Snap (SNAP) 31 Jan 232022 Q4 Earnings call transcript

Good afternoon, everyone, and welcome to Snap Inc.'s Fourth Quarter 2022 Earnings Conference Call. At this time, participants are in a listen-only mode.

I would now like to turn the call over to David Ometer, Head of Investor Relations.

Thank you, and good afternoon, everyone. Welcome to Snap's fourth quarter 2022 earnings conference call. Evan Operating Executive Chief Officer; are Jerry and Financial today Chief Hunter, and us Spiegel, Officer Chief Co-Founder; Officer. With Derek Andersen, to slides, to today's presentation. refer our Relations at Please Investor press letter investor investor.snap.com release, and investor website find

forward-looking these call are which we to no forward-looking of statements, includes assumptions materially from update based may obligation Actual and results This differ our our those as statements, conference on today. expressed disclosures. in make

results as about to please our information For risks particularly factors section Risk XX-Q, forward-looking press cause actual in described Form materially that statements, titled differ more Factors. refer release may from we well in the to recent the issued most today as

the note as be Please the amortization release. understand metrics and as figures, Today's today's and press when any two that it in of today's call and of related include Reconciliations can discussed with will GAAP filings will depreciation found our our Please both, discuss and the we on charges. well all call. non-GAAP stock-based nonrecurring SEC we expense to calculate exclude between taxes payroll how compensation to measures. refer

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

joining us. everyone, thank all you Hi, and for

investments augmented our and XXXX our accelerating products, revenue support to changes growing macroeconomic our the engagement as headwinds, action our diversifying challenging and taken of for platform three their investing priorities community increased we was to growth future a in be with our refocus and of business to policy year strategic continue impacted by deepening reality. competition. and our We've

delivering advertising important improving Snapchatters most partners. business focused control, outcomes on We inputs to that our the and we for experiences are engaging can

increase at our XX% drive community, of in strong XXX year-over-year. an QX, growth year We continue daily active to users million the ending in

our Our ways to support team community. the growth rapidly innovate that continues of in

with our spotlight we each helps on-boarded partners, Plus Snapchat down and offering progress features QX, engagement several to launch expand of released double service. in across on example, media new our new For communities which our content drive

we year, advertising. a the up full performant or is the and as it most deceleration response Direct companies revenue grow advertising way of the $X.X many in forms growth. reflecting flat that billion rapid generated one advertising year-over-year, critical generated in of quarter is billion of digital and their year-over-year For businesses, measurable XX% $X.X the

have our improving in engagements high-quality updating and ad quality, investing over of We across volume made and improving and past and measurement, three conversions. key and the platform the year engagement conversion areas, progress observability increasing

near to time top-line it very take these term, the for improvements will In improved growth. translate into

of utilizing believe that potential are communicate. to Over improve share the of business. and the ARPU return inventory and advertising critical long realizing wallet term, represents growth people greatest that efficiently the we way spend on full inputs and camera the to our higher revenue believe gaining live delivering accelerating We our more our opportunity

million Snapchatters AR and to on our the XXX future augmented Over leadership last every investing hardware AR we decade, engage advances our significant enabled rapidly and made we position. with the that the have platform we in have today. day that sophisticated AR to are growth and average, further the software thoughtfully of of have expand Over reality

by profitability million consecutive year positive sustainable EBITDA our XXXX to path in EBITDA. third adjusted achieving our continued We generating of $XXX of adjusted

in our on balance XXXX positive growing to highly sheet products, and three with securities. and and revenue focused EBITDA community of accelerating and against million priorities diversifying free in for we community, marketable year We and look and with investing cost reality. a engagement a Investors billion on Thank our adjusted structure Santa and we at begin Q&A delivering future a our at positive our in XXXX, $X.X achieving you. of XX, cash our consecutive significant upcoming and cash about flow And our free with emerged Day $XX growth growing strong forward progress offices second a clear session. with team cash in strategic more deepening to sustained path cash of focused our our February begin and generated also business have engaged the sharing plans their our flow. challenges XXXX that, augmented brought will of free executing and our We Monica. We flow more profitability

you. Thank

We begin Instructions]. [Operator now the will question-and-answer session.

comes The question Post Justin from Bank with first of America.

