Snap Inc.

afternoon, everyone, and welcome to Snap Inc.' 's fourth 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 one on your telephone keypad. This call will be recorded. Thank you very much, Betsy Frank, Senior Director of Investor Relations. You may begin.

Thank you, and good afternoon, everyone. Welcome to SNAP's fourth quarter 2020 earnings conference call. With us today are Evan Spiegel, chief executive officer and co-founder, Jeremy Gorman, chief business officer, and Derek Anderson, chief financial officer. Earlier today, we made a slide presentation available that provides an overview of our user and financial metrics for the fourth 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 fourth 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 obligations 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 risk described in our quarterly report on Form 10Q for the quarter ended September 30th, 2020, 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. With that, I'd like to turn the call over to Evan.

Hi, everyone, and thank you for joining us. Our mission is to contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together. From start to finish, 2020 reinforced the importance of that mission. During one of the most challenging years in recent history for our global community and their loved ones, our team worked hard to find ways to bring people closer together. We've enabled relationships to deepen and flourish even as we're physically apart. We added 16 million daily active users this quarter for a total of 265 million, up 22% year over year. This growth validates the broad appeal of our service and the role we play in the life of each member of the Snapchat community. Our quarterly revenue increased 62% year over year to $911 million, showing the trust advertisers have placed in us and our community's receptiveness to brands with shared values. We expect our relationships with community members and business partners to become even stronger as our platform continues to evolve. We set an internal goal for full-year adjusted EBITDA profitability in 2020, and I'm excited to share that we achieved this with positive adjusted EBITDA of $45 million. As a result of exceptional efforts from our team members around the world and their disciplined execution, our fourth quarter adjusted EBITDA was $166 million. Achieving full-year profitability in the midst of such a difficult and destabilizing year proves the resilience of our business and represents an important milestone as we work towards being able to self-fund our investments in the future. Snapchat is embraced by a generation that is driving the future. The Snapchat generation, primarily Gen Z and millennials, are 150% more likely to communicate with pictures than words, and 82% of them believe they have a personal responsibility to change the world. Our opportunities to serve and uplift this community in the coming decades will continue to grow, and we are inspired by the world that the Snapchat generation is working to create. At the core of this opportunity is the power of our camera. It is one of the world's most used cameras with an average of over 5 billion snaps created every single day. Cameras are no longer only a means to capture a moment in time or a memory. They now enable a whole world of self-expression and visual communication. And we have worked to drive this fundamental transformation since our founding. We've done this by putting the camera at the center of our application and the center of our strategy and by building businesses around it. Empowering people to communicate visually drives high frequency engagement with our application, with daily active users opening Snapchat 30 times per day on average. This means that improving speed, ease, and quality of visual communication are important for growing engagement. We finished rolling out new messaging infrastructure this quarter, making it easy to innovate and add new features within chat while simultaneously improving performance and enabling regionalization of our chat infrastructure. We also made significant improvements to the video quality for snaps while still ensuring Snapchat is the fastest way to communicate and share a moment. The first platform we built to extend the utility of the Snapchat camera beyond visual messaging was Stories. which allows Snapchatters, publishers, businesses, and influencers to express themselves in creative and compelling ways without the pressures associated with traditional social media. Stories are ephemeral, display content in chronological order, and don't have public likes or comments. We have evolved stories over time to embrace new formats like shows, with total time spent watching shows increasing nearly 70% year over year in 2020. Our commitment to both the quality and integrity of content on our service has driven a lot of this product evolution. Initiatives like our 2018 redesign to separate social content from media content, our content guidelines that we enforce equally across publishers and all community members, and our early decision to create a hand curated platform with Discover proved valuable as we have been able to provide trusted and reliable content to our community. For example, During the week of the U.S. presidential election, nearly 30 million Snapchatters watched election-related coverage on Discover from our trusted media partners. We're also excited to see the success that both new and traditional media companies are finding on our content platform. Partners ranging from digital natives like Wave TV, Barcroft, Team Whistle, and Group9 to more established media companies like NBCUniversal, ESPN, and ViacomCBS have each reached over 25 million viewers across their Discover channels in Q4. We launched 10 new Snap originals, including the second season of Will Smith's Will From Home, a show which has reached 43 million total viewers in its two seasons. Offering relevant content to our diverse and growing user base is an important part of our strategy, and we launched a record 97 new international Discover channels this quarter. Furthermore, we continue to add shows and publisher content offerings that appeal to older audiences, with a 25% year-over-year increase in viewership among our 35-plus audience. The camera also drives engagement on our map. Our goal is to build the world's most personalized map, and we made investments years ago that are now paying dividends. Each month, over 250 million Snapchatters open our map where they can find the people and places that mean the most to them. Our community can engage with shared stories from around the globe and explore new places by tapping on the map. There are now more than 35 million businesses on the map for our community to discover, and connecting local businesses with prospective customers represents a substantial future revenue opportunity for our business. More recently, the power and frequency of use of our camera allowed us to launch Spotlight. We're really excited about the opportunity that this new platform creates for our community to reach a large audience with their most compelling snaps and to be rewarded for their creativity. We've long watched as some of the best snaps go viral on other platforms and wish to provide a way for snaps to reach a large audience on Snapchat. But we struggled