payment terms, usually within 30 to 60 days. Sales and other similar taxes are excluded from revenue. Advertising Revenue We recognize advertising revenue only after transferring control of promised goods or services to customers, which occurs when a user clicks on an ad contracted on a cost per click (“CPC”) basis, views an ad contracted on a cost per thousand impressions (“CPM”) basis, views a video ad contracted on a cost per view (“CPV”) basis, or on a fixed fee basis, based upon ad delivery over the service period, which is typically less than 30 days in duration. Generally, we recognize advertising revenue on a gross basis since we control the advertising units before being transferred to our users. In arrangements where another party is involved in providing specified services to a customer, we evaluate whether we are the principal or agent. In this evaluation, we consider if we obtain control of the specified goods or services before they are transferred to the customer. For advertising revenue arrangements where we are not the principal, we recognize revenue on a net basis. For the periods presented, revenue for arrangements where we are the agent was not material. The transaction price in advertising arrangements is generally calculated as the number of advertising units delivered multiplied by the contractually agreed upon CPC, CPM, or CPV, or on a fixed fee basis and revenue is recognized based on the number of clicks, impressions, or views, or ratable over the service period, respectively. Other Revenue In our content licensing arrangements, we provide customers with the right to access content from our platform over the contractual period. The transaction price in content licensing arrangements is generally a fixed fee or usage-based fee. We recognize content licensing revenue as our content partners consume and benefit from their use of the licensed content, which is generally ratably over the license period. We recognize Reddit Premium subscription revenue ratably over the subscription period, which is generally less than one year. Products within our user economy include Reddit Gold and Collectible Avatars. Revenue from Reddit Gold and Collectible Avatars was not material for the years ended December 31, 2024, 2023, and 2022. Cost of Revenue Cost of revenue consists primarily of payments to third parties for the cost of hosting and supporting our mobile applications and website. In addition, cost of revenue includes expenses directly associated with the delivery of our advertising and other services, including advertising measurement services and credit card and other transaction processing fees. Cost of revenue also consists of employee-related costs, including salaries, benefits, and stock-based compensation. Research and Development Expenses Research and development expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for engineers and other employees engaged in the research, design, and development of new and existing products. Research and development expenses also include professional services and hosting costs associated with internal research and development activities, as well as allocated facilities and other supporting overhead costs. Sales and Marketing Expenses Sales and marketing expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for employees engaged in sales, sales support, business and brand development, marketing, and customer service functions. Sales commissions are expensed as incurred in sales and marketing expenses as the expected period of benefit is one year or less. Sales and marketing expenses also include costs incurred for advertising, market research, branding, professional services, marketing, and promotional expenditures, as well as allocated facilities and other supporting overhead costs. General and Administrative Expenses General and administrative expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for certain executives as well as employees engaged in finance, legal, human resources, information technology, communications, and other administrative teams. General and administrative expenses also include costs incurred for professional services, as well as allocated facilities and other supporting overhead costs. Advertising Costs Advertising costs are expensed as incurred and were $9.2 million, $8.2 million, and $34.4 million for the years ended December 31, 2024, 2023, and 2022 respectively. Stock-Based Compensation We measure and recognize compensation expense for stock-based awards, including restricted stock units (“RSUs”), restricted stock awards (“RSAs”), and stock options granted to employees and non-employees based on the grant date fair value of the awards granted. Prior to the IPO, for secondary sale transactions with existing investors, we recognized stock-based compensation expense representing the excess of the purchase price over the fair value of our common stock on the date of the transaction. Income Taxes We account for income taxes using an asset and liability approach. Under this method, the tax provision includes taxes currently due plus the net change in deferred tax assets and liabilities. Deferred tax assets and liabilities arise from temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements, as well as from net operating loss and tax credit carryforwards. Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will be paid or refund received, as provided for under currently enacted tax law. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. Should there be a change in the ability to recover deferred tax assets, the income tax provision would increase or decrease in the period in which the assessment is changed. We recognize the effect of income tax positions only if those positions are more likely than not to be sustained. Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Any interest and penalties related to unrecognized tax benefits are recognized as income tax expense in the consolidated statements of operations. Functional Currency Generally, the U.S. dollar is the functional currency for our subsidiaries, and therefore, foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at exchange rates at the balance sheet date and foreign currency denominated non-monetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in other income (expense), net in the consolidated statements of operations. Net foreign exchange gains and losses were not material for the years ended December 31, 2024, 2023, and 2022. On January 1, 2024, we changed the functional currency of our U.K. subsidiary, Reddit UK Limited, from the U.S. dollar to the British pound. The change in functional currency is due primarily to the increased exposure to the British pound as our future operating cash flows for our U.K. subsidiary are expected to be in British pounds. We translate the financial statements of the U.K. subsidiary to U.S. dollars at exchange rates at the balance sheet date for assets and liabilities and at monthly average exchange rates for revenues and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a component of stockholders' equity (deficit). The change in the functional currency of Reddit UK Limited was accounted for prospectively from January 1, 2024 and did not have a material impact on our consolidated financial statements. Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents consist of highly liquid investments with original maturities of 90 days or less from the date of purchase. We define restricted cash as cash that cannot be withdrawn or used for general operating activities. Restricted cash is classified as current or noncurrent assets based on the contractual or estimated term of the remaining restriction. As of December 31, 2024 and 2023, restricted cash included in other noncurrent assets in the consolidated balance sheets was not material. Marketable Securities We hold investments in marketable securities consisting of U.S. and non-U.S. government securities, investment-grade corporate and government agency securities, certificates of deposit, and commercial paper. We classify our marketable securities as available-for-sale investments in current assets because they represent investments available for current operations. Our available-for-sale investments are carried at fair value with any unrealized gains and losses included in accumulated other comprehensive income (loss) in stockholders’ equity (deficit). Expected losses from credit related impairment, if any, are recognized through an allowance for credit losses and adjusted each period for changes in credit risk. Gains or losses on the sale or maturities of marketable securities are determined using the specific identification method and recorded in other income (expense), net in our consolidated statements of operations. Fair Value Measurements Certain financial instruments are required to be recorded at fair value. Other financial instruments, including cash, cash equivalents, and restricted cash, are recorded at cost, which approximates fair value. Additionally, the carrying amounts of accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities approximate fair value due to their short-term nature. Accounts Receivable, Net Accounts receivable are recorded at the invoiced amount, net of any allowance for doubtful accounts due to expected credit losses and potentially uncollectible receivables. We apply a “single loss” rate approach to the overall accounts receivable portfolio and also evaluate the aging, historical write-offs, and collectability of accounts receivable on a customer-by-customer basis. The allowance for doubtful accounts was immaterial as of December 31, 2024 and 2023. Contract Assets When revenue recognition exceeds the amounts billable on a contract, the difference is recorded as a contract asset. The current portion of contract assets included within accounts receivable, net, and the noncurrent portion of contract assets included within other noncurrent assets on the consolidated balance sheets were not material as of December 31, 2024 and 2023. Property and Equipment, Net Property and equipment are stated at cost, less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is generally three Software Development Costs Software development costs include costs to develop software to be used to meet internal needs and applications used to deliver our services. We capitalize development costs related to these software applications once the preliminary project stage is complete, it is probable that the project will be completed, and the software will be used to perform the function intended. Due to the iterative process of our development projects, development costs meeting our capitalization criteria were not material for the periods presented. Leases Leases arise from contractual obligations that convey the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. We determine if a contract is, or contains, a lease at contract inception. All of our leases are operating leases and are included in operating lease right-of-use assets, net, operating lease liabilities, and operating lease liabilities, non-current on the consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term discounted using our incremental borrowing rate. Operating lease right-of-use assets also include any lease payments made and exclude lease incentives. As our leases do not provide an implicit rate, the incremental borrowing rate used is estimated based on what we would have to pay on a collateralized basis over a similar term as the lease. Lease payments include fixed payments and any variable payments based on an index or rate, and are recognized as lease expense on a straight-line basis over the term of the lease. Deferred Offering Costs Prior to our IPO, deferred offering costs, which consisted of direct incremental legal, accounting, consulting, and other fees related to the IPO, were capitalized in other noncurrent assets on the consolidated balance sheets. After the IPO, the deferred offering costs were reclassified into additional paid-in capital as an offset against IPO proceeds. Deferred offering costs included in other noncurrent assets were $16.5 million as of December 31, 2023. Business Combinations We include the results of operations of the businesses that we acquire from the date of acquisition. We determine the fair value of the assets acquired and liabilities assumed based on their estimated fair values as of the respective date of acquisition. The excess purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, and selection of comparable companies. Our estimates of fair value are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. When we issue cash payments or grants of equity to selling stockholders in connection with an acquisition, we evaluate whether the payments or awards are compensatory. This evaluation includes whether cash payments or stock award vesting is contingent on the continued employment of the selling stockholder beyond the acquisition date. If continued employment is required for the cash to be paid or stock awards to vest, the award is treated as compensation for post-acquisition services and is recognized as compensation expense. