Q4 2024 Snap Inc Earnings Call

February 4, 2025

I'd like to turn the call over to David Ohmmeter head of Investor Relations.

Speaker Change: Thank you and good afternoon, everyone.

Speaker Change: Welcome to <unk> fourth quarter 2024 earnings conference call.

Evan Spiegel: With us today are Evan Spiegel, Chief Executive Officer, and co founder and Derek Anderson Chief Financial Officer.

Evan Spiegel: Please refer to our Investor relations website at Investor Dot snap Dot com to find today's press release earnings slides investor letter and Investor presentation.

Evan Spiegel: This conference call includes forward looking statements, which are based on our assumptions as of today.

Evan Spiegel: Actual results may differ materially from those expressed in these forward looking statements and we make no obligation to update our disclosures.

Evan Spiegel: For more information about factors that may cause actual results to differ materially from these forward looking statements. Please refer to the press release, we issued today as well as risks described in our most recent Form 10-K, particularly in the section titled risk factors.

Evan Spiegel: Today's call will include both GAAP and non-GAAP measures.

Evan Spiegel: Reconciliations between the two can be found in today's press release.

Evan Spiegel: Please note that when we discuss all of our expense figures, they will exclude stock based compensation and related payroll taxes, as well as depreciation and amortization and certain other items.

Evan Spiegel: Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call.

Evan Spiegel: With that I'd like to turn the call over to Evan.

Evan Spiegel: Hi, everyone and thank you for joining our call in Q4, we continued to make progress on our core priorities of growing our community and improving depth of engagement driving topline revenue growth and diversifying our revenue sources and building toward our long term vision for augmented reality.

Daily active users reached $453 million in Q4, an increase of $39 million year over year and content viewers and total time spent watching content grew year over year.

Evan Spiegel: The progress we have made with our direct response advertising business and the growth of our snapshot plus subscription business contributed to Q4 revenue, increasing 14% year over year to $1 6 billion.

Evan Spiegel: The benefits of our more focused investments are now evident in our improved profitability and free cash flow generation in Q4, the combination of top line progress and expense discipline translated to $276 million of adjusted EBITDA and 60% adjusted EBITDA flow through $182 million of free cash flow and $9 million of net income.

Evan Spiegel: In 2024, we generated $5 $36 billion of revenue, which grew 16% year over year, driven primarily by Dr. AD revenue, which also grew 16% year over year for the full year snapshot.

Evan Spiegel: Snapchat plus grew from $7 million or 14 million subscribers in 2024, and other revenue the majority of which is snapshot plus subscription revenue grew 131% year over year exiting the full year with an annualized revenue run rate well over $500 million.

Evan Spiegel: We delivered $509 million of adjusted EBITDA for the full year, marking our fifth consecutive year of positive adjusted EBITDA in 2024, we generated $219 million in free cash flow, achieving our fourth consecutive year of positive free cash flow.

Evan Spiegel: As we enter 2025, we are focused on key initiatives to build on the momentum we established in 2024 first our new AD placements sponsored snaps and promoted places provide advertisers with incremental reach while enabling them to connect with our community and unique and personalized ways second we are improving the way we go to market by providing advertising partners with actionable insights and intra.

Evan Spiegel: <unk> automated campaign optimization tools to enhance performance.

Evan Spiegel: Third we are rolling out a simplified snapshot experience designed to improve accessibility and usability for our community.

Evan Spiegel: Fourth we will continue to advance our machine learning infrastructure to drive higher quality at interactions.

Evan Spiegel: Lastly in 2024, we launched our fifth generation of spectacles powered by our new snap OS operating system as well as our latest version of lens studio, which empowers developers to create innovative experiences that overlay computing on the real world in 2025, we will expand our developer ecosystem by enhancing our tools that simplify our creation.

Evan Spiegel: And increase the number of spectacles experiences that can bring augmented reality into everyday life.

Speaker Change: We are also pleased to announce that <unk> Mohan will be our new Chief business Officer, <unk> joined snap over two years ago as president of APAC, where he rapidly grew our business and presence across the region as chief business Officer of <unk>, who will be responsible for growing our advertising business across all regions and will lead our revenue product and business operations organizations to help bring greater ally.

Evan Spiegel: Across our teams responsible for serving our advertising partners.

Evan Spiegel: Our progress in 2024 reinforces our confidence in our ability to adapt and innovate in a dynamic environment. We believe that the foundation, we built positions snap to unlock even greater value for our business community and partners in the years to come.

Evan Spiegel: We continue to make progress in growing our global community, reaching 453 million daily active users in Q4, an increase of $10 million quarter over quarter daily active users in North America was $100 million compared to $100 million in the prior quarter and $100 million in the prior year daily active users in Europe was $99 million compared to $99 million in the prior quarter and <unk> nine.

Fourth consecutive year of positive free cash flow.

As we enter 2025, we are focused on key initiatives to build on the momentum we established in 2024.

Evan Spiegel: $6 million in the prior year daily active users in rest of world is $254 million compared to $244 million in the prior quarter and $218 million in the prior year.

First our new AD placements sponsored stamps and promoted places provide advertisers with incremental reach while enabling them to connect with our community and unique and personalized ways second we are improving the way we go to market by providing advertising partners with actionable insights and introducing automated campaign optimization tools to enhance performance third we are rolling out a simplified snapshot.

Evan Spiegel: Staffing with friends and family is the core of our service and the primary driver of the continued growth and long term retention of our global community. In Q4, we introduced new features to inspire creation and help our community strengthen their relationships through staffing for example in Q4, we launched new but emoji stickers based on new trends for snap chatters to react and express themselves visually we also announced new.

<unk> is designed to improve accessibility and usability for our community.

Fourth we will continue to advance our machine learning infrastructure to drive higher quality at interactions.

Evan Spiegel: Location sharing features and family center, our Nf hub for parental tools and resources, making it easier for families to stay connected while on the move. In addition, we launched new and early access snapshot plus features including footsteps, which helps <unk> keep track of the places they visited on the snap map and new App teams and custom backgrounds.

Lastly in 2024, we launched our fifth generation of spectacles powered by our new snap OS operating system as well as our latest version of lens studio, which empowers developers to create innovative experiences that overlay computing on the real world in 2025, we will expand our developer ecosystem by enhancing our tools to simplify our creation.

Evan Spiegel: In Q4 global time spent watching content grew year over year, driven primarily by strong growth in total time spent watching spotlight. Our focus is now on refining the symbol snapshot experience in preparation for a broader rollout over the coming year, while also expanding our creator community to foster a vibrant content ecosystem in Q4, we expanded simple snapshot testing to over 25 million snap chatters in near.

And increase the number of spectacles experiences that can bring augmented reality into everyday life.

Speaker Change: We are also pleased to announce that <unk> Mohan will be our new Chief business Officer, <unk> joined snap over two years ago as president of APAC, where he rapidly grew our business and presence across the region as chief business officer of <unk> will be responsible for growing our advertising business across all regions and will lead our revenue product and business operations organizations to help bring greater <unk>.

Evan Spiegel: Every country, where we offer snapshot, while we will gain further insights from these initial tests in the months ahead early learnings have already led to future refinements, including improvements to help snap chatters more easily locate their subscriptions.

<unk> across our teams responsible for serving our advertising partners.

Evan Spiegel: These optimizations are aimed at improving the symbol snapchat experience for our power users in order to make the transition easier for some of our most engaged community members we.

Speaker Change: Our progress in 2024 reinforces our confidence in our ability to adapt and innovate in a dynamic environment. We believe that the foundation, we built positions snap to unlock even greater value for our business community and partners in the years to come.

Evan Spiegel: We continue to see encouraging trends in engagement metrics, including increased content active days among less frequent or more casual users. We're particularly pleased with that simple fact that is driving a shift in behavior with snapchat or spending a greater share of their time watching content rather than scrolling to find something to watch we will continue to test and learn gain insights and iterate accordingly in the months ahead to ensure a smooth rollout of us.

Speaker Change: We continue to make progress in growing our global community, reaching 453 million daily active users in Q4, an increase of $10 million quarter over quarter daily active users in North America was $100 million compared to $100 million in the prior quarter and $100 million in the prior year daily active users in Europe was $99 million compared to $99 million in the prior quarter and <unk>.

Evan Spiegel: Snapchat.

In Q4, we reaffirmed our commitment to fostering a dynamic and original content ecosystem on snapchat by prioritizing authentic creators and timely original content, we proactively balanced near term view time with the long term health of our platform.

Speaker Change: $6 million in the prior year.

Speaker Change: Daily active users in rest of world was $254 million compared to $244 million in the prior quarter and $218 million in the prior year.

Evan Spiegel: For example comment on spotlight videos within 24 hours of submission increased significantly over the last three months driven primarily by pressure content, leading to deeper engagement between snap chatters in content from creators. In addition, more than 1 billion snaps where share publicly on Snapchat every month in Q4 from our community creators and media partners as part of our broader efforts to grow the creator community.

