Snap Inc.

Good afternoon, everyone, and welcome to SNAP, Inc.'s second 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.

Thank you, and good afternoon, everyone. Welcome to SNAP's second 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 .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 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, everybody, and welcome

to our call. In Q2, we made exciting progress on our long-term strategy to grow our community, enhance value for advertisers, and invest in the future of augmented reality. Enriching relationships between friends and family is central to our mission, and we continue to build products that bring people together and spark conversations among Snapchatters, from messaging and maps to personalized content and AR experiences. Our team's continuous innovation was evident as we reached 932 million monthly active users in Q2, an increase of 64 million or 7% year over year, moving us closer to our goal of serving 1 billion Snapchatters around the world. Our large and -to-reach audience, brand-safe environment, and performance advertising platform continues to make us a valuable partner for businesses looking to grow with Gen Z and Millennials. One of the many things that sets Snapchat apart is the unique space that provides Snapchatters to feel free to express their creativity and maintain close relationships without the pressures of public performance. This authentic communication and self-expression is a key differentiator in the crowded digital landscape because it empowers brands to build strong relationships with their audience. Revenue increased 9% year over year to reach $1.34 billion in Q2, driven primarily by the continued growth of our small and medium customers and delivery against lower funnel objectives. Snapchat Plus approached 16 million subscribers in Q2 and was the primary driver of other revenue, growing 64% year over year to reach an annualized run rate of nearly $700 million. To build on this momentum, we introduced Lens Plus, a new Snapchat Plus subscription tier that offers access to exclusive new AI video lenses, emoji game lenses, as well as early access to new features. We continue to focus on aligning our investments with our core strategic priorities while improving financial performance. In Q2, we delivered $41 million of adjusted EBITDA and generated $24 million of free cash flow, as we continue to make progress towards profitability while generating consistent and meaningful free cash flow. We ended the quarter with $2.9 billion in cash and marketable securities, providing financial flexibility to invest in our future. We have made a long-term and consistent investment in augmented reality, committing more than over the past 11 years to develop the world's only full-stack, vertically integrated augmented reality platform. With one of the world's largest AR developer communities, purpose-built developer tools, a proprietary rendering engine, our own highly optimized operating system, our own optical engine, as well as the design of the hardware itself, our tight control over each aspect of the hardware and software allows us to deliver a product experience that is unmatched. We're excited about our progress as we work to make specs available to the public in 2026. While we are moving quickly to realize the full potential of our business, we believe there is an opportunity to better align SNAP's engineering and technology investments with our business priorities. We will be distributing our engineering teams to directly support our business functions with our core applications team reporting to Bobby Murphy, co-founder and chief technology officer, and our monetization engineering team reporting to Ajit Mohan, our chief business officer. Our chief information officer and chief information security officer will report to me and lead enterprise-wide foundational infrastructure and platform integrity. This new distributed structure will empower our teams to take greater ownership and drive continued innovation for our community and advertising partners. We are grateful to Eric Young, SVP of engineering, for his contributions and wish him all the best as he departs to pursue a new opportunity. Snapping with friends and families at the core of our service, driving daily engagement and long-term retention. In Q2, we introduced several features to make communication faster, easier, and more fun. We launched the Snapchat app on Apple Watch, allowing Snapchatters to preview incoming messages and respond using the keyboard, scribble, dictation, or emojis. Leveraging our investments in AI and machine learning, we enhanced group suggestions to help people connect more easily with their closest friends. Our video chat feature continues to strengthen real connections, with Snapchatters spending 30% more time video chatting year over year in Q2. These updates highlight our ongoing commitment to enriching the Snapchat experience through visual communication and fostering deeper connections amongst our community. Global time spent watching content and the number of content viewers increased year over