Snap Inc.

Good afternoon, everyone, and welcome to Snap, Inc.' 's first quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. I would now like to turn the call over to David O'Meader, head of investor relations. You may proceed.

Thank you, and good afternoon, everyone. Welcome to Snap's first quarter 2025 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, earnings slides, and investor letter. 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 10-K or Form 10-Q, 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 for joining our call. Q1 marked an important milestone for SNAP as we reached more than 900 million monthly active users on the way to our goal of 1 billion monthly active users. Our focus on visual communication between friends and family is a strategic advantage that has enabled us to build engaging and retentive services. In Q1, our community grew to 460 million daily active users, an increase of 38 million year over year, and content viewers and total time spent watching content grew year over year. Q1 revenue increased 14% year-over-year to $1.36 billion, driven by the progress we have made with our direct response advertising solutions, continued momentum and driving performance for small and medium-sized businesses, and the growth of our Snapchat Plus subscription business. The benefits of our more focused investments are now evident in our improved profitability and free cash flow generation. In Q1, the combination of top line progress and expense discipline translated to $108 million of adjusted EBITDA and $114 million of free cash flow. Since the launch of our fifth generation Spectacle smart glasses six months ago, we have expanded our AR platform with new features for developers, introduced innovative lens experiences, and created new opportunities for AR developers to be rewarded for their creations. Key feature updates include global positioning system integration, advanced hand tracking capabilities, an improved keyboard, and in-game leaderboards that are enabling new and engaging Spectacles AR use cases. Our large, hard-to-reach audience, brand-safe environment, and performant advertising platform have made us a valuable partner for businesses that want to grow and reach the next generation of Snapchatters. Given the progress we have made with our advertising platform and the pace of execution against our 2025 strategic priorities, we believe we are well positioned to deliver improved business performance and meaningful positive free cash flow as we make further progress towards GAAP profitability. We continue to make progress growing our global community, reaching 460 million DAU in Q1, an increase of 7 million quarter-over-quarter, and 38 million, or 9%, year-over-year. DAU in North America was $99 million compared to $100 million in the prior quarter and $100 million in the prior year. DAU in Europe was $99 million compared to $99 million in the prior quarter and $96 million in the prior year. DAU in the rest of the world was $262 million compared to $254 million in the prior quarter and $226 million in the prior year. We continue to see robust growth in our global community driven by ongoing adoption of visual communication in less mature markets. To continue to grow our community in North America and Europe, we are prioritizing innovation in three key areas, enhancing our core product value of visual communication, investing in our AI and ML models for better content ranking and personalization, and strengthening our creator ecosystem. Snapping with friends and family is the core of our service and the primary driver of the continued growth and long-term retention of our global community. In Q1, we launched new features designed to boost creative expression and deepen connections through snapping, including streamlined group creation for messaging and the ability to replay a snap a Snapchatter has sent to their friends. These updates reflect our ongoing commitment to enhancing the Snapchat experience through visual communication. We are inspired by all of the innovative ways our community continues to adopt conversational AI, and we've rolled out enhanced multimodal capabilities through Gemini as we continue to expand image understanding to more geographies. These improvements in MyAI responsiveness resulted in an increase of more than 55% year-over-year in the number of MyAI daily active users in the U.S. Global time spent watching content increased year-over-year in Q1, reflecting the continued investment in our AI and ML models for better content ranking and personalization. To further deepen content engagement, we implemented fresher, more responsive machine learning models, doubling the pace at which they integrate new trends and user interaction signals. While we anticipate that it will take several quarters to reach our ultimate goal of near real-time model refreshes, we are encouraged by the results we have achieved to date. The number of views on Spotlight posts less than 24 hours old doubled year over year, which contributes to a more engaging, timely, and fresh viewer experience and accelerates the creator posting flywheel. We have been testing a simplified version of Snapchat designed to help new and casual users of our service better understand and navigate the app. We found that elements like a more prominent spotlight experience and friend stories within the chat experience contributed to increases in daily content viewers and total content views, particularly among more casual users. Our most engaged Snapchatters consistently demonstrated a preference for a five tab layout, favoring the familiarity of tile-based content discovery and a dedicated map tab. Informed by these insights, we have begun testing a refined five tab interface that combines the best of both approaches. bringing more stories to the messaging experience, and adding easier access to Spotlight, now placed directly to the right of the camera. As always, we are iterating thoughtfully to deliver the most seamless experience for Snapchatters, creators, and our advertising partners. We are committed to growing our creator community, and we are prioritizing Snap native creators who bring fresh, original content to Snapchat, fostering a dynamic and engaging content ecosystem. Over the past year we onboarded thousands of creators to our snap star program driving strong momentum with a number of spotlight post by snap stars growing more than 125% year over year in North America in key one. Well, we have onboarded thousands of established creators and celebrities we've also seen significant growth and creators that have achieved snap star status by growing their following in business organically on snapchat. For example, Bridget Ugarte, a 25-year-old advocate for