Speaker Change: Staffing with friends and family at the core of our service and the primary driver of the continued growth and long term retention of our global community. In Q4, we introduced new features to inspire creation and help our community strengthen their relationships through snapping for example in Q4, we launched new bid emoji stickers based on new trends for snap chatters to react and express themselves digitally we also.

Evan Spiegel: We continue to invest in constant creation tools in a diverse set of monetization opportunities. For example, we announced our new unified monetization program for creators that allows eligible creators to monetize spotlight videos building on our storage revenue share program that helps creators monetize their stories.

Speaker Change: Announced new location sharing features and family center or in a pub for frontal tools and resources, making it easier for families to stay connected while on the move. In addition, we launched new and early access Snapchat plus features including footsteps, which helps <unk> keep track of the places they visited on the snap map and new app themes and custom backgrounds.

Evan Spiegel: These initiatives are yielding results over the past year, we on boarded thousands of creators to our snap star program and the number of creators posting content grew more than 40% year over year in Q4.

Speaker Change: In Q4 global time spent watching content grew year over year, driven primarily by strong growth in total time spent watching spotlight. Our focus is now on refining the simplest asset experience in preparation for a broader rollout over the coming year, while also expanding our creator community to foster a vibrant content ecosystem in Q4, we expanded simple snapshot testing to over 25 million snap chatters in knee.

While we have on boarded many established creators and celebrities. We've also seen significant growth and creators that achieve snap star status by growing their falling in business organically on snapshot.

Evan Spiegel: For example, <unk> increase a 20 year old health an adventure enthusiasts increased your Snapchat followers six fold in just six months and is now established herself as one of our top viewed creators. These efforts underscore our dedication to empowering creators strengthening the health of our content ecosystem and delivering fresh engaging content for our community.

Speaker Change: Every country, where we offer snapshot.

Speaker Change: We will gain further insights from these initial tests in the months ahead early learnings have already led to future refinements, including improvements to help snap chatters more easily locate their subscriptions.

Speaker Change: These optimizations are aimed at improving the simple snapchat experience for our power users in order to make the transition easier for some of our most engaged community members we.

Evan Spiegel: Augmented reality continues to inspire creation and drive engagement on Snapchat, a key driver of this is the growth of the vibrant developer and creator ecosystem. We have supported over the last several years more than 375000 creators developers and teams from nearly every country in the world have built over 4 million lenses using lens studio.

Speaker Change: We continue to see encouraging trends in engagement metrics, including increased content active days among less frequent or more casual users. We were particularly pleased with how simple center is driving a shift in behavior with snapchat or spending a greater share of their time watching content rather than scrolling to find something to watch we will continue to test and learn gain insights and iterate accordingly in the months ahead to ensure a smooth rollout of this in.

Evan Spiegel: In Q4, we introduced the first two person generative islands, which uses generative AI to create a personalized therapy together with our friends.

Snapchat.

Evan Spiegel: In Q4, our new meaning the <unk> AI lens, which enabled snap chatters to transform into a <unk> version of themselves was viewed over 900 million times to build on this momentum and to continue to support our creator ecosystem. We expanded our lens creator rewards program designed to reward the top lenses built by our community and introduced new lens challenges to help our creators monetize.

Speaker Change: In Q4, we reaffirmed our commitment to fostering a dynamic and original content ecosystem on snapchat by prioritizing authentic creators and timely original content, we proactively balance near term view time with the long term health of our platform.

Speaker Change: For example comments on spotlight videos within 24 hours of submission increased significantly over the last three months driven primarily by pressure content, leading to deeper engagement between snap chatters in content from creators. In addition, more than $1 billion appstore share publicly on Snapchat every month in Q4 from our community of creators and media partners as part of our broader efforts to grow the creator community.

Evan Spiegel: There are lenses.

Evan Spiegel: In Q4, we made significant strides in AI research and innovation our team developed a groundbreaking AI model capable of generating high resolution images on mobile devices in just seconds. This on device model with only 379 million parameters as compact yet highly efficient producing images in just one four seconds on iPhone 16 Pro Max.

Speaker Change: We continue to invest in content creation tools in a diverse set of the monetization opportunities. For example, we announced our new unified monetization program for creators that allows eligible creators to monetize spotlight videos building on our storage revenue share program that helps creators monetize their stories.

Evan Spiegel: We are excited to bring this technology into production in the coming quarters and.

Evan Spiegel: In addition, we launched easy lens and lens studio five four and AI powered tool that simplifies our creation by enabling users to create and customize lenses through text prompts.

Speaker Change: These initiatives are yielding results over the past year, we on boarded thousands of creators to our snap star program and the number of creators posting content grew more than 40% year over year in Q4.

Evan Spiegel: Response has been remarkable within a month of launch over 3000 lenses have been published using easy lands with snapshot are engaging with these lenses nearly 300 million times. This is a testament to the potential of AI to unlock creativity and drive engagement across our platform.

Speaker Change: While we have on boarded many established creators and celebrities. We've also seen significant growth and creators that achieve snap star status by growing their falling in business organically on Snapchat.

For example, <unk> increase a 20 year old health, an adventure enthusiasts increased our snapchat followers six fold in just six months and is now established yourself as one of our top few creators. These efforts underscore our dedication to empowering creators strengthening the health of our content ecosystem and delivering fresh engaging content for our community.

Evan Spiegel: Looking ahead, we are focused on innovating and enhancing our core product experience, while continuing to invest in the future of augmented reality. We believe continued progress on these initiatives is a critical input to serving our community and expanding our long term monetization opportunity.

Evan Spiegel: Over the past year, we've made significant progress on three foundational advertising platform initiatives, including better and larger ml models improved utilization of privacy safe signals and more performance AD formats to drive improved results for our advertising partners. We continue to see strong demand for our pixel purchase in App purchase optimizations, which are becoming a more meaningful contributor.

Speaker Change: Augmented reality continues to inspire creation and drive engagement on Snapchat, a key driver of this is the growth of the vibrant developer and creator ecosystem. We have supported over the last several years more than 375000 creators developers and teams from nearly every country in the world have built over 4 million lenses using lens studio.

Evan Spiegel: Topline growth for example revenue from App based purchase optimizations grew more than 70% year over year. Our recent expansion of seven zero optimization to app install an in App purchase is driving better performance for advertisers. For example go with a global digital wishlist platform leveraged seven zero app install an in App purchase which resulted in a 70%.

Speaker Change: In Q4, we introduced the first two person generative islands, which uses generative AI to create a personalized healthy together with a friend.

Speaker Change: In Q4, our new Nina <unk>, AI lens, which enabled snap chatters to transform into a 16th version of themselves was viewed over 900 million times to build on this momentum and to continue to support our <unk> ecosystem, we expanded our lens create a rewards program designed to reward the top lenses built by our community and introduced new lens challenges to help our creators monetize.

Evan Spiegel: The decrease in cost per install and an increase of over 3000% in app installs in just 12 weeks outperforming other large digital platforms over the past year, we've made significant enhancements to our lead generation product, including AD ranking model improvements, new creative customization and integrations with preferred CRM partners as a result in Q4, we saw it.

Speaker Change: <unk> <unk> lenses.

In Q4, we made significant strides in AI research and innovation our team developed a groundbreaking AI model capable of generating high resolution images on mobile devices in just seconds. This on device model with only 379 million parameters as compact yet highly efficient producing images and just 1.4 seconds on iPhone 16 Pro Max.

Evan Spiegel: Six times increase year over year in the number of leads that were generated for advertisers, while decreasing cost per lead by over 40% on average.

Evan Spiegel: For example, the University of Idaho leveraged our lead generation objective to help drive applications for its undergraduate programs and saw snap emerge as the most effective platform delivering 69% of all undergraduate conversions at a 22% lower cost per conversion compared to other social media platforms.

Speaker Change: We're excited to bring this technology into production in the coming quarters.

Speaker Change: In addition, we launched easy lens and lens CDO five four and AI powered tool that simplifies our creation by enabling users to create and customize lenses through tax prompts. The response has been remarkable within a month of launch over 3000 lenses have been published using easy lens with snapshot are engaging with these lenses nearly 300 million times. This is a.

Evan Spiegel: The combination of more performance ER products improved go to market operations optimized for small and medium size business customers and a simplified AD buying experience made SMB is the largest contributor to AD revenue growth in 2020 for snap promote has enabled smbs and creators to promote their services content of our products reach new audiences and measure outperformance all within snapshot on their mobile.

Speaker Change: But to the potential of AI to unlock creativity and drive engagement across our platform.

Speaker Change: Looking ahead, we are focused on innovating and enhancing our core product experience, while continuing to invest in the future of augmented reality. We believe continued progress on these initiatives is a critical input to serving our community and expanding our long term monetization opportunity.

Evan Spiegel: Devices recently, we launched automated in flight campaign recommendations adaptive templates for campaign setup and scaled creative editing to further improve our go to market strategy for Smbs.