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in our consolidated statements of operations. Goodwill Goodwill represents the excess of the aggregate purchase consideration over the fair value of net assets acquired in a business combination. We perform our annual impairment test on October 1. We also test for impairment whenever events or circumstances indicate that the fair value of goodwill has been impaired. Our impairment tests are based on a single operating segment and reporting unit structure. No impairment charges were recorded during the years ended December 31, 2024, 2023, and 2022. Acquired Intangible Assets Identifiable acquired intangible assets consist primarily of acquisition-related developed technology. We determine the appropriate useful life of our intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized on a straight-line basis over the estimated useful life of up to five years. Cryptocurrency We account for cryptocurrency investments, and cryptocurrency received in exchange for goods and services, as intangible assets with indefinite useful lives, which are measured at cost, net of any impairment losses incurred since acquisition, on the consolidated balance sheets. Cryptocurrency accounted for as intangible assets are not amortized, but assessed for impairment quarterly, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. The computation of gains or losses on the sale of cryptocurrency, or use of cryptocurrency to settle any obligations, is based on the difference between the market price quoted on our principal market for cryptocurrencies at the time of sale or settlement and the cost basis of the cryptocurrency, which is determined on a first-in, first-out basis. During the year ended December 31, 2024, we sold the majority of our cryptocurrency portfolio, which consisted primarily of Bitcoin and Ether. The net carrying value of our cryptocurrencies and all related cryptocurrency activity, including the gain recognized on sale, was immaterial for the periods presented. Impairment of Long-Lived Assets We evaluate recoverability of our property and equipment and definite-lived intangible assets when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Events and changes in circumstances considered in determining whether the carrying value of long-lived assets may not be recoverable include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in our business strategy. Recoverability of these assets is measured by comparison of their carrying amount to future undiscounted cash flows to be generated. If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the assets. We determined that there were no events or changes in circumstances that indicated our long-lived assets were impaired during the periods presented. Concentration of Business Risk We primarily use Amazon Web Services and Google Cloud Platform for our hosting requirements. A disruption or loss of service from Amazon Web Services or Google Cloud Platform could harm our ability to operate. Although we believe there are other qualified providers that can provide these services, a transition to a new provider could create a disruption to our business and negatively impact our operating results. Concentration of Credit Risk Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, marketable securities, and accounts receivable. We maintain cash and cash equivalents with several financial institutions. We believe that the financial institutions that hold our cash and cash equivalents are financially sound and, accordingly, minimal credit risks exist with respect to these balances. We maintain investments in U.S. and non-U.S. government securities, investment-grade corporate and government agency securities, certificates of deposit, commercial paper, and money market accounts that carry high credit ratings and accordingly, minimal credit risk exists with respect to these balances. No customer accounted for greater than 10% of our revenues for the years ended December 31, 2024, 2023, and 2022. No customer accounted for greater than 10% of our accounts receivable as of December 31, 2024 and 2023. Segments We have determined that we have a single operating segment. Our Chief Executive Officer is our chief operating decision maker who evaluates performance and makes operating decisions about allocating resources based on consolidated financial data. Emerging Growth Company Status As of December 31, 2024, we lost our status as an emerging growth company as defined in the JOBS Act. As a result, we are no longer entitled to take advantage of specified reduced reporting requirements and relief from certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, we previously elected to leverage the provision of the JOBS Act that allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies through December 31, 2022. As a result, our financial statements for the year ended December 31, 2022 may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Beginning January 1, 2023, we elected to irrevocably opt out of the extended transition period provided in the JOBS Act and began to comply with new or revised accounting standards at the time when adoption of such standards was required for public companies that are non-emerging growth companies. Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis. All disclosure requirements of this standard are required for entities with a single reportable segment. We adopted this standard effective January 1, 2024. Adoption of this standard resulted in additional segment-related disclosures made in Note 18—Segment and Geographic Information , but did not impact our consolidated financial statements. Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an entity to disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. This standard also requires certain disaggregated disclosures related to income from continuing operations, income tax expense, and income taxes paid. The standard is effective for us beginning January 1, 2025, with early adoption permitted. We are currently evaluating the impact the adoption will have on our disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires an entity to disclose disaggregated information about certain income statement expense line items. The standard is effective for us beginning January 1, 2027, with early adoption permitted. We are currently evaluating the impact the adoption will have on our disclosures. |
