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What changed in Snap Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Snap Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+469 added−501 removedSource: 10-K (2024-02-07) vs 10-K (2023-02-01)

Top changes in Snap Inc's 2023 10-K

469 paragraphs added · 501 removed · 380 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThey can also communicate with our proprietary personalized avatar tool, Bitmoji, and its associated contextual stickers and images, which integrate seamlessly into both mobile devices and desktop browsers. Snap Map : Snap Map is a live and highly personalized map that allows Snapchatters to connect with friends and explore what is going on in their local area.
Biggest changeWe also offer My AI, our AI-powered chatbot, which helps our community foster creativity and connection with friends, receive real-world recommendations, and learn more about their interests and favorite subjects. They can also communicate through our proprietary personalized avatar tool, Bitmoji, and its associated contextual stickers and images, which integrate seamlessly into both mobile devices and desktop browsers.
Information about Segment and Geographic Revenue Information about segment and geographic revenue is set forth in Notes 1 and 2 of the notes to our consolidated financial statements included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Available Information Our website address is www.snap.com.
Information about Segment and Geographic Revenue Information about segment and geographic revenue is set forth in Notes 1 and 2 of the notes to our consolidated financial statements included in “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. Available Information Our website address is www.snap.com.
Diversity, Equity, and Inclusion : Snap has long supported a Diversity, Equity and Inclusion, or DEI, program, and we have made progress on a number of fronts, including diversifying our board of directors and executive leadership, introducing new accountability around DEI outcomes, maintaining an allyship program to inspire a more inclusive culture, and enhancing our recruiting process to continue driving diverse hiring.
Diversity, Equity, and Inclusion : Snap has long supported Diversity, Equity and Inclusion, or DEI, initiatives, and we have made progress on a number of fronts, including diversifying our board of directors and executive leadership, introducing new accountability around DEI outcomes, maintaining an allyship program to inspire a more inclusive culture, and enhancing our recruiting process to continue driving diverse hiring.
Snap Ads include the following: • Single Image or Video Ads: These are full screen ads that are skippable, and can contain an attachment to enable Snapchatters to swipe up and take action. 7 Table of Contents • Story Ads: Story Ads are branded tiles that live within the Discover section of the Stories tab that can be either video ads or a series of 3 to 20 images. • Collection Ads: Collection Ads feature four tappable tiles to showcase multiple products, giving Snapchatters a frictionless way to browse and buy. • Dynamic Ads: Dynamic ads leverage our machine learning algorithm to match a product catalog to serve the right ad to the right Snapchatter at the right time. • Commercials: Commercials are non-skippable for six seconds, but can last up to three minutes.
Snap Ads include the following: • Single Image or Video Ads: These are full screen ads that are skippable, and can contain an attachment to enable Snapchatters to swipe up and take action. • Story Ads: Story Ads are branded tiles that live within the Discover section of the Stories tab that can be either video ads or a series of 3 to 20 images. • Collection Ads: Collection Ads feature four tappable tiles to showcase multiple products, giving Snapchatters a frictionless way to browse and buy. • Dynamic Ads: Dynamic ads leverage our machine learning algorithm to match a product catalog to serve the right ad to the right Snapchatter at the right time. • Commercials: Commercials are non-skippable for six seconds, but can last up to three minutes.
Technology Our research and development efforts focus on product development, advertising technology, and large-scale infrastructure. Product Development : We work relentlessly and invest heavily to create and improve products for our community and our partners. We develop a wide range of products related to visual messaging and storytelling that are powered by a variety of new technologies.
Technology Our research and development efforts focus on product development, advertising technology, and large-scale infrastructure. Product Development : We work relentlessly and invest deliberately to create and improve products for our community and our partners. We develop a wide range of products related to visual messaging and storytelling that are powered by a variety of new technologies.
This is where you’ll also find our Transparency Report in which we provide insight into these efforts and visibility into the nature and volume of content reported on our platform. 9 Table of Contents We also understand that privacy policies—no matter how ambitious—are only as good as the people and practices behind those policies.
This is where you’ll also find our Transparency Report in which we provide insight into these efforts and visibility into the nature and volume of content reported on our platform. We also understand that privacy policies—no matter how ambitious—are only as good as the people and practices behind those policies.
We focus on the health and well-being of our employees through programs and benefits that support their physical, emotional, and financial fitness. To attract and retain the best talent, we aim to offer challenging work in an environment that enables our employees 8 Table of Contents to have a direct meaningful contribution to new and exciting projects.
We focus on the health and well-being of our employees through programs and benefits that support their physical, emotional, and financial fitness. To attract and retain the best talent, we aim to offer challenging work in an environment that enables our employees to have a direct meaningful contribution to new and exciting projects.
We also offer Public Profiles, as a way for our creator community and our advertising partners to memorialize and scale their content and AR Lenses on our platform. 6 Table of Contents Spotlight : Spotlight showcases the best of Snapchat, helping people discover new creators and content in a personalized way.
We also offer Public Profiles, as a way for our creator community and our advertising partners to memorialize and scale their content and AR Lenses on our platform. Spotlight : Spotlight showcases the best of Snapchat, helping people discover new creators and content in a personalized way.
Snapchat+ offers a variety of features from allowing Snapchatters to customize the look and feel of their app, to giving special insights into their friendships. We also offer Snapchat for Web, a browser-based product that brings Snapchat’s signature calling and ephemeral messaging capabilities to the web.
Snapchat+ offers a variety of features from allowing Snapchatters to customize the look and feel of their app, to giving special insights into their friendships. We also offer Snapchat for Web, a browser-based product that brings Snapchat’s signature capabilities to the web.
With a breadth of visual messaging and content experiences available within the application, Snapchatters can interact with all five, or a subset of those five tabs. Camera : The Camera is a powerful tool for communication and the entry point for augmented reality experiences in Snapchat.
With a breadth of visual messaging and content experiences available within the application, Snapchatters can interact with any or all of the five tabs. Camera : The Camera is a powerful tool for communication and the entry point for augmented reality experiences in Snapchat.
Many of these companies, such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Meta (including Facebook, Instagram, and WhatsApp), Pinterest, and Twitter, may have greater financial and human resources and, in some cases, larger user bases.
Many of these companies, such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Meta (including Facebook, Instagram, Threads, and WhatsApp), Pinterest, and X (formerly Twitter), may have greater financial and human resources and, in some cases, larger user bases.
AR Lenses can be memorialized on Snapchat, through Public Profiles that aggregate content and lenses in a single, easy to find place. Snap Ads : We let advertisers tell their stories the same way our users do, using full screen videos with sound.
AR Lenses can be memorialized on Snapchat, through Public Profiles that aggregate content and lenses in a single, easy to find place. 7 Table of Contents Snap Ads : We let advertisers tell their stories the same way our users do, using full screen videos with sound.
The Discover section of this tab displays curated content based on a Snapchatter’s subscriptions and interests, and features news and entertainment from both our creator community and publisher partners.
The Discover section of this tab displays curated content based on a Snapchatter’s subscriptions and interests, and features news and 6 Table of Contents entertainment from both our creator community and publisher partners.
