Q1 2025 Snap Inc Earnings Call

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Unknown Executive: Good afternoon, everyone, and welcome to SNAP, Inc.'s first quarter 2025 earnings conference call.

Speaker Change: Good afternoon, everyone and welcome to Snap Inc. 's first quarter 2025 earnings conference call. At this time participants are in a listen only mode. I would now like to turn the call over to David Ohmmeter head of Investor Relations you May proceed.

Unknown Executive: At this time, participants are in a listen-only mode.

David Ometer: I would now like to turn the call over to David Ometer, head of investor relations. You may proceed. Thank you and good afternoon everyone.

Speaker Change: Thank you and good afternoon, everyone welcome to snaps first quarter 2025 earnings conference call.

Unknown Executive: Welcome to SNAP's first quarter 2025 earnings conference call.

Evan Spiegel: With us today are Evan Spiegel, Chief Executive Officer and Co-Founder, and Derek Andersen, Chief Financial Officer.

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

Unknown Executive: Please refer to our Investor Relations website at investor.snap.com to find today's press release, earning slides and investor. This conference call includes forward-looking statements which are based on our assumptions as of today. Actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update our disclosure. 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 or Form 10-Q, particularly in the section titled Risk Factors.

Speaker Change: Please refer to our Investor relations website at Investor Snap Dot com to find today's press release earnings slides and Investor letter.

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

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

Speaker Change: 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 or Form 10-Q, particularly in the section titled risk factors.

Unknown Executive: Today's call will include both GAAP and non-GAAP measures. Reconciliation between the two can be found in today's press release. 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. Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call.

Speaker Change: Today's call will include both GAAP and non-GAAP measures.

Speaker Change: Reconciliations between the two can be found in today's press release.

Speaker Change: 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.

Speaker Change: 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. Hi, everyone, and thank you for joining our call. Q1 marked an important milestone for Snap as we reached more than 900 million monthly active users on the way to our goal of 1 billion monthly active users. Our focus on visual communication between friends and family is a strategic advantage that has enabled us to build engaging and retentive services. In Q1, our community grew to 460 million daily active users, an increase of 38 million year-over-year, and content viewers and total time spent watching content grew year-over-year.

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

Evan Spiegel: Hi, everyone and thank you for joining our call.

Evan Spiegel: Q1 marked an important milestone percent as we reached more than 900 million monthly active users on the way to our goal of 1 billion monthly active users or focus on visual communication between friends and family as a strategic advantage that has enabled us to build engaging and retentive services.

Evan Spiegel: In Q1, our community grew to 460 million daily active users an increase of $38 million year over year and content viewers and total time spent watching content grew year over year.

Evan Spiegel: Q1 revenue increased 14% year-over-year to $1.36 billion, driven by the progress we have made with our direct response advertising solutions, continued momentum and driving performance for small and medium-sized businesses, and the growth of our Snapchat Plus subscription business. The benefits of our more focused investments are now evident in our improved profitability and free cash flow generation. In Q1, the combination of top-line progress and expense discipline translated to $108 million of adjusted EBITDA and $114 million of free cash flow. Since the launch of our fifth generation Spectacle smart glasses six months ago, we have expanded our AR platform with new features for developers, introduced innovative lens experiences, and created new opportunities for AR developers to be rewarded for their creations.

Evan Spiegel: Q1 revenue increased 14% year over year to $1 36 billion.

Evan Spiegel: Driven by the progress we have made with our direct response advertising solutions continued momentum in driving performance for small and medium sized businesses and the growth of our snapshot plus subscription business.

Evan Spiegel: Benefits of our more focused investments are now evident in our improved profitability and free cash flow generation in Q1, the combination of top line progress and expense discipline translated to $108 million of adjusted EBITDA and $114 million of free cash flow.

Evan Spiegel: Since the launch of our fifth generation spectacles smart glasses six months ago, we have expanded our platform with new features for developers introduced innovative lens experiences and created new opportunities for developers to be rewarded for their creations.

Evan Spiegel: Key feature updates include global positioning system integration, advanced hand tracking capabilities, an improved keyboard, and in-game leaderboards that are enabling new and engaging Spectacles AR use cases. Our large, hard-to-reach audience, brand-safe environment, and performant advertising platform have made us a valuable partner for businesses that want to grow and reach the next generation of Snapchatter. Given the progress we have made with our advertising platform and the pace of execution against our 2025 strategic priorities, we believe we are well positioned to deliver improved business performance and meaningful positive free cash flow as we make further progress towards GAAP profitability.

Evan Spiegel: Key feature updates include global positioning system integration advanced hand tracking capabilities and improved keyboard and in game leaderboards that are enabling new and engaging spectacles use cases.

Evan Spiegel: Our large hard to reach audience brand safe environment and performance advertising platform have made us a valuable partner for businesses that want to grow and reach the next generation of snap chatters.

Evan Spiegel: Given the progress we have made with our advertising platform and the pace of execution against our 2025 strategic priorities. We believe we are well positioned to deliver improved business performance and meaningful positive free cash flow as we make further progress towards GAAP profitability.

Evan Spiegel: We continue to make progress growing our global community reaching 460 million DAU in Q1, an increase of 7 million quarter over quarter and 38 million or 9% year over year. DAU in North America was 99 million compared to 100 million in the prior quarter and 100 million in the prior year. DAU in Europe was 99 million compared to 99 million in the prior quarter and 96 million in the prior year. DAU and rest of world was $262 million compared to $254 million in the prior quarter and $226 million in the prior year. We continue to see robust growth in our global community driven by ongoing adoption of visual communication in less mature markets.

Evan Spiegel: We continue to make progress growing our global community, reaching $460 million in Q1, an increase of 7 million quarter over quarter, and $38 million or 9% year over year <unk> in North America was $99 million compared to $100 million in the prior quarter and $100 million in the prior year.

Evan Spiegel: And Europe was $99 million compared to $99 million in the prior quarter and $96 million in the prior year.

Evan Spiegel: <unk> and rest of world was $262 million compared to $254 million in the prior quarter and $226 million in the prior year.

We continue to see robust growth in our global community driven by ongoing adoption of visual communication in less mature markets to continue to grow our community in North America and Europe. We are prioritizing innovation in three key areas enhancing our core product value of visual communication investing in our AI and ml models for better content ranking in personalization and strengthening our.

Evan Spiegel: To continue to grow our community in North America and Europe, we are prioritizing innovation in three key areas, enhancing our core product value of visual communication, investing in our AI and ML models for better content ranking and personalization, and strengthening our creator ecosystem. Snapping 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 Q1, we launched new features designed to boost creative expression and deepen connections through snapping, including streamlined group creation for messaging and the ability to replay a snap a Snapchatter has sent to their friends.

Evan Spiegel: Creator ecosystem.

Evan Spiegel: Snapping 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.

Evan Spiegel: In Q1, we launched new features designed to boost creative expression and deepen connections through staffing, including streamline group creation for messaging and the ability to replay a snap a snapshot or listen to their friends.

Evan Spiegel: These updates reflect our ongoing commitment to enhancing the Snapchat experience through visual communication. We are inspired by all the innovative ways our community continues to adopt conversational AI, and we've rolled out enhanced multimodal capabilities through Gemini as we continue to expand image understanding to more geographies. These improvements in MyAI responsiveness resulted in an increase of more than 55% year-over-year in the number of MyAI daily active users in the U.S. Global time spent watching content increased year over year in Q1, reflecting the continued investment in our AI and ML models for better content ranking and personalization.

Evan Spiegel: These updates reflect our ongoing commitment to enhancing the <unk> experience through visual communication.

Evan Spiegel: We are inspired by all the innovative ways. Our community continues to adopt conversational AI and we've rolled out enhanced multimodal capabilities through Gemini as we continued to expand image understanding to more geographies.

Evan Spiegel: These improvements in my responsiveness resulted in an increase of more than 55% year over year and the number of my daily active users in the U S.

Evan Spiegel: Global time spent watching content increased year over year in Q1, reflecting the continued investment in our AI and ml models for better content ranking and personalization.

Evan Spiegel: To further deepen content engagement, we implemented fresher, more responsive machine learning models, doubling the pace at which they integrate new trends and user interaction signals. While we anticipate that it will take several quarters to reach our ultimate goal of near real-time model refreshes, we are encouraged by the results we have achieved to date. The number of views on spotlight posts less than 24 hours old doubled year over year, which contributes to a more engaging, timely, and fresh viewer experience and accelerates the creator posting flywheel. We have been testing a simplified version of Snapchat designed to help new and casual users of our service better understand and navigate the app.

Evan Spiegel: Further deepen content engagement, we implemented fresher more responsive machine learning models, doubling the pace at which they integrate new trends and user interaction signals, while we anticipate that it will take several quarters to reach our ultimate goal of near real time model Refreshes. We are encouraged by the results. We've achieved to date the number of views on spotlight posts less than 24 hours old dub.

