Snap Inc.

afternoon everyone and welcome to snap inc's first quarter 2021 earnings conference call at this time participants are in 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 first quarter 2021 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 first quarter 2021 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 2021 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 risk described in our annual report on Form 10-K for the year ended December 31st, 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. We began 2021 by achieving our highest year-over-year revenue and daily active user growth rates in over three years during the quarter. and delivering positive free cash flow for the first time as a public company. We grew revenues 66% year-over-year to $770 million, grew daily active users 22% year-over-year to $280 million, and generated $126 million in free cash flow. The strength of our business underscores our relentless focus on product innovation and our team's ability to execute well together over the long term. This momentum has also enabled us to increase our investments in product innovation and the longer-term future of our business. In addition to expanding our global community and growing our advertising business, we are also focused on improving our augmented reality capabilities and building on the early momentum we are seeing with Spotlight. We are thrilled with the progress we are seeing in these areas and look forward to accelerating our efforts going forward. We added 15 million daily active users in Q1. A lot of this growth has been unlocked through our ongoing investments in improving the performance and stability of our products across a wide variety of regions and devices. The vast majority of smartphones in the world are powered by Android, and our Android user base is now larger than our iOS user base, a critical milestone that reflects the long-term value of the investment we made to rebuild our Android application. Furthermore, as our user base continues to grow outside the United States, we are evolving our team and operations to be able to more nimbly and effectively support our global community. These efforts range from region-specific performance improvements of our underlying service to the localization of content, creative tools, and language support. We launched our first local market Snap original this March with PhoneSwap India, and are dramatically expanding our partnerships and sales efforts to support new geographies where we are seeing increasing traction with our community. These efforts have helped drive steady and healthy growth around the world with our daily active user base outside of North America and Europe now being our largest community. Additionally, we are optimistic about the engagement trends we are seeing as the world is beginning to open up. As things began to open up in the United States in late February, we saw inflection points in key behaviors like story posting and engagement with the Snap Map. More recently, we saw a rise in the rate of new friendships and bi-directional communication on Snapchat in late March, as people have begun to socialize in broader groups. We designed Snapchat to be a useful complement to real-life friendships and are excited about these optimistic trends developing with our audience. Augmented reality remains one of our biggest opportunities as we look to the future, and we are investing heavily in both core technology and the community facing AR experiences on our service. The number of Snapchatters engaging daily with our augmented reality lenses grew more than 40% year over year in Q1, outpacing our daily active user growth by more than 80% as people interact more with augmented reality on Snapchat. A lot of this growth has been driven by the incredible creativity of our community. This quarter, lenses created by our community accounted for more than half of all lens views. We have also been expanding the capabilities of Lens Studio, where we continue to put powerful technology into the hands of creators to make more compelling experiences, such as Andre Pappas, who leveraged our machine learning platform to create a viral beard removal lens. We are now bringing our AR platform to cameras beyond Snapchat through Camera Kit. Over the years, we have invested deeply in both our fundamental technology platform and the creativity of our community and partners to make augmented reality a daily activity for over 200 million people around the world. While we are continuing to invest in improving our technology and growing our community on Snapchat, we believe that expanding the number of places where people can interact with these AR experiences is an opportunity to grow the overall augmented reality ecosystem. We are excited to expand our AR capabilities to the Samsung native camera on the latest Galaxy A series, which extends the reach of lenses to a much larger global audience and complements our existing Bitmoji integration with the Samsung native keyboard. We believe that our leadership in both AR capabilities and user engagement positions us well to expand augmented reality to new use cases and behaviors. For example, as the shift to online shopping continues to accelerate, we believe there is a massive untapped opportunity for AR-driven product innovation in e-commerce, and that our young audience will continue to be early adopters of these new technologies and shopping experience. One of the key verticals we are tailoring our solutions for is apparel and accessories, which is the largest shopping category by far among U.S. teenagers. We believe that helping buyers find the right size, fit, and styles will reduce friction in their online shopping experience, which in turn will improve revenue and margins for our business partners while reducing the waste generated from returns. This is just one example among a variety of behaviors and use cases we believe we can support through our augmented reality platform. We are also focusing on our ongoing rollout of Spotlight, which is gaining traction as we improve the experience for our community and creators. We launched Spotlight in India, Mexico, and Brazil during Q1 and are now live in over a dozen countries, reaching more than 125 million monthly active users on Spotlight in March. We are also seeing healthy increases in engagement across both creation and consumption on the platform. For example, daily video submissions have increased by over 40% from January to March, while the number of viewers watching Spotlight for at least 10 minutes per day grew by over 70%. We are also continuing to evolve the product itself. We recently launched public profiles for our entire community, made improvements to ranking, and are seeing rapid adoption of our sounds feature as we continue to expand our music library available on Snapchat. Meanwhile, we continue to see healthy growth in viewership of shows on Discover, which has become a go-to destination for credible and entertaining content for our community. We added over 300 new channels in Q1, including Ryan Doesn't Know, a new Snap original show starring Ryan Reynolds, which reached over 20 million viewers. This has helped us deepen our content offerings in genres that matter to our audience, including news, sports, entertainment, and beauty. For example, we now have over 75 million Snapchatters watching beauty content and over 85 million Snapchatters watching sports content each month on average on Discover. Nearly every aspect of our service, including each of the five screens of Snapchat, is supported by our partners, and we believe that working together we can offer the best and most innovative user experiences for our community. We have been working hard to improve our platform offering for our partners and to help them grow their businesses. For example, we more than doubled the revenue for our gaming partners over the past year as we continue to work closely toward launching new titles. Meanwhile, we are thrilled to see early progress as we continue to test business profiles with partners like L'Oreal and Zenni Optical using them as an organic digital showroom of their AR try-on lenses. We are also expanding the reach of Lens Studio through partners like Moj, one of India's top short video apps, who leverage our augmented reality platform by implementing CameraKit in their own application. We have more to announce about these partnerships at our Snap Partner Summit on May 20th, which will be broadcast on snappartnersummit.com. We are so excited to celebrate our partners and share more around what we've been working on together. We are excited to see our long-term investments in our advertising business begin to pay off as we deliver higher ROI to advertisers. We still have a lot of upside in terms of the level of optimization and efficiency that we can deliver and are investing heavily across the board to both improve our ad platform and support our growing global advertiser base. This has developed into a positive flywheel where our improved efficiency has driven more advertisers and larger budgets to our platform, leading to more impressions and learnings, which in turn increases the rate at which we are able to further improve efficiency and ROI. Furthermore, we believe that our philosophy and early investments in building a business that is thoughtful about the privacy and the trust of our community positions us well as the overall digital advertising industry continues to move in that direction. While there are, of course, a lot of unknowns to figure out along the way, we are excited to work together with our advertising partners to innovate together toward our vision for protecting user privacy while delivering great business results. It has now been over a year since we have been working from home, and I'm so proud of what our team has accomplished over this period. Furthermore, our financial performance has enabled us to increase our investments in growth and innovation which positions us well for the future. We are extremely excited and optimistic about our ability to execute against our long-term goals, especially as we look toward working together and serving our community in a post-pandemic world. Now, I'd like to turn the call over to Jeremy to share more about our business.