We license content, trademarks, technology, and other intellectual property from our partners, and rely on our license agreements with those partners to use the intellectual property. We also enter into licensing agreements with third parties to receive rights to patents and other know-how.
We license content, trademarks, technology, and other intellectual property from our partners, and rely on our license agreements with those partners to use the intellectual property. We also enter into licensing agreements with third parties to receive rights to patents and other know-how. Third parties may assert claims related to intellectual property rights against our partners or us.
We also purchased renewable energy certificates in 2022 sufficient to cover all of the electricity consumed in our global operations for the year ended December 31, 2021. Our Commitment to Privacy Our approach to privacy is simple: Be upfront, offer choices, and never forget that our community comes first.
In 2023 and 2022, we purchased renewable energy certificates covering all electricity consumed in our global operations for the years ended December 31, 2022 and 2021, respectively. Our Commitment to Privacy Our approach to privacy is simple: Be upfront, offer choices, and never forget that our community comes first.
Third parties may assert claims related to intellectual property rights against our partners or us. 10 Table of Contents Other companies and “non-practicing entities” that own patents, copyrights, trademarks, trade secrets, and other intellectual property rights related to the mobile, camera, communication, content, internet, and other technology-related industries frequently enter into litigation based on allegations of infringement, misappropriation, and other violations of intellectual property or other rights.
Other companies and “non-practicing entities” that own patents, copyrights, trademarks, trade secrets, and other intellectual property rights related to the mobile, camera, communication, content, internet, and other technology-related industries frequently enter into litigation based on allegations of infringement, misappropriation, and other violations of intellectual property or other rights.
Snap Map makes it easy to locate nearby friends who choose to share their location, view a heatmap of recent Snaps posted to Our Story by location, and locate local businesses.
Snap Map : Snap Map is a live and highly personalized map that allows Snapchatters to connect with friends and explore what is going on in their local area. Snap Map makes it easy to locate nearby friends who choose to share their location, view a heatmap of recent Snaps posted to Our Story by location, and locate local businesses.
We also enter into confidentiality and invention assignment agreements with our employees and contractors and sign confidentiality agreements with third parties. Our internal controls are designed to restrict access to proprietary technology.
We also enter into confidentiality and invention assignment agreements with our employees and contractors and sign confidentiality agreements with third parties.
As of December 31, 2022, we had approximately 2,425 issued patents and approximately 3,247 filed patent applications in the United States and foreign countries relating to our camera platform and other technologies. Our issued patents will expire between 2023 and 2047.
Our internal controls are designed to restrict access to proprietary technology. 10 Table of Contents As of December 31, 2023, we had approximately 3,174 issued patents and approximately 3,111 filed patent applications in the United States and foreign countries relating to our camera platform and other technologies. Our issued patents will expire between 2024 and 2047.
Our public policy team monitors legal and regulatory developments in the United States, as well as many foreign countries, and communicates with policymakers and regulators in the United States and internationally. Corporate Information We were formed as Future Freshman, LLC, a California limited liability company, in 2010.
Our public policy team monitors legal and regulatory developments in the United States, as well as many foreign countries, and communicates with policymakers and regulators in the United States and internationally.
That’s why choice matters. We build products and services that emphasize the context of a conversation—who, when, what, and where something is being said. If you don’t have the autonomy to shape the context of a conversation, the conversation will simply be shaped by the permanent feeds that homogenize online conversations.
That’s why choice matters. We build products and services that emphasize the context of a conversation—who, when, what, and where something is being said.
As of December 31, 2022, we had approximately 5,288 full-time employees, of whom approximately 57% are in engineering roles involved in the design, development, support, and manufacture of new and existing products and processes. Climate Change: We continue to deepen our commitment to help combat climate change.
As of December 31, 2023, we had 5,289 full-time employees, of whom approximately 54% are in engineering roles involved in the design, development, support, and manufacture of new and existing products and processes. Climate Change: Our commitment to combating climate change remains unchanged. In 2021, we adopted science-based emissions reduction targets approved by the Science Based Targets Initiative.
When you read our Privacy Policy, we hope that you’ll notice how much we care about the integrity of personal communication. For starters, we’ve written our Privacy Policy in plain language because we think it’s important that everyone understands exactly how we handle their information. Otherwise, it’s hard to make informed choices about how you communicate.
For starters, we’ve written our Privacy Policy in plain language because we think it’s important that everyone understands exactly how we handle their information. Otherwise, it’s hard to make informed choices about how you communicate. We’ve also created a robust Safety and Privacy Hub where we show that context and choice are more than talking points.
In 2021, we adopted science-based emissions reduction targets approved by the Science Based Targets Initiative and became historically carbon neutral from our founding in 2011 through 2020. In 2022, we remained carbon neutral by purchasing offsets to balance emissions attributable to Snap through December 31, 2021 and are committed to achieving net negative carbon emissions by 2030.
Additionally, in 2021, we achieved carbon neutrality from our founding in 2011 through 2020. In 2023 and 2022, we maintained our carbon-neutral status by purchasing offsets to emissions attributable to Snap as of December 31, 2022 and 2021, respectively. We remain committed to achieve net negative carbon emissions by 2030.
These partnerships have allowed us to scale quickly without upfront physical infrastructure costs, allowing us to focus our efforts on product innovation. Employees and Culture We seek to be a force for good through our products, our work to strengthen our communities, our efforts to make a positive impact on the planet, and our inclusive workplace.
These partnerships have allowed us to scale quickly without upfront physical infrastructure costs, allowing us to focus our efforts on product innovation.
Supporting Our Team : Our values at Snap are being kind, smart, and creative, and we put those values into action through how we support our team and how our team supports one another.
Employees and Culture We seek to be a force for good through our products, our work to strengthen our communities, our efforts to make a positive impact on the planet, and our inclusive workplace. 8 Table of Contents Supporting Our Team : Our values at Snap are being kind, smart, and creative, and we put those values into action through how we support our team and how our team supports one another.
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We’ve also created a robust Privacy and Safety Hub where we show that context and choice are more than talking points.
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If you don’t have the autonomy to shape the context of a conversation, the conversation will simply be shaped by the permanent feeds that homogenize online conversations. 9 Table of Contents When you read our Privacy Policy, we hope that you’ll notice how much we care about the integrity of personal communication.
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We changed our name to Toyopa Group, LLC in 2011, incorporated as Snapchat, Inc., a Delaware corporation, in 2012, and changed our name to Snap Inc. in 2016.
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We completed our initial public offering in March 2017 and our Class A common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “SNAP.” Our principal executive offices are located at 3000 31st Street, Santa Monica, California 90405, and our telephone number is (310) 399-3339.