Evan Spiegel: <unk> year over year, which contributes to a more engaging timely and fresh viewer experience and accelerates the creator posting flywheel.

Evan Spiegel: We have been testing a simplified version of <unk> designed to help new and casual users of our service better understand and navigate the app, we found that elements like a more prominent spotlight experience and friends' stories within the chat experience contributed to increases in daily content viewers in total content views, particularly among more casual users are most engaged snap chatters consistently.

Evan Spiegel: We found that elements like a more prominent spotlight experience and friend stories within the chat experience contributed to increases in daily content viewers and total content views, particularly among more casual users. Our most engaged Snapchatters consistently demonstrated a preference for a five tab layout, favoring the familiarity of title-based content discovery and a dedicated map tab. Informed by these insights, we have begun testing a refined five tab interface that combines the best of both approaches, bringing more stories to the messaging experience and adding easier access to spotlight now placed directly to the right of the camera.

Evan Spiegel: Greater preference for five tablet favoring the familiarity of tile based content discovery and a dedicated map tab informed by these insights we have begun testing our refined five type of interface that combines the best of both approaches bringing more stories to the messaging experience and adding easier access to spotlight now place directly to the right of the camera.

Evan Spiegel: As always, we are iterating thoughtfully to deliver the most seamless experience for Snapchatters, creators, and our advertising partners. We are committed to growing our creator community and we are prioritizing Snap-native creators who bring fresh, original content to Snapchat, fostering a dynamic and engaging content ecosystem. Over the past year, we onboarded thousands of creators to our Snapstar program, driving strong momentum with a number of spotlight posts by Snapstars growing more than 125% year-over-year in North America in Q1. While we have onboarded thousands of established creators and celebrities, we've also seen significant growth in creators that have achieved Snapstar status by growing their following and business organically on Snapchat.

Evan Spiegel: As always we are iterating thoughtfully to deliver the most seamless experience for snap chatters creators and our advertising partners.

Evan Spiegel: We are committed to growing our creator community and we are prioritizing snap native creators, who bring fresh original contents of snapchat, fostering a dynamic and engaging content ecosystem.

Evan Spiegel: Over the past year, we on boarded thousands of creators to our snap star program driving strong momentum with a number of spotlight posts by snap stars growing more than 125% year over year in North America in Q1.

Evan Spiegel: While we are onboarding thousands of established creators and celebrities. We've also seen significant growth and creators that are achieved snap star status by growing their falling in business organically on Snapchat.

Evan Spiegel: For example, Bridget Ugarte, a 25-year-old advocate for body positivity and mental health, has grown her followers tenfold over the past six months by posting daily to Stories and Spotlight. Augmented reality continues to empower creativity on Snapchat, fueled by the growth of our vibrant AR developer and creator ecosystem. We have supported more than 400,000 AR creators, developers, and teams worldwide who have built over 4 million lenses using Lens Studio. Q1 marked six months since the launch of our fifth generation of Spectacles. To celebrate the occasion, we introduced innovative lenses and platform enhancements, including three advanced hand-tracking capabilities, a phone detector that recognizes when a Snapchatter is holding their phone, a new grab gesture for intuitive control, and improved targeting intent to minimize false positives while typing.

Evan Spiegel: For example, rigid regard day, a 25 year old advocate for body positivity and mental health has grown our followers tenfold over the past six months by posting daily to stories and spotlight.

Evan Spiegel: Augmented reality continues to empower creativity on snapchat fueled by the growth of our vibrant developer and creator ecosystem. We have supported more than 400000 creators developers and teams worldwide, who have built over 4 million lenses using lens studio.

Evan Spiegel: Q1 March six months since the launch of our fifth generation of spectacles to celebrate the occasion, we introduced innovative lenses and platform enhancements, including three advanced hand tracking capabilities, our phone detector that recognizes when our sandpiper is holding their phone a new grand gesture for intuitive control and improved targeting intent to minimize false positives.

Evan Spiegel: We also announced Spectacles Community Challenges, offering prizes to developers for submitting new lenses or enhancing existing ones. 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. In Q1, we made significant progress across our three core advertising platform initiatives, advancing our ML capabilities, enhancing the use of privacy-safe signals, and optimizing ad formats to drive performance for our advertising partners. We improved the freshness of our models and the scale of training data, which increased the rate of model learning by six times and grew the volume of historical interaction data used for training by over five times.

Evan Spiegel: While typing.

Evan Spiegel: Also announced spectacles community challenges offering prizes to developers for submitting new lenses or enhancing existing ones.

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: In Q1, we made significant progress across our three core advertising platform initiatives advancing our ml capabilities enhancing the use of privacy safe signals and optimizing AD formats to drive performance for our advertising partners.

Evan Spiegel: We improved the freshness of our models in a scaled training data, which increased the rate of model learning by six times and grew the volume of historical interaction data used for training by over five times.

Evan Spiegel: Advancements in training speed and increased volume of data is helping to deepen the level of personalization we can provide to our community. In addition, we significantly advanced our app-based advertising models by consolidating several disparate models into a larger integrated and more powerful implementation that better optimizes for app conversion events. This change aligns model learning objectives with advertiser goals by using a broader range of performance signals, moving beyond a narrower view of conversion data that had previously been utilized. Together, these foundational advancements are delivering more relevant ads to Snapchatters and more conversions for advertisers, which contributed in part to SK Ad Network reported app purchases growing more than 30% year over year in Q1.

Evan Spiegel: The advancements in training speed and increase volume of data is helping to deepen the level of personalization, we can provide to our community.

Evan Spiegel: In addition, we significantly advanced our App based advertising models by consolidating several disparate models into a larger integrated and more powerful implementation that better optimizes for App conversion events. This change aligns model learning objectives with advertiser goals by using a broader range of performance signals moving beyond a narrower view of conversion data that had previously.

Evan Spiegel: <unk> been utilized.

Evan Spiegel: Together these foundational advancements are delivering more relevant ads to Sam charters and more conversions for advertisers, which contributed in part to SK network reported app purchases growing more than 30% year over year in Q1.

Evan Spiegel: Our investments in automation and lower funnel optimization tools are delivering value for our advertisers. For example, improvements to our automated target cost bidding strategy helps advertisers scale efficiently by dynamically adjusting bids to meet their desired cost per action. As a result, early adopters are seeing strong gains. Advertisers using target cost bidding strategies on 7-0 pixel purchase and 7-0 pixel sign-up report a 32% drop in cost per purchase and a 16% lift in return on advertising spend, respectively. For example, Headspace, a popular meditation and mindfulness app, saw a two-times increase in conversion volume with a 47% more efficient cost per action after shifting their bid strategy to target cost.

Evan Spiegel: Our investments in automation and lower funnel optimization tools are delivering value for our advertisers for example improvements to our automated target cost bidding strategy helps advertisers scale efficiently by dynamically adjusting bids to meet their desired cost per action.

Evan Spiegel: As a result early adopters are seeing strong gains advertisers using target cost saving strategies on seven zero pixel purchase and seven zero pixel sign up reported 32% drop in cost per purchase and a 16% lift in return on advertising expense respectively.

Evan Spiegel: For example, headspace a popular meditation mindfulness app. So a two times increase in conversion volume with a 47% more efficient cost per action after shifting their bid strategy to target cost to.

Evan Spiegel: To further improve return on ad spend, we launched new high-intent formats for dynamic product ads in Q1, enabling advertisers to move beyond generic catalog images to create richer and more engaging ad experiences. These new multi-product ad formats combine storytelling with performance, showcasing a curated range of products in a visually compelling way that drives stronger down-funnel results. We also continue to invest in our global partnerships ecosystem by building and strengthening relationships with leading marketing technology partners to deliver automation solutions to our advertisers. For example, marketing tech partner ROI Hunter and leading fashion and lifestyle retailer SixthStreet.com leveraged Snap's dynamic product ads, delivering the most relevant and high performing products to the right customers.

Evan Spiegel: To further improve return on AD spend we launched new high intent formats for dynamic product ads in Q1, enabling advertisers to move beyond generic catalog images to create richer and more engaging AD experiences. These new multi product AD formats combined storytelling with performance showcasing a curated range of products and a visually compelling way that drives <unk>.

Evan Spiegel: <unk> down funnel results.

Evan Spiegel: We also continue to invest in our global partnerships ecosystem by building and strengthening relationships with leading marketing technology partners to deliver automation solutions to our advertisers for example, marketing Tech partner, Roy Hunter, and leading fashion and lifestyle retailers sixth Street Dot com leveraged snap dynamic product ads delivering the most relevant and high performing <unk>.

