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 Snap Inc. Reports First Quarter 2017 Results
   Wednesday, May 10, 2017 4:01:00 PM ET

Snap Inc. (SNAP ) today announced financial results for the quarter ended March 31, 2017.

First Quarter 2017 Financial Highlights:

                                                                                                    Three Months Ended March 31,                                                                Percent
                                                                       -----------------------------------------------------------------------------------------------------------------------------
                                                                            2017            2016                                       Change
                                                                       -------------------- ---------- --------------------                      -------------------- -------- --------------------                      --------------------------------
                                                                                                                                                     (dollars in thousands)
(Unaudited)                                                                                                                                           (NM = Not Meaningful)
Revenue                                                                                   $    149,648                                                              $   38,798                                                  286 %
Net loss(1)                                                                               $ (2,208,837 )                                                            $ (104,576 )                                                 NM  
Adjusted EBITDA(2)                                                                        $   (188,243 )                                                            $  (93,234 )                                                102 %
                                                                                                                                                                                                                          
Other Financial Highlights
Cash, cash equivalents, and marketable securities                                         $  3,242,556                                                              $  987,368
Cash used in operating activities                                                         $   (154,997 )                                                            $  (92,541 )
Free Cash Flow(3)                                                                         $   (172,990 )                                                            $ (104,993 )
Capital expenditures                                                                      $    (17,993 )                                                            $  (12,452 )
 
(1)                                                      Net loss for Q1 2017 includes $2.0 billion of stock-based
                                                                            compensation expense, primarily due to the recognition of expense
                                                                            related to RSUs with a performance condition satisfied on the
                                                                            effectiveness of the registration statement for our initial public
                                                                            offering.
(2)                                                                         Adjusted EBITDA is defined as net income (loss), excluding
                                                                            interest income; interest expense; other income (expense) net;
                                                                            income tax benefit (expense); depreciation and amortization; and
                                                                            stock-based compensation expense and related payroll tax expense.
(3)                                                                         Free Cash Flow is defined as net cash used in operating
                                                                            activities, reduced by purchases of property and equipment.
 
Note: For adjustments and additional information regarding the
non-GAAP financial measures discussed, please see "Non-GAAP
Financial Measures" and "Reconciliation of GAAP to Non-GAAP
Financial Measures" below.

Operational Highlights

-- Daily active users (DAU)(1) - DAUs grew from 122 million in Q1 2016 to 166 million in Q1 2017, an increase of 36% year-over-year. DAUs increased 5% quarter-over-quarter, from 158 million in Q4 2016.

-- Average revenue per user (ARPU)(2) - ARPU was $0.90 in Q1 2017, an increase of 181% over Q1 2016 when ARPU was $0.32. ARPU decreased 14% over Q4 2016 when ARPU was $1.05.

-- Hosting costs per DAU - Hosting costs per DAU were $0.60 in Q1 2017, as compared to $0.52 in Q1 2016 and $0.72 in Q4 2016.

-- Capital expenditures - Capital expenditures were $18.0 million in Q1 2017, as compared to $12.5 million in Q1 2016 and $20.4 million in Q4 2016.

(1)   We define a Daily Active User, or DAU, as a registered Snapchat
                         user who opens the Snapchat application at least once during a
                         defined 24-hour period. We measure average Daily Active Users for
                         a particular quarter by calculating the average Daily Active Users
                         for that quarter.
(2)                      We define ARPU as quarterly revenue divided by the average
                         Daily Active Users.

CONFERENCE CALL INFORMATION

Snap Inc. will host a conference call to discuss the results at 1:30 p.m. Pacific / 4:30 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call.

Snap Inc. uses the investor.snap.com and snap.com/news websites as means of disclosing material non-public information and for complying with its disclosure obligation under Regulation FD.

Forward-Looking Statements

This press release contains "forward-looking" statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include statements about expected financial metrics, such as revenue, non-GAAP Adjusted EBITDA, capital expenditures, and stock-based compensation, as well as non-financial metrics, such as DAU and video views. They also include statements about our possible or assumed business strategies, potential growth opportunities, new products, and potential market opportunities.

Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "believes," "continue," "could," "potential," "remain," "will," "would" or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: our limited operating history, our lack of significant revenue to date, our ability to monetize our products, the highly competitive and rapidly changing market for internet and advertising companies, infrastructure costs, our ability to create new and innovative products, our ability to manage any future user growth, and our international expansion strategies. Additional risks and uncertainties that could affect our financial results are included in the section titled "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the final prospectus for our initial public offering, dated March 1, 2017, which is available on the SEC’s website at www.sec.gov. Additional information will be made available in Snap Inc.’s quarterly report on Form 10-Q and other filings that we make from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; and stock-based compensation expense and related payroll tax expense. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.

We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash used in operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

We believe that both Adjusted EBITDA and Free Cash Flow provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting the non-GAAP measures of Adjusted EBITDA and Free Cash Flow to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

Snap Inc., "Snapchat," and our other registered and common law trade names, trademarks, and service marks are the property of Snap Inc. or our subsidiaries.

                                                                                                        SNAP INC.
                                                                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                   (In thousands, except per share amounts, unaudited)
 
                                                                                                                      Three Months Ended March 31,
                                                                                      -----------------------------------------------------------------------------------------------------------------------------------
                                                                                           2017               2016       
                                                                                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Revenue                                                                                                  $    149,648                                                              $         38,798
Costs and expenses:
   Cost of revenue                                                                                            163,358                                                                        75,773
   Research and development                                                                                   805,848                                                                        28,098
   Sales and marketing                                                                                        219,733                                                                        14,737
   General and administrative                                                            1,174,476                                  24,011  
                                                                                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
      Total costs and expenses                                                           2,363,415                                 142,619  
                                                                                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Loss from operations                                                                                       (2,213,767 )                                                                    (103,821 )
Interest income                                                                                                 2,424                                                                           359
Interest expense                                                                                                 (695 )                                                              --
Other income (expense), net                                                                    187                                    (993 )
                                                                                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Loss before income taxes                                                                                   (2,211,851 )                                                                    (104,455 )
Income tax benefit (expense)                                                                 3,014                                    (121 )
                                                                                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Net loss                                                                                                 $ (2,208,837 )                                                            $       (104,576 )
                                                                                      ==================== ========== ====================                      ==================== ============== ====================
Net loss per share attributable to Class A, Class B, and Class C
common stockholders:
   Basic                                                                                                 $      (2.31 )                                                            $          (0.14 )
                                                                                      ==================== ========== ====================                      ==================== ============== ====================
   Diluted                                                                                               $      (2.31 )                                                            $          (0.14 )
                                                                                      ==================== ========== ====================                      ==================== ============== ====================
 
                                                                                                                SNAP INC.
                                                                                                       CONSOLIDATED BALANCE SHEETS
                                                                                                (In thousands, except per share amounts)
 
