Snap Inc.

Good afternoon, everyone, and welcome to Snap Incorporated's fourth quarter 2023 earnings conference call. At this time, participants are in a listen-only mode. I would now like to turn the call over to David Olmeter, head of investor relations.

Thank you, and good afternoon, everyone. Welcome to Snap's fourth quarter 2023 earnings conference call. With us today are Evan Spiegel, chief executive officer and co-founder, and Derek Anderson, chief financial officer. Please refer to our investor relations website at investor.snap.com to find today's press release, slides, investor letter, and investor presentation. 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 disclosures. 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 10Q, particularly in the section titled Risk Factors. Today's call will include both GAAP and non-GAAP measures. Reconciliations 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. With that, I'd like to turn the call over to Evan.

Hi, everyone, and thank you all for joining us. In Q4, we continue to make progress on our core priorities of growing our community and improving depth of engagement, driving top-line growth and diversifying our revenue sources, and carving a path to adjusted EBITDA profitability and positive free cash flow. Monthly active users increased more than 8% year over year and surpassed the 800 million milestone in Q4, demonstrating progress towards our goal of 1 billion monthly active users. Daily active users reached 414 million in Q4, an increase of 10% year over year, and we continue to deepen engagement with our content platform, with the number of viewers and total time spent watching content growing year over year. Revenue grew 5% year over year in Q4 to reach 1,361,000,000, as we remain focused on investing in our direct response business to deliver increased return on ad spend for our advertising partners. Adjusted gross margins expanded one percentage point quarter over quarter, adjusted operating expenses declined by 2% year over year, and we delivered adjusted EBITDA of $159 million and free cash flow of $111 million in Q4. 2023 was a pivotal year for Snap, as we focused relentlessly on adding value to our community while evolving our business for long-term growth. Last year we made transformative changes to our business by shifting to a more customer centric approach. Investing heavily in our ML platform to drive improved performance for advertising partners and better leveraging privacy safe signals for ranking and optimization. We also transformed our go to market efforts with new regional leadership and a renewed focus on customer oriented advertising solutions. We begin 2024 with a focus on three initiatives that we believe are essential for snapchat long term success. First, we are continuing to evolve our machine learning models to drive more ad interactions across our platform. Second, we are working to unify the content experience across spotlight and stories to improve the user experience and deepen engagement. Lastly, we are shifting more of our focus towards user growth and deepening engagement in our most highly monetizable geographies, including North America and Europe. We believe that focusing on these initiatives will help us to increase daily active usage of Snapchat, deepen content engagement, improve performance for advertisers, and ultimately accelerate revenue growth and drive increased free cash flow. In order to best position our business to execute on these priorities and to ensure we have the capacity to invest incrementally to support our growth over time, we have made the difficult decision to restructure our team while continuing our investments in our highest priorities, including improved top line growth. We will reduce layers of management and concentrate our team members in major hub locations to support in-person collaboration. resulting in a reduction in our full-time workforce of approximately 10% in Q1 of 2024. The team members impacted by these changes are kind, smart, and creative colleagues who have been important contributors to our business during this challenging time, and we are committed to supporting them in their transition. Thank you, and with that, we will begin our Q&A session.