reflecting the multi-year investment in our machine learning infrastructure and the continued growth in Spotlight. In Q2, we began testing our largest mixed feed model to date, which reduced training time by half and led to an increase in content view time growth. These strategic investments and improvements have been fundamental in Spotlight, reaching an average of more than 550 million monthly active users. Time spent on Spotlight grew 23% year over year in Q2 and now contributes more than 48% of total time spent watching content. In Q2, we introduced a suite of new tools and features that make it easier for Snapstars to create and share content. Creators can now generate videos from their saved memories using templates and may have access to new insights like returning viewers, top content, and total view time, which will enable creators to optimize their content to deepen their relationship with their audience and receive rewards for posting. Over the past year, we onboarded thousands of creators to our Snapstar program, driving momentum with the number of Spotlight posts by Snapstars growing more than 145% year over year in North America in Q2. As part of our efforts to strengthen real-world connections among close friends, we acquired Saturn, a social calendar app that helps high school and college students manage and share their class schedules. Saturn transforms calendaring by orienting it around friends to make time management feel intuitive and fun. Students from over 80% of U.S. high schools use Saturn with their friends to organize their day. We are excited to support Saturn's growth and explore ways to integrate its calendaring expertise into Snapchat in new and innovative ways. Augmented reality continues to empower creativity and drive engagement on Snapchat. Snapchatters use AR lenses in our camera more than 8 billion times each day, and over 400,000 creators from nearly every country have built more than 4 million lenses using our industry-leading AR tools. In Q2, more than 350 million Snapchatters engage with AR every day on average. Our 90s school photos, AI lens, different eras AI lens, and cartoon world AI lens were collectively viewed over 1 billion times in Q2, highlighting strong engagement with our latest AR experiences powered by generative AI. Much of this momentum is driven by our growing AR creator and developer ecosystem. Lens Studio, our desktop authoring tool, has helped foster a global community of professional developers by giving them powerful tools to create innovative AR experiences. We have made AR creation increasingly more accessible with EasyLens, an AI tool that empowers lens creators to build a lens in just minutes by typing out a prompt for the lens that they want to create. In Q2, we expanded access with the introduction of the Lens Studio iOS app and a new web-based Lens Studio creation tool at .Snapchat.com. While the desktop version of Lens Studio remains the primary tool for professional developers creating advanced and more sophisticated AR experiences across Snapchat, partner apps, and Spectacles, these new tools are designed to help more people at all skill levels get started with AR. To support creators building lens games, our latest Lens Studio update includes new features and simplified development. These include the new Bitmoji Suite for enhanced personalization and animation that makes it easier to bring 3D Bitmoji avatars to any game environment, along with new game assets, including leaderboards and multiplayer features built specifically for Snapchat. As a result, games engagement on Snapchat has continued to grow, now reaching more than 175 million monthly active users, up over 40% year over year. We believe games represent a compelling long-term opportunity for driving engagement on Snapchat and eventually new monetization opportunities for creators and our business. In Q2, we announced plans to publicly launch our first fully standalone lightweight Specs AR glasses in 2026, marking an exciting milestone for our company and a critical step toward realizing our long-term vision for augmented reality. Snap is uniquely positioned as the only company in the world with a fully integrated AR computing stack. Our upcoming Specs represent a leap forward in human-centered computing. It will be significantly smaller, lighter, and more capable than our fifth-generation Spectacles released to developers in 2024. By combining advanced machine learning and AI with spatial intelligence, Specs will enable users to interact with computing in fundamentally new ways, delivering digital experiences embedded directly into the world around us. Our developer community continues to build new and compelling use cases and creative lenses for Specs. Recently launched lenses for Specs include Goa's Super Travel for real-time translation and currency conversion, Paradiddle's Drum Kit for interactive music learning overlaid on a physical drumset, and ANRK's Pool Assist to help players make better shots while playing pool. These examples demonstrate how Specs seamlessly integrate computing experiences into three-dimensional space, enabling practical