to accomplish that in a way that aligns with our values. Spotlight combines a simple submission flow that allows people to submit their best snaps in just one tap with a rigorous review and ranking process that allows us to filter out content that is inconsistent with our guidelines. The result is a fun and safe product experience that services the best of Snapchat all in one place. Our primary goal in launching Spotlight was to build critical mass both in terms of video submissions and audience in a select set of countries so that we could begin to rapidly iterate on content ranking and the overall product experience. We are seeing over 175,000 video submissions per day on average, in part due to our incentive program for creators, where we distribute over $1 million per day to the top performing videos. Getting early momentum with creators is vital for attracting new viewers to the spotlight experience. And these investments have helped Spotlight grow to over 100 million monthly active users in January. Our product and ranking teams have been able to quickly improve our ability to match Spotlight viewers with the right content. And we are now working on a broader rollout of Spotlight to our entire community. Our commitment to reinventing the camera is most evident through our advances in augmented reality. Today, more than 200 million people engage with AR on Snapchat every day on average. We have co-developed our vision for augmented reality together with our growing community and have created cutting edge tools and capabilities that allow creators to build increasingly advanced lenses and distribute them to the entire Snapchat community. We are inspired every day by the creativity of our creator community who have made over 1.5 million lenses using Lens Studio across a growing variety of use cases. For example, during a year when physical gatherings were difficult for many, AR remained integral to empowering Snapchatters' self-expression, creativity, and connectivity with loved ones during the holidays. For Diwali this year, many lenses leveraged new body tracking and segmentation capabilities so people could try on festive stories in AR. Our community played with Diwali-themed lenses more than 500 million times, more than eight times the engagement of our Diwali lenses last year. We are particularly excited about the ways that AR is evolving beyond self-expression, communication, and entertainment. For example, our beauty partners have been accelerating their investments in virtual discovery and try-on experiences in response to the COVID pandemic. The Estee Lauder company's brand, Too Faced Cosmetics, launched an eye makeup tutorial lens through Lens Studio. The lens overlays each step of makeup application in augmented reality. and can be activated anytime by scanning the product packaging. The brand's lens organically grew to become one of our top performing lenses with millions of people using it to learn about the product. Other examples include NYX Professional Makeup's virtual store they created in Lens Studio, where people can walk around and explore their products in AR. In addition to promoting this experience on their Snapchat brand profile, They are also leveraging CameraKit to distribute their lens to partners like Triller. We are doubling down on our solutions for beauty with our partnership with PerfectCore, which will enable hundreds of makeup brands to seamlessly create high quality makeup AR experiences. Beauty is just one of the many areas where we see opportunities to provide valuable utility through augmented reality. We are excited to continue investing in experiences like trying on clothes, visualizing products in your home, learning about the items and locations around you, and so much more. We're excited about the progress we're making in collaboration with our partners on games, minis, and SnapKit. For example, Voodoo revamped one of its most popular games, Aqua Park, so Snapchatters can play in real time with their friends on Snapchat, complete with in-game bitmojis. TurboVote supported our Gen Z and millennial audience during the 2020 election with its voter registration mini, which helped register more than 1.2 million U.S. Snapchatters. We recently launched an integration with Twitter using CreativeKit, where Twitter users can share tweets directly through snaps and stories on Snapchat. BitmojiKit helps personalize user experiences through people's beloved avatars, whether on the Samsung default keyboard or when you're sending money on Venmo. We are now powering AR experiences on other apps through CameraKit, further expanding the opportunity of Lens Studio. In just the past two years, since our first partner summit, we have launched several new capabilities and thousands of successful partner integrations, and we look forward to continuing this momentum as we expand our platform. Looking forward, we are focused on continuing our disciplined execution on both our short and long-term goals for growing our business. We plan to make additional progress on profitability and free cash flow, accelerate our full-year revenue growth beyond the 46% year-over-year growth achieved in 2020, and grow our community around the world by improving and localizing the Snapchat product experience. We are also reorganizing our product team around the five core platforms on Snapchat, map, communication, camera, stories, and spotlight, which we believe will drive increased focus and operational excellence as we transition each platform into a monetizable business. We've successfully made that transition with Stories, which we monetize with full screen vertical video ads, and with our camera, where businesses can pay to promote their lenses. All of our platforms share the same powerful monetization infrastructure, which drives strong ROI for our advertising partners. In time, we look forward to creating new ways for businesses to reach customers on our map, engage with their customers using minis and games in chat, and extend the reach of their video campaigns on Spotlight. Lastly, we see a tremendous opportunity to innovate in e-commerce, which to date has been largely driven by utilitarian benefits such as price, selection, and convenience. As we have learned from our progress in providing new ways for people to try on and interact with products using augmented reality, improvements in the shopping experience to make it more entertaining and immersive can lead to powerful downstream results in terms of conversion. We plan to experiment rapidly and plant many seeds because we see this opportunity as very large and still very early in terms of maturity, despite the massive step change in adoption due to the global pandemic. This year has shown us that there is nothing more important than the people we share our lives with. As the global health crisis is addressed and the world begins to reopen, we see opportunities to help strengthen the bonds of the Snapchat community all over the world and are committed to making sure Snap continues to play a positive and constructive role in people's lives. I look forward to speaking with many of you in a few weeks at our first ever Investor Day, when you'll have the chance to meet more of our extraordinary team. Until then, take care and stay safe. I'll now turn it over to Jeremy to share more about our business.