Snap Inc.

Good afternoon, everyone, and welcome to SNAP, Inc.'s first quarter 2020 earnings conference call. At this time, participants are in a listen-only mode. After the prepared remarks, there will be a question-and-answer session. If you would like to ask a question during that time, please press star, then the number 1 on your telephone keypad. This call will be recorded. Thank you very much, Mr. David Ometer of Investor Relations. You may begin.

Thank you and good afternoon, everyone. Welcome to SNAP's first quarter 2020 earnings conference call. With us today are Evan Spiegel, Chief Executive Officer and Co-Founder, Jeremy Gorman, Chief Business Officer, and Derek Andersen, Chief Financial Officer. Earlier today, we made a slide presentation available that provides an overview of our user and financial metrics for the first quarter 2020, which can be found on our investor relations website at investor.snap.com. Now I will cover the safe harbor. Today's call is to provide you with information regarding our first quarter 2020 performance in addition to our financial outlook. This conference call includes forward-looking statements. Any statement that refers to expectations, projections, guidance, or other characterizations of future events, including financial projections, future market conditions, or the impact of COVID-19 on our business and on the economy as a whole is a forward-looking statement based on assumptions today. Actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as risks described in our annual report on Form 10-K for the year ended December 31, 2019, particularly in the section titled Risk Factors. This information can be found in our other filings with the SEC when available. Our commentary today will also include non-GAAP financial measures, and we believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued today a copy of which can be found on our investor relations website. 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 non-recurring charges. At times in our prepared remarks or in response to questions we may offer additional metrics to provide greater insight into our business or our quarterly and annual results. This additional detail may be one time in nature and we may or may not provide an update in the future on these metrics. Please refer to our filings with the SEC to understand how we calculate our metrics. Lastly, in an effort to keep our team members safe, each member on the call is dialed in remotely. We hope everyone is staying safe and healthy during this time and we appreciate your understanding as we work through the call. With that, I'd like to turn the call over to Evan.