Speaker Change: Over the past year, we've made significant progress on three foundational advertising platform initiatives, including better and larger ml models improved utilization of privacy safe signals and more performance AD formats to drive improved results for our advertising partners. We continue to see strong demand for our pixel purchase in App purchase optimization, which are becoming a more meaningful contributor.

Evan Spiegel: We also continue to invest in our partnership's ecosystem globally by building and deepening partnerships with leading marketing Tech partners. For example bed parks in online gaming platform partnered with Snapchat and <unk>. The performance driven marketing agency to drive lower funnel. Dr performance by leveraging advanced optimization features including granular targeting of high value.

Speaker Change: Topline growth for example revenue from App based purchase optimizations grew more than 70% year over year. Our recent expansion of seven zero optimization to app install an in App purchase is driving better performance for advertisers. For example go wish a global digital wishlist platform leveraged seven zero app install an in app purchase which resulted in a $70.

Evan Spiegel: Gauged audiences.

Evan Spiegel: <unk> at 32% increase in raws on a five times increase in purchases compared to their previous Snapchat campaign.

Evan Spiegel: We believe automation is a key driver of advertiser performance and we remain focused on empowering advertisers to enhance their campaign outcome through automation.

Evan Spiegel: Instance, in Q1, we will be testing, our new smart budget optimization feature which automatically adjusts campaign budgets across assets to deliver the best results.

Speaker Change: <unk> decrease in cost per install and an increase of over 3000% in app installs in just 12 weeks outperforming other large digital platforms over the past year, we've made significant enhancements to our lead generation products, including AD ranking model improvements, new creative customization and integrations with preferred CRM partners as a result in Q4, we saw it.

Evan Spiegel: We're focused on re accelerating demand for upper funnel brand revenue by continuing to deliver innovative and performance advertising products. We are prioritizing enhanced support for large brands and agencies by offering increased collaboration platform integration and advanced measurement tools. For example last year, we launched a first to market partnership with media measurement and optimization company in video.

Speaker Change: Six times increase year over year in the number of leads that were generated for advertisers, while decreasing cost per lead by over 40% on average.

Evan Spiegel: To provide our agency partners have reached planning and measurement tools.

Speaker Change: For example, the University of Idaho leveraged our lead generation objective to help drive applications for its undergraduate programs and solid snap emerge as the most effective platform delivering 69% of all undergraduate conversions at a 22% lower cost per conversion compared to other social media platforms.

Evan Spiegel: Initiative is sent to on board some of our largest agency partners, including Omnicom Media Group IPG media brands and dentsu, enabling them to build cross screen media plans with Snapchat in mind and assess key metrics like incremental reach.

Evan Spiegel: Looking ahead, we remain committed to leveraging the unique ways, our audience engages with snapchat and delivering actionable differentiated insights to empower our advertising partners and agencies.

Speaker Change: The combination of more performance ER products improved go to market operations optimized for small and medium size business customers and a simplified AD buying experience made SMB is the largest contributor to AD revenue growth in 2020 for snap promote has enabled smbs and creators to promote their services content or products reach new audiences and measure our performance all within snapshot on their mobile.

Evan Spiegel: In Q4, we began testing two new AD placements sponsored SaaS and promoted places designed to help advertisers engage with the Snapchat community in unique and impactful ways sponsored SaaS enabled advertisers to connected visually with snap chatters delivering incremental reach in helping brands leave a lasting impression. The initial results have been promising with sponsored snaps delivering more than 50 million.

Speaker Change: Devices.

Speaker Change: <unk>, we launched automated in flight campaign recommendations adaptive templates for campaign setup and scaled creative editing to further improve our go to market strategy for Smbs.

Evan Spiegel: Dollars impressions on average in the U S is <unk> 18 or older making it our largest single day reach product.

Speaker Change: We also continue to invest in our partnership's ecosystem globally by building and deepening partnerships with leading marketing Tech partners. For example bed parks in online gaming platform partnered with Snapchat and <unk>, a performance driven marketing agency to drive lower funnel. Dr performance by leveraging advanced optimization features including granular targeting of high value.

Evan Spiegel: Promoted places enable businesses to use the snap map to highlight sponsored locations encouraging Sam centers to discover new places engage with place profiles and visit those locations and realized.

Evan Spiegel: For example on Taco Bell leverage promoted places in Q4 and saw the number of place profile views on the snap map increased by five times when compared to snap Chatters, who are not exposed to the campaign in Q4 sponsored Samson promoted places grew the number of unique snap chatters reached by advertising partners delivering a 30% increase in reach on average in the U S.

Engaged audiences they achieved a 32% increase in <unk> and a five times increase in purchases compared to their previous Snapchat campaign.

Speaker Change: We believe automation is a key driver of advertiser performance and we remain focused on empowering advertisers to enhance their campaign outcomes through automation.

Evan Spiegel: In Q1, we plan to rollout sponsored Sampson promoted places to additional markets. While also beginning limited testing of pixel purchase optimization for sponsored snaps as we begin to make this new placement available for lower funnel bidding objectives. We're excited to see these placements drive meaningful results for our partners and deepen engagement with our community.

Speaker Change: For instance in Q1, we will be testing, our new smart budget optimization feature which automatically adjusts campaign budgets across assets to deliver the best results.

Speaker Change: We are focused on re accelerating demand for upper funnel brand revenue by continuing to deliver innovative and performance advertising products we have.

Evan Spiegel: With that I'd like to turn the call over to Derek to discuss our financial results.

Speaker Change: <unk> enhanced support for large brands and agencies by offering increased collaboration platform integrations and advanced measurement tools. For example last year, we launched a first to market partnership with media measurement and optimization company video App to provide our agency partners with reach planning and measurement tools.

Derek: Thanks, Kevin and good afternoon, everyone.

Derek: In Q4 total revenue was $1 $5 6 billion up 14% year over year.

Derek: Advertising revenue was 141 billion up 10% year over year, driven primarily by growth from Dr advertising revenue, which increased 14% year over year.

Speaker Change: This initiative is centered on boarded some of our largest agency partners, including Omnicom Media group IPG media brands and dentsu, enabling them to build cross screen media plans with Snapchat in mind and assess key metrics like incremental reach.

Derek: Brand oriented advertising revenue was down 1% year over year, driven by continued weakness that is concentrated among a relatively small group of large clients focused largely in North America, we drove robust growth from our SMB clients segment globally as we continue to build towards a more diversified and performance based.

Speaker Change: Looking ahead, we remain committed to leveraging the unique ways, our audience engages with snapchat and delivering actionable differentiated insights to empower our advertising partners and agencies.

Speaker Change: In Q4, we began testing two new AD placements sponsored Sampson promoted places designed to help advertisers engage with the Snapchat community in unique and impactful ways sponsored SaaS enabled advertisers to connect visually with snap chatters delivering incremental reach in helping brands leave a lasting impression. The initial results have been promising with sponsored snaps delivering more than $50 million.

Derek: Rising business.

Derek: Other revenue, which is driven primarily by Snapchat plus subscription revenue more than doubled year over year to reach $143 million in Q4, with Snapchat plus subscribers, reaching $14 million in Q4.

Speaker Change: <unk> on average in the U S to Snapchat or is 18 or older making it our largest single day reach product.

Derek: In Q4, North America revenue grew 8% year over year, and Europe revenue grew 20% year over year with a relatively lower rate of growth in North America due to the impact of weaker large client upper funnel demand being relatively concentrated in this region.

Speaker Change: Promoted places enable businesses to use the snap map to highlight sponsored locations encouraging Sam centers to discover new places engage with place profiles and visit those locations in real life.

Speaker Change: For example, Taco Bell leverage promoted places in Q4 and saw the number of place profile views on a statin that have increased by five times when compared to snap Chatters, who are not exposed to the campaign in Q4 sponsored Samson promoted places grew the number of unique Snapchat is reached by advertising partners delivering a 30% increase in reach on average in the U S.

Derek: Rest of World revenue grew 35% year over year, driven by the continued progress with our <unk> platform and investments in go to market operations.

Derek: Adjusted cost of revenue was $669 million in Q4 up 9% year over year.

Speaker Change: In Q1, we plan to rollout sponsored Sampson promoted places to additional markets. While also beginning limited testing of pixel purchase optimization for sponsored snaps as we begin to make this new placement available for lower funnel bidding objectives. We're excited to see these placements drive meaningful results for our partners and deepen engagement with our community.

Derek: Infrastructure costs were the largest driver of the year over year increase due in large part to the ramp in ml and AI investments over the past year.

Derek: Infrastructure costs per <unk> was 84 cents in Q4, which is in line with the prior quarter and within our expected range of 83 to 85.

Speaker Change: With that I'd like to turn the call over to Derek to discuss our financial results.

Derek: The remaining components of adjusted cost of revenue were $289 million in Q4, or 19% of revenue, which is in line with the prior quarter and within our full year cost structure guidance range of 19% to 21%.

Derek: Thanks, Kevin and good afternoon, everyone.

Derek: In Q4 total revenue was 156 billion up 14% year over year.