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Snap Inc., “Snapchat,” and our other registered and common-law trade names, trademarks, and service marks appearing in this Annual Report on Form 10-K are property of Snap Inc. or our subsidiaries.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, as our international operations and sales continue to grow, we are subject to a variety of risks inherent in doing business internationally, including: • political, social, and economic instability, including war and other armed conflicts; • risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, and unexpected changes in laws, regulatory requirements, and enforcement; • potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities; • fluctuations in currency exchange rates; • higher levels of credit risk and payment fraud; • complying with tax requirements of multiple jurisdictions; • enhanced difficulties of integrating any foreign acquisitions; 37 Table of Contents • complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions, and termination requirements; • reduced protection for intellectual-property rights in some countries; • difficulties in staffing and managing global operations and the increased travel, infrastructure, and compliance costs associated with multiple international locations; • regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash; • import and export restrictions and changes in trade regulation; • complying with statutory equity requirements; • complying with the U.S.
Biggest changeIn addition, as our international operations and sales continue to grow, we are subject to a variety of risks inherent in doing business internationally, including: • political, social, and economic instability, including war and other armed conflict, and significant political developments or disruptions in foreign jurisdictions, such as the ongoing legal and regulatory changes in the United Kingdom as a result of the withdrawal of the United Kingdom from the European Union; • risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, rights of publicity, content, data protection, cybersecurity, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, and unexpected changes in laws, regulatory requirements, and enforcement; • potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities; • fluctuations in currency exchange rates; • higher levels of credit risk and payment fraud; • complying with tax requirements of multiple jurisdictions; • enhanced difficulties of integrating any foreign acquisitions; • complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions, and termination requirements; • complying with a variety of foreign disclosure and reporting obligations, including those related to environmental, social, and corporate governance impacts and security breaches; • reduced protection for intellectual-property rights in some countries; • difficulties in staffing and managing global operations and the increased travel, infrastructure, and compliance costs associated with multiple international locations; • regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash; • import and export restrictions and changes in trade regulation; 37 Table of Contents • complying with statutory equity requirements; • complying with the U.S.
Our business model materially depends on our ability to process personal data, particularly in connection with our advertising offerings, so we are particularly exposed to the risks associated with the rapidly changing legal landscape regarding privacy, security, and data protection.
Our business model materially depends on our ability to process personal data in connection with our advertising offerings, so we are particularly exposed to the risks associated with the rapidly changing legal landscape regarding privacy, security, and data protection.
In the future, we may acquire additional patents or patent portfolios, which could require significant cash expenditures.
In the future, we may acquire additional patents or patent portfolios in the future, which could require significant cash expenditures.
As a result of the strategic reprioritization, in the year ended December 31, 2022, we incurred pre-tax charges of $188.9 million, primarily consisting of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization.
As a result of the strategic reprioritization, in the year ended December 31, 2022, we incurred pre-tax charges of $188.9 million, primarily consisting of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization.
For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock.
For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class-action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock.
In addition, our co-founders may make long-term strategic investment decisions and take risks that may not be successful and may seriously harm our business. As our Chief Executive Officer, Mr. Spiegel has control over our day-to-day management and the implementation of major strategic investments of our company, subject to authorization and oversight by our board of directors.
In addition, our co-founders may make long-term strategic investment decisions for the company and take risks that may not be successful and may seriously harm our business. As our Chief Executive Officer, Mr. Spiegel has control over our day-to-day management and the implementation of major strategic investments of our company, subject to authorization and oversight by our board of directors.
If we elect to satisfy tax withholding and remittance obligations in whole or in part by drawing on our revolving credit facility, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business. There are numerous risks associated with our internal and contract manufacturing of our physical products and components.
If we were to elect to satisfy tax withholding and remittance obligations in whole or in part by drawing on our revolving credit facility, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business. There are numerous risks associated with our internal and contract manufacturing of our physical products and components.
Moreover, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties in our supply chain have not been compromised or that their systems or networks are free from exploitable defects or bugs that could result in a breach of or disruption to our platform, systems, and networks or the systems and networks of third parties that support us and our services.
Moreover, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties in our supply chain have not been compromised or that their systems, networks, or code are free from exploitable defects or bugs that could result in a breach of or disruption to our platform, systems, and networks or the systems and networks of third parties that support us and our services.
We plan to continue to introduce new products and features regularly, including some features that may only work on the latest systems and hardware, and have experienced that it takes time to optimize new products and features to function with the variety of existing mobile operating systems, hardware, and standards, impacting the popularity of such products, and we expect this trend to continue.
We plan to continue to introduce new products and features regularly, including some features that may only work on the latest systems and hardware, and have experienced that it takes significant time to optimize new products and features to function with the variety of existing mobile operating systems, hardware, and standards, impacting the popularity of such products, and we expect this trend to continue.
In addition, if we fail to successfully close transactions, integrate new teams, or integrate the products and technologies associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully.
In addition, if we fail to successfully close transactions, integrate new teams, or integrate the products, technologies, and systems associated with these acquisitions into our company, our business could be seriously harmed. Any integration process may require significant time and resources, and we may not be able to manage the process successfully.
While we implement alternative solutions, we are subject to rules and standards set by the owners of such mobile operating systems which may be unclear, change, or be interpreted in a manner adverse to us and require us to halt or change our solutions, any of which could seriously harm our business.
Any alternative solutions we implement are subject to rules and standards set by the owners of such mobile operating systems which may be unclear, change, or be interpreted in a manner adverse to us and require us to halt or change our solutions, any of which could seriously harm our business.
Certain competitors, including Alphabet, Apple, and Meta, could use strong or dominant positions in one or more market segments to gain competitive advantages against us in areas where we operate, including by: • integrating competing social media platforms or features into products they control such as search engines, web browsers, advertising networks, or mobile operating systems; • making acquisitions for similar or complementary products or services; or • impeding Snapchat’s accessibility and usability by modifying existing hardware and software on which the Snapchat application operates.
Certain competitors, including Alphabet, Apple, and Meta, could use strong or dominant positions in one or more market segments to gain competitive advantages against us in areas where we operate, including by: • integrating competing social media platforms or features into products they control such as search engines, web browsers, artificial intelligence services, advertising networks, or mobile operating systems; • making acquisitions for similar or complementary products or services; or • impeding Snapchat’s accessibility and usability by modifying existing hardware and software on which the Snapchat application operates.
In addition, we may expend significant resources to launch new products that we are unable to monetize, which may seriously harm our business. Additionally, we may not succeed in further monetizing Snapchat. We currently monetize Snapchat by displaying advertisements sold by us and our partners.
In addition, we may expend significant resources to launch new products that we are unable to monetize, which may seriously harm our business. Additionally, we may not succeed in further monetizing Snapchat. We currently primarily monetize Snapchat by displaying advertisements sold by us and our partners.
Additionally, Google has announced that it will implement similar changes with respect to its Android operating system and major web browsers, like Firefox, Safari, and Chrome, have or plan to make similar changes as well.
Additionally, Google announced that it will implement similar changes with respect to its Android operating system, and major web browsers, like Firefox, Safari, and Chrome, have or plan to make similar changes as well.
It is possible that changes under the Tax Cuts and Jobs Act, the IRA or other tax legislation could increase our future tax liability, which could in turn adversely impact our business and future profitability.
It is possible that changes or interpretations under the Tax Cuts and Jobs Act, the IRA, or other tax legislation could increase our future tax liability, which could in turn adversely impact our business and future profitability.