into digital the thank bigger the the economy it's environment revenue macro a quarter a first the go in model? overall. a you changes then, monetization positive the you. impact my talk And tough for on from Clearly, one you headwinds making quarter question. Can you're for about of Great, perspective? could the taking you that longer can of some Thank have that Snap from

any direct business in in that partners like can the seems cautiously grow it Hey, recent we just demand conversations the it significantly improved, very brand our changes hasn't but our to it but either. are seems in they Justin. continued is like Evan. like our hasn't response their obviously, so managing general, advertising quarter, reduced, And worse, I environment. react partners, significantly mean, Thanks, saw quickly its really with our in spend QX. gotten to the From spend

far measurability things and implementation making pixel cleanrooms, We we ad taking over conversions It's data like of observability here. our really QX, conversions, our on a thus as or about API, computation, course, our step e-commerce a advertisers. year our significant ad re-architecting have multi-party a Maybe shared most our impact the platform. to look the just really for been lot like and last think changes back I the platform. journey to improvements of been at we're

API revenue conversions think the And our using now scan, made adoption I of integration progress or MMPs. conversion continues API, measured grow have signals to there, we majority good is nicely. from pixel

value we've is been using to doing what taking of this lot improve conversions. and measurability a And of those improved so the it

believe things at because the our big of in recently are QX ad improve consideration some UI we which app will to help more so beginning shipped content we've aligns the organic experience. the the UI, of quarter with And the in it changes

We've improve to which of improved help contribute View on platform. improve work attribution which can our well. helps user a believe to Web We've in-app conversions lot graph, the performance, we done our ID as updated

results And some the early of are promising.

for So attribution. advertisers utilizing example, pixel one-zero

likely like and to match in are dwell rate. stuff conversion. For We're seeing rates, them also result higher clicks XX% higher higher times, non-bounce more a third-party

a example. benefits as in are hopefully, overall. changes conversions, we advertisers, conversions them the about we're haven't our overall, retrain, of advertisers these on these training implemented So obviously, results to machine higher models, changes which these are are addition And measurement, then, us cleanroom, these what those last time. and improve for because we're don't short-term smaller on experiencing our we the or but we're scale for learning doing hopefully of excited is, quarter, them really but increase value making. advertisers models the that as And fewer who are our progress click value early, volume the through will have there taking data can maybe that is conversions over much API, net-net, reliant really, larger are conversions, obviously, conversions help number we're the the and they higher impact But in and more overall we

near-term is the potential of on these think, and very I course, this really we're it. hard business, So, about excited to a of the we're changes, headwind but working long-term

from Thank with Alliance Bernstein. comes you. The Shmulik Mark next question

question. thanks for taking the Yes,

spent content time like I on looks – it So by was globally think led off,

comes from Please My Barclays. apologies, proceed. question Mark Ross next Sandler The has dropped. with

Hey. I've high-level got question. a technology

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a or opportunity just powerful sophisticated we're lenses more camera clarity editing A of input. much AI, extreme our mean, technology. And most so even some or AR And a We're about based opportunities it's are images us. like for excited you our generative opportunity Ross. on we more investing make AI. or of AI lot examples generative simple Snaps transformations resolution the ton. with after Thanks, capture of it, the use a to huge already lot text around also generative I a a and improving Snap see

augmented of mentioned, you to longer the five going think growth reality. to term, as we be if But, this critical is years,

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my kids can a and glasses art, is really your to using exciting. bring can pirate gosh, You a monster.” generative imagine ship which and playing there's think big I those pointing. we with And life wearing “oh around AR

Lens tools integrate built Studio. a those lot success, course, And enabled Lens we're Snap craters how then, We And XXX,XXX ML have to saw of about things. X Lens into incredible now some lenses more than Studio. of million build to integrating in really also it's creators thinking tools We into Studio. who

also So the think, will tools, these powerful. democratization be very of I

The Partners. next you. question with Richard Greenfield Thank is from LightShed

One, taking your on like DR which The that about help Thanks bit just topic I us to of actually why investment making was sort want back is down of as encouraging drive you've number. go X% on sort to it to negative and to sounds in the as investing something. I but lot actually you heard about initial in, pretty know DR Hi. not up I a a up Can QX, just accelerated in of a DR in DR to your letter, to confusion this, is guess hurting? that start your it. of talking a for it But driving I there's little is are in why improve questions. to inflection guidance. the think the follow QX changes spend? forward of of based Why kick understand, better it going from, you're flywheel you're sort the

And be that reels, great. was then, you in you content. on pressure TikTok just Is what's just true time that Was And stories, spent was up said comment? of comment any the sort more a on that made of it engagement, then Shorts, would the a color global in on friends' global U.S.? that friends' stories on in on was QX? QX down driving Or

in There's thanks, Hey, Rich. a lot there.