Derek: Advertising revenue was 141 billion up 10% year over year, driven primarily by growth from Dr advertising revenue, which increased 14% year over year.

Derek: Adjusted gross margin was 57% in Q4 up from 54% in the prior quarter and 55% in the prior year.

Derek: Adjusted operating expenses were $612 million in Q4 up 4% year over year.

Derek: <unk> costs decreased 1% year over year, driven by a 7% year over year decline in full time head count, partially offset by inflationary impacts on wage rates and lower payroll tax credits compared to the prior year.

Derek: <unk> business.

Derek: Lower personnel costs were partially offset by increases in legal costs, including litigation and regulatory compliance related costs as well as higher product related research and development costs.

Derek: Adjusted EBITDA was $276 million in Q4 up from $159 million in Q4 of the prior year, reflecting higher revenue and operating expense discipline.

Derek: Adjusted EBITDA flow through or the share of incremental year over year revenue that flowed through to adjusted EBITDA was 60% in Q4, reflecting seasonally higher revenue in Q4, and our continued prioritization of our investments to drive top line growth and deliver improved financial performance.

Derek: Rest of World revenue grew 35% year over year, driven by the continued progress with our <unk> platform and investment and go to market operations.

Derek: Adjusted cost of revenue was $669 million in Q4 up 9% year over year.

Derek: We achieved net income of $9 million in Q4 compared to a net loss of $248 million in Q4 of the prior year.

Derek: Infrastructure costs were the largest driver of the year over year increase due in large part to the ramp in ml and AI investments over the past year infra.

Derek: The $257 million year over year improvement reflects the flow through of a $117 million improvement in adjusted EBITDA of $78 million or 23% reduction in stock based compensation and related expenses.

Derek: Infrastructure costs per <unk> was 84 cents in Q4, which is in line with the prior quarter and within our expected range of 83 to 85.

Derek: <unk> net investment impacts of $27 million due.

Derek: Due primarily to losses incurred in the prior year.

Derek: And an improvement of $22 million in nonrecurring items due to business restructuring costs incurred in the prior year.

Derek: Adjusted gross margin was 57% in Q4 up from 54% in the prior quarter and 55% in the prior year.

Derek: Free cash flow was $182 million in Q4, while operating cash flow was $231 million over the trailing 12 months free cash flow was $219 million.

Adjusted operating expenses were $612 million in Q4 up 4% year over year.

Derek: And operating cash flow was $413 million.

Derek: Personnel costs decreased 1% year over year, driven by a 7% year over year decline in full time head count, partially offset by inflationary impacts on wage rates and lower payroll tax credits compared to the prior year.

Derek: As we continue to balance investments with top line growth to deliver sustained positive cash flow dilution or the year over year growth in our share count, which just one 2% in Q4.

Derek: We ended Q4 with $3 4 billion in cash and marketable securities on hand, and just $36 million of debt maturing in 2025.

Derek: For the full year, we generated $5 $36 billion in revenue, reflecting 16% year over year growth driven primarily by continued progress in lower funnel direct response revenue.

Derek: Adjusted EBITDA was $276 million in Q4 up from $159 million in Q4 of the prior year.

Derek: We delivered $509 million and adjusted EBITDA, representing adjusted EBITDA flow through of 46%.

Derek: Collecting higher revenue and operating expense discipline.

Derek: Importantly, we came within or below our full year cost structure guidance across all key metrics announced at the beginning of 2024 as we managed our investment levels in balance with the rate of revenue growth realized by our business.

Derek: And as we look ahead to 2025, we see additional opportunities to invest productively in scaling our business given the foundational improvements we have made to our AD platform and the momentum we have established in our go to market initiatives, particularly the SMB segment, our investment plans for 2025 reflect this.

Derek: <unk>.

Derek: We achieved net income of $9 million in Q4 compared to a net loss of $248 million in Q4 of the prior year.

Derek: The $257 million year over year improvement reflects the flow through of a $117 million improvement in adjusted EBITA of $78 million or 23% reduction in stock based compensation and related expenses.

Derek: Optimism alongside a strong commitment to make further financial progress towards profitability as we scale.

Derek: Just as we did in 2024.

Derek: Favorable net investment impacts of $27 million due.

Derek: Our intention is to calibrate our investments to revenue growth as we move through the year. As a result, we estimate that infrastructure cost per <unk> will be within a range of 82 to.

Lauralee: Lauralee to losses incurred in the prior year.

Lauralee: And an improvement of $22 million in nonrecurring items due to business restructuring costs incurred in the prior year.

Derek: To <unk> 87 per quarter in 2025.

Lauralee: Free cash flow was $182 million in Q4, while operating cash flow was $231 million over the trailing 12 months free cash flow was $219 million.

Derek: We anticipate starting out at the low end of this range in Q1, as we benefit from recent pricing improvement.

Derek: And progressing to the higher end of this range as we move through the year driven by planned investments to move toward even larger models and near real time model refreshes, we estimate that the remaining components of adjusted cost of revenue will be a COVID-19% to 20% of revenue in each quarter of 2025.

Lauralee: And operating cash flow was $413 million.

Lauralee: As we continue to balance investments with top line growth to deliver sustained positive cash flow dilution or the year over year growth in our share count, which just one 2% in Q4.

Lauralee: We ended Q4 with $3 4 billion in cash and marketable securities on hand, and just $36 million of debt maturing in 2025.

We expect to grow full time head count by 8% to 10% over the course of 2025 with.

Derek: With the related costs growing slightly faster due to moderate wage inflation.

Lauralee: For the full year, we generated $5 $36 billion in revenue, reflecting 16% year over year growth driven primarily by continued progress in lower funnel direct response revenue.

Derek: We also anticipate that higher legal costs associated with litigation and compliance will contribute to adjusted operating expense growth as a.

Lauralee: We delivered $509 million and adjusted EBITDA, representing adjusted EBITDA flow through of 46% and.

Derek: We estimate that full year adjusted operating expenses will be between $2 7 billion and $2 75 billion.

Accordingly, we came within or below our full year cost structure guidance across all key metrics to announced at the beginning of 2024 as we managed our investment levels in balance with the rate of revenue growth realized by our business.

Derek: Our FTC and related expenses, we anticipate growth to be approximately in line with the employee population growth, resulting in an estimated full year SBC expense of one five to $1 2 billion.

Lauralee: As we look ahead to 2025, we see additional opportunities to invest productively in scaling our business given the foundational improvements we have made to our AD platform and the momentum we have established in our go to market initiatives, particularly the SMB segment, our investment plans for 2025 reflect this.

Derek: For Q1, specifically, we anticipate continued growth of our global community and our Q1 guidance is built on the assumption that <unk> will be approximately $459 million in Q1.

Derek: Our Q1 guidance range for revenue is 132 5 billion to $1 $3 6 billion.

Lauralee: Optimism alongside a strong commitment to make further financial progress towards profitability as we scale.

Derek: We estimate infrastructure cost per day in Q1 will be at the low end of the full year guidance range, while all other cost of revenue as a percentage of revenue will be within our full year cost structure range of 19% to 20% for adjusted operating expense, we estimate year over year growth of 11% to <unk>.

Lauralee: Just as we did in 2024.

Our intention is to calibrate our investments to revenue growth as we move through the year. As a result, we estimate that infrastructure cost per <unk> will be within a range of 82%.

Derek: <unk> percent in Q1.

Lauralee: The <unk> 87 per quarter in 2025.

Derek: Driven by growth in head count higher legal related costs and a C.

Lauralee: We anticipate starting out at the low end of this range in Q1, as we benefit from recent pricing improvements and progressing to the higher end of this range as we move through the year driven by planned investments to move toward even larger models and near real time model refreshes, we estimate that the remaining components of it.

Derek: Seasonal shift of marketing expenses into Q1 relative to the prior year.

Derek: In addition, we have committed approximately $5 million to support communities and team members impacted by the recent wildfires to date in Q1 and anticipate we may make further commitments over time.

Lauralee: Adjusted cost of revenue will be a COVID-19% to 20% of revenue in each quarter of 2025.

Derek: Given the revenue range above and our investment plans for the quarter ahead, we estimate that adjusted EBITDA will be between $40 million and $75 million in Q1.

Lauralee: We expect to grow full time head count by 8% to 10% over the course of 2025.

Derek: As we continue to execute in the quarters ahead, we remain focused on growing and serving our community through innovative and responsible products that foster meaningful connections amongst snap chatters.

Lauralee: With the related costs growing slightly faster due to moderate wage inflation.

Lauralee: We also anticipate that higher legal costs associated with litigation and compliance will contribute to adjusted operating expense growth.

Derek: Strengthening our Dr business to deliver a measurable rollout for our advertising partners.

Lauralee: As a result, we estimate that full year adjusted operating expenses will be between $2 7 billion and $2 75 billion.

Derek: Diversifying our revenue streams to drive sustainable topline growth.

Derek: And scaling our investments strategically to deliver meaningful and sustained profitability and positive free cash flow.