Evan Spiegel: This resulted in a 76% increase in return on ad spend and a 22% reduction in cost per act. We're continuing to strengthen the foundation of our ad platform by improving advertiser signal quality readiness, ensuring advertisers have the actionable signals needed for better optimization and measurement. Our foundational ML work this quarter included data-centric optimization throughout the engineering stack, where we audited, optimized, and improved signals to enhance their timeliness and fidelity. In Q1, the number of advertisers with strong signal setups increased 29% for large advertisers and 48% for mid-sized advertisers, laying the groundwork for improved performance. In addition, the number of advertisers that have adopted our conversions API continues to grow, with over 60% of all direct response ad revenue having now completed conversions API integration.

Evan Spiegel: To the right customers. This resulted in a 76% increase in return on AD spend and a 22% reduction in cost per action.

Evan Spiegel: We're continuing to strengthen the foundation of our AD platform by improving advertiser signal quality readiness, ensuring advertisers have actionable signals needed for better optimization and measurement.

Evan Spiegel: Our foundational ml work this quarter included data centric optimization throughout the engineering stack, where we audited optimized and improved signals to enhance their timeliness and fidelity and Q1, the number of advertisers with strong signal setups increased 29% for large advertisers and 48% for mid sized advertisers laying the groundwork for improved performance.

Evan Spiegel: <unk>.

Evan Spiegel: In addition, the number of advertisers that have adopted our conversions API continues to grow with over 60% of all direct response AD revenue, having now completed conversions API integrations.

Evan Spiegel: We are now working closely with top advertisers to further enhance their signal infrastructure as those with deeper conversions API integrations are seeing even stronger outcomes. For example, FootLocker realized a 49% decrease in cost per action and a more than 100% increase in return on advertising spend by implementing conversions API and leveraging 7.0 optimization per pixel purchase. In Q4 of 2024, we launched Sponsored Snaps to provide advertisers with a unique and impactful way to engage the Snapchat community. In Q1, we began limited testing of Sponsored Snaps as a biddable product in our auction. We began this testing by leveraging our pixel purchase optimization.

Evan Spiegel: We are now working closely with top advertisers to further enhance our signal infrastructure as those with deeper conversions API integrations are seeing even stronger outcomes. For example foot locker realized a 49% decrease in cost per action and a more than 100% increase in return on advertising spend by implementing conversions API and leveraging seven zero optimization.

Evan Spiegel: For pixel purchase.

Evan Spiegel: In Q4, 2024, we launched sponsored <unk> to provide advertisers with a unique and impactful way to engage the Snapchat community. In Q1, we began limited testing of sponsored SaaS is available product in our auction. We began this testing by leveraging our pixel purchase optimization. We are encouraged by the performance outcomes. We are seeing in these tests however, the impact.

Evan Spiegel: We are encouraged by the performance outcomes we are seeing in these tests. However, the impact to revenue in Q1 was less than $10 million, given the limited scale of this testing. Given the encouraging results we have observed to date, we intend to expand Sponsored Snaps to additional regions and bidding goals in the months ahead. Finally, our leadership in augmented reality remains a strategic differentiator. A recent multi-phase research study with Tenuity found that 81% of U.S. Snapchatters agree augmented reality is a fun way to discover new products, and they are 1.6 times more likely than users of other apps to use AR to shop with friends, creating a key opportunity for brands.

Evan Spiegel: Revenue in Q1 was less than $10 million given the limited scale of this testing.

Evan Spiegel: Given the encouraging results we have observed to date, we intend to expand sponsored two additional regions and bidding goals in the months ahead.

Evan Spiegel: Finally, our leadership in augmented reality remains a strategic differentiator a recent multi phase research study with Genuity found that 81% of use snap chatters agree augmented reality is a fun way to discover new products and they were one six times more likely than users of other apps, who used to shop with friends, creating a key opportunity for brands with this.

Evan Spiegel: With this in mind, in Q1, we launched Sponsored AI Lenses, bringing our generative AI-powered AR technology to advertisers and enabling shareable AR experiences on Snapchat. Looking ahead, we see significant opportunity to continue improving return on advertising spend for our partners through deeper investment in AI and ML models, high quality signals, and innovative formats across the funnel.

Evan Spiegel: In mind in Q1, we launched sponsored AI lenses, bringing our generative AI powered AI technology to advertisers and enabling shareable AR experiences on Snapchat.

Evan Spiegel: Looking ahead, we see significant opportunity to continue improving return on advertising spend for our partners through deeper investment in AI and ml models high quality signals and innovative formats across the funnel with that I'd like to turn the call over to Derek to discuss our financial results.

Derek Andersen: With that, I'd like to turn the call over to Derek to discuss our financial results. Thanks, Evan, and good afternoon, everyone. In Q1, total revenue was $1.363 billion, up 14% year-over-year and up 15% year-over-year on a constant currency basis. Advertising revenue was $1.211 billion, up 9% year over year, driven primarily by growth from DR advertising revenue, which increased 14% year over year. Brand-oriented advertising revenue was down 3% year over year due to a combination of softness and upper funnel demand across all regions, as well as the ongoing shift in the mix of our advertising business toward performance-oriented advertising solutions.

Derek: Thanks, Kevin and good afternoon, everyone. In Q1 total revenue was 136 3 billion up 14% year over year and up 15% year over year on a constant currency basis.

Derek: Advertising revenue was one point to one 1 billion.

Derek: Up 9% year over year, driven primarily by growth from Dr advertising revenue, which increased 14% year over year.

Derek: Brand oriented advertising revenue was down 3% year over year due to a combination of softness in upper funnel demand across all regions as well as the ongoing shift in the mix of our advertising business toward performance oriented advertising solutions.

Derek Andersen: This mixed shift is evident in the fact that direct response advertising revenue contributed 75% of our total advertising revenue for the first time in Q1. We continue to drive robust top-line growth from our S&B client segment, and this segment contributed in part to total active advertisers growing by 60% year-over-year in Q1, even as we lapped the launch of Snap Promote in Q1 of the prior year. Other revenue, which is driven primarily by Snapchat Plus subscription revenue, increased 75% year-over-year to reach $152 million in Q1, or just over a $600 million annualized run rate, with Snapchat Plus subscribers reaching nearly $15 million in Q1, an increase of $5 million or 59% year-over-year.

Derek: This mix shift is evident in the fact that direct response advertising revenue contributed 75% of our total advertising revenue for the first time in Q1, we.

Derek: We continue to drive robust topline growth from our SMB client segment and this segment contributed in part to total active advertisers growing by 60% year over year in Q1, even as we lapped the launch of snap promote in Q1 of the prior year.

Derek: Other revenue, which is driven primarily by Snapchat cost subscription revenue increased 75% year over year to reach $152 million in Q1, or just over a $600 million annualized run rate with Snapchat, plus subscribers, reaching nearly $15 million in Q1 and incur.

Derek: Lease of $5 million or 59% year over year.

Derek Andersen: North America revenue growth accelerated to 12% year over year in Q1, up from 8% in the prior quarter, with a faster growth rate in Q1, driven primarily by a higher rate of direct response advertising revenue growth. Europe revenue grew 14% year-over-year and rest of world revenue grew 20% year-over-year with softer brand-oriented advertising demand in these regions, partially offsetting continued strong growth in direct response to advertising revenue and continued momentum in the SMB customer segment in particular in these regions. Global impression volume grew approximately 17% year over year, driven in large part by expanded advertising delivery within Spotlight, as well as creator storage.

Derek: North America revenue growth accelerated to 12% year over year in Q1.

Derek: 8% in the prior quarter with a faster growth rate in Q1, driven primarily by a higher rate of direct response advertising revenue growth.

Derek: Europe revenue grew 14% year over year and rest of world revenue grew 20% year over year with softer brand oriented advertising demand in these regions, partially offsetting continued strong growth in direct response advertising revenue and continued momentum in the SMB customer segment in particular in the.

Derek: These regions.

Derek: Global impression volume grew approximately 17% year over year, driven in large part by an expanded advertising delivery within spotlight as well as creator stories.

Derek Andersen: Total eCPMs were down approximately 7% year-over-year as inventory growth exceeded advertising demand growth in Q1. Adjusted cost of revenue was $637 million in Q1, up 12% year-over-year. Infrastructure costs were the largest driver of the year-over-year increase, due in large part to the ramp in ML and AI investments last year. Infrastructure cost per DAU was $0.82 in Q1, which came in at the low end of our full year guidance range of $0.82 to $0.87, as we anticipated entering the quarter. The remaining components of adjusted cost of revenue were $260 million in Q1, or 19% of revenue, which is in line with the prior quarter and within our full year cost structure guidance range of 19% to 20%.

Derek: Total <unk> were down approximately 7% year over year inventory growth exceeded advertising demand growth in Q1.

Derek: Adjusted cost of revenue was $637 million in Q1 up 12% year over year infra.

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 last year.

Derek: Infrastructure costs per <unk> was 82 in Q1, which came in at the low end of our full year guidance range of 82 to 87.

Derek: As we anticipated entering the quarter.

Derek: The remaining components of adjusted cost of revenue were $216 million in Q1, or 19% of revenue, which is in line with the prior quarter and within our full year cost structure guidance range of 19% to 20%.