If we do not succeed in attracting, hiring, and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively and our business could be seriously harmed.
If we do not succeed in attracting, hiring, and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow or effectively manage our business and our business could be seriously harmed.
We also are or may in the future be subject to many federal, state, local, and foreign laws and regulations, including those related to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation.
We also are or may in the future be subject to many federal, state, local, and foreign laws and regulations, including those related to privacy, rights of publicity, content, data protection, artificial intelligence, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation.
We may introduce significant changes to our existing products or develop and introduce new and unproven products and services, including technologies with which we have little or no prior development or operating experience.
We may introduce significant changes to, or discontinue, our existing products or develop and introduce new and unproven products and services, including technologies with which we have little or no prior development or operating experience.
Any restriction on access to Snapchat due to foreign government actions or initiatives, or any withdrawal by us from certain countries because of such actions or initiatives, or any increased competition due to actions and initiatives of foreign governments would adversely affect our DAUs, including by giving our competitors an opportunity to penetrate geographic markets that we cannot access or to which they previously did not have access.
Any restriction on access to Snapchat due to government actions or initiatives, or any withdrawal by us from certain countries or regions because of such actions or initiatives, or any increased competition due to actions and initiatives of governments would adversely affect our DAUs, including by giving our competitors an opportunity to penetrate geographic markets that we cannot access or to which they previously did not have access.
Such new lines of business, new products, and other initiatives may be costly, difficult to operate and monetize, increase product liability and litigation risk, and divert management’s attention, and there is no guarantee that they will be positively received by our community or provide positive returns on our investment.
Such new lines of business, new products, and other initiatives may be costly, difficult to operate and monetize, increase regulatory scrutiny and product liability and litigation risk, and divert management’s attention, and there is no guarantee that they will be positively received by our community or provide positive returns on our investment.
We therefore may be at heightened risk of regulatory scrutiny, as regulators focus their attention on data processing activities of companies like us, and any changes in the regulatory framework or enforcement actions – whether against us or our competitors – could require us to fundamentally change our business model.
We therefore may be at heightened risk of regulatory scrutiny, as regulators focus their attention on data processing activities of companies like us, and any changes in the regulatory framework or enforcement actions, whether against us or our competitors, could require us to fundamentally change our business model, and seriously harm our business.
Using our products, some partners and advertisers not only can interact directly with our users but can also direct our users to content with third-party websites and products and downloads of third-party applications. In addition, our users may generate content by using Snapchat features, but then share, use, or post it on a different platform.
Using our products, some partners and advertisers not only can interact directly with our users but can also direct our users to content on third-party websites or downloads of third-party applications. In addition, our users may generate content by using Snapchat features, but then share, use, or post the content on a different platform.
Most of that information, however, will be reported in other public filings. For example, any disclosures required by Part III of Form 10-K as well as disclosures required by the NYSE for the year ended December 31, 2022 that are customarily included in a proxy statement are instead included in our Annual Report.
Most of that information, however, will be reported in other public filings. For example, any disclosures required by Part III of Form 10-K as well as disclosures required by the NYSE for the year ended December 31, 2023 that are customarily included in a proxy statement are instead included in our Annual Report.
In addition, if we are unable to mitigate these and future developments, and alternative solutions do not become widely adopted by our advertisers, then our targeting, measurement, and optimization capabilities will be materially and adversely affected, which would in turn continue to negatively impact our advertising revenue.
In addition, if we are unable to mitigate or respond to these and future developments, and alternative solutions do not become widely adopted by our advertisers, then our targeting, measurement, and optimization capabilities will be materially and adversely affected, which would in turn continue to negatively impact our advertising revenue.
While certain of these threats have occurred in the past, they have become more prevalent and sophisticated in our industry, and may occur in the future. Because of our prominence and value of our sensitive data, we believe that we are an attractive target for these sorts of attacks. In particular, severe ransomware attacks are becoming increasingly prevalent.
While certain of these threats have occurred in the past, they have become more prevalent and sophisticated in our industry, and may occur in the future. Because of our prominence and value of our sensitive information, we believe that we are an attractive target for these sorts of attacks. In particular, severe ransomware attacks are becoming increasingly prevalent.
For example, we monitor how advertising on Snapchat affects our users’ experiences to ensure we do not deliver too many advertisements to our users, and we may decide to decrease the number of advertisements to ensure our users’ satisfaction in the product. In addition, we improve Snapchat based on feedback provided by our users, advertisers, and partners.
For example, we monitor how advertising on Snapchat affects our users’ experiences to attempt to ensure we do not deliver too many advertisements to our users, and we may decide to decrease the number of advertisements to increase our users’ satisfaction in the product. In addition, we improve Snapchat based on feedback provided by our users, advertisers, and partners.
The loss of key personnel, including members of management and key engineering, product development, marketing, and sales personnel, could disrupt our operations, adversely impact employee retention and morale, and seriously harm our business. As we continue to grow, we cannot guarantee we will continue to attract and retain the personnel we need to maintain our competitive position.
The loss of key personnel, including members of management and key engineering, product development, marketing, and sales personnel, could disrupt our operations, adversely impact employee retention and morale, and seriously harm our business. We cannot guarantee we will continue to attract and retain the personnel we need to maintain our competitive position.
Moreover, we permit a hybrid work environment, which has increased risks to our information technology systems and data, as our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Moreover, for certain employees we permit a hybrid work environment, which has increased risks to our information technology systems and data, as our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
To the extent that our e-commerce capabilities and other business operations depend on the successful and secure operation of open source software, any undetected errors or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation.
To the extent that our e-commerce capabilities and other business operations depend on the successful and secure operation of open source software, any undetected or unremediated vulnerabilities, errors, or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation.
We have expanded to new international markets and are growing our operations in existing international markets, which may have very different cultures and commercial, legal, and regulatory systems than where we predominantly operate. In connection with our international expansion and growth, we have also hired new team members in many of these markets.
We have expanded to new international markets and are growing our operations in existing international markets, which may have very different cultures and commercial, legal, and regulatory systems than where we predominantly operate. In connection with our international expansion and growth, we also hire new team members in many of these markets.
In addition, we could become subject to investigations by the NYSE, the SEC, and other regulatory authorities, which could require additional financial and management resources. The requirements of being a public company may strain our resources, result in more litigation, and divert management’s attention.
In addition, we could become subject to investigations by the NYSE, the SEC, and other regulatory authorities, which could require additional financial and management resources. The requirements of being a public company have and may continue to strain our resources, result in more litigation, and divert management’s attention.
In August 2022, we, and certain of our directors, were named as defendants in a class action lawsuit in Delaware Chancery Court purportedly brought on behalf of Class A stockholders, alleging that a transaction between the company’s co-founders and the company, in which the co-founders agreed to employment agreements and we agreed to amend our certificate of incorporation and issue a stock dividend if certain conditions were met, was not advantageous to the stockholders and constituted a breach of fiduciary duty.