Lauralee: Our FTC and related expenses, we anticipate growth to be approximately in line with the employee population growth, resulting in an estimated full year SBC expense of one five to $1 2 billion.

Derek: Thank you for joining our call today, and we will now take your questions.

Derek: Thank you.

Derek: We'll now begin the Q&A session.

Derek: To ask a question you May Press Star then one on your Touchtone phone.

Lauralee: For Q1, specifically, we anticipate continued growth of our global community and our Q1 guidance is built on the assumption that <unk> will be approximately $459 million in Q1.

Derek: If youre using a speakerphone please pick up your handset before pressing the keys.

Derek: To withdraw your question. Please press Star then two.

Derek: At this time, we exited please limit yourself to one question.

Lauralee: Our Q1 guidance range for revenue is 132 5 billion to $1 $3 6 billion.

Derek: After your initial question as act your line will be muted.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Lauralee: We estimate infrastructure cost per day in Q1 will be at the low end of the full year guidance range, while all other cost of revenue as a percentage of revenue will be within our full year cost structure range of 19% to 20% for adjusted operating expense, we estimate year over year growth of 11% to <unk>.

Speaker Change: Our first question comes from Doug Anmuth with Jpmorgan. Your line is now open.

Doug Anmuth: Thanks, So much for taking my question can you talk about the early results around simple snap now that it's rolled out to more than 25 million users are you seeing any differences across user geos and how are you managing any user or advertiser budget disruption or impact associated with the Roe.

Lauralee: 12% in Q1.

Lauralee: Driven by growth in head count higher legal related costs and a C.

Lauralee: Seasonal shift of marketing expenses into Q1 relative to the prior year.

Speaker Change: Thanks.

Lauralee: In addition, we have committed approximately $5 million to support communities and team members impacted by the recent wildfires to date in Q1 and anticipate we may make further commitments over time.

Doug Anmuth: Hi, Doug. Thanks, so much for the question, we're definitely continuing to see encouraging testing results, especially with engagement.

Doug Anmuth: Metrics like increased content active days, so we are seeing more casual users.

Lauralee: Given the revenue range above and our investment plans for the quarter ahead, we estimate that adjusted EBITDA will be between $40 million and $75 million in Q1.

Doug Anmuth: Our content experiences more frequently I think there are sort of two big puzzle pieces that we're still working on as it pertains to the rollout.

Lauralee: As we continue to execute in the quarters ahead, we remain focused on growing and serving our community through innovative and responsible products that foster meaningful connections amongst snap chatters.

Doug Anmuth: First is migrating story AD demand, which was typically build in those titles on the stories page migrating that to the in feed ore to our sponsored snap unit and so that's going to be a priority on the.

Lauralee: Strengthening our Dr business to deliver measurable rollouts for our advertising partners.

Doug Anmuth: On the advertising side and then in terms of engagement. There is still a cohort of users who really come to snapchat or our stories page four the current tile based lay out to the creators and publishers that they love and we still haven't been able to claw back some of the engagement losses, we're seeing with that cohort. So we're very.

Lauralee: Diversifying our revenue streams to drive sustainable top line growth.

Lauralee: And scaling our investments strategically to deliver meaningful and sustained profitability and positive free cash flow.

Lauralee: Thank you for joining our call today, and we will now take your questions.

Lauralee: Thank you.

Doug Anmuth: Focused on continuing to iterate there, we've got a number of ideas.

Lauralee: We'll now begin the Q&A session.

Lauralee: To ask a question you May Press Star then one on your Touchtone phone.

Doug Anmuth: On how we can solve.

Doug Anmuth: So both of those both of those pieces and we're going to work on rolling those out in the coming weeks and months.

Lauralee: If youre using a speakerphone please pick up your handset before pressing the keys.

Lauralee: To withdraw your question. Please press Star then two.

Doug Anmuth: Okay.

Lauralee: And answered at this time, we exited please limit yourself to one question.

Unknown Moderator: Our next question comes from Rich Greenfield with flagship partners.

Doug Anmuth: Your line is now open.

Lauralee: After your initial question is ask your line will be muted.

Rich Greenfield: Hi, I've got two kind of high level questions Youre, the only mobile AD platform that has built a robust subscription business and snap plus I think it's now like almost 10% of total revenues and it's by far your fastest driver of growth I guess, Evan how should we think about the growth potential in terms of not just subscribers and <unk>, but what are the features that you can add.

Lauralee: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Our first question comes from Doug Anmuth with Jpmorgan. Your line is now open.

Doug Anmuth: That would make this an even more meaningful product.

Doug Anmuth: Thanks, So much for taking the question can you talk about the early results around simple snap now that it's rolled out to more than 25 million users are you seeing any differences across user geos and how are you managing any user or advertiser budget disruption or impact associated with the roll.

Doug Anmuth: Going forward and then given everything that's happened with deep seek and sort of China based AI in terms of innovations over the course of the past couple of weeks. Just curious how you think the cost curve may be changing for AI and how that impacts the snap cost structure over the coming year.

Speaker Change: Thanks.

Unknown Moderator: Thanks Rich for the question Yeah on startup cost. So we're really excited about the progress there and theres definitely been a lot of adoption, especially of our personalization features you know people really like feeling like the App has made for them and changing its appearance or the icon those sorts of things.

Speaker Change: Hi, Doug. Thanks, so much for the question, we are definitely continuing to see encouraging testing results, especially with engagement.

Speaker Change: Engagement metrics like increased content active days, so we are seeing more casual users.

Unknown Moderator: As we look at the roadmap for future development one of the areas. We're focused on is just the core engagement loop, but snapping and how we can make that more differentiated our snapshot plus features so that'll be a priority.

Speaker Change: Enjoy our content experiences more frequently I think there are sort of two big puzzle pieces that we're still working on as it pertains to the rollout.

Speaker Change: The first is in migrating story AD demand, which was typically build in those tiles on the stories page migrating that to the in feed ore to our sponsored snap unit and so that's going to be a priority on the.

Speaker Change: This year and I also think there will be room for some price increases I think the annual plan here in the U S is about $202 50, a month and I think folks have indicated that.

Unknown Moderator: But they are getting a lot of value from from sapped up plus so that may be another avenue.

Speaker Change: On the advertising side and then in terms of engagement. There is still a cohort of users who really come to snapchat or our stories page four the current tile based lay out to the creators and publishers that they love and we still haven't been able to claw back some of the engagement losses, we're seeing with that cohort. So we're.

Unknown Moderator: In terms of growing <unk> over the longer term.

Unknown Moderator: As it pertains to deep Sea I mean first I would just say its been really inspiring to see the innovation there I loved I think the founder made a comment along the lines of how capital is just not a long term mode in the technology business and the way that constraints really can drive innovation and creativity and so that was that was definitely an exciting.

Speaker Change: Very focused on continuing to iterate there we've got a number of ideas.

Speaker Change: On how we can solve.

Speaker Change: Both of those both of those pieces and we're going to work on rolling those out in the coming weeks and months.

Unknown Moderator: Development for the industry, but I think it just further validates our view that a lot of these models, we're going to continue to become commoditized over time and obviously.

Okay.

Speaker Change: Our next question comes from Rich Greenfield with <unk> partners your.

Unknown Moderator: Are going to become more and more efficient to run so.

Speaker Change: Your line is now open.

Unknown Moderator: Hopefully that will have some impact for us over the longer term I think right now we're just sort of in the early experimentation phase with some of their open source work.

Rich Greenfield: Hi, I've got two kind of high level questions here, the only mobile AD platform. That's built a robust subscription business and snap plus I think it's now like almost 10% of total revenues and it's by far your fastest driver of growth I guess, Evan how should we think about the growth potential in terms of not just subscribers and <unk>, but what are the features that you can add that.

Unknown Moderator: Okay.

Speaker Change: Our next question comes from Mark Shmulik with Bernstein.

Speaker Change: Your line is now open.

Speaker Change: Hi, This is luisa dialing in for Mark Shmulik can.

Speaker Change: Make this an even more meaningful product.

Speaker Change: Can you provide any color on what you've seen around engagement and advertiser behavior. Since Tictoc went dark in the App stores and hopefully we will get an answer one way or another on pick talk resolution soon but how does it affect the way you think about priorities for the year and where do you expect the most nimble and will it be simple snapshot.

Rich Greenfield: Going forward and then.

Speaker Change: Given everything that's happened with deep seek and sort of China based AI in terms of innovations over the course of the past couple of weeks. Just curious how you think the cost curve may be changing for AI and how that impacts the snap cost structure over the coming year.

Speaker Change: Hey, Thanks Rich for the question Yeah on snapshot plus so we're really excited about the progress there and there's definitely been a lot of adoption, especially of our personalization features you know people really like feeling like the App has made for them and changing its appearance or the icon those sorts of things I think as we look at the roadmap for future development one of the areas.

I believe you said thanks, so much for the question.

Speaker Change: I think so.