Derek Andersen: Addressed the gross margin was 53% in Q1, up from 52% in the prior year. Adjusted operating expenses were $618 million in Q1, up 7% year over year. Personnel costs increased 2% year over year, driven by a 5% year over year increase in full-time headcount. Additional drivers included increases in legal costs, including litigation and regulatory compliance-related costs, and higher product-related research and development. Adjusted EBITDA was $108 million in Q1, up from $46 million in Q1 of the prior year, which exceeded our expectations entering the corridor, reflecting higher revenue growth and operating expense discipline. Flow-through, or the percentage of year-over-year revenue growth that flowed through to adjusted EBITDA, was 37% in Q1, as we continue to balance investment with realized top-line growth.

Derek: Adjusted gross margin was 53% in Q1 up from 52% in the prior year.

Derek: Adjusted operating expenses were $618 million in Q1 up 7% year over year personnel costs increased 2% year over year, driven by a 5% year over year increase in full time head count additional drivers included increases in legal costs, including litigation and regulatory.

Derek: Compliance related costs and higher product related research and development costs.

Derek: Adjusted EBITDA was $108 million in Q1 up from $46 million in Q1 of the prior year, which exceeded our expectations entering the quarter, reflecting higher revenue growth and operating expense discipline.

Derek: Flow through or the percentage of year over year revenue growth.

Derek: <unk> through to adjusted EBITDA was 37% in Q1, as we continue to balance investment with realized top line growth.

Derek Andersen: Net loss was $140 million in Q1, down 54% from a net loss of $305 million in Q1 of the prior year. The $166 million year-over-year improvement largely reflects the flow-through of a $63 million improvement in adjusted EBITDA, a $70 million improvement in non-recurring items due to business restructuring costs incurred in the prior year, a $49 million improvement from a net impact of financing and investment activity driven in large part by gains resulting from repurchasing convertible notes at prices below par in Q1, a $6 million or 2% reduction in stock-based compensation and related expenses offset by a $19 million increase in interest expense.

Derek: Net loss was $140 million in Q1 down 54% from a net loss of $305 million in Q1 of the prior year.

Derek: The $166 million year over year improvement largely reflects the flow through.

Derek: $63 million improvement in adjusted EBITDA.

Derek: $70 million improvement in non recurring items due to business restructuring costs incurred in the prior year.

Derek: $49 million improvement from the net impact of financing and investment activity driven in large part by gains resulting from repurchasing convertible notes at prices below par in Q1 of <unk>.

Derek: $6 million or 2% reduction in stock based compensation and related expenses offset by a $19 million increase in interest expense.

Derek Andersen: Pre-cash flow was $114 million in Q1, while operating cash flow was $152 million. Over the trailing 12 months, free cash flow was $295 million and operating cash flow was $477 million as we continue to balance investments with top line growth to deliver sustained positive cash dilution, or the year over year growth in our share count, which is 1.9% in Q1. As part of our efforts to responsibly manage the impact of SBC on our share count, we've repurchased 27 million shares at a cost of $257 million in Q1. In Q1, we issued $1.5 billion in senior unsecured notes maturing in 2033 with a coupon rate of 6.875% and utilized the vast majority of the proceeds to repurchase $1.44 billion of our existing convertible notes maturing at earlier dates, including $45 million of our 2026 convertible notes, $797 million of our 2027 convertible notes, and $800 million of our 2028 convertible notes.

Derek: Free cash flow was $114 million in Q1, while operating cash flow was $152 million.

Derek: Over the trailing 12 months free cash flow was $295 million in operating cash flow was $477 million as we continue to balance investments with topline growth to deliver sustained positive cash flow.

Derek: Dilution or the year over year growth in our share count, which just one 9% in Q1.

Derek: As part of our efforts to responsibly manage the impact of SBC on our share count, we repurchased 27 million shares at a cost of $257 million in Q1.

Derek: In Q1, we issued $1 5 billion in senior unsecured notes maturing in 2033 with a coupon rate of six 875% and utilize the vast majority of the proceeds to repurchase 144 billion of our existing convertible notes maturing at earlier.

Derek: <unk>, including.

Derek: $45 million of our 2026 convertible notes.

Derek: $797 million of our 2027 convertible notes and $800 million of our 2028 convertible notes.

Derek Andersen: The total cash repurchase price was $198.1 million below par value and therefore contributed to total debt outstanding declining by $0.2 billion quarter over quarter to $3.5 billion as of the end of Q1 2025. We ended Q1 with $3.2 billion in cash and marketable securities on hand and just $36 million of debt maturing in 2020. We believe the combination of these transactions and our improved free cash flow generation ensure that our business has more than adequate capital and financial flexibility to execute against our strategic priorities.

Derek: The total cash were purchase price was $198 1 million below par value and therefore contributed to total debt outstanding declining by <unk> 2 billion quarter over quarter to $3 5 billion and will be end of Q1 2025.

Derek: We ended Q1 with $3 2 billion in cash and marketable securities on hand, and just $36 million of debt maturing in 2025.

Derek: We believe the combination of these transactions and our improved free cash flow generation and ensure that our business has more than adequate capital and financial flexibility to execute against our strategic priorities.

Derek Andersen: Given the uncertainty with respect to how macroeconomic conditions may evolve in the months ahead and how this may impact advertising demand more broadly, we do not intend to share formal financial guidance for Q2. While our top-line revenue has continued to grow, we have experienced headwinds to start the current quarter, and we believe it is prudent to continue to balance our level of investment with realized revenue growth. As a result, we are updating our full-year cost structure guidance to reflect our current investment plan. For infrastructure costs per DAU, we maintain our full year guidance range of $0.82 to $0.87 per quarter and anticipate that we will fall near the midpoint of this range in Q2, with DAU estimated to be $468 million, as we continue to prioritize investments in ML and AI infrastructure to drive improvements in our ad platform and depth of content engagement.

Derek: Given the uncertainty with respect to how macroeconomic conditions may evolve in the months ahead and how this may impact advertising demand more broadly we do not intend to share formal financial guidance for Q2.

Derek: While our top line revenue has continued to grow we have experienced headwinds to start the current quarter and we believe it is prudent to continue to balance our level of investment with realized revenue growth.

Derek: As a result, we are updating our full year cost structure guidance to reflect our current investment plans.

Derek: For infrastructure costs per <unk>, we maintain our full year guidance range of 82 to 87 per quarter and anticipate that we will fall near the midpoint of this range in Q2 with DAA you estimated to be $468 million as we continue to prioritize investments in ml and AI infrastructure to drive improvements in our AD.

Derek: Form and depth of content engagement.

Derek Andersen: For all other costs of revenue, we maintain our full year cost guidance at 19 to 20% of revenue and anticipate we will be within this range in Q2.

Derek: For all other cost of revenue, we maintain our full year cost guidance at 19% to 20% of revenue and anticipate we will be within this range in Q2.

Derek Andersen: For adjusted operating expenses, we are lowering our full-year cost guidance from the prior range of $2.7 billion to $2.75 billion to a new range of $2.65 to $2.7 billion, which implies a $50 million reduction at the midpoint.

Derek: For adjusted operating expenses, we are lowering our full year cost guidance from the prior range of $2 7 billion to $2 75 billion to a new range of $2 65 to $2 7 billion, which implies a 50 million dollar reduction at the midpoint for stock based compensation, we are lowering our full year.

Derek Andersen: For stock-based compensation, we are lowering our full-year cost guidance from the prior range of $1.15 billion to $1.2 billion to a new range of $1.13 billion to $1.16 billion, which implies a $30 million reduction at the mid-term. While there is uncertainty regarding the macro-operating environment, we remain optimistic about the long-term prospects for our business. We remain optimistic because of the progress we have made with our ad platform to improve performance for our advertising partners, because of the progress we have made to diversify our advertiser base, as well as our revenue sources with the growth of Snapchat+.

Derek: Your cost guidance from the prior range of $1, one 5 billion to $1 2 billion to a new range of $1. One 3 billion to $1 6 billion, which implies a $30 million reduction at the midpoint.

Derek: While there is uncertainty regarding the macro operating environment, we remain optimistic about the long term prospects for our business. We remain optimistic because of the progress we have made with our AD platform to improve performance for our advertising partners because of the progress we have made to diversify our advertiser base as well as our revenue sources with the growth.

Derek Andersen: Because of our demonstrated ability to prioritize our cost structure to balance investment with top-line growth over time and because we have built a strong balance sheet with the financial flexibility necessary to maintain strategic focus through volatile macro conditions.

Derek: Of Snapchat plus.

Derek: Because of our demonstrated ability to prioritize our cost structure to balance investment with topline growth over time and.

Derek: And because we have built a strong balance sheet with the financial flexibility necessary to maintain strategic focus through volatile macro conditions.

Derek Andersen: Moving forward, we will remain focused on executing against our strategic priorities of growing our community and improving depth of engagement, driving top-line revenue growth and diversifying our revenue sources and building toward our long-term vision for augmented reality.