So let of can me all see to that. get if I

mentioned, so DR example. our think, it's expand time. bids models I see value. at a conversions But I is level And requiring improving that as really to high that measurement and value example, to reflect in me, volume go party has to we of they of the on their conversions we're need increased business, increase that third in that tools, a as driving, over those advertisers here their and volume that But, value for decreased can were show the also key increased up, excuse the the hopefully, that conversions. of increased up on volume then, relearn those adapt, overall result show for as obviously

of And at it's like layer quarter, our band sales changes a UI, you that so rather and app disruption, aid. redesign again, reorg all rip the once. even and of in, channel this sort the But we'd frankly, course, things lot when overall, to the

of we waited make changes. Jerry qX, for that advertising to QX to know is changes. their has know lot businesses. that partners, And of lot But been a we our to important these In so, it's I just critically eager these release a vital

and held all we're of once. QX, changes making we those them And at lot to a so

is in the it expected the terms terms they're having And to really frankly, business. of I thing impact of the think value our advertisers. So intended exciting that, in disruptive, the to disruption but impact is

improvements all exciting. the rates, So, going terms again, of third-party that's time, seeing match to work but rates in we're continue to it really through dwell non-bounce we're

improving an overall I our think an for partners. advertising return to advertising on spend input

stories to watching our content total growing, watching platform grow content I where then, overall, content viewers overall in does headwind on Spotlight, time to time time friends' globally friends' partner continues spent about I content. as spent And the is I'd content That's time the to say spent. to including continue so true U.S. viewership grow. creator stories, think continue a said products, and well spent But content be stories,

important investments here really year-over-year we've MAU. think So here. is spent if a spent content, what the time headroom increasing in with year-over-year viewership re-accelerate and about we're XXX% We doing you think and our lot and growth of most engagement. thing about time We're growth on got XX% the Spotlight to excited Spotlight

a which year-over-year community QX. stories, we are think innovations new We're definitely and lot content to a watching supply growing and in creator also That stories in invest making including increase grew of and product creator tools stories, then, continuing around to XX%, creator really creator improvements was community. our to friends' like in time bright And the we're U.S. where spent things ecosystem valuable diversity. spot our

shared driving significant competition is and to the be I letter. continue intense. going very time we do to then, onboarding think are as new viewership And obviously spent short who partners video in media lastly,

videos. loves watching community Our entertaining short

do So to really messaging. X day, creation network on benefit Snaps close trying billion play friends who of really just from amount what happening across videos strengths our is we're enjoy platform. camera platform. We of every video our created this and enormous Over our around to sharing here our the and

So there. in the contributing great what's strengths to we'll It's of I to seeing, continue part we're to spotlight. growth our think play

Brian Stanley. Thank you. Nowak with question The is next Morgan from

Thanks questions. for taking my

questions to of of on I of to nine. the is I'm value one disruption increasing this, back just it, way guess up, ad you're ad the the understanding of effective sort about is near-term, to the laid go advertisers maybe the of think Just out in really the have in near-term the I load. kind not kind going Page the because

pricing that am down So right? one. platform in there, we the is Or first going about sort near-term. should of off think wide the I Is

to one capture that of users? to potential capture to and already these just of data talk thing, think the the Can sort about you direct being and of about large important build of second data the response DR drive how some business? users of business aspects able Then of sort the driving and us a to you you cohort cohorts have Thanks.

Derek speaking. the It's take first Brian. Hey, I'll one.

that's of is just Just the the seeing terms creator effectively in terms perspective. ad And particular, from engagement posting, some had in engagement been contribute, there, that fairly of is seen product we've what and an popular, in as you're we've and with of both you've their inventory sounds positive seeing very load from in experience growth we're what an impressions invested product. driven by stories

in terms efficiently. ecosystem inventory the we're auction, overall of what is our what then using we're in here doing the of, sort seeing more And significantly of

auction, has absorbed GDBs. the which back be actually that so effect And to impressions have of into across the returning other

And equal auction. sort contestation of all puts being downward and the else pressure, on the

do we're that opportunity And and seeing increases obviously, equal, the advertisers. ROAs that lower being CPMs in else short-term. And so, translate the is return all for for into

But lower that improving auctions earlier, of the translating shared dwell really platform into we're and some have bounce you. the and rates, that with the times, value metrics longer we're been Short DR the to the of making are driving. improvements