In August 2022, we, and certain of our directors, were named as defendants in a class-action lawsuit in Delaware Chancery Court purportedly brought on behalf of Class A stockholders, alleging that a transaction between the company’s co-founders and the company, in which the co-founders 36 Table of Contents agreed to employment agreements and we agreed to amend our certificate of incorporation and issue a stock dividend if certain conditions were met, was not advantageous to the stockholders and constituted a breach of fiduciary duty.
These actions, including any potential unfavorable outcomes, and our compliance with any associated regulatory orders, consent decrees, or settlements, may require us to change our policies or practices, subject us to substantial monetary fines or other penalties or sanctions, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal and other expenses, any of which could seriously harm our business.
These actions, including any potential unfavorable outcomes, and our compliance with any associated regulatory orders, consent decrees, or settlements, may require us to change our policies or practices, subject us to substantial monetary fines or other penalties or sanctions, result in increased operating costs, divert management’s 34 Table of Contents attention, harm our reputation, and require us to incur significant legal and other expenses, any of which could seriously harm our business.
There are many factors that could negatively affect user retention, growth, and engagement, including if: • users engage more with competing products instead of ours; • our competitors continue to mimic our products or improve on them; • we fail to introduce new and exciting products and services or those we introduce or modify are poorly received; 12 Table of Contents • our products fail to operate effectively or compatibly on the iOS or Android mobile operating systems; • we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones; • we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products; • we are unable to combat spam, bad actors, or other hostile or inappropriate usage on our products; • there are changes in user sentiment about the quality or usefulness of our products in the short-term, long-term, or both; • there are concerns about the privacy implications, safety, or security of our products and our processing of personal data; • our content partners do not create content that is engaging, useful, or relevant to users; • our content partners decide not to renew agreements or devote the resources to create engaging content, or do not provide content exclusively to us; • advertisers and partners display ads that are untrue, offensive, or otherwise fail to follow our guidelines; • our products are subject to increased regulatory scrutiny or approvals, including from international privacy regulators (particularly in the EEA/UK), or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience; • technical or other problems frustrate the user experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner; • we fail to provide adequate service to users, advertisers, or partners; • we do not provide a compelling user experience to entice users to use the Snapchat application on a daily basis, or our users don’t have the ability to make new friends to maximize the user experience; • we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; • we do not maintain our brand image or our reputation is damaged; or • our current or future products reduce user activity on Snapchat by making it easier for our users to interact directly with our partners.
There are many factors that could negatively affect user retention, growth, and engagement, including if: • users engage more with competing products instead of ours; • our competitors continue to mimic our products or improve on them; • we fail to introduce new and exciting products and services or those we introduce or modify are poorly received; • our products fail to operate effectively or compatibly on the iOS or Android mobile operating systems; • we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones; • we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products; 12 Table of Contents • we are unable to combat bad actors, spam, or other hostile or inappropriate usage on our products; • there are changes in user sentiment about the quality or usefulness of our products in the short-term, long-term, or both; • there are concerns about the privacy implications, safety, or security of our products and our processing of personal data; • our content partners do not create content that is engaging, useful, or relevant to users; • our content partners decide not to renew agreements or devote the resources to create engaging content, or do not provide content exclusively to us; • advertisers and partners display ads that are untrue, offensive, or otherwise fail to follow our guidelines; • our products are subject to increased regulatory scrutiny or approvals, including from foreign privacy regulators, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience; • technical or other problems frustrate the user experience or negatively impact users' trust in our service, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner, or cyberattacks, breaches, or other security incidents that compromise our sensitive user data; • we fail to provide adequate service to users, advertisers, or partners; • we do not provide a compelling user experience to entice users to use the Snapchat application on a daily basis, or our users don’t have the ability to make new friends to maximize the user experience; • we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; • we do not maintain our brand image or our reputation is damaged; or • our current or future products reduce user activity on Snapchat by making it easier for our users to interact directly with our partners.
We have a practice of rapidly updating our products and some errors in our products may be discovered only after a product has been released or shipped and used by users, and may in some cases be detected only under certain circumstances or after extended use.
We have a practice of updating our products, but some errors in our products may be discovered only after a product has been released or shipped and used by users, and may in some cases be detected only under certain circumstances or after extended use.
Furthermore, in April 2021, Apple issued an iOS update that imposes heightened restrictions on our access and use of user data by allowing users to more easily opt-out of tracking of activity across devices.
Furthermore, in April 2021, Apple issued an iOS update that imposed heightened restrictions on our access and use of user data by allowing users to more easily opt-out of tracking of activity across devices.
The longer-term impact of these changes on the overall mobile advertising ecosystem, our competitors, our business, and the developers, partners, and advertisers within our community is uncertain, and depending on how we, our competitors, and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed.
The longer-term impact of these changes on the overall mobile advertising ecosystem, our competitors, our business, and the developers, partners, and advertisers within our community remains uncertain, and depending on how we, our competitors, and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed.
If we are unable to continue to successfully grow our user base and further monetize our products, our business will suffer. We have made, and are continuing to make, investments to enable users, partners, and advertisers to create compelling content and deliver advertising to our users.
If we are unable to continue to maintain or successfully grow our user base and further monetize our products, our business will suffer. We have made, and are continuing to make, investments to enable users, partners, and advertisers to create compelling content and deliver advertising to our users.
Foreign governments may censor Snapchat in their countries, restrict access to Snapchat from their countries entirely, impose other restrictions that may affect their citizens’ ability to access Snapchat for an extended period of time or even indefinitely, require data localization, or impose other laws or regulations that we cannot comply with, would be difficult for us to comply with, or would require us to rebuild our products or the infrastructure for our products.
Foreign governments may censor Snapchat in their countries, restrict access to Snapchat from their countries entirely, impose age-based restrictions on access to Snapchat, impose other restrictions that may affect their citizens’ ability to access Snapchat for an extended period of time or even indefinitely, require data localization, or impose other laws or regulations that we cannot comply with, would be difficult for us to comply with, or would require us to rebuild our products or the infrastructure for our products.
Spammers attempt to use our products to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make our products less user friendly. Our actions to combat spam may also divert significant time and focus from improving our products.
Spammers attempt to use our products to send targeted and untargeted spam messages to users, which may embarrass, offend, threaten, or annoy users and make our products less user friendly. Our actions to combat spam may also divert significant time and focus from improving our products.
We continually seek to address these technical issues and improve our accuracy, such as comparing our active users and other metrics with data received from other pipelines, including data recorded by our servers and systems.
We continually seek to address these technical issues and improve our measurement processes and accuracy, such as comparing our active users and other metrics with data received from other pipelines, including data recorded by our servers and systems.