Derek: Moving forward, we will remain focused on executing against our strategic priorities of growing our community and improving depth of engagement driving topline revenue growth and diversifying our revenue sources and building towards our long term vision for augmented reality.

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

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

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two in the interest of time, we ask that you please limit yourself to one.

Unknown Executive: To withdraw your question, please press star then two. In the interest of time, we ask that you please limit yourself to one question. After your initial question is asked, your line will be muted.

Speaker Change: Question. After your initial question is asked your line will be muted at this time, we will pause momentarily to assemble our roster.

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

Tom Champion: The first question comes from Tom Champion with Piper Sandler. You may proceed. Hi, good afternoon, everyone. So guys, looks like a really solid result in North American revenue accelerating four point Derek, I think you had some comments around DR there. But can you just elaborate on that improvement in growth?

Speaker Change: The first question comes from Tom Champion with Piper Sandler You May proceed.

Speaker Change: Hi, good afternoon, everyone.

Speaker Change: So guys it looks like a really solid results in north American revenue accelerating four points.

Speaker Change: Eric I think you had some comments around Dr. There, but can you just elaborate on that improvement in growth and then if I could sneak a second one in around simple snap I think there were 25 million users.

Tom Champion: And then, if I could sneak a second one in around SimpleSnap, I think there were 25 million users of the test as of 4Q, seems like you've gone in a new direction, can you talk about that a little bit? Thank you.

Speaker Change: Of the test as of <unk>. It seems like you've got a new direction can you can you talk about that a little bit. Thank you.

Evan Spiegel: Hi, and thanks so much for the question, Evan, here. We're really excited about what we've been seeing in North America. We've obviously been very focused on advertiser performance, and we've seen really strong growth in the small and medium customer segment, and of course, a healthy contribution from Snapchat+, as well.

Speaker Change: Hi, Thanks, so much for the question I have in here.

Speaker Change: We're really excited about what we've been seeing in North America. We've obviously been very focused on advertiser performance and we've seen really strong growth in the small and medium customer segment.

Speaker Change: And of course, a healthy contribution from Snapchat plus.

Evan Spiegel: So really great to see the long-term investments we've been making in the ad platform, and particularly in direct response and diversification with small and medium-sized customers beginning to pay off there. In terms of the simple Snapchat design, we learned a lot from the three-tab design, but ultimately found that it was difficult, especially for power users, folks who really love Snapchat the way that it is, who use the map and stories all the time to really adopt the three-tab design, which made it harder to find stories and subscriptions and harder to find the map. So ultimately, we're taking a bunch of learnings from the three-tab simple Snapchat design and evolving the fifth-tab design with those learnings.

Speaker Change: Well, so really great to see the long term investments, we've been making the AD platform in particular in direct response and diversification with small and medium size customers began to pay off there.

Speaker Change: In terms of the simple Snapchat design, we learned a lot from the three tab design, but ultimately.

Speaker Change: And found that it was difficult, especially for power.

Speaker Change: Power users folks, who really loves Snapchat, the way that it is who use the map and stories all the time too.

Speaker Change: To really adopt the three tab design, which made it harder to find stories and subscriptions and harder to find the map. So ultimately we're taking a bunch of learnings from the three tab simple snapshot design and evolving.

Evan Spiegel: And I think as a result, we've been seeing some more broad-based gains. And of course, it'll be easier to navigate the transition on the monetization side because we won't have to deprecate the tile ad unit, so there's a benefit there as well. So overall, we learned a lot, but I think it's really important that we really paid attention to our community and how they were using the service and ultimately ended up in a place where we're seeing more broad-based gains. And I think it'll be easier to navigate some of the monetization trends.

Speaker Change: Have designed with those learnings and I think as a result, we've been seeing some more broad based gains and of course, it'll be easier to navigate the transition on the monetization side, because we won't have to deprecate the tile AD units, there's a benefit there as well. So overall, we learned a lot, but I think it's really important that we really paid attention to our community and how they were using the service.

Speaker Change: Ultimately.

Speaker Change: I ended up in a place where we're seeing more broad based gains and I think it will be easier to navigate some of the monetization transition there.

Speaker Change: Okay.

Unknown Executive: Thank you.

Ross Sandler: The next question comes from Ross Sandler with Barclays. You may proceed. Great. I got to ask the obligatory macro question. So I think everybody is curious what you guys are seeing thus far here in the second quarter on both brand and DR. Sounds like you're growing, but you're starting to see some impact.

Speaker Change: Thank you. The next question comes from Ross Sandler with Barclays. You May proceed.

Speaker Change: Great.

Speaker Change: Okay, Victoria macro question.

Speaker Change: So I think everybody is curious what you guys are seeing thus far here in the second quarter on both brand and Dr. It sounds like Youre growing youre starting to see some impact. So I guess could you just give us a little bit more color on.

Ross Sandler: So I guess, could you just give us a little more color on what categories or what segments of the business are seeing an impact?

Speaker Change: Categories.

Speaker Change: Segments of the business are seeing an impact and then the.

Ross Sandler: And then the second question is just the expense reduction is low single digit percentages here for 2025. So is it fair to assume that, you know, with that small of a reduction, you know, things are kind of softening. But this is all kind of trending in line with what you're seeing on the revenue side. Thank you very much.

Speaker Change: Second question is just the expense reduction is low single digit percentages here for 2025.

Speaker Change: Is it fair to assume that.

Speaker Change: We've got small of a reduction things are kind of softening, but this is all kind of trending in line with.

Speaker Change: And what Youre seeing on the revenue side. Thank you very much.

Derek Andersen: Hey, Ross, thanks for the questions. It's Derek speaking.

Speaker Change: Okay.

Speaker Change: Hey, Ross Thanks for the questions. It's Derek speaking.

Derek Andersen: At a high level, the macro is changing quickly. And I think, you know, the path we're concerned here, you know, going forward isn't entirely clear. That obviously impacts visibility on our We've learned from some of the big past macro events that we've experienced and external events to be thoughtful about how this can impact the operating environment and therefore our approach to guidance generally. We've had a really solid Q1, you know, top line growth at the very high end of our guide range and then both adjusted EBITDA and net income, you know, well above those ranges.

Speaker Change: At a high level of the macros changing quickly and I.

Speaker Change: I think the path, we're concerned here going forward isn't entirely clear that obviously impacts visibility on her and we've learned from some of the big past macro events that we experienced in external events to be thoughtful about how this can impact the operating environment and therefore, our approach to guidance generally we've had a really saw.

Speaker Change: The Q1 top line growth at the very high end of our guide range and then both adjusted EBITDA and net income well above those ranges. So we started the year really strong thus far in Q2, we're still growing but we've seen some headwinds to our top line growth so far.

Derek Andersen: So we started the year really strong. Thus far in Q2, we're still growing, but we've seen some headwinds for our top line growth so far. You know, as one example, we've heard from a subset of advertisers that their spending has been impacted by the changes to the de minimis exemption. However, I caution here, it's just really difficult to parse the drivers between the various potential factors there.

Speaker Change: One example, we've heard from a subset of advertisers that theyre spending has been impacted by the changes to the de minimus exemption. However, I would caution you. It's just really difficult to parse the drivers between the various potential factors there were.

Derek Andersen: We're just really focused on continuing to execute for our customers and to build on the momentum we saw in Q1 with active advertisers up 60%, VR advertising revenue reaching 70% of total ad revenue for the first time. You know, we believe by continuing to shift our mix towards DR and lower funnel by continuing to diversify our advertiser base to the growth and the SMB channel and by diversifying our revenue sources with the growth of Snapchat+. It will build a more resilient and stronger business over time as we continue to execute there.

Speaker Change: Just really focused on continuing to execute for our customers and to build on the momentum. We saw in Q1 with active appetizers up 60%, Dr advertising revenue, reaching 70% of total AD revenue for the first time.

Speaker Change: We believe by continuing to shift our mix towards <unk> and.

Speaker Change: Lower funnel by continuing to diversify our advertiser base to the growth in the SMB channel and by diversifying our revenue sources with the growths that snapshot plus they will build a more resilient and stronger business over time as we continue to execute there.

Derek Andersen: On the cost side, you know, I think our approach on costs and expenses and investments in the business in general is to carefully prioritize our investments to favor our core priorities and to calibrate the overall level of investment relative to the realized revenue growth that we see in the business. And in order to continue to drive healthy flow through and to continue to make progress towards GAAP profitability over time, we were really pleased with how we did on this in Q1. You know, we reached 37% flow through of incremental revenue to adjusted EBITDA in the quarter.

Speaker Change: On the cost side, I think our approach on cost and expenses and investments in the business in general is to carefully prioritize our investments to favor our core priorities and to calibrate the overall level of investment relative to the realized revenue growth that we see in the business.