And is for more advertisers. that the so performative

clearly through. higher. So value driven, volumes can very And through this pressure the already being disruption but with in on are see the is the comes the that supply that near-term, to the and the we coming disruption

the that what's Jerry, of gives your the second demand of question. hopefully, to I'll more there. context it So bit over environment you supply turn part on in sort happening little a for

the question. Thanks, Yes. for Derek. thanks Brian,

about think about Let you little give data. we this me how just a

ways we of have that a we're collecting So data. bunch

interacting our changes made over that we View talked with feed ML. like that to customers computation, about all our to It's the And these multi-party better and targeting These MMP. conversions. and and ad so train And that us Evan cleanrooms. to gives give earlier, about our with how data pixel, signals we the what's system API, and Add of happening all Web into come signal the view scan product. conversion our to format, are us together of better customers better time. So a get

make think better to changes still into to and the think So information constantly sort their feed make board as the ad circle it making customers of changes the format, campaigns, way in products, and a we make of across better where in. and CPMs we us changes time, which then the circle well as we changes this this We sort is our we gives ML about over customers. and coming each of there's better that's targeting -- ROAs for leads to these better

with The you. Mahaney next question Thank Mark comes from Evercore.

Okay, thanks.

you're just on see, that clearly that little that's undermine on asset want monetizing kind you? user of what's to monetization a Thank under or experience, monetizing what don't strong Spotlight. and what's back a the aggressive question when you want you think holdup bit spotlight, you the to don't in What's I ask for that now. looking while but make the It's the for decision decision? on-off asked I to factors gone really on that know I want the do a more but like be -- allow for, in that, full to are one something forth -- I you. growth do of I

is Derek speaking. I question can This Hey, for that you. Mark. take

that little we supply moment. and decline the I are in translated growth think hinted point for most question. impression in we into finer X% that the at context, that, constrained on and definitely demand saw sort constrained earlier in a prior and I X% We just recent not eCPM. of put this at just to a a believe quarter, start, And the

of is demand sort portion lacking things there. clearly, the So of

DR and why inventory that our in focus so we that's is share. can on the monetize so much obviously, utilize it, improvement take business And

we're seeing investments posting with recent translated think into already. what supply quarter growth into I on also that stories creator the in pleased that in engagement. we the and good we're most really The volumes in made solid and really translated

pleased we're the driven impression growth in that's that so really about. from recent And quarter most

did the In what terms And we It of that testing Spotlight really in specifically, remains Spotlight, QX we pleased though, the last higher on getting your elsewhere yield realizing in to that thus testing. and seen the we're similar that we're of in expanding yield with the than far, in share cases, quarter to we saw. the currently would monetization. in be for we've answer some But testing, is we're we served ad equal the app. in question, and did Spotlight early do ads

again, But that's become it what So to in the business future. of meaningful terms early. a in about means this really of optimism potential encouraging overall for our our really the very Spotlight content is data for portion

earlier, the constrained, ramp given in going are community monetization, ad and continue the we're on to continue But ahead So for to advertising the advance the I said as advertiser both thing experience to on months and in partners. we near-term. the optimize testing our Spotlight to and our is focusing there customer very demand is important most the up the experience limited urgency and

next Sheridan with Eric from you. question Sachs. Thank is The Goldman

Maybe cost can much and Thanks if for tie the side taking loose equation a pivot try ends together. few to the just so to of the question. I

to you as sounds that go 'XX will some it into key like Evan headwind there's to a in, margins, earlier areas as exit So act even invest 'XX. said, obviously and

thinking your we the of of back the back coming there's then structure to much. the as initiative business and in through 'XX. move we And you how revenue an about cost cutting profile winds of was sort versus Thanks then, it granular XX? initiatives, get versus cost should the leverage more be a investment implementation the initiative, the think cost cutting through so improve on XXXX. improved out elements on tail cadence the a removed would and DR the some we about when and done tying little business Can headwinds of of of obviously You've

I Derek It’s can that speaking. take Hey, one. Eric.

end going I of announced approach from the to we structure. off, shared be near removing the that start million QX, when reprioritization, where we cost we $XXX cash were think we to the that

really lower I to think we were achieve make profitability a it's were that, very building clearly two in wanted positive priorities EBITDA three One make that sure important and we strategic wanted wanted goals. But funded. free were we flow, approach to about understand that that is, rates. each just to we growth fully of to path adjusted we at to because thoughtful also sure our cash our even

that to growth doing efforts well as and to the were revenue platform plus. that improve our grow efforts community we're order fully work our So see engagement, the the continue diversifying with deepen revenue our we accelerate in growth, as around to DR funding to Snapchat just

continue And then to being in long-term also, invest the of AR course, to business. able

you what three able we've structure deliver still we're so $XXX we million in that cost that can reduction. a all sure been but have priorities, cost those see make And the fully to to as of funds track on

see So reductions. the you costs that to course fixed remove the in of component the the through of were operating should cost various wind QX. was first there reflected continuing the fixed similarly, cash And to QX. operations And in And we the $XXX is down content out objective on XX of structure, million. fully million coming there content

benefit QX, as just see that full of the So again, you'll we cost in reduction anticipated.