body positivity and mental health, has grown her followers tenfold over the past six months by posting daily to Stories and Spotlight. Augmented reality continues to empower creativity on Snapchat, fueled by the growth of our vibrant AR developer and creator ecosystem. We have supported more than 400,000 AR creators, developers, and teams worldwide who have built over 4 million lenses using Lens Studio. Q1 marked six months since the launch of our fifth generation of Spectacles. To celebrate the occasion, we introduced innovative lenses and platform enhancements, including three advanced hand tracking capabilities, a phone detector that recognizes when a Snapchatter is holding their phone, a new grab gesture for intuitive control, and improved targeting intent to minimize false positives while typing. We also announced Spectacles Community Challenges, offering prizes to developers for submitting new lenses or enhancing existing ones. Looking ahead, we are focused on innovating and enhancing our core product experience while continuing to invest in the future of augmented reality. We believe continued progress on these initiatives is a critical input to serving our community and expanding our long-term monetization opportunity. In Q1, we made significant progress across our three core advertising platform initiatives, advancing our ML capabilities, enhancing the use of privacy safe signals, and optimizing ad formats to drive performance for our advertising partners. We improved the freshness of our models and the scale of training data, which increased the rate of model learning by six times and grew the volume of historical interaction data used for training by over five times. The advancements in training speed and increased volume of data is helping to deepen the level of personalization we can provide to our community. In addition, we significantly advanced our app-based advertising models by consolidating several disparate models into a larger, integrated, and more powerful implementation that better optimizes for app conversion events. This change aligns model learning objectives with advertiser goals by using a broader range of performance signals, moving beyond a narrower view of conversion data that had previously been utilized. Together, these foundational advancements are delivering more relevant ads to Snapchatters and more conversions for advertisers, which contributed in part to SK Ad Network reported app purchases growing more than 30% year-over-year in Q1. Our investments in automation and lower funnel optimization tools are delivering value for our advertisers. For example, improvements to our automated target cost bidding strategy helps advertisers scale efficiently by dynamically adjusting bids to meet their desired cost per action. As a result, early adopters are seeing strong gains. Advertisers using target cost bidding strategies on 7-0 pixel purchase and 7-0 pixel signup report a 32% drop in cost per purchase and a 16% lift in return on advertising spend, respectively. For example, Headspace, a popular meditation mindfulness app, saw a two times increase in conversion volume with a 47% more efficient cost per action after shifting their bid strategy to target cost. To further improve return on ad spend, We launched new high-intent formats for dynamic product ads in Q1, enabling advertisers to move beyond generic catalog images to create richer and more engaging ad experiences. These new multi-product ad formats combine storytelling with performance, showcasing a curated range of products in a visually compelling way that drives stronger down-funnel results. We also continue to invest in our global partnerships ecosystem by building and strengthening relationships with leading marketing technology partners to deliver automation solutions to our advertisers. For example, marketing tech partner, ROI Hunter, and leading fashion lifestyle retailer, 6thStreet.com, leveraged Snap's dynamic product ads, delivering the most relevant and high-performing products to the right customers. This resulted in a 76% increase in return on ad spend and a 22% reduction in cost per action. We're continuing to strengthen the foundation of our ad platform by improving advertiser signal quality readiness, ensuring advertisers have the actionable signals needed for better optimization and measurement. Our foundational ML work this quarter included data-centric optimization throughout the engineering stack, where we audited, optimized, and improved signals to enhance their timeliness and fidelity. In Q1, the number of advertisers with strong signal setups increased 29% for large advertisers and 48% for mid-sized advertisers, laying the groundwork for improved performance. In addition, the number of advertisers that have adopted our conversions API continues to grow, with over 60% of all direct response ad revenue having now completed conversions API integrations. We are now working closely with top advertisers to further enhance their signal infrastructure as those with deeper conversions API integrations are seeing even stronger outcomes. For example, Footlocker realized a 49% decrease in cost per action and a more than 100% increase in return on advertising spend by implementing conversions API and leveraging 7.0 optimization per pixel purchase. In Q4, 2024, we launched sponsored snaps to provide advertisers with a unique and impactful way to engage the Snapchat community. In Q1, we began limited testing of sponsored snaps as a biddable product in our auction. We began this testing by leveraging our pixel purchase optimization. We are encouraged by the performance outcomes we are seeing in these tests. However, the impact to revenue in Q1 was less than $10 million, given the limited scale of this testing. Given the encouraging results we have observed to date, we intend to expand sponsored snaps to additional regions and bidding goals in the months ahead. Finally, our leadership in augmented reality remains a strategic differentiator. A recent multi-phase research study with Tenuity found that 81% of U.S. Snapchatters agree augmented reality is a fun way to discover new products, and they are 1.6 times more likely than users of other apps to use AR to shop with friends, creating a key opportunity for brands. With this in mind, in Q1, we launched sponsored AI lenses, bringing our generative AI-powered AR technology to advertisers and enabling shareable AR experiences on Snapchats. Looking ahead, we see significant opportunity to continue improving return on advertising spend for our partners through deeper investment in AI and ML models, high quality signals, and innovative formats across the funnel. With that, I'd like to turn the call over to Derek to discuss our financial results.