Speaker Change: In order to continue to drive healthy flow through and to continue to make progress towards GAAP profitability over time, we were really pleased with how we did on this in Q1, we reached 37% flow through of incremental revenue to adjusted EBITDA in the quarter.

Derek Andersen: And of course, you know, as I said earlier, you know, above our ranges for both adjusted EBITDA and You know, but what we're given what we're seeing in the operating environment, we believe it's prudent to update our four-year cost structure guidance by lowering the adjusted operating expense expectations by about $50 million at the midpoint and SBC by $30 million at the midpoint. We also reiterated our estimate for all other costs of revenue as a percentage of revenue, as we expect that to largely flex with revenue growth rates over time. So we'll stay vigilant on this to maintain reasonable balance and flow through to ensure we keep making financial progress as we have over the last year.

Speaker Change: And of course, as I said earlier above our ranges for both adjusted EBITDA and net income.

Speaker Change: Given what we're seeing in the operating environment. We believe it is prudent to update our full year cost structure guidance by lowering the adjusted operating expense expectations by about $50 million at the midpoint, an SPC by $30 million at the midpoint.

Speaker Change: We also reiterated our estimate for all other cost of revenue as a percentage of revenue as we expect that to largely flex with revenue growth rates of return. So we'll stay vigilant on this to maintain reasonable balance and flow through to ensure we keep making our financial progress as we have over the last year hopefully that gives you a little more context around those two questions.

Derek Andersen: Hopefully that gives you a little more context around those two questions. And thank you.

Speaker Change: Thank you.

Richard Greenfield: The next comes from Richard Greenfield with Light Shed Partners. You may proceed. Hi, thanks for taking the question. You know, I guess one of the big questions that everyone's trying to understand, you've been sort of in that mid-teens-ish or low to mid-teens-ish growth rate for direct response advertising. The comp was definitely harder this quarter than it's been in a long time. But I think as you sort of look at the investments you've been making, the rollout of new products like sponsored snaps, what will it take to deliver 20 plus percent growth in the DR business?

Speaker Change: Thank you.

Speaker Change: The next comes from Rich Greenfield with <unk> partners you May proceed.

Rich Greenfield: Hi, Thanks for taking the question.

Speaker Change: I guess one of the big questions that everyone's trying to understand you have been sort of in that mid teens ish low to mid teens. This growth rate for direct response advertising.

Speaker Change: Comp was definitely harder this quarter than it's been in a long time, but I think as you sort of look at the investments you've been making the rollout of new products like.

Speaker Change: Sponsored snaps.

Speaker Change: Will it take to deliver 20 plus percent growth in the Dr business like do you have line of sight to like what needs to happen or how long it'll take to sort of get that.

Richard Greenfield: Like, do you have line of sight to like what needs to happen or how long it'll take to sort of get that to be a 20 plus percent growth business?

Richard Greenfield: And then just two housekeeping things, Derek. One of the de minimis that you just mentioned, anything that you could say in terms of how much China-based advertisers is a percentage of your revenue? And on the guidance comment, the forward-looking that April's continuing to grow, I've gotten a lot of questions, is advertising growing? Or is it, you know, if you look at excluding Snap+, is it still growing excluding Snap+, as you look into April? Because everyone's trying to isolate what's happening in core ad business, given everything that's happened with Tariffs. Thank you.

Speaker Change: At 20 plus percent growth business, and then just two housekeeping things Derek.

Speaker Change: One of the de Minimis that you just mentioned.

Speaker Change: That you could say in terms of how much China based advertisers is that percentage of your revenue and on the guidance comments are forward looking that April is continuing to grow I've gotten a lot of questions is advertising growing or is it. If you look excluding snap <unk> plus is it still growing excluding staff plus as you look into April because everyone's trying to <unk>.

Speaker Change: What's happening in core AD business, given everything that's happened with tariffs. Thank you.

Evan Spiegel: Thanks, Rich. Yeah, we're really excited about the progress we've been making in the direct response business over the past couple of years. We've really invested heavily there. I think, you know, just thinking big picture in terms of the contributors to accelerating to 20% from I think about 14% we're at today, you know, of course, we're going to continue the ongoing ad platform improvements we mentioned on the call, including larger and fresher models and better signal utilization. I think in terms of the product roadmap and the product pieces, we've got a really good roadmap for our app goal-based bidding objectives, and for dynamic product ads as well that will land throughout the year.

Speaker Change: Thanks, Rich Yeah, we're really excited about the progress we've been making on the direct response business over the past couple of years, we really invested heavily there I think yes, just thinking big picture in terms of the contributors to the accelerating to 20% from I think they're about 14% we're at.

Speaker Change: Today, you know of course, we're going to continue the ongoing AD platform improvements, we mentioned on the call, including larger and pressure models and better signal.

Speaker Change: Realization I think in terms of the product roadmap and our product. He says we've got a really good road map or our app goal based bidding objectives and for dynamic product ads as well that will land throughout the year.

Evan Spiegel: And then I think, you know, bringing direct response goal-based bidding objectives to new placements like sponsored snaps will also, you know, be a contributing factor as well.

Speaker Change: And then I think bringing direct response score based video objectives to new placements like sponsored snaps will.

Evan Spiegel: And then I think, you know, one of the areas I'm really excited about is the consolidated go-to-market leadership under Ajit. We've already seen some improvements there, and I'm really excited about all the work he's doing with our go-to-market teams. I think that can be a multiplier on top of all the, you know, foundational platform and product work that we've been doing.

Speaker Change: We will also.

Speaker Change: It will be a contributing factor as well and then I think one of the areas I'm really excited about.

Speaker Change: The consolidated go to market leadership under a Jeep, we've already seen some improvements there and I'm really excited about all the work. He is doing with our go to market teams I think that can be a multiplier on top of all the foundational platform and product work that we've been doing.

Derek Andersen: Hey Rich, it's Derek speaking on the second part of your question there. You know, on the China-based advertisers, you know, we don't really break it down at that level of detail. You know, we've not previously disclosed that market, you know, as a breakout market in our queues and case. So, you know, in some ways that perhaps is helpful in and of itself.

Eric: Hey, rich and it's Eric speaking on the second parts of your question there.

Speaker Change: On the China based advertisers, we don't really break it down at that level of detail. We have not previously disclosed that market you know, it's a breakout market.

Speaker Change: Our Qs and K. So you know in some ways that perhaps it's helpful in and of itself and look we're early in the quarter were only a few weeks in.

Derek Andersen: And look, we're early in the quarter. We're only a few weeks in. You know, we're continuing to grow as a business, but we've seen some headwinds thus far. You know, I think it's early. And of course, there's a lot of quarter ahead of us in the macro uncertainty and how that's going to evolve over time. So we're going to keep watching it and monitoring the growth of the business and go from there. So, you know, hopefully that gives you a little bit more color on the China-based side.

Speaker Change: We're continuing to grow as a business, but we've seen some headwinds thus far I think its early and of course, there is a lot of quarter ahead of us in the macro uncertainty and how that's going to evolve over time, so we're going to keep watching it and monitoring the growth of the business and.

Speaker Change: And go from there so hopefully that gives you a little bit more color on the on the China based side of things.

Mark Shmolek: The next question comes from Mark Shmolek with Bernstein. You may proceed. Yes, thanks for taking the questions. You know, Evan, appreciate the color around kind of my AI usage growth.

Speaker Change: Thank you. The next question comes from Mark Shmulik with Bernstein You May proceed.

Mark Shmulik: Yes, thanks for taking the questions.

Mark Shmulik: I appreciate the color around kind of my usage growth, but I guess, just kind of broader picture, where do you see my AI going and perhaps kind of standing out versus the growing number of kind of AI chatbot. So we've seen how do we think about potentially like a standalone app or integration in the spectacle.

Evan Spiegel: But I guess just kind of broader picture, you know, where do you see my AI going and perhaps kind of standing out versus, you know, the growing number of kind of AI chatbots we've seen? You know, how do we think about potentially like a standalone app or integration into Spectacles? But just, you know, overall, where do you see it going?

Evan Spiegel: And then a follow up question just around engagement domestically. You know, we saw that tick down a little bit, but there's color on spotlight growth for newer content kind of up. How's this overall spotlight engagement trending kind of against that fresher content? And, you know, any color on kind of what's happening domestically would be appreciated. Thank you.

Mark Shmulik: Overall, where do you see it going.

Speaker Change: And then a follow up question just around engagement domestically, we saw that tick down a little bit, but theres color on spotlight growth for newer content kind of up how does that overall spotlight engagement trending kind of against that pressure content than any color on kind of whats happening domestically would be appreciated. Thank you.

Evan Spiegel: Yeah, thanks so much for the question. You know, I'm particularly excited about the new ways that people are going to want to interface with AI. Of course, chat is a popular interface. I think voice to some degree is growing as well. As we look at the areas where we really want to differentiate it, it's really around that visual communication. And so as we look at the way that people are interacting with my eye by sending snaps, and you know, either receiving snaps or chat response in return, I think that that really starts to show the way that you know, these multimodal models are going to play a really powerful role in people's lives.