utilities, enriching educational experiences, and fostering imaginative new forms of entertainment. To build on this momentum, we introduced updates to Snap OS and new tools to unlock deeper AR capabilities. AI-powered experiences with OpenAI and Gemini on Google Cloud, in addition to hosted open source models, now enable the creation of sophisticated, multimodal AI-powered lenses. Additionally, our new automated speech recognition API supports real-time transcription across dozens of languages, and the Snap 3D API empowers developers to generate 3D objects on the fly from any prompt. Future enhancements, including a new partnership with Niantic Spatial to develop a shared AI-powered map of the world, and our recently announced WebXR support, will further expand the utility and accessibility of our AR platform, and help our developer community build more unique industry-leading experiences in advance of the public launch of Specs next year. We have made significant progress across our advertising platform by focusing on three core priorities. Advancing our AI and ML capabilities with privacy-safe signals, optimizing ad formats and tools for performance, and improving our -to-market strategy with a strong focus on SMBs. In Q2, we further enhanced our AI and ML capabilities, leading to meaningful improvements in ad platform performance, particularly in conversion attribution, real-time personalization, and product relevance. This contributed to 7-0 purchase volume, increasing 39% -over-year for commerce advertisers, and total purchase-related ad revenue growing more than 25% -over-year in Q2. We continued to innovate on our ad offerings, and in June we expanded sponsored snaps in the U.S. and several other regions globally, activating all Pixel and App DR objectives. We also introduced First Snap, a single-day takeover format that delivers the first sponsored snap in the chat inbox. Sponsored snaps enable advertisers to show up like a Snapchatter, helping them build authentic relationships with our community. Sponsored snaps are proving highly effective in driving incremental conversions, delivering up to a 22% increase when included in an advertiser's broader Snap campaign mix. Sponsored snaps represent a significant new pool of inventory for our advertising business, and an opportunity to reach our unique audience directly and natively within our highest engagement surface, the chat inbox. In the near term, this is delivering ROI for advertisers in the form of incremental reach and additional conversions that we believe will translate into incremental top-line growth over time as we build demand and continue to enhance the performance of this new product. We continue to make meaningful progress in App Direct Response performance. Notably, sponsored snaps are now driving an 18% lift in unique converters across app installs and app purchases. We recently began testing App End Cards that reinforce advertiser messaging and guide users to a conversion at the end of a Snap ad, and are delivering a 19% average boost in scan installs. In addition, we have delivered core ML improvements and introduced smarter tools like target cost bidding to deliver performance and scale while remaining within an advertiser's cost constraints. Our investment in automation continued with the launch of Snapchat Smart Campaign Solutions, an AI-powered suite designed to enhance campaign performance and simplify advertiser workflows. This suite includes smart bidding, which dynamically adjusts bids to achieve a desired cost per action. For example, I Can I Will, a leading European sportswear brand, saw their ROAS double and conversion volume increase by 80% while reducing their cost per action by 50% after implementing smart bidding. We are also encouraged by initial testing of Smart Budget, which automatically adjusts campaign budgets across ad sets, and the alpha testing of auto-targeting, which leverages AI to identify and reach high-value users. We continue to enhance our -to-market operations in Q2 with particular focus on better serving our growing community of SMB advertising partners. SMBs were the largest contributor to ad revenue growth in Q2, driven by a combination of more performant DR products, improved -to-market operations, and a simplified ad buying experience. For example, WISB Money, an online financial services tool in France, leveraged smart bidding on Snapchat to significantly lower their cost per acquisition, resulting in a 77% improvement in eCPM and a 69% improvement in cost per click, making Snapchat one of their top performing acquisition channels. Looking ahead, we see significant opportunities to further enhance return on advertising spend by deepening our investments in AI and machine learning, delivering innovative ad formats across the entire funnel, and enhancing the tools and insights that help our advertising partners optimize their campaigns. These ongoing efforts are aimed at ensuring Snapchat remains a high-performing and increasingly automated platform for all of our advertising partners. With that, I'd like to turn it over to Derek to share more about our financial progress.