Our advertising revenue could also be seriously harmed by many other factors, including: • diminished or stagnant growth, or a decline, in the total and regional number of DAUs on Snapchat; • our inability to deliver advertisements to all of our users due to hardware, software, or network limitations; • a decrease in the amount of time spent on Snapchat, a decrease in the amount of content that our users share, or decreases in usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms; • our inability to create new products that sustain or increase the value of our advertisements; • changes in our user demographics that make us less attractive to advertisers; • lack of ad creative availability by our advertising partners; • a decline in our available content, including if our content partners do not renew agreements, devote the resources to create engaging content, or provide content exclusively to us; • decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by us, our community, or partners; • increases in resistance by users to our collecting, using, and sharing their personal data for advertising-related purposes; • changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating systems, that demonstrate the value of our advertisements and other commercial content; • competitive developments or advertiser perception of the value of our products that change the rates we can charge for advertising or the volume of advertising on Snapchat; • product changes or advertising inventory management decisions we may make that change the type, size, or frequency of advertisements displayed on Snapchat or the method used by advertisers to purchase advertisements; • adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, executive actions, or litigation regarding the collection, use, and sharing of personal data for certain advertising-related purposes; • adverse media reports or other negative publicity involving us, our founders, our partners, or other companies in our industry segment; • advertiser or user perception that content published by us, our users, or our partners is objectionable; 16 Table of Contents • the degree to which users skip advertisements and therefore diminish the value of those advertisements to advertisers; • changes in the way advertising is priced or its effectiveness is measured; • our inability, or perceived inability, to measure the effectiveness of our advertising or target the appropriate audience for advertisements; • our inability to collect and disclose data or access a user’s personal data, including identifier for advertising or similar deterministic identifiers that new and existing advertisers may find useful; • difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines; • volatility in the equity markets, which may reduce our advertisers’ capacity or desire for aggressive advertising spending towards growth; and • the political, economic, and macroeconomic climate and the status of the advertising industry in general, including impacts related to labor shortages, supply chain disruptions, inflation, and as a result of war, terrorism, or armed conflict, including Russia’s invasion of Ukraine.
Our advertising revenue could also be seriously harmed by many other factors, including: • diminished or stagnant growth, or a decline, in the total or regional number of DAUs on Snapchat; • our inability to deliver advertisements to all of our users due to legal restrictions or hardware, software, or network limitations; • a decrease in the amount of time spent on Snapchat, a decrease in the amount of content that our users share, or decreases in usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms; • our inability to create new products that sustain or increase the value of our advertisements; • changes in our user demographics that make us less attractive to advertisers; • lack of ad creative availability by our advertising partners; • a decline in our available content, including if our content partners do not renew agreements, devote the resources to create engaging content, or provide content exclusively to us; • decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by us, our community, or partners; • increases in resistance by users to our collecting, using, and sharing their personal data for advertising-related purposes; 14 Table of Contents • changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating systems, that demonstrate the value of our advertisements and other commercial content; • competitive developments or advertiser perception of the value of our products that change the rates we can charge for advertising or the volume of advertising on Snapchat; • product changes or advertising inventory management decisions we may make that change the type, size, frequency, or effectiveness of advertisements displayed on Snapchat or the method used by advertisers to purchase advertisements; • adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, executive actions, or litigation regarding the collection, use, and sharing of personal data for certain advertising-related purposes; • adverse media reports or other negative publicity involving us, our founders, our partners, or other companies in our industry; • advertiser or user perception that content published by us, our users, or our partners is objectionable; • the degree to which users skip advertisements and therefore diminish the value of those advertisements to advertisers; • changes in the way advertising is priced or its effectiveness is measured; • our inability, or perceived inability, to achieve an advertiser’s intended performance metric, measure the effectiveness of our advertising, or target the appropriate audience for advertisements; • our inability to access, collect, and disclose user’s personal data, including advertising or similar deterministic identifiers that new and existing advertisers may find useful; • difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines; • volatility in the equity markets, which may reduce our advertisers’ capacity or desire for aggressive advertising spending towards growth; and • the political, economic, and macroeconomic climate and the status of the advertising industry in general, including impacts related to labor shortages and disruptions, supply chain disruptions, banking instability, inflation, and as a result of war, terrorism, or armed conflict.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a breach of fiduciary duty; 49 Table of Contents • any action asserting a claim against us arising under the Delaware General Corporation Law, our certificate of incorporation, or our bylaws; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: • any derivative action or proceeding brought on our behalf; • any action asserting a breach of fiduciary duty; • any action asserting a claim against us arising under the Delaware General Corporation Law, our certificate of incorporation, or our bylaws; and • any action asserting a claim against us that is governed by the internal-affairs doctrine.
We compete broadly with the social media offerings of Alphabet, Apple, ByteDance, Meta, Pinterest, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries. As we introduce new products, as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.
We compete broadly with the products and services of Alphabet, Apple, ByteDance, Meta, Pinterest, and X (formerly Twitter), and with other, largely regional, social media platforms that have strong positions in particular countries. As we introduce new products, as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.
In addition, affected users or government authorities could initiate legal or regulatory action against us, including class-action claims, investigations, penalties, and audits, which could be time-consuming and cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.
In addition, affected users or government authorities could initiate legal or regulatory action against us, including class-action claims, mass arbitration demands, investigations, penalties, and audits, which could be time-consuming and cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.
As a result, our user growth, retention, and engagement may be seriously harmed, and we may not be able to maintain or grow our revenue as anticipated and our business could be seriously harmed. Our users may increasingly engage directly with our partners and advertisers instead of through Snapchat, which may negatively affect our revenue and seriously harm our business.
As a result, our user growth, retention, and engagement may be seriously harmed, and we may not be able to maintain or grow our revenue as anticipated and our business could be seriously harmed. 32 Table of Contents Our users may increasingly engage directly with our partners and advertisers instead of through Snapchat, which may negatively affect our revenue and seriously harm our business.
Therefore, it is possible that our valuation of an acquisition may change and result in unanticipated write-offs or 38 Table of Contents charges, impairment of our goodwill, or a material change to the fair value of the assets and liabilities associated with a particular acquisition, any of which could seriously harm our business.
Therefore, it is possible that our valuation of an acquisition may change and result in unanticipated write-offs or charges, impairment of our goodwill, or a material change to the fair value of the assets and liabilities associated with a particular acquisition, any of which could seriously harm our business.
As of December 31, 2022, Mr. Spiegel and Mr. Murphy control over 99% of the voting power of our capital stock, and Mr. Spiegel alone may exercise voting control over our outstanding capital stock. Mr. Spiegel and Mr. Murphy voting together, or in many instances, Mr.
As of December 31, 2023, Mr. Spiegel and Mr. Murphy control over 99% of the voting power of our capital stock, and Mr. Spiegel alone may exercise voting control over our outstanding capital stock. Mr. Spiegel and Mr. Murphy voting together, or in many instances, Mr.
If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
If there is no lawful manner for us to transfer personal data, or if the requirements for a legally compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors, and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.
Hosting costs also have and will continue to increase as our 14 Table of Contents user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Google Cloud, AWS, or similar providers.
Hosting costs also have and will continue to increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Google Cloud, AWS, or similar providers.
This international expansion may: 33 Table of Contents • impede our ability to continuously monitor the performance of all of our team members; • result in hiring of team members who may not yet fully understand our business, products, and culture; or • cause us to expand in markets that may lack the culture and infrastructure needed to adopt our products.
