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 Snap Inc. Reports Third Quarter 2017 Results
   Tuesday, November 07, 2017 4:15:05 PM ET

Snap Inc. (SNAP ) today announced financial results for the quarter ended September 30, 2017.

Third Quarter 2017 Financial Highlights:

                                                                                                                                                                          
                                                                                        Three Months Ended                                                                                     Nine Months Ended
                                                                                           September 30,                                         Percent                                         September 30,                                                Percent
                                                                       ----------------------------------------------------                                                  -----------------------------------------------------
                                                                             2017             2016                            Change                            2017              2016                                  Change
                                                                       ----------------                     ---------------                     --------                     -----------------                     ---------------                     ---------------------
                                                                                                    (dollars in thousands)                                                                                       (dollars in thousands)
(Unaudited)                                                                                          (NM = Not Meaningful)                                                                                        (NM = Not Meaningful)
                                                                                                                                                                              
Revenue                                                                 $   207,937                          $  128,204                          62 %                         $    539,256                          $  238,800                                126 %
Net loss(1)                                                             $  (443,159 )                        $ (124,228 )                        NM                           $ (3,095,089 )                        $ (344,698 )                               NM
Adjusted EBITDA(2)                                                      $  (178,901 )                        $ (108,604 )                        65 %                         $   (561,134 )                        $ (306,959 )                               83 %
                                                                                                                                                                                                                                                        
Other Financial Highlights
Cash, cash equivalents, and marketable securities                       $ 2,298,068
Cash used in operating activities                                       $  (194,013 )                        $ (216,866 )                                                     $   (558,584 )                        $ (443,517 )
Free Cash Flow(3)                                                       $  (219,961 )                        $ (234,058 )                                                     $   (621,890 )                        $ (489,582 )
Capital expenditures                                                    $   (25,948 )                        $  (17,192 )                                                     $    (63,306 )                        $  (46,065 )
                                                                                                                                                                                                                                                        
(1)   Net loss for the nine months ended September 30, 2017 includes
                         $2.5 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;
                         stock-based compensation expense and related payroll tax expense;
                         and certain other non-cash or non-recurring items impacting net
                         income (loss) from time to time, as described below.
(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 153 million in Q3 2016 to 178 million in Q3 2017, an increase of 25.2 million or 17% year-over-year. DAUs increased 4.5 million or 3% quarter-over-quarter, from 173 million in Q2 2017.

-- Average revenue per user (ARPU)(2) - ARPU was $1.17 in Q3 2017, an increase of 39% over Q3 2016 when ARPU was $0.84. ARPU increased 12% over Q2 2017 when ARPU was $1.05.

-- Hosting costs per DAU - Hosting costs per DAU were $0.68 in Q3 2017, as compared to $0.64 in Q3 2016 and $0.61 in Q2 2017.

-- Capital expenditures - Capital expenditures were $25.9 million in Q3 2017, as compared to $17.2 million in Q3 2016 and $19.4 million in Q2 2017.

-- Excess inventory and related charges - In Q3 2017, we recorded $39.9 million of charges related to Spectacles inventory, primarily related to excess inventory reserves and inventory purchase commitment cancellation charges.

(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 2:00 p.m. Pacific / 5:00 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call.

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

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; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time, as described below. 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 use the non-GAAP financial measure of Non-GAAP Net Loss, which is defined as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and related payroll tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP Net Loss and weighted average diluted shares are then used to calculate Non-GAAP diluted net loss per share. Similar to Adjusted EBITDA, we believe these measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses we exclude in the measure.