Speaker Change: Some of the changes would take that they've sort of been on I guess on in an imperfect experiment. So we're not trying to draw too many conclusions from some of the engagement lift we saw when when the App.

Speaker Change: We're focused on is just the core engagement loop, but snapping and how we can make that more differentiated our snapshot plus features so that'll be a priority.

Speaker Change: Went dark for that brief period of time.

Speaker Change: I'd say that the overall environment of uncertainty is benefitting our business I mean, certainly advertisers are very focused on contingency planning and diversifying their spend and I think the same goes for creators who are really thinking hard about how they can build the most diversified engagement with their fan base.

Speaker Change: This year and I also think that there will be room for some price increases I think the annual plan here in the U S is about $202 50, a month and I think folks have indicated.

Speaker Change: But theyre getting a lot of value from from Samsung So that may be another avenue.

Speaker Change: In terms of growing <unk> over the longer term.

Speaker Change: As it pertains to deep Sea I mean first I would just say its been really inspiring to see the innovation there I I Love I think the founder made a comment along the lines of how capital is just not a long term mode in the technology business and the way that constraints really can drive innovation and creativity and so that was that was definitely an exciting.

Speaker Change: Improving that that overall creation flywheel and that's why we're seeing a 40% increase in the number of creators posting to Snapchat and I think in Q4, we actually reached a $1 billion public posts a months on Snapchat. So the public content ecosystem is growing and it.

Speaker Change: Development for the industry, but I think it just further validates our view that a lot of these models, we're going to continue to become commoditized overtime and obviously.

Speaker Change: Really nice and healthy way.

Speaker Change: So we're just going to continue our focus there when it comes to our strategy and participation.

Speaker Change: Are going to become more and more efficient to run so.

Speaker Change: Hopefully that that will have some impact for us over the longer term I think right now we're just sort of in the early experimentation phase with some of their open source work.

Speaker Change: Our next question comes from Dan Salmon with New Street Research. Your line is now open.

Dan Salmon: Great. Good afternoon, thanks for taking the question.

Speaker Change: Okay.

Evan I'd love to just dig into small and medium size advertisers grow Tomorrow. You noted it was the biggest contributor to add revenue in 2024, and the letter and snap promote remains a big part of that.

Speaker Change: Our next question comes from Mark Shmulik with Bernstein. Your line is now open.

Speaker Change: Okay. This is luisa dialing in for Mark Wallach can.

Speaker Change: Could you just talk a little bit more about what the team is doing to leverage that growth, helping them expand beyond that.

Speaker Change: Can you provide any color on what you've seen around engagement and advertiser behavior since tick tock with dark and the App stores and hopefully we will get an answer one way or another on Pip talk resolution soon but how does it affect the way you think about priorities for the year and where do you expect to be most nimble and will it be simple snapshot.

Speaker Change: <unk> ads manager accounts start to get a little bit more sophisticated on the platform on the platform excuse me.

Speaker Change: And then.

Speaker Change: You talked a little bit last quarter about how that snap promote let's go straight into the go to market team to help facilitate that.

Speaker Change: I believe you said thanks, so much for the question.

Speaker Change: Other initiatives that you'd highlight to help accelerate that growth.

Speaker Change: I think so.

Speaker Change: Some of the changes would take that there's sort of been on I guess on in an imperfect experiment. So we're not trying to draw too many conclusions from some of the engagement lift we saw when when the App.

Speaker Change: <unk> AD products in general that you'd see that group really picking up with that.

Speaker Change: Taking up strongly.

Speaker Change: Went dark for that brief period of time.

Speaker Change: Hey, Dan It's Derek speaking I will take that one first we.

Speaker Change: We are really pleased with what we're seeing with the SMB segment, it's been a big focus area over the last year, there's sort of a combination here of more performance. Dr. AD products. The improvements we made to our go to market operations that are specifically optimizing them for the SMB segment and then we've done a lot of work to simplify the AD buying experience <unk>.

Speaker Change: Across various platforms, including Snapchat, So a big priority for US is really just helping make sure we support advertisers and creators during this period of uncertainty and for creators in particular, we've been spending a lot of time working on just improving that that overall creation flywheel and that's why we're seeing a 40% increase in the number of creators posting its a snapshot.

Speaker Change: <unk>.

Speaker Change: Elements that are automated make it a lot easier for our SMB advertisers to get started.

Speaker Change: Advertisers in the SME segment in particular benefited from a growing number of copy integration partners, including for example, snowflake data hash helium and <unk> to make it really fast and easy to integrate and benefit from the improved performance of Kathy can deliver snap promote as you noted is also a key driver of the SMB advertiser growth.

Speaker Change: And I think in Q4, we actually reached a $1 billion public posts a months on Snapchat. So the public content ecosystem is growing and a really nice and healthy way and so we're just going to continue our focus there when it comes to our strategy and parts station.

Speaker Change: It makes it really easy for folks to get started right within the App and this contributed in part to the active advertisers from the segment more than doubling year over year in Q4.

Speaker Change: Yeah.

Dan Salmon: Our next question comes from Dan Salmon with New Street Research. Your line is now open.

Speaker Change: To build on this momentum we have got a pretty robust roadmap of enhancements on the way for us to be clients. Just as an example, there will be testing in Q1, our new smart budget optimization feature which will automatically adjust campaign budgets across ADCETRIS to deliver the best results for the advertiser.

Dan Salmon: Great. Good afternoon, thanks for taking the questions.

Speaker Change: Kevin I'd love to just dig into small and medium size advertisers gross margin. You noted it was the biggest contributor to our revenue in 2024, and the letter and snapped promote remains a big part of that could.

Speaker Change: So thats a big part of it you'll also note in some of our investments that we're looking on the year ahead, not just the investments in product and to deliver the averages and roadmap, but also more resources specifically to help scale. The F&B segment. So hopefully that gives you a little bit of color about what's been driving the success, there and how we'll be investing going forward.

Speaker Change: Could you just talk a little bit more about what the team is doing to leverage that growth.

Speaker Change: <unk>.

Speaker Change: Extend beyond fat from the field.

Speaker Change: Built for ads manager accounts start to get a little bit more sophisticated on the platform on the platform excuse me.

Speaker Change: And then.

Speaker Change: You talked a little bit last quarter about how that snap promote let's go straight into the go to market team to help facilitate that any other initiatives that you'd highlight to help accelerate that growth or other AD products in general that you see that group.

Speaker Change: Our next question comes from James <unk> with Jefferies. Your line is now open.

James: Okay, Great guys. Thanks for the question what if anything is factored into your Q1 revenue and user growth guidance as it relates to the rollout of Snapchat is it fair to say, we're just too early for that to be meaningfully impacting results right now or that maybe it could kind of.

Speaker Change: Really picking up with that.

Speaker Change: Up strongly.

Speaker Change: Hey, Dan It's Derek speaking I will take that one first we are really pleased with what we're seeing with the SMB segment. It's been a big focus area over the last year, there's sort of a combination here of more performance. Dr. AD products. The improvements we made to our go to market operations.

Speaker Change: Later in the quarter. Thank you.

Speaker Change: Hi, there thanks for the question as it pertains.

Speaker Change: Pertains to the guide both for revenue and user growth and some will snapchat theres really nothing material factored into either of those around staples com chat, we're being really thoughtful as Evan mentioned earlier around the testing and learning in some of the things that we're rolling out.

Specifically optimizing them for the SMB segment, and then we've done a lot of work to simplify the AD buying experience, including.

Speaker Change: Sort of optimize that experience and so that's not really a big factor in how were thinking about either the engagement growth further revenue growth in the coming quarter, it's really about the momentum that we're seeing in the business.

Speaker Change: Elements that are automated make it a lot easier for our SMB advertisers to get started.

Speaker Change: Advertisers in the us.

Speaker Change: <unk> segment in particular benefited from a growing number of copy integration partners, including for example, snowflake data hashed helium and live ramp to make it really fast and easy to integrate and benefit from the improved performance that Kathy can deliver snap promote as you noted is also a key driver of the SMB advertiser growth. It makes it really easy for.

Speaker Change: Both in terms of the momentum on the Dr side overall, some of the SMB strength that I, just mentioned earlier and the growth that we're seeing in the global community and more recently, so hopefully that helps a little bit and we'll continue to test and learn going forward.

Speaker Change: Our next question comes from <unk> <unk> with Wolfe Research. Your line is now open.

Speaker Change: Hopes to get started right within the App and this contributed in part to the active advertisers from the segment more than doubling year over year in Q4 to.

Speaker Change: Okay. Thank you for taking my question.

Speaker Change: To build on this momentum we've got a pretty robust roadmap of enhancements on the way for SMB clients. Just as an example, there will be testing in Q1, our new smart budget optimization feature which will automatically adjust campaign budgets across ADCETRIS to deliver the best results for the advertiser.

Speaker Change: Let me try two please.

Speaker Change: First one is just generally on verticals.

Speaker Change: Comment on overall demand environment as you see both across brand and Dr. And then anything that jumped out to you that way.