This international expansion may: • impede our ability to continuously monitor the performance of all of our team members; • result in hiring of team members who may not yet fully understand our business, products, and culture; or • cause us to expand in markets that may lack the culture and infrastructure needed to adopt our products.
Holders of the Convertible Notes that participate in any of these exchanges, repurchases, or induced conversions may enter into or unwind various derivatives with respect to our Class A common stock or sell shares of our Class A common stock 46 Table of Contents in the open market to hedge their exposure in connection with these transactions.
Holders of the Convertible Notes that participate in any of these exchanges, repurchases, or induced conversions may enter into or unwind various derivatives with respect to our Class A common stock or sell shares of our Class A common stock in the open market to hedge their exposure in connection with these transactions.
Our financial condition and results of operations in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • our ability to maintain and grow our user base and user engagement; • the development and introduction of new or redesigned products or services by us or our competitors; • the ability of our cloud service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service; • our ability to attract and retain advertisers in a particular period; • seasonal or other fluctuations in spending by our advertisers and product usage by our users, each of which may change as our product offerings evolve or as our business grows or as a result of unpredictable events such as the COVID-19 pandemic, inflationary pressures, labor shortages, supply chain disruptions, or the conflict in Ukraine; • restructuring or other charges and unexpected costs or other operating expenses; • the number of advertisements shown to users; • the pricing of our advertisements and other products; • our ability to demonstrate to advertisers the effectiveness of our advertisements; • the diversification and growth of revenue sources beyond current advertising; • increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive; • our ability to maintain operating margins, cash provided by operating activities, and Free Cash Flow; • our ability to accurately forecast consumer demand for our physical products and adequately manage inventory; • system failures or security incidents, and the costs associated with such incidents and remediations; • inaccessibility of Snapchat, or certain features within Snapchat, due to third-party or governmental actions; • stock-based compensation expense; • our ability to effectively incentivize our workforce; • adverse litigation judgments, settlements, or other litigation-related costs, or product recalls; • changes in the legislative or regulatory environment, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, enforcement by government regulators, including fines, orders, sanctions, or consent decrees, or the issuance of executive orders or other similar executive actions that may adversely affect our revenues or restrict our business; • new privacy, data protection, and security laws and other obligations and increased regulatory scrutiny on our or our competitors’ data processing activities and privacy and information security practices, which some of our competitors have already experienced, including through enforcement actions potentially resulting in large penalties or other severe sanctions and increased restrictions on the data processing activities and personal data transfers critical to the operation of our current business model; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our consolidated balance sheet; • changes in our effective tax rate; • announcements by competitors of significant new products, licenses, or acquisitions; • our ability to make accurate accounting estimates and appropriately recognize revenue for our products for which there are no relevant comparable products; • our ability to meet minimum spending commitments in agreements with our infrastructure providers; • changes in accounting standards, policies, guidance, interpretations, or principles; 28 Table of Contents • the effect of war or other armed conflict on our workforce, operations, or the global economy; and • changes in domestic and global business or macroeconomic conditions, including as a result of the COVID-19 pandemic or the conflict in Ukraine, and resulting labor shortages, supply chain disruptions, and inflation.
Our financial condition and results of operations in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • our ability to maintain and grow our user base and user engagement; • the development and introduction of new or redesigned products or services by us or our competitors; • the ability of our cloud service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service; • our ability to attract and retain advertisers in a particular period; • seasonal or other fluctuations in spending by our advertisers and product usage by our users, each of which may change as our product offerings evolve or as our business grows or as a result of unpredictable events such as labor shortages and disruptions, supply chain disruptions, banking instability, inflationary pressures, or geo-political conflicts; • restructuring or other charges and unexpected costs or other operating expenses; • the number of advertisements shown to users; • the pricing of our advertisements and other products; • the effectiveness, and our ability to demonstrate to advertisers the effectiveness, of our advertisements; • the diversification and growth of revenue sources beyond current advertising; • increases in marketing, sales, research and development, and other operating expenses that we may incur to grow and expand our operations and to remain competitive; • our ability to maintain operating margins, cash provided by operating activities, and Free Cash Flow; • our ability to accurately forecast consumer demand for our physical products and adequately manage inventory; • system failures or security incidents, and the costs associated with such incidents and remediations; • inaccessibility of Snapchat, or certain features within Snapchat, due to third-party or governmental actions; • stock-based compensation expense; • our ability to effectively incentivize our workforce; 28 Table of Contents • adverse litigation judgments, settlements, or other litigation-related costs, or product recalls; • changes in the legislative or regulatory environment, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, enforcement by government regulators, including fines, orders, sanctions, or consent decrees, or the issuance of executive orders or other similar executive actions that may adversely affect our revenues or restrict our business; • new privacy, data protection, and security laws and other obligations and increased regulatory scrutiny on our or our competitors’ data processing activities and privacy and information security practices, including through enforcement actions potentially resulting in large penalties or other severe sanctions and increased restrictions on the data processing activities and personal data transfers critical to the operation of our current business model; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our consolidated balance sheet; • changes in our effective tax rate; • announcements by competitors of significant new products, licenses, or acquisitions; • our ability to make accurate accounting estimates and appropriately recognize revenue for our products; • our ability to meet minimum spending commitments in agreements with our infrastructure providers; • changes in accounting standards, policies, guidance, interpretations, or principles; • the effect of war or other armed conflict on our workforce, operations, or the global economy; and • changes in domestic and global business or macroeconomic conditions, including as a result of inflationary pressures, banking instability, geo-political conflicts, terrorism, or responses to these events.
We cannot assure you that we will effectively manage our growth. The growth and expansion of our business, headcount, and products create significant challenges for our management, including managing multiple relationships with users, advertisers, partners, and other third parties, and constrain operational and financial resources.
We cannot assure you that we will effectively manage our growth or changes to our business. The growth and expansion of our business, headcount, and products create significant challenges for our management, including managing multiple relationships with users, advertisers, partners, and other third parties, and constrain operational and financial resources.
We have been and may in the future be exposed to inventory risks related to our physical products as a result of rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending 40 Table of Contents patterns, changes in consumer tastes with respect to our products, and other factors.
We have been and may in the future be exposed to inventory risks related to our physical products as a result of rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns, changes in consumer tastes with respect to our products, and other factors.
In addition, if our reputation were to be harmed, whether as a result of our strategic reprioritization in 2022, media, legislative, or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.
In addition, if our reputation were to be harmed, whether as a result of our strategic decisions or media, legislative, or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.
As a result, we may be exposed to material risks of theft of our proprietary information and other intellectual property, including technical data, manufacturing processes, data sets, or 31 Table of Contents other sensitive information, and we may also encounter significant problems in protecting and defending our intellectual property or proprietary rights abroad.
As a result, we may be exposed to material risks of theft of our proprietary information and other intellectual property, including technical data, manufacturing processes, data sets, or other sensitive information, and we may also encounter significant problems in protecting and defending our intellectual property or proprietary rights abroad.
Because we store, process, and use data, some of which contains personal data, we are subject to complex and evolving federal, state, local and foreign laws, regulations, executive actions, rules, contractual obligations, policies, and other obligations regarding privacy, data protection, content, and other matters.