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

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, please see "Reconciliation of GAAP to Non-GAAP Financial Measures" 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                                                                                                             Nine Months Ended
                                                                                                                                             September 30,                                                                                                                                    September 30,
                                                                                      ---------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------
                                                                                                             2017                                                 2016                                                                     2017                                                  2016
                                                                                      ---------------------------------------------------                     ---------------------------------------------------                     -----------------------------------------------------                     ---------------------------------------------------
Revenue                                                                                                  $  207,937                                                              $  128,204                                                              $    539,256                                                              $  238,800
Costs and expenses:
   Cost of revenue                                                                                          210,710                                                                 127,780                                                                   526,216                                                                 298,310
   Research and development                                                                                 239,442                                                                  54,562                                                                 1,301,025                                                                 118,712
   Sales and marketing                                                                                      101,511                                                                  34,658                                                                   412,147                                                                  73,982
   General and administrative                                                            118,101                            42,172                           1,424,480                            98,444  
                                                                                      -------------------- -------- --------------------                      -------------------- -------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------- --------------------
      Total costs and expenses                                                           669,764                           259,172                           3,663,868                           589,448  
                                                                                      -------------------- -------- --------------------                      -------------------- -------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------- --------------------
Loss from operations                                                                                       (461,827 )                                                              (130,968 )                                                              (3,124,612 )                                                              (350,648 )
Interest income                                                                                               6,253                                                                   1,938                                                                    15,026                                                                   3,168
Interest expense                                                                                               (887 )                                                                  (648 )                                                                  (2,580 )                                                                  (648 )
Other income (expense), net                                                                1,002                            (1,421 )                                                1,975                            (3,353 )
                                                                                      -------------------- -------- --------------------                      -------------------- -------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------- --------------------
Loss before income taxes                                                                                   (455,459 )                                                              (131,099 )                                                              (3,110,191 )                                                              (351,481 )
Income tax benefit (expense)                                                              12,300                             6,871                              15,102                             6,783  
                                                                                      -------------------- -------- --------------------                      -------------------- -------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------- --------------------
Net loss                                                                                                 $ (443,159 )                                                            $ (124,228 )                                                            $ (3,095,089 )                                                            $ (344,698 )
                                                                                      ==================== ======== ====================                      ==================== ======== ====================                      ==================== ========== ====================                      ==================== ======== ====================
Net loss per share attributable to Class A, Class B, and Class C
common stockholders:
   Basic                                                                                                 $    (0.36 )                                                            $    (0.15 )                                                            $      (2.71 )                                                            $    (0.43 )
                                                                                      ==================== ======== ====================                      ==================== ======== ====================                      ==================== ========== ====================                      ==================== ======== ====================
   Diluted                                                                                               $    (0.36 )                                                            $    (0.15 )                                                            $      (2.71 )                                                            $    (0.43 )
                                                                                      ==================== ======== ====================                      ==================== ======== ====================                      ==================== ========== ====================                      ==================== ======== ====================
                                                                                                                                                                                                                                                                                                                                               
 
                                                                                                                SNAP INC.
                                                                                                       CONSOLIDATED BALANCE SHEETS
                                                                                                (In thousands, except per share amounts)
 
                                                                                                    September 30,                                              December 31,
                                                                                                                           2017                                                                          2016
                                                                                                 ---------------------------------------------------------                     ---------------------------------------------------------
                                                                                                                        (Unaudited)
Assets
Current assets
   Cash and cash equivalents                                                                                        $        317,554                                                              $        150,121
   Marketable securities                                                                                                   1,980,514                                                                       837,247
   Accounts receivable, net of allowance                                                                                     194,971                                                                       162,659
   Prepaid expenses and other current assets                                                               54,692                                  29,958  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total current assets                                                                                                 2,547,731                                                                     1,179,985
Property and equipment, net                                                                                                  143,112                                                                       100,585
Intangible assets, net                                                                                                       164,612                                                                        75,982
Goodwill                                                                                                                     612,823                                                                       319,137
Other assets                                                                                               74,102                                  47,103  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total assets                                                                                                  $      3,542,380                                           $      1,722,792  
                                                                                                 ==================== ============== ====================                      ==================== ============== ====================
Liabilities and Stockholders’ Equity
Current liabilities
   Accounts payable                                                                                                 $         15,207                                                              $          8,419
   Accrued expenses and other current liabilities                                                         280,957                                 148,325  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total current liabilities                                                                                              296,164                                                                       156,744
Other liabilities                                                                                          70,946                                  47,134  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total liabilities                                                                                   367,110                                 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 September 30, 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 September 30, 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 September 30, 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 September 30, 2017 and
   December 31, 2016, respectively. No shares and 215,888 shares issued
   and outstanding at September 30, 2017 and December 31, 2016,
   respectively.
   Class A non-voting common stock, $0.00001 par value. 3,000,000                                                                  9                                                                             5
   shares authorized, 858,546 shares issued and outstanding at
   September 30, 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                                                                 1                                                                --
   authorized, 127,302 shares issued and outstanding at September 30,
   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 September 30,
   2017, and 260,888 shares authorized and no shares issued and
   outstanding at December 31, 2016.
   Additional paid-in capital                                                                                              7,470,272                                                                     2,728,823
   Accumulated other comprehensive income (loss)                                                                              11,682                                                                        (2,057 )
   Accumulated deficit                                                                                 (4,306,696 )                                               (1,207,862 )
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total stockholders’ equity                                             3,175,270                               1,518,914  
                                                                                                 -------------------- -------------- --------------------                      -------------------- -------------- --------------------
      Total liabilities and stockholders’ equity                                         $      3,542,380                                           $      1,722,792  
                                                                                                 ==================== ============== ====================                      ==================== ============== ====================
                                                                                                                                                                                