                                                                                                      March 31,                                                December 31,
                                                                                                        2017                                    2016       
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
                                                                                                                        (Unaudited)
Assets
Current assets
   Cash and cash equivalents                                                                                        $      1,427,114                                                              $        150,121
   Marketable securities                                                                                                   1,815,442                                                                       837,247
   Accounts receivable, net of allowance                                                                                     147,677                                                                       162,659
   Prepaid expenses and other current assets                                                               72,973                                  29,958  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total current assets                                                                                                 3,463,206                                                                     1,179,985
Property and equipment, net                                                                                                  116,132                                                                       100,585
Intangible assets, net                                                                                                        79,781                                                                        75,982
Goodwill                                                                                                                     332,205                                                                       319,137
Other assets                                                                                               50,453                                  47,103  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total assets                                                                                                  $      4,041,777                                           $      1,722,792  
                                                                                                 ==================== ============== ====================                      ==================== ============== ====================
Liabilities and Stockholders’ Equity
Current liabilities
   Accounts payable                                                                                                 $         13,849                                                              $          8,419
   Accrued expenses and other current liabilities                                                         228,436                                 148,325  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total current liabilities                                                                                              242,285                                                                       156,744
Other liabilities                                                                                          63,974                                  47,134  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total liabilities                                                                                   306,259                                 203,878  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Commitments and contingencies
Stockholders’ equity
   Convertible voting preferred stock, Series A, A-1, and B, $0.00001                                                 --                                                                             1
   par value. No shares and 146,962 shares authorized, issued, and
   outstanding at March 31, 2017 and December 31, 2016, respectively.
   Liquidation preference of $95,175 at December 31, 2016.
   Convertible non-voting preferred stock, Series C, $0.00001 par                                                     --                                                                --
   value. No shares and 16,000 shares authorized, issued, and
   outstanding at March 31, 2017 and December 31, 2016, respectively.
   Liquidation preference of $54,543 at December 31, 2016.
   Convertible non-voting preferred stock, Series D, E, and F, $0.00001                                               --                                                                             2
   par value. No shares and 83,851 shares authorized, issued, and
   outstanding at March 31, 2017 and December 31, 2016, respectively.
   Series FP convertible voting preferred stock, $0.00001 par value. No                                               --                                                                             2
   shares and 260,888 shares authorized at March 31, 2017 and December
   31, 2016, respectively. No shares and 215,888 shares issued and
   outstanding at March 31, 2017 and December 31, 2016, respectively.
   Class A non-voting common stock, $0.00001 par value. 3,000,000                                                                  7                                                                             5
   shares authorized, 681,994 shares issued and outstanding at March
   31, 2017, and 1,500,000 shares authorized, 504,902 shares issued and
   outstanding at December 31, 2016.
   Class B voting common stock, $0.00001 par value. 700,000 shares                                                                 3                                                                --
   authorized, 280,968 shares issued and outstanding at March 31, 2017,
   and 1,500,000 shares authorized, 31,469 shares issued and
   outstanding at December 31, 2016.
   Class C voting common stock, $0.00001 par value. 260,888 shares                                                                 2                                                                --
   authorized, 215,888 shares issued and outstanding at March 31, 2017,
   and 260,888 shares authorized and no shares issued and outstanding
   at December 31, 2016.
   Additional paid-in capital                                                                                              7,157,585                                                                     2,728,823
   Accumulated other comprehensive income (loss)                                                                              (1,635 )                                                                      (2,057 )
   Accumulated deficit                                                                                 (3,420,444 )                                               (1,207,862 )
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total stockholders’ equity                                             3,735,518                               1,518,914  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total liabilities and stockholders’ equity                                         $      4,041,777                                           $      1,722,792  
                                                                                                 ==================== ============== ====================                      ==================== ============== ====================
 
                                                                                                              SNAP INC.
                                                                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                      (In thousands, unaudited)
 
                                                                                                                               Three Months Ended March 31,
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    2017                 2016       
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash flows from operating activities
Net loss                                                                                                        $     (2,208,837 )                                                            $       (104,576 )
   Adjustments to reconcile net loss to net cash used in operating
   activities:
      Depreciation and amortization                                                                                       12,450                                                                         5,049
      Stock-based compensation                                                                                         1,992,121                                                                         5,538
      Deferred income taxes                                                                                               (1,488 )                                                              --
      Other                                                                                                                1,892                                                                           961
      Change in operating assets and liabilities, net of effect of
      acquisitions:
         Accounts receivable, net of allowance                                                                            13,444                                                                        (7,161 )
         Prepaid expenses and other current assets                                                                       (43,436 )                                                                      (5,848 )
         Other assets                                                                                                      2,715                                                                        (1,572 )
         Accounts payable                                                                                                  5,619                                                                            47
         Accrued expenses and other current liabilities                                                                   69,204                                                                        13,997
         Other liabilities                                                                              1,319                                   1,024  
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
            Net cash used in operating activities                                                    (154,997 )                                                  (92,541 )
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash flows from investing activities
      Purchases of property and equipment                                                                                (17,993 )                                                                     (12,452 )
      Purchases of intangible assets                                                                              --                                                                          (562 )
      Non-marketable investments                                                                                            (625 )                                                                      (2,173 )
      Cash paid for acquisitions, net of cash acquired                                                                   (18,013 )                                                                     (50,936 )
      Issuance of notes receivable from officers/stockholders                                                     --                                                                       (15,000 )
      Purchases of marketable securities                                                                              (1,423,214 )                                                                    (140,045 )
      Maturities of marketable securities                                                                                445,047                                                                --
      Change in restricted cash                                                                --                                  (4,300 )
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
            Net cash used in investing activities                                                  (1,014,798 )                                                 (225,468 )
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash flows from financing activities
      Proceeds from the exercise of stock options                                                                            594                                                                --
      Stock repurchases from employees for minimum tax withholdings                                                     (206,579 )                                                              --
      Proceeds from issuance of Class A common stock in initial public                                                 2,657,797                                                                --
      offering, net of underwriting commissions
      Proceeds from issuances of preferred stock, net of issuance costs                                           --                                                                       192,186
      Payments of initial public offering issuance costs                                               (5,024 )                                           --  
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
            Net cash provided by financing activities                                               2,446,788                                 192,186  
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
            Change in cash and cash equivalents                                                                        1,276,993                                                                      (125,823 )
Cash and cash equivalents, beginning of period                                                        150,121                                 640,810  
                                                                                             -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash and cash equivalents, end of period                                                                        $      1,427,114                                           $        514,987  
                                                                                             ==================== ============== ====================                      ==================== ============== ====================
Supplemental disclosures
   Cash paid for income taxes                                                                                   $          3,545                                                              $              4
Supplemental disclosures of non-cash activities
   Issuance of Class B common stock related to acquisitions                                                     $ --                                                              $         13,097
   Purchase consideration liabilities related to acquisitions                                                   $          1,901                                                              $          6,028
   Construction in progress related to financing lease obligations                                              $            257                                                              $            404
   Net change in accounts payable and accrued expenses and other                                                $         (4,355 )                                                            $          1,921
   current liabilities related to property and equipment additions
 