Because we store, process, and use data, some of which contains personal data, we are subject to complex and evolving federal, state, local and foreign laws, regulations, executive actions, rules, contractual obligations, policies, and other obligations regarding privacy, data protection, content, the use of artificial intelligence, and other matters.
But some information required in a proxy statement or information statement is not required in any other public filing. For example, we will not be required to comply with the proxy access rules or the “pay versus performance” disclosure rules under Section 14 of the Exchange Act.
But some information required in a proxy statement or information statement is not required in any other public filing. For example, we are not required to comply with the proxy access rules or the “pay versus performance” disclosure rules under Section 14 of the Exchange Act.
Our competitors range from smaller or newer companies to larger, more established companies such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Kakao, LINE, Meta (including Facebook, Instagram, and WhatsApp), Naver (including Snow), Pinterest, Tencent, and Twitter.
Our competitors range from smaller or newer companies to larger, more established companies such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Kakao, LINE, Meta (including Facebook, Instagram, Threads, and WhatsApp), Naver (including Snow), Pinterest, Tencent, and X (formerly Twitter).
As board members and officers, Mr. Spiegel and Mr. Murphy owe a fiduciary duty to our stockholders and must act in good faith in 17 Table of Contents a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, even controlling stockholders, Mr. Spiegel and Mr.
As board members and officers, Mr. Spiegel and Mr. Murphy owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, even controlling stockholders, Mr. Spiegel and Mr.
But given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue, particularly if 24 Table of Contents we continue to expand in parts of the world where mobile data systems and connections are less stable.
But given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable.
Some open source licenses contain express requirements or impose conditions, which may be triggered under certain circumstances, with respect to the exploitation of proprietary source code or other intellectual property by users of open source software.
Some open 31 Table of Contents source licenses contain express requirements or impose conditions, which may be triggered under certain circumstances, with respect to the exploitation of proprietary source code or other intellectual property by users of open source software.
If any of these or similar events occur, our or our third party partners’ sensitive information and information technology systems could be accessed, acquired, modified, destroyed, lost, altered, encrypted, or disclosed in an unauthorized, unlawful, accidental, or other improper manner, resulting in a security incident or other interruption.
Vulnerabilities could be exploited and result in a security or privacy incident. If any of these or similar events occur, our or our third-party partners’ sensitive information and information technology systems could be accessed, acquired, modified, destroyed, lost, altered, encrypted, or disclosed in an unauthorized, unlawful, accidental, or other improper manner, resulting in a security incident or other interruption.
The impact of these and other tax reforms is uncertain and one or more of these or similar measures could seriously harm our business. We may have exposure to greater-than-anticipated tax liabilities, which could seriously harm our business.
We continue to examine the impact these and other tax reforms may have on our business. The impact of these and other tax reforms is uncertain and one or more of these or similar measures could seriously harm our business. We may have exposure to greater-than-anticipated tax liabilities, which could seriously harm our business.
We have no control over these mobile operating systems, application stores, or hardware, and any changes may degrade our products’ functionality, or give preferential treatment to competitive products. Actions by government authorities may also impact our access to these systems or hardware and could seriously harm Snapchat usage.
We have no control over these mobile operating systems, application stores, 15 Table of Contents or hardware, and any changes may degrade our products’ functionality, or give preferential treatment to competitive products. Actions by government authorities may also impact our access to these systems or hardware and could seriously harm Snapchat usage.
Additionally, our competitors that control the standards for the application stores could make Snapchat, or certain features of Snapchat, inaccessible for a potentially significant period of time or require us to make changes to maintain 13 Table of Contents access.
Additionally, our competitors that control the standards for the application stores could make Snapchat, or certain features of Snapchat, inaccessible for a potentially significant period of time or require us to make changes to maintain access.
As a result, our financial performance and ability to grow revenue could be seriously harmed if: • we fail to increase or maintain DAUs; • our user growth outpaces our ability to monetize our users, including if we don’t attract sufficient advertisers or if our user growth occurs in markets that are not as monetizable; • we fail to increase or maintain the amount of time spent on Snapchat, the amount of content that our users share, or the usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms; • partners do not create sufficient engaging content for users or renew their agreements with us; • we fail to attract sufficient advertisers to utilize our self-serve platform to make the best use of our advertising inventory; • advertisers do not continue to introduce engaging advertisements; • advertisers reduce their advertising on Snapchat; • we fail to maintain good relationships with advertisers or attract new advertisers, or demonstrate to advertisers the effectiveness of advertising on Snapchat; or • the content on Snapchat does not maintain or gain popularity.
As a result, our financial performance and ability to grow revenue could be seriously harmed if: • we fail to increase or maintain DAUs, especially in regions where we have higher monetization; • our user growth outpaces our ability to monetize our users, including if we don’t attract sufficient advertisers or if our user growth occurs in markets that are not as monetizable; • we fail to increase or maintain the amount of time spent on Snapchat, the amount of content that our users share, or the usage of our Camera, Visual Messaging, Map, Stories, and Spotlight platforms; • partners and users do not create sufficient engaging content for users or partners do not renew their agreements with us; 29 Table of Contents • we fail to attract sufficient advertisers to utilize our self-serve platform to make the best use of our advertising inventory; • advertisers do not continue to introduce engaging advertisements; • advertisers reduce their advertising on Snapchat; • we fail to maintain good relationships with advertisers or attract new advertisers, or demonstrate to advertisers the effectiveness of advertising on Snapchat; or • the content on Snapchat does not maintain or gain popularity.
The market price of our Class A common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our user growth, retention, engagement, revenue, or other operating results; • variations between our actual operating results and the expectations of investors and the financial community; • the accuracy of our financial guidance or projections; • any forward-looking financial or operating information we may provide, any changes in this information, or our failure to meet expectations based on this information; • actions of investors who initiate or maintain coverage of us, changes in financial estimates by any investors who follow our company, or our failure to meet these estimates or the expectations of investors; • whether our capital structure is viewed unfavorably, particularly our non-voting Class A common stock and the significant voting control of our co-founders; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if we issue shares to satisfy equity-related tax obligations; • stock repurchase programs undertaken by us; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or the level of user engagement; • changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors; 45 Table of Contents • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, the COVID-19 pandemic, inflationary pressures, war, armed conflict, including Russia’s invasion of Ukraine, incidents of terrorism, or responses to these events; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits, executive actions, or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and • other events or factors, including those resulting from war, incidents of terrorism, pandemics, or responses to these events.
The market price of our Class A common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our user growth, retention, engagement, revenue, or other operating results; • variations between our actual operating results and the expectations of investors and the financial community; • the accuracy of our financial guidance or projections; • any forward-looking financial or operating information we may provide, any changes in this information, or our failure to meet expectations based on this information; • actions of investors who initiate or maintain coverage of us, changes in financial estimates by any investors who follow our company, or our failure to meet these estimates or the expectations of investors; • significant acquisitions or divestitures of our stock by investors, whether voluntarily or to comply with regulatory or