-- headcount the from actual end numbers our the are XX%, QX. example, of quarter peak down current For in are the at

down the cost structure prioritized structure. and So progress it the to ourselves made gives you we've managing and getting sense the a of cost

oriented like, thinking then long-term first, business. it's we're in So about forward, the investments the when going we remain

made just are increase investment, going in compelling stories, in investment are things an for very compelling example, obviously, incredibly to that So invest a business. immediately resulting to be for creator us in in the the And inventory. in, we there X%

to EBITDA the to along to be going consistent are What maintain we and that make to aggregate very way now to EBITDA is remain incredibly It's disciplined that are compelling. third on cash our there on have focused second the very cash investments profitability, And consecutive flow path cost of future the free fund controlling, of forward flow. that manage year the adjusted and we financial going like making dilution investments business. experience consecutive So do important destiny our one sure the that our the that sure year adjusted sure our that prioritizing And of investments and generation. profitability we structure, see, in been that's positive making business. free we we doing. also But that and in you any to cash have flow active cash in we've can

So hopefully, that gives you we're thinking funding forward. how a sense of like, the balancing where discipline we but are structure cost also about on priorities, that the reprioritization and of going our

Thank you.

question next from Walmsley Lloyd is UBS. Our with

Two, if Thanks. can. I

talk you've what per whether of the seeing expect stories, to kind in in one the in moving you First, time you whole business? in anything mentioned, that spent share of growth headwinds chat day more early here. per user Thanks. more And places? core this monetization, anchor doing the talked can lot just if discover content, feeds can it's in per time you that you a you second into just friends' or core seeing learnings that with engagement us or to you driver was be engagement experiences? letter, Have both? of Curious the started then, a but the visits of you're user, about about Are kind

course, to core of with and and Thanks, friends experience, and Lloyd we're around momentum people family, excited Yes, our incredibly connect really helps visual the enhances their what their the seeing we're is Snapchat messaging about messaging for relationships. the service, question.

with there. on as So out try try course, work reality helping lenses AR new doing and we're And about get camera, reality community our themselves in really of that momentum the with excited well. and augmented we're and like our around utility that of augmented things express

they those map, really example, core of a letter, QX the Snapchatters like XXXX. and believe lot as So for QX we also mentioned, map camera things of messaging in us. I often as are for And obviously in the places around experiences the as than on growth more twice the did open exciting driving

definitely strong about the core the we lot in of as we're products So, have messaging of a of around well. product engagement growth optimistic come that value really and some around new

you. Thank

from comes question last JPMorgan. Our with Doug Anmuth

two. questions. taking have I for Thanks the

First particular on is of just to part sounds circle back the Is here to to to into goal get the people how there. on idea stories? the then can strategy stories them like about or in shift shift Spotlight revenue into friends' more? within It And that creators to just Spotlight? and you sharing work talk with Spotlight videos Thanks. put also will tab friends'

sure. Yes,

day-to-day more longer So we're a level, what their at somebody's to is of really people story prefer family. friends stories close that a high their and watch really friends they from a watch still with entertaining friends' than want stories seeing It's to about the tail life. their video where maybe

content sort at as of and help them And so Spotlight with our sort of really to that's members different moment to less stories. friends' that trying where we're understand that discover become they where of engaged for start breakpoint is community

So even that tap of creating directly people can into so some points content from experience. that, is that in entry example, Discover, for content right, Spotlight four-tab

folks addition, also in itself, to tab helping especially. Spotlight And the we're drive

folks they are video, new let following that way. creators the we can Spotlight and a of them one if posted know spotlight into example, has For bring

So that's, more of kind I of driving about we're to in think, near-term. least how the thinking top Spotlight funnel at

of content pertains contests but share like large-scale do have we revenue not it share. sort of rolled we out for a things that small sort and seating, a amount example, with revenue around Spotlight, sort with yet to of creators, As of

with that to actually, something is use lot revenue do seeing their distribution it drive them. for business the creators because of creators share hit which we're to is and Spotlight, provides what subscription really in bit then think, to creator stories, our that's is subscribe creators. I do stable to their Spotlight, stories so get quite And fact, to think In much where I more more a they beneficial compared Spotlight discovered people revenue for a value that to both And we that model, driven. become

people their drive that got video, they've great over their that that durably if relationship build and hit to to with then they monetize time So a audience. use story more and can

Snap concludes call. attending as session. earnings XXXX This question-and-answer our you. Thank conference as well quarter today's Thank session you Inc.'s for fourth

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