 
                                                                                                             SNAP INC.
                                                                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                     (In thousands, unaudited)
 
                                                                                                                                    Nine Months Ended
                                                                                                                                                         September 30,
                                                                                            ---------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      2017                                                       2016
                                                                                            ---------------------------------------------------------                     ---------------------------------------------------------
Cash flows from operating activities
Net loss                                                                                                       $     (3,095,089 )                                                            $       (344,698 )
   Adjustments to reconcile net loss to net cash used in operating
   activities:
      Depreciation and amortization                                                                                      42,502                                                                        18,482
      Stock-based compensation                                                                                        2,458,851                                                                        25,075
      Deferred income taxes                                                                                             (14,397 )                                                                      (7,231 )
      Excess inventory reserve and related asset impairment                                                              21,997                                                                --
      Other                                                                                                              (3,714 )                                                                        (360 )
      Change in operating assets and liabilities, net of effect of
      acquisitions:
         Accounts receivable, net of allowance                                                                          (24,513 )                                                                     (78,488 )
         Prepaid expenses and other current assets                                                                      (48,965 )                                                                     (14,926 )
         Other assets                                                                                                    (8,545 )                                                                         450
         Accounts payable                                                                                                 4,103                                                                         1,656
         Accrued expenses and other current liabilities                                                                 103,449                                                                       (45,475 )
         Other liabilities                                                                             5,737                                   1,998  
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
            Net cash used in operating activities                                                   (558,584 )                                                 (443,517 )
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash flows from investing activities
     Purchases of property and equipment                                                                                (63,306 )                                                                     (46,065 )
     Purchases of intangible assets                                                                                      (8,025 )                                                                        (572 )
     Non-marketable investments                                                                                          (7,530 )                                                                      (5,703 )
     Cash paid for acquisitions, net of cash acquired                                                                  (352,407 )                                                                     (68,096 )
     Issuance of notes receivable from officers/stockholders                                                     --                                                                       (15,000 )
     Repayment of notes receivables from officers/stockholders                                                   --                                                                        15,000
     Purchases of marketable securities                                                                              (3,412,776 )                                                                  (1,358,295 )
     Sales of marketable securities                                                                                     441,089                                                                       164,003
     Maturities of marketable securities                                                                              1,831,327                                                                       180,805
     Change in restricted cash                                                                         9,899                                  (7,048 )
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
           Net cash used in investing activities                                                  (1,561,729 )                                               (1,140,971 )
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash flows from financing activities
     Proceeds from the exercise of stock options                                                                          6,855                                                                           576
     Stock repurchases from employees for tax withholdings                                                             (367,234 )                                                              --
     Proceeds from issuance of Class A common stock in initial public                                                 2,657,797                                                                --
     offering, net of underwriting commissions
     Repurchase of Class B voting common stock and Series FP voting                                              --                                                                       (10,593 )
     preferred stock
     Proceeds from issuances of preferred stock, net of issuance costs                                           --                                                                     1,157,147
     Borrowings from revolving credit facility                                                                   --                                                                         5,000
     Principal payments on revolving credit facility                                                             --                                                                        (5,000 )
     Payments of initial public offering issuance costs                                               (9,672 )                                           --  
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
           Net cash provided by financing activities                                               2,287,746                               1,147,130  
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
           Change in cash and cash equivalents                                                                          167,433                                                                      (437,358 )
Cash and cash equivalents, beginning of period                                                       150,121                                 640,810  
                                                                                            -------------------- -------------- --------------------                      -------------------- -------------- --------------------
Cash and cash equivalents, end of period                                                                       $        317,554                                           $        203,452  
                                                                                            ==================== ============== ====================                      ==================== ============== ====================
Supplemental disclosures
   Cash paid for income taxes                                                                                  $          5,437                                                              $              4
Supplemental disclosures of non-cash activities
   Issuance of Class B common stock related to acquisitions                                                    $ --                                                              $         96,145
   Assumed equity awards in acquisitions                                                                       $          3,911                                                              $ --
   Purchase consideration liabilities related to acquisitions                                                  $         11,772                                                              $         17,042
   Repurchase of Class B voting common stock and Series FP voting                                              $ --                                                              $         13,500
   preferred stock in exchange for notes receivable from
   officers/stockholders
   Construction in progress related to financing lease obligations                                             $          1,107                                                              $          1,024
   Net change in accounts payable and accrued expenses and other                                               $         (4,155 )                                                            $          2,395
   current liabilities related to property and equipment additions
                                                                                                                                                                           