Hi everyone and thanks for joining our call. It has been a very difficult few months for the world, but we remain hopeful and optimistic about the future. As a team, we have been focused on doing our part to help as we all navigate this unimaginable tragedy. We're inspired that people are working together and staying home to save lives, and it gives us added faith in humanity to see how deeply we all care about supporting one another during this time. The shared compassion we have all demonstrated towards one another during this crisis gives us confidence that we will all be able to find the right path forward towards a safe, healthy, and positive future. At Snap, our first priority is the health and safety of our community, our partners, and our team. We closed our first office in January and continue to close offices as COVID-19 spread around the globe. Our team has rallied around maintaining business continuity during this critical time, and I am in awe of how quickly our team adapted to the circumstances and continued to execute against our ongoing opportunities. We are monitoring the current situation daily and are working towards a best-case scenario for a rapid recovery while also preparing for a worst-case scenario. Our team remains inspired and motivated despite the challenging circumstances because our product has never been more important in people's lives, especially for helping close friends and family stay together emotionally while they are separated physically. We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays. For example, communication with friends increased by over 30% in the last week of March compared to the last week of January, with more than a 50% increase in some of our larger markets. Snapchat has always been focused on helping people build and maintain their friendships, which is especially critical as people practice physical distancing and shelter in their homes. We are working hard to provide our community with factual and up-to-date information, as well as resources for their safety and mental health. In the early days of the crisis, we immediately launched multiple filters and lenses, featuring safety tips and best practices, which quickly reached hundreds of millions of people around the world. We added a new feature, called Here For You, that provides proactive in-app support to Snapchatters who may be experiencing a mental health or emotional crisis, or who may be curious to learn more about these issues and how they can help their friends. We have also published over 700 Discover editions featuring up to the minute coverage on COVID-19 from our content partners, our in-house news teams and agencies like the CDC and WHO. With more than half of the United States Gen Z population watching news content on Discover, we feel it is particularly important for us to educate our audience with curated and trustworthy information during these critical times. We are also trying to help maintain positivity and help our community have fun together during this stressful time. We adapted our annual Snap Map Egg Hunt to encourage playing from home with friends rather than going out into the world. We have seen a sharp increase in group-related activities across chat, calling, and games. We launched five new games this quarter and saw average daily time spent in games more than double in the month of March. In addition to news and information, Discover now includes programming that celebrates the doctors, teachers, store employees, and others in our community who are sharing their experiences from the front lines. This includes uplifting content like Will from Home, in which Will Smith shares his own shelter-in-place experience along with his friends, which garnered over 15 million viewers in its first three episodes. Our community has been incredibly engaged on Snapchat during this period across all of these areas, An average time spent is up over 20% in the last week of March compared to the last week of January, with some larger markets like France and the UK seeing more than a 30% increase. Additionally, as people turn to video conferencing and live streaming to work and hang out together, we've seen a more than 30x increase in the daily downloads of Snap Camera, a desktop app which allows people to add our suite of lenses to whichever video conferencing service they use. While supporting our community and partners during the COVID-19 health crisis has been our top priority over the past few months, we remain focused on building on the momentum we've established in the growth of our community. Our community grew by 11 million daily active users to an average of 229 million daily active users during Q1, up 5% quarter over quarter and 20% year over year. Our community is using Snapchat to express themselves and communicate visually, are creating over 4 billion snaps with our camera every day on average. In addition to the increased usage of our camera, people are spending more and more time on Discover. Our editorial selectivity and curated approach has helped us bring best-in-class mobile content to our community that is accurate, timely, and topical. We are continuing to use engagement insights and data to drive our investments in Discover by regularly adding new channels to serve the varied needs and tastes of our audience Thank you for joining us. and original content like Nikita Unfiltered, a new docuseries, has helped deepen engagement on our Discover platform. Augmented reality is continuing to play an important role in the lives of Snapchatters, with people now playing with lenses 85% more each day than they did last year. A lot of this behavior is driven by our growing community of lens creators using Lens Studio, with lenses created by our community reaching 40% of our daily active users every day on average. We've also built new immersive lenses powered by machine learning that transform the ground into lava or water. We believe that the recent acceleration in the adoption of communication technology and augmented reality during these travel restrictions will help support our longer-term trends in engagement growth. We generated $462 million of revenue in Q1, representing a 44% year-over-year growth rate. While many advertising budgets declined due to COVID-19, we experienced high revenue growth rates in the first two months of the quarter, which offset our lower growth in March. These high growth rates in the beginning of the quarter reflect our investments in our audience, ad products, and optimization, and give us confidence in our ability to grow revenue over the long term. We are seeing some bright spots amongst direct response advertisers. especially those who provide activities or products that our community can enjoy at home. In the short term, we are shifting sales resources and pulling forward some investments in direct response to better serve the advertisers who are trying to reach our audience during this time. For example, we can help movie studios pivot to digital releases by supporting them with a suite of products designed to track titles over a dynamic and flexible release window. We've also seen many large brands doing a lot of important things to help their community and the broader world, and we are helping these brands communicate their efforts to our audience in a thoughtful and approachable way that inspires others to make a positive impact. In the medium term, we are helping our partners plan for the road to recovery, which we believe will be led in part by the younger generation. As people are sheltering in their homes, they are increasingly turning to digital behaviors across every aspect of their lives. including communication, commerce, entertainment, fitness, and learning. We believe that this will accelerate the digital transformation across many businesses and that the heightened levels of activity we are seeing today will lead to a sustained uplift in the digital economy over time. The Snapchat generation is digitally native and adopts new technologies quickly which will help them continue to drive this transformation. This makes our audience uniquely positioned to help businesses recover and we want to do our part to help jumpstart the recovery. While it is difficult to predict the near-term impact of this unprecedented, complex and global pandemic on our business, we believe that all of the long-term indicators we see in terms of our audience, their engagement, our momentum on product innovation, our auction dynamics and advertiser ROI position us very well for success. Our deep investments in direct response advertising over the past few years including advanced bidding and campaign management tools, ad formats designed specifically for mobile apps and e-commerce, and back-end performance optimization have positioned us well in this uncertain environment. Our strong cash position allows us to continue to hire and make long-term investments in innovation during this time while simultaneously prioritizing the health and safety of our community, team, and partners. We are beginning to see the light at the end of the tunnel in terms of the immediate health crisis, with the curve flattening in many cities and countries. The next chapter will be figuring out what the new normal will look like, both from a logistical perspective as well as in regard to the physical and mental well-being of our team. The third chapter will be the recovery, which we expect may be very fast for some businesses and much slower for others. and we are committed to helping our partners as we navigate this uncertain journey together. The many difficult transitions and changes we made as a business over the past few years have positioned us well for the challenges ahead. We have strong, resilient leadership, a growing community that deeply values the service we provide, an efficient advertising platform that delivers value for our advertising partners and a relentless pace of innovation driven by the creativity and operational excellence of our team. I am so proud of and inspired by our team and the way they have risen to this challenge while putting the health and safety of our community first. Thanks again for joining the call, and with that, I'll turn it over to Jeremy to share more about our business.