Speaker Change: In terms of demand trends, specifically muted trends that you saw or strength and then my second question.

Speaker Change: And so that's a big part of that you also note in some of our investments that we're looking on the year ahead, not just the investments in products and to deliver the averages and roadmap, but also more resources specifically to help scale. The F&B segment. So hopefully that gives you a little bit of color about what's been driving the success, there and how we'll be investing going forward.

Speaker Change: Please call Us and I think this was asked a bit earlier, but let me try it one more time.

Speaker Change: Do you think about efficiency gains in our compute costs over the next year can you give us a three years. How are you thinking about where you would realize them. The most and how are you positioned to realize those gains. Thanks a lot.

Speaker Change: Yeah.

Speaker Change: Our next question comes from James <unk> with Jefferies. Your line is now open.

Speaker Change: Hey, there thanks for the question to start speaking.

Speaker Change: On vertical specifically, what we're really seeing there is that we get the best results in verticals, where we've really built out great product market fit.

Speaker Change: Okay, Great guys. Thanks for the question what if anything is factored into your Q1 revenue and user growth guide as it relates to the rollout of Snapchat is it fair to say, we're just too early for that to be meaningfully impacting results right now or that maybe it could kind of occur later in the quarter. Thank you.

Speaker Change: If you think for example, it's been about a year and a half since we rolled out the new seven zero pixel purchase optimization and Thats been a very big driver of the Dr business over the last year and we're seeing really good results in retail CPG and health and wellness without particular optimization and of course broadening out from there.

Speaker Change: Hey, there. Thanks for the question is it.

Speaker Change: Pertains to the guide both for revenue and user growth and some will snapchat theres really nothing material factored into either of those around Sipelstein, Chad, we're being really thoughtful as Evan mentioned earlier around the testing and learning in some of the things that we're rolling out.

Speaker Change: As we've been able to make progress on rolling out for testing and then general availability some of the improvements to other optimizations, we see the product market fit expand so for example, we added a number of enhanced outpaced optimizations around mid year or 24 based on our new sort of MLR architecture on product stack and we're seeing.

Speaker Change: That work really well for more verticals. So for example.

Speaker Change: We saw more than 70% year over year growth with our purchase optimizations in Q4, and we're seeing that work for our gaming our retail E comm and financial services verticals and so as we're able to make more progress in rolling out our improved AD stack against different optimizations that really helps us expand the applicability of those to more more verticals.

Speaker Change: That helps a little bit and we'll continue to test and learn going forward.

Speaker Change: Okay.

Speaker Change: Our next question comes from <unk> with Wolfe Research. Your line is now open.

Speaker Change: And make more progress on compute costs I think what we've seen over the long term.

Speaker Change: Okay. Thank you for taking my question.

Speaker Change: Let me try two please the first one is just generally on verticals could you. Please comment on overall demand environment as you see it.

Speaker Change: A couple of things really go our way there.

Speaker Change: One our teams have been very good about.

Speaker Change: Both across brand and Dr. And then anything that jumped out to you that way.

Speaker Change: Innovating very quickly getting products out to our community really quickly and then based on what we see in utilization being able to migrate between skus with cloud partners and to optimize our own code base in order to use.

Speaker Change: Terms of demand trends, specifically muted trends that you saw or Frank and then my second question.

Speaker Change: And it's causing I think this was asked a bit earlier, but let me try it one more time.

Speaker Change: Infrastructure as efficiently as possible and I think what you are seeing.

Speaker Change: You think about efficiency gains in your compute thoughts over the next year can you go three years, how are you thinking about where you would realize them. The most and how are you positioned to realize those gains. Thanks a lot.

Speaker Change: It's being able to get better and better over time and it allows us to move really quickly and then come behind ourselves and be more efficient and it's one of the wonderful things about having a cloud first model is that you are not making these fixed commitments to infrastructure that are harder than roll off from.

Speaker Change: Yeah.

Hey, there thanks for the question to start speaking.

Speaker Change: On vertical specifically, what we're really seeing there is that we get the best results in verticals, where we've really built out great product market fit. So if you think for example, it's been about a year and a half since we rolled out the new seven zero pixel purchase optimization and Thats been a very big driver of the Dr business over the last year and.

Speaker Change: I think the other thing is that our own scale is helping us and we've seen that through our own pricing improvements. Most recently and as we were able to take advantage of really advanced Skus early in the going and then as we grow the scale on those and they become more commoditized, we're able to bring our rates down and youre seeing that both in the Q4 results shrimp croaker Dow and of course, there won't be any.

Speaker Change: We're seeing really good results in retail CPG and health and wellness without particular optimization and of course broadening out from there as we've been able to make progress on on rolling out for testing and then general availability some of the improvements to other optimizations, we see the product market fit expand so for example, we added a number.

Speaker Change: <unk>, our estimate would be for Q1 as well so the key here is to keep vigilant on that constantly be pushing for the best pricing in market and to work with our teams to really optimize our cost structure and the skus that we're using overtime in order to have the most efficient possible infrastructure stack. Thanks.

Speaker Change: Thanks for the question much appreciate it.

Speaker Change: Of enhanced outpaced optimizations around midyear of 2004 based on our new sort of MLR architecture on product stack and we're seeing that work really well for more verticals. So for example.

Ken Garosci: Our next question comes from Ken Garosci with Wells Fargo. Your line is now open.

Ken Garosci: Thank you very much two questions. Please on the outside.

Ken Garosci: First.

Speaker Change: We saw more than 70% year over year growth with App purchase optimizations in Q4, and we're seeing that work for our gaming our retail E comm and financial services verticals and so as we're able to make more progress in rolling out our improved AD stack against different optimizations that really helps us expand the applicability of those to more more verticals.

Ken Garosci: Kind of on the upper funnel brand side.

Ken Garosci: Continued weakness there could you talk a little bit about from a category perspective, or do you continue to see pressure in the same category as you talked about food and beverage in the past.

Ken Garosci: But as that broaden out or does that roughly similar.

Ken Garosci: And where do you see the opportunities are there new categories that are potential opportunities there on the upper funnel brand side and then the second one on the lower funnel side.

Speaker Change: And make more progress.

Speaker Change: <unk> costs I think what we've seen over the long term.

Speaker Change: A couple of things really go our way there.

Ken Garosci: Nice progress on doubling the number of advertisers could.

Speaker Change: One our teams have been very good about.

Ken Garosci: Could you talk about just the typical ramp period for those advertisers in terms of getting to kind of what maybe a full run rate.

Ken Garosci: The volume increase is great. The question is should we see continued momentum there.

Ken Garosci: On the direct response side and.

Speaker Change: Infrastructure as efficiently as possible and I think what youre seeing is us being able to get better and better about over time and it allows us to move really quickly and then come behind ourselves and be more efficient and it's one of the wonderful things about having a cloud first model is that youre not making these fixed commitments to infrastructure that are hard to then roll off from.

Ken Garosci: On the lower funnel side.

Speaker Change: Volume increase thank you.

Speaker Change: Hi, there Ken Thanks for the question.

Speaker Change: As it pertains to the sort of upper funnel business and the source of the weakness there specifically it continues to be concentrated in a relatively small number of larger uplift frontal oriented advertisers I think our real focus there in terms of being able to reignite growth in this category and make progress is number one we're focused on.

Speaker Change: I think the other thing is that our own scale is helping us and we've seen that through our own pricing improvements. Most recently and as we were able to take advantage of really advanced Skus early in the going and then as we grow the scale on those when they become more commoditized, we're able to bring our rates down and youre seeing that both in the Q4 result, shrimp croaker, Dow and <unk> and of course it will be.

Speaker Change: Accelerating our product innovation and specifically we are encouraged by the incremental reach that advertisers have realized in the early rollout of sponsored snaps and the positive feedback we're hearing from clients and agencies in those products. So looking forward to making that solution available to more partners over the course of the year ahead.

Speaker Change: Our estimate would be for Q1 as well so the key here is to keep vigilant on that to constantly be pushing for the best pricing in market and to work with our teams to really optimize our cost structure and the skus that we're using overtime in order to have the most efficient possible infrastructure stack. Thanks.

Speaker Change: Prioritizing support for large brands and agencies by offering enhanced client support easier platform integrations and advanced measurement tools. So for example last year, we launched a partnership with video am to provide agencies with the reach planning and measurement tools that enable agencies to build multichannel media plans and then have the visibility to key metrics.

Speaker Change: Thanks for the question much appreciate it.

Ken Garosci: Our next question comes from Ken Garosci with Wells Fargo. Your line is now open.

Speaker Change: Thank you very much two questions. Please on the outside.

Speaker Change: <unk> and incremental reach and so we're going to keep leaning into those innovations in order to be able to.

Ken Garosci: First.

Ken Garosci: Kind of on the upper funnel brand side.

Speaker Change: Deliver improved performance for those advertisers I also think it's just important to maintain our real focus and priority around diversifying the business and leaning into the places that are the focus of our roadmap. So.