                                                                                                         SNAP INC.
                                                                                   RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                                                                                 (In thousands, unaudited)
 
                                                                                                                        Three Months Ended March 31,
                                                                                        -----------------------------------------------------------------------------------------------------------------------------------
                                                                                             2017               2016       
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Adjusted EBITDA reconciliation:
Net loss                                                                                                   $ (2,208,837 )                                                            $       (104,576 )
Add (deduct):
   Interest income                                                                                               (2,424 )                                                                        (359 )
   Interest expense                                                                                                 695                                                                --
   Other (income) expense, net                                                                                     (187 )                                                                         993
   Income tax (benefit) expense                                                                                  (3,014 )                                                                         121
   Depreciation and amortization(1)                                                                              12,450                                                                         5,049
   Stock-based compensation expense(2)                                                                        1,992,121                                                                         5,538
   Payroll tax expense related to stock-based compensation                                    20,953                          --  
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Adjusted EBITDA                                                                                            $   (188,243 )                                                            $        (93,234 )
                                                                                        ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                   
                                                                                                                                                                   
(1) Total depreciation and amortization expense by function:
                                                                                                                                           Three Months Ended March 31,
                                                                                        -----------------------------------------------------------------------------------------------------------------------------------
                                                                                             2017                                  2016       
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Depreciation and amortization expense:
   Cost of revenue                                                                                         $      1,669                                                              $             71
   Research and development                                                                                       5,755                                                                         3,611
   Sales and marketing                                                                                            2,600                                                                           150
   General and administrative                                                                  2,426                                   1,217  
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
      Total                                                                                                $     12,450                                           $          5,049  
                                                                                        ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                   
(2) Total stock-based compensation and related payroll tax expense
by function:
                                                                                                                                           Three Months Ended March 31,
                                                                                        -----------------------------------------------------------------------------------------------------------------------------------
                                                                                             2017                                  2016       
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Stock-based compensation and related payroll tax expense:
   Cost of revenue                                                                                         $     20,026                                                              $            154
   Research and development                                                                                     722,129                                                                         2,648
   Sales and marketing                                                                                          160,942                                                                           775
   General and administrative                                                              1,109,977                                   1,961  
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
      Total                                                                                                $  2,013,074                                           $          5,538  
                                                                                        ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                   
                                                                                                                                                                   
                                                                                                                                           Three Months Ended March 31,
                                                                                        -----------------------------------------------------------------------------------------------------------------------------------
                                                                                             2017                                  2016       
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Free Cash Flow reconciliation:
Net cash used in operating activities                                                                      $   (154,997 )                                                            $        (92,541 )
Less:
   Purchases of property and equipment                                                       (17,993 )                                                  (12,452 )
                                                                                        -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Free Cash Flow                                                                                             $   (172,990 )                                                            $       (104,993 )
                                                                                        ==================== ========== ====================                      ==================== ============== ====================

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170510006400r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170510006400/en/

SOURCE: Snap Inc.

Snap Inc. 
Investors and Analysts: 
ir@snap.com 
or 
Press: 
press@snap.com


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