 
                                                                                                                                                                                SNAP INC.
                                                                                                                                                          RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
                                                                                                                                                                        (In thousands, unaudited)
 
                                                                                                                    Three Months Ended                                                                                                                   Nine Months Ended
                                                                                                                                          September 30,                                                                                                                                          September 30,
                                                                                ---------------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       2017                                                    2016                                                                        2017                                                     2016
                                                                                ---------------------------------------------------                     ---------------------------------------------------------                     -----------------------------------------------------                     ---------------------------------------------------------
Adjusted EBITDA reconciliation:
Net loss                                                                                           $ (443,159 )                                                            $       (124,228 )                                                            $ (3,095,089 )                                                            $       (344,698 )
Add (deduct):
   Interest income                                                                                     (6,253 )                                                                      (1,938 )                                                                 (15,026 )                                                                      (3,168 )
   Interest expense                                                                                       887                                                                           648                                                                     2,580                                                                           648
   Other (income) expense, net                                                                         (1,002 )                                                                       1,421                                                                    (1,975 )                                                                       3,353
   Income tax (benefit) expense                                                                       (12,300 )                                                                      (6,871 )                                                                 (15,102 )                                                                      (6,783 )
   Depreciation and amortization(1)                                                                    17,467                                                                         7,437                                                                    42,502                                                                        18,482
   Stock-based compensation expense(2)                                                                221,702                                                                        14,795                                                                 2,458,851                                                                        25,075
   Payroll tax expense related to stock-based compensation                                              3,890                                                                           132                                                                    22,258                                                                           132
   Spectacles inventory-related charges(3)                                          39,867                          --                              39,867                          --  
                                                                                -------------------- -------- --------------------                      -------------------- -------------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Adjusted EBITDA                                                                                    $ (178,901 )                                                            $       (108,604 )                                                            $   (561,134 )                                                            $       (306,959 )
                                                                                ==================== ======== ====================                      ==================== ============== ====================                      ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                 

(1) Total depreciation and amortization expense by function:

                                                                                                                      
                                                                                         Three Months Ended                                                                                  Nine Months Ended
                                                                                            September 30,                                                                                      September 30,
                                                            ----------------------------------------------------------------------------                     ---------------------------------------------------------------------------------
                                                                        2017                         2016                                             2017                            2016
                                                            ----------------------------                     ---------------------------                     ----------------------------                     --------------------------------
Depreciation and amortization expense:
   Cost of revenue                                                             $  5,404                                         $   778                                         $ 10,043                                         $        947
   Research and development                                                       6,401                                           4,623                                           18,139                                               12,398
   Sales and marketing                                                            2,820                                             394                                            7,009                                                  780
   General and administrative                                  2,842                        1,642                         7,311                             4,357
                                                            -------------------- ------                      -------------------- -----                      -------------------- ------                      -------------------- ----------
      Total                                                                    $ 17,467                                         $ 7,437                                         $ 42,502                                         $     18,482
                                                            ==================== ======                      ==================== =====                      ==================== ======                      ==================== ==========
                                                                                                                                                                                                               

(2) Total stock-based compensation and related payroll tax expense by function:

 
                                                                                          Three Months Ended                                                                  Nine Months Ended
                                                                                                                September 30,                                                                                         September 30,
                                                                               ------------------------------------------------------------------------------                     ------------------------------------------------------------------------------------
                                                                                           2017                           2016                                              2017                              2016
                                                                               -----------------------------                     ----------------------------                     -------------------------------                     --------------------------------
Stock-based compensation and related payroll tax expense:
   Cost of revenue                                                                                $   2,039                                         $    128                                         $    24,288                                         $        410
   Research and development                                                                         146,531                                           12,143                                           1,032,508                                               17,491
   Sales and marketing                                                                               27,968                                            1,262                                             209,468                                                2,590
   General and administrative                                                     49,054                         1,394                        1,214,845                             4,716
                                                                               -------------------- -------                      -------------------- ------                      -------------------- ---------                      -------------------- ----------
      Total                                                                                       $ 225,592                                         $ 14,927                                         $ 2,481,109                                         $     25,207
                                                                               ==================== =======                      ==================== ======                      ==================== =========                      ==================== ==========
                                                                                                                                                                                                                                       

(3) Spectacles inventory-related charges were primarily related to excess inventory reserves and inventory purchase commitment cancellation charges. These charges are non-recurring and not reflective of underlying trends in our business.

 
                                                                                                                            SNAP INC.
                                                                                                RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued)
                                                                                                       (In thousands, except per share amounts, unaudited)
 
                                                                            Three Months Ended                                                                         Nine Months Ended
                                                                                                  September 30,                                                                                                September 30,
                                                            -----------------------------------------------------------------------------------------                     ---------------------------------------------------------------------------------------
                                                                           2017                                2016                                                   2017                               2016
                                                            ----------------------------------                     ----------------------------------                     ----------------------------------                     --------------------------------
Free Cash Flow reconciliation:
Net cash used in operating activities                                          $ (194,013 )                                           $ (216,866 )                                           $ (558,584 )                                           $ (443,517 )
Less:
   Purchases of property and equipment                         (25,948 )                           (17,192 )                           (63,306 )                           (46,065 )
                                                            -------------------- -------- ---                      -------------------- -------- ---                      -------------------- -------- ---                      -------------------- -------- -
Free Cash Flow                                                                 $ (219,961 )                                           $ (234,058 )                                           $ (621,890 )                                           $ (489,582 )
                                                            ==================== ======== ===                      ==================== ======== ===                      ==================== ======== ===                      ==================== ======== =
                                                                                                                                                                                                                                  
 
                                                                                                                     Three Months Ended                                                                                                                   Nine Months Ended
                                                                                                                                           September 30,                                                                                                                                          September 30,
                                                                                ----------------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        2017                                                    2016                                                                        2017                                                     2016
                                                                                ----------------------------------------------------                     ---------------------------------------------------------                     -----------------------------------------------------                     ---------------------------------------------------------
Non-GAAP Net Loss reconciliation:
Net loss                                                                                           $  (443,159 )                                                            $       (124,228 )                                                            $ (3,095,089 )                                                            $       (344,698 )
   Amortization of intangible assets                                                                     9,743                                                                         4,467                                                                    20,947                                                                        11,379
   Stock-based compensation expense                                                                    221,702                                                                        14,795                                                                 2,458,851                                                                        25,075
   Payroll tax expense related to stock-based compensation                                               3,890                                                                           132                                                                    22,258                                                                           132
   Spectacles inventory-related charges                                                                 39,867                                                                --                                                                    39,867                                                                --
   Income tax adjustments                                                              (123 )                                           --                              (2,313 )                                           --  
                                                                                -------------------- --------- --------------------                      -------------------- -------------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Non-GAAP net loss                                                                                  $  (168,080 )                                                 (104,834 )                                             (555,479 )                                                 (308,112 )
                                                                                ==================== ========= ====================                      ==================== ============== ====================                      ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                  
Weighted-average common shares - Diluted                                                             1,232,993                                                                       832,401                                                                 1,140,004                                                                       798,660
                                                                                                                                                                                                                                                                                                                  
Non-GAAP Diluted Net Loss Per Share reconciliation:
   Diluted net loss per share                                                                      $     (0.36 )                                                            $          (0.15 )                                                            $      (2.71 )                                                            $          (0.43 )
   Non-GAAP adjustment to net loss                                                     0.22                                    0.02                                2.22                                    0.04  
                                                                                -------------------- --------- --------------------                      -------------------- -------------- --------------------                      -------------------- ---------- --------------------                      -------------------- -------------- --------------------
Non-GAAP diluted net loss per share                                                                $     (0.14 )                                                            $          (0.13 )                                                            $      (0.49 )                                                            $          (0.39 )
                                                                                ==================== ========= ====================                      ==================== ============== ====================                      ==================== ========== ====================                      ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                  

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20171107006708r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20171107006708/en/

SOURCE: Snap Inc.

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


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