Speaker Change: Continued weakness there could you talk a little bit about from a category perspective are you continuing to see pressure in the same category. So you talked about food and beverage in the past.

Ken Garosci: But as that broaden out or does that roughly similar.

Speaker Change: As much as we'd like to see this category grow a lot faster I think it's important that we have our resources focused on doubling down on the momentum that we're seeing with our direct response business.

Ken Garosci: And where do you see the opportunities that are there new categories that are potential opportunities there on the upper funnel brand side and then the second one on the lower funnel side.

Speaker Change: Doubling down on the momentum that we're seeing with the SMB category and of course, continuing divest two investments timeshare plus so that over time, we continue to build a business that is more resilient more performance based and more diversified.

Ken Garosci: Nice progress on doubling the number of advertisers could.

Ken Garosci: Could you talk about just the typical ramp period for those advertisers in terms of getting to kind of what maybe a full run rate.

Ken Garosci: The volume increase is great. The question is should we see continued momentum there.

Speaker Change: And that sort of gets into your second question around.

Speaker Change: The drivers of growth and what we're seeing around customer ramps on our lower funnel and I think it's important to think about the dichotomy between the growth in the active advertisers were really excited to see once again that we were able to more than double the active advertisers and you are seeing that being driven from account perspective by smaller customers, which is.

Ken Garosci: On the direct response side and on.

Ken Garosci: The lower funnel side.

Ken Garosci: Volume increase thank you.

Ken Garosci: Ken Thanks for the question.

Ken Garosci: As it pertains to the sort of upper funnel business and the source of the weakness there specifically it continues to be concentrated in a relatively small number of larger upper frontal oriented advertisers I think our real focus there in terms of being able to reignite growth in this category and make progress is number one we're focused on.

Speaker Change: Really exciting and snap promote is a very helpful tool in that regard, but then the overall growth in revenue of course is going to come even more from folks as they either grow into the medium advertiser segment or or that start out there.

Ken Garosci: Accelerating our product innovation and specifically we are encouraged by the incremental reach that advertisers are realized in the early rollout of sponsored snaps and the positive feedback we're hearing from clients and agencies in those products. So looking forward to making that solution available to more partners over the course of the year ahead.

Speaker Change: The key there is really about.

Speaker Change: Ease of getting started.

Speaker Change: So automated campaign set up helping advertisers choose the right optimization right over the gate, helping them choose the right measurement solution with automated tooling and then of course.

Speaker Change: The ability to realize really good results and thats for the improved Dr. AD stack really makes a difference because thats going to be the key in order for us to continue growing the active advertisers in growing the top line, we need to be delivering the returns on advertising expense that folks see that in their ROI and thats going to have them retain and grow their spend over time, so hopefully that.

Ken Garosci: We're also prioritizing support for large brands and agencies by offering enhanced client support easier platform integrations and advanced measurement tools. So for example last year, we launched a partnership with video am to provide agencies with the reach planning and measurement tools that enable agencies to build multichannel media plans and then have the visibility to key metro.

Speaker Change: Gives you a little context around what we're seeing there on both the upper and lower funnel. Thank you.

Ken Garosci: Sections and incremental reach and so we're going to keep leaning into those innovations in order to be able to.

Allen: Our last question comes from the past amount of Allen with Cantor Fitzgerald. Your line is now open.

Ken Garosci: Deliver improved performance for those advertisers I also think it's just important to maintain our real focus and priority around diversifying the business and leaning into the places that are the focus of our roadmap. So.

Speaker Change: Great. Thanks for taking the questions to add product questions first on sponsored snaps that reached some of the advertisers are seeing on the early campaigns looks very strong can you just talk about the go to market strategy. This year for a sponsor snap how fast can you ramp the adoption of this in 2025 and then second.

Ken Garosci: As much as we'd like to see this category grow a lot faster I think it's important that we have our resources focused on doubling down on the momentum that we're seeing with our direct response business.

Allen: One on Dr.

Ken Garosci: Doubling down on the momentum that we're seeing with the SMB category and of course, continuing to divest and to invest in Snapchat, plus so that over time, we continue to build a business that is more resilient more performance based and more diversified.

Allen: We're seeing companies like meta and of those deploy kind of gpus to improve.

Allen: <unk> relevance beyond areas like creative iterations for that product, how do you think about that opportunity to kind of dip to deploy additional compute and drive performance in our <unk>.

Ken Garosci: And that sort of gets into your second question around.

Allen: For us not cri products. Thank you very much.

Ken Garosci: The drivers of growth and what we're seeing around customer ramps on our lower funnel and I think it's important to think about the dichotomy between the growth in the active advertisers were really excited to see once again that we were able to more than double the active advertisers and you are seeing that being driven from account perspective by smaller customers.

Allen: Yeah. Thanks. Thanks, so much for the question in terms of sponsors and so we're really excited about what we're seeing there and one of the reasons why I think the creative execution by advertisers has been really thoughtful which has made for a really sort of native and organic feeling experience for folks who have received sponsored snap. So I think for us as we look at <unk>.

Ken Garosci: It's really exciting and snap promote is a very helpful tool in that regard, but then the overall growth in revenue of course is going to come even more from folks as they either grow into the medium advertiser segment or or that start out there.

Ailing out demand for sponsors now so we want to do that in a way that's thoughtful and that really maintains a high bar for relevance. So we will be starting with our pixel purchase GBP, where we've got a.

Speaker Change: Quite a significant diversity of advertisers.

Ken Garosci: The key there is really about.

Speaker Change: Mid range of creative and really holding a high bar for relevance as we bring that product to our auction and so that'll be the first step and we will learn from that we've already been doing some preliminary testing there.

Ken Garosci: <unk> of getting started.

Ken Garosci: So automated campaign set up helping advertisers choose the right optimization right out of the gate, helping them choose the right measurement solution with automated tooling and then of course.

Ken Garosci: The ability to realize really good results and that's where the improved Dr. AD stack really makes a difference because that's going to be the key in order for us to continue growing the active advertisers are growing the top line, we need to be delivering the returns on the advertising expense that folks see that in their ROI and that's going to have them retain and grow their spend over time, so hopefully that.

Speaker Change: And then of course expand to other <unk> over time as it pertains to our investments in machine learning for our advertising business. This is certainly a huge focus area for the company our AD business benefits a lot from the broader MLP platform investments, we've been making across the company and we are definitely experimenting with things like sequence models.

Speaker Change: And in other.

Ken Garosci: Gives you a little context around what we're seeing there on both the upper and the lower funnel. Thank you.

Speaker Change: Techniques.

Speaker Change: Driving improved relevance.

Speaker Change: Some of these other themes like much larger models and fresher models really benefit our advertising business as well in addition to our content business, even though of course, the corpus of ads is much smaller than the corpus of content that we need to recommend to our community.

Speaker Change: Our last question comes from the pack Mcdonald with Cantor Fitzgerald. Your line is now open.

Speaker Change: Great. Thanks for taking the questions to add product questions first on sponsor snaps that reached some of the advertisers are seeing on the early campaigns looks very strong can you talk about the go to market strategy. This year for a sponsor snap how fast can you ramp the adoption of this in 2025 and then second one.

Speaker Change: This concludes our Q&A session as well as Snap Inc. 's fourth quarter 2024 earnings conference call.

Speaker Change: Thank you all for attending today's session you may now disconnect.

Speaker Change: Dr.

Speaker Change: We're seeing companies like meta and of those deploy kind of Gpus to.

Speaker Change: Improved relevance beyond areas like creative with pricing for that product. How do you think about that opportunity to kind of dip to deploy additional compute and drive performance.

Speaker Change: <unk> snap cri products. Thank you very much.

Speaker Change: Yeah. Thanks. Thanks, so much for the question in terms of the sponsors have so we're really excited about what we're seeing there and one of the reasons why it is I think the creative execution by advertisers has been really thoughtful which has made for a really sort of native and organic feeling experience for folks who have received sponsored snap. So I think for us as we look at scale.

Speaker Change: Going out demand for for sponsors now so we want to do that in a way that's thoughtful and that really maintains a high bar for relevance. So we'll be starting with our pixel purchase GBP, where we've got a.

Speaker Change: Quite a significant diversity of advertisers and wide range of creative and really holding a high bar for relevance.

Speaker Change: As we bring that product to our auction and so that'll be the first step and we will learn from that we've already been doing some preliminary testing there.

Speaker Change: And then of course expand to other <unk> over time as it pertains to our investments in machine learning for our advertising business. This is certainly a huge focus area for the company our AD business benefits a lot from the broader MLP investments, we've been making across the company and we're definitely experimenting with things like sequence models.

Speaker Change: And in other <unk>.

Me too.

Speaker Change: <unk> improved relevance, but.

Speaker Change: This concludes our Q&A session as well as Snap Inc. 's fourth quarter 2024 earnings conference call.

Speaker Change: Thank you all for attending today's session you may now disconnect.

Speaker Change: Yes.

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