Mark Shmulik: Yeah.

Mark Shmulik: Okay.

Mark Shmulik: Yes, thanks, so much for the question.

Mark Shmulik: Really excited about the new ways that people are going to want to interface with AI of course, Chad is a popular interface I think poised to some degree is growing as well as we look at the areas, where we really want to differentiate it it's really around that visual communication and so as we look at the way that people are interacting with my eye by sending.

Mark Shmulik: <unk> and either receiving snaps are chat response in return I think that that really starts to show the way that these multimodal models are going to play a really powerful role in People's lives I think looking even longer term beyond that the way that people are going to integrate.

Evan Spiegel: I think, looking even longer term beyond that, the way that people are going to integrate AI into augmented reality, and I think provide a totally new user interface, powered by AI is something that we're investing a lot in. We'll have more announcements around that later this year, because we really do believe that augmented reality is the ideal interface for AI.

Mark Shmulik: AI and augmented reality and I think provide a totally new user interface powered by AI is something that we're investing a lot and we'll have more announcements around that.

Mark Shmulik: Later this year, because we really do believe that augmented reality is the ideal interface for AI.

Evan Spiegel: In terms of spotlight, certainly a lot of progress there, you know, we're now reaching more than 500 million monthly active users there and view time, I think grew about 25% year over year in Q1. So certainly some good momentum and you know, the team's focused on timely and fresh content, I think is really important, because it just increases the probability that folks will see, you know, really unique and relevant content as they're using the spotlight.

Mark Shmulik: In terms of spotlight certainly a lot of progress there, we're now reaching more than $500 million a month.

Mark Shmulik: Monthly active users there and our view time.

Mark Shmulik: I think grew about 25% year over year in Q1, so certainly some good momentum and the team's focus on timely and fresh content. I think is really important because it just increases the probability that folks will see really unique and relevant content as they are using the spotlight service.

Okay.

Unknown Executive: Thank you.

Dan Salmon: The next comes from Dan Salmon with New Street Research. You may proceed. Great afternoon, everyone. Evan, you highlighted once again, the growth in your total advertiser base of 60% this quarter, again, big theme there being more small and medium sized business advertisers. Also noted, you're lapping the launches of SnapPromote. So I'd just like to hear a little bit more about the next steps for SMB advertiser growth. Do you expect that rate of growth to slow or does SnapPromote have legs beyond that, maybe internationally more? Are there other initiatives you'd highlight? And then just to follow up to it, I think I've asked you this one before, but how much are you starting to see those advertisers that come in through SnapPromote move over to the Snap Ads platform and start to do a little bit more with your advertising from there?

Dan Salmon: Thank you. The next comes from Dan Salmon with New Street Research you May proceed.

Dan Salmon: Alright, great afternoon, everyone.

Dan Salmon: Kevin highlighted once again the growth in your total advertiser base of 60% this quarter against the big theme, there being more small and medium sized business advertisers.

Dan Salmon: Also noted your Youre lapping the launch of snap promote so just like to hear a little bit more about the next steps for SMB Advertiser growth do you expect that rate of growth to slow or the snap promote.

Dan Salmon: Legs beyond that maybe internationally more are there other initiatives you'd highlight just.

Dan Salmon: Follow up to it I think capacity this one before but how much are you starting to see those advertisers will come in through snap promote move over to two the snap ads platform and start to do a little bit more.

Evan Spiegel: Thanks. Thanks so much for the question. We're excited about what we've seen with SnapPromote and we've got a whole string of product updates there. Plan to really streamline the SnapPromote product within the app and, of course, try to ease that transition to the full-fledged Ads Manager, including a lot of work that we've been doing to simplify Ads Manager overall. I think, you know, looking at the small-medium customer segment, I'd say, you know, in terms of our acquisition focus, we're really trying to ramp up those medium-sized advertisers, just, I think, in terms of the dollar volume overall, certainly in terms of active advertiser count, SnapPromote is very important.

Dan Salmon: With your advertising from there thanks.

Dan Salmon: And thanks, so much for the question. We're excited about what we've seen with snap promote and we've got a whole string of product updates there.

Dan Salmon: To really streamline the snap promote product with within the App and of course try to ease that transition to the full fledged ads manager, including a lot of work that we've been doing to simplify ads manager overall I think looking at the small and medium customer segment I'd say in terms of oven or our acquisition.

Dan Salmon: We're really trying to ramp up those medium size advertisers just I think in terms of the dollar volume overall certainly in terms of active advertiser counts now promote.

Evan Spiegel: But in terms of the dollar volume, I think those medium customers, you know, can really help accelerate the growth of our direct response business and we're seeing some really good product market fit there. So, certainly a lot to do on the SnapPromote side in terms of the product and we're excited about the momentum we're seeing there.

Very important but in terms of the dollar volume I think those medium customers.

Dan Salmon: It can really help accelerate the growth of our direct response business and we're seeing some really good product market fit there. So certainly a lot to do on the sound promote side in terms of the product and we're excited about the momentum we're seeing there, but but I think in terms of the team's focus right now in the evolution of our go to market efforts I would say that team is probably more focused on the on the mid size customer segment.

Evan Spiegel: But I think in terms of the team's focus right now and the evolution of our go-to-market efforts, I'd say the team's probably more focused on the mid-sized customer segment. Thank you.

Dan Salmon: Yeah.

Kenneth Gawrelski: The next question comes from Kenneth Gawrelski with Wells Fargo. You may proceed. Thank you, appreciate the appreciate the opportunity.

Speaker Change: Thank you. The next question comes from Ken <unk> with Wells Fargo. You May proceed.

Kenneth Gawrelski: Maybe first, you could talk a little bit about the kind of progression through the first quarter on the ad side. And as you go into April, any particular categories that you're seeing or geographies that you're seeing changes in performance? Maybe we'll start there and one follow up after that. Thank you.

Speaker Change: Thank you I appreciate the color I appreciate the opportunity.

Speaker Change: Maybe first you could talk a little bit about.

Speaker Change: You can.

Speaker Change: Kind of progression through the first quarter on the AD side and and as you go into April any particular categories that youre seeing or geographies that you are seeing.

Speaker Change: Changes in performance.

Speaker Change: Maybe we'll start there and one follow up after that thank you.

Evan Spiegel: I think first we're really pleased with what we've seen. You know, we continue to execute against our roadmap and priorities on the ad platform. You know, pleased to see the progress we were able to make on model freshness and model size and signal incorporation, the progress we're seeing in Cappy adoption. You're seeing that, you know, translate into the outputs of the business, you know, both not just the top line revenue that was at the very high end of our range, but also the progress on the DR growth rate and, you know, what we're seeing with the growth of active advertisers and the progress in the SMB channel specifically, which we're really pleased with.

Speaker Change: Yeah.

Speaker Change: Sure Hey, Ken It's Derek speaking I think first we're really pleased with what we saw in Q1.

Speaker Change: We continue to execute against our roadmap and priorities on our platform and are pleased to see the progress we were able to make on model freshness and middle size and signal incorporation.

Speaker Change: Progress, we're seeing in copy adoption you're.

Speaker Change: Youre seeing that translate into the outputs of the business both not just the top line revenue that was at the very high end of our range, but.

Speaker Change: So good progress on the <unk> growth rate and what we're seeing with the growth of active advertisers in the progress in the SMB channel, specifically, which we're really pleased with so.

Evan Spiegel: So off to a good start, really focused on executing for our customers and delivering ROAS for them. You know, in terms of, you know, what we're seeing early here in the new quarter, we're just a few weeks in. It's very early in the going. You know, as I said earlier, you know, the business is continuing to grow, but we have seen some headwinds to start the quarter to the growth rate. You know, as I mentioned earlier, you know, one example of a factor that we've seen as a driver there is, you know, some advertisers that have been impacted by the changes to the DeMinimis six.

Speaker Change: So off to a good start really focused on executing for our customers and delivering rollout for them in terms of what we're seeing early here in the new quarter. We're just a few weeks in it's very early in the going you know as I said earlier the business is continuing to grow but we have seen some headwinds to start the quarter to the growth rate.

Speaker Change: As I mentioned.

Speaker Change: Earlier, one example of a factor that we've seen as a driver there is some advertisers that have been impacted by the changes to the de minimus exemption.

Evan Spiegel: But, you know, as I also said earlier, it's really difficult this early in the going to parse the different drivers, you know, that can be can be impacting that. So we're going to continue to watch it really carefully. And of course, you know, where we head from here on the macro and some of the factors there is also uncertain. So the key is that, you know, we stay focused on executing for our customers, improving the ad platform, and that we continue to be thoughtful about balancing our investment levels over time to make progress for the business Hopefully that gives you a little bit more color on your question.

Speaker Change: As I also said earlier, it's really difficult this early in the going deep.

Speaker Change: Parse the different drivers that can be can be impacting that so we're going to continue to watch it really carefully and of course.

Speaker Change: Where we had from here on the macro and some of the factors. There is also uncertainty. So the key is that we stay focused on executing for our customers improving the AD platform and that we continue to be thoughtful about balancing our investment levels over time to make progress for the business potentially so hopefully that gives you a little bit more color on your question. Thank you.

Benjamin Black: The following comes from Benjamin Black with Deutsche Bank. You may proceed. Great. Thank you for taking my question. You mentioned hitting 900 million MAUs and that you're approaching a billion, yet North America DAUs contracted sequentially. I know you've been working on a number of initiatives to re-stimulate growth in North America. So curious to hear what is potentially not working and what gives you confidence that those trends can reflect positively again. Thank you.

Benjamin Black: Thank you the following comes from Benjamin Black with Deutsche Bank You May proceed.

Benjamin Black: Great. Thank you for taking my question.

Speaker Change: You mentioned hitting $900 million may use them that.

Speaker Change: Youre approaching $1 billion, yet North America <unk>.

Speaker Change: Contracted.

Speaker Change: Italy.

Speaker Change: <unk> been working on a number of initiatives.

Speaker Change: We stimulate growth in North America, So curious to hear what.

Speaker Change: What is potentially not working and what gives you confidence that those trends can inflect positively again. Thank you.

Evan Spiegel: Thanks so much for the question. We're really excited about hitting that milestone of 900 million monthly active users and really looking forward to crossing a billion at some point here in the future. That'll be a really exciting moment for the company. In North America in particular, you know, we sort of trended around this 100 million, 99 million DAU sort of number. We're not expecting further declines here in Q2 in North America. And the things that sort of make us confident or that we're excited about are really the engagement around snapping that is so core to the service, people making and sending snaps with their friends.

Speaker Change: Yes. Thanks, so much for the question, we're really excited about hitting that milestone of 900 million monthly active users and really.

Speaker Change: Looking forward to crossing 1 billion at some point here in the future that'll be a really exciting moment for the company in North America in particular, we sort of trend around this $100 million $99 million.

Speaker Change: Do you sort of number.

Speaker Change: Not expecting further declines here in Q2 in North America.

Speaker Change: And the things that make us confident or that we're excited about are really engaging around snapping that is so core to the service people, making them sending snaps with their friends. So.

Evan Spiegel: So we've seen some positive trends there. We're continuing to build on those overall and then continuing to invest in the content business as well. Some of the things we mentioned earlier around content freshness, around homegrown creators and engagement around content overall. That's a real priority for us.

Speaker Change: So we've seen some positive.

Speaker Change: Trends there, we're continuing to build on those overall and then and then continuing to invest in the content business as well some of the things we mentioned earlier around content freshness around homegrown creators and engaged around content overall that that's a real priority for us as well.

Unknown Executive: Thank you.

Justin Post: The next question comes from Justin Post with Bank of America. You may proceed. Great, thank you.

Speaker Change: Yeah.

Speaker Change: Thank you. The next question comes from Justin Post with Bank of America. You May proceed.

Justin Post: I just want to go back to prior comments that you might have been a little bit demand constrained. And just, are you still, you know, when you think about your supply and demand, how do you feel about that balance right now? And if you are demand constrained, obviously ignoring the macro, what do you think are the keys to unlocking that over the next year or two?

Speaker Change: Great. Thank you just wanted to go back to prior comments that you might have been a little bit demand constrained and just are you still when you think about your supply and demand how do you feel about that balance right now.

Speaker Change: You are demand constrained, obviously, ignoring the macro.

Evan Spiegel: Thank Yeah, thanks so much for the question. We certainly see a lot of opportunity to continue to grow demand on the service, although I do think we are taking some steps to increase inventory overall, especially with sponsored snaps, which not only expand reach for advertisers to, you know, to connect with folks who are primarily using that chat surface, but also just given, you know, the overall engagement with chat and the chat page on Snapchat, I think should provide a pretty substantial, meaningful amount of incremental inventory for us. So the keys right now are really bringing more goal-based bidding objectives to that inventory.

Speaker Change: What do you think are the keys to unlocking that.

Speaker Change: Over the next year or two thank you.

Speaker Change: Yes. Thanks, so much for the question, we certainly see a lot of opportunity to continue to grow demand on the service. Although I do think we are taking some steps to increase inventory overall, especially with sponsored snaps.

Speaker Change: Which you know not only expand reach for advertisers to connect with folks who are primarily using that Chad.

Speaker Change: Surface, but also just given the overall engagement with chat and chat.

Speaker Change: Chad page on Snapchat, I think should provide a.

Speaker Change: Pretty substantial meaningful amount of incremental inventory for us. So the key is right now are really bringing more goal based bidding objectives to that inventory. It's taken a bit of time, we brought pixel purchase sponsored snaps and we've been working on training. The models on this new placement and we will be bringing more <unk>.

Evan Spiegel: It's taken a bit of time. We brought Pixel Purchase to sponsored snaps, and we've been working on training the models on this new placement, and we'll be bringing more GBBs to sponsored snaps in the coming months. Thank you.

Two sponsored snaps in the coming months.

Speaker Change: Okay.

Mark Mahaney: The final question comes from Mark Mahaney with Evercore, you may proceed. Oh, thanks. I'll just ask a cost question related to headcount. I think this quarter, you had one of the biggest additions you've had in, I don't know, a year, two years, I guess.

Speaker Change: Thank you.

Our final question comes from Mark Mahaney with Evercore you May proceed.

Speaker Change: Oh, Thanks, So I'll just ask a cost question related to head count I think this quarter you had one of the biggest additions <unk> had and I don't know a year or two years I guess.

Mark Mahaney: With the kind of the new trim down of the cost guidance for the full year, does that mean that the headcount kind of pace should slow from what we saw in that in the March quarter? Thank you.

Speaker Change: The kind of the new.

Speaker Change: Trim down to the cost guidance for the full year does that mean that the head count kind of pace should slow from what we saw in that in the March quarter. Thank you.

Derek Andersen: Mark, thanks for the question. Yeah, look, we're trying to be really thoughtful here in terms of, you know, managing the cost structure over time and, and balancing that, you know, we were pretty pleased with what we were able to do in Q1, with a 37% flow through and also, you know, being able to come over the top of our range in both adjusted EBITDA and net income. So, you know, demonstrating, you know, the ability to balance it there in Q1. Yeah, we've, we have done some hiring in Q1. And, you know, the focus there has been really around our core priorities and bringing people into the building that can help us with, you know, our go to market efforts around, especially around the SMB client space, you know, help around supporting clients, you know, with Mars High measurement and things like that.

Speaker Change: Yeah.

Speaker Change: Hey, Mark Thanks for the question Yeah look we're trying to be really thoughtful here in terms of managing the cost structure over time and balancing that we were pretty pleased with what we were able to do in Q1 with a 37% flow through and also being able to come over the top of our range in both adjusted EBITDA and net income so demonstrating.

Speaker Change: The ability to balance it during Q1, yes.

Speaker Change: Yes, we have.

Speaker Change: I've done some hiring in Q1 and the focus there has been really around our core priorities and bringing people into the building that can help us with.

Speaker Change: Our go to market efforts around especially around the SMB client space.

Speaker Change: Help around supporting clients.

Derek Andersen: And, and also around, you know, engineering and specifically ML and AI competencies as well. So big focus there, you know, in supporting the business and supporting our top line growth and our roadmap for the year. I, you know, approximately two thirds of our adjusted operating expenses are roughly there about our people or people-related costs. So certainly anytime, you know, that we're adjusting, you know, our cost at look for the year, you know, that's, that's going to be part of the mix. And we're sort of being thoughtful there to make sure that our pace of hiring, you know, makes sense relative to the balance that I spoke about earlier.

Speaker Change: With Marseille and measurement and things like that and also around engineering and specific the ml and AI competencies as well so big focus there and supporting the business and supporting our topline growth in our roadmap for the year.

Speaker Change: Approximately two thirds of our adjusted operating expenses are roughly there about our people our people related costs. So certainly anytime there were adjusting.

Speaker Change: Our cost outlook for the year.

Speaker Change: It's going to be part of the mix and were sort of being thoughtful there to make sure that our pace of hiring makes sense relative to the balance that I spoke about earlier. So hopefully that gives you some sense of how we're thinking about the cost structure.

Derek Andersen: So hopefully that gives you some sense of how we're thinking about the cost structure and, and balancing it there. Thank you.

And balancing it there.

Unknown Executive: This concludes our question and answer session as well as Snap Inc's first quarter 2025 earnings conference call. Thank you for attending today's session. You may now disconnect.

Speaker Change: Okay.

Thank you. This concludes our question and answer session as well as Snap Inc. 's first quarter 2025 earnings conference call. Thank you for attending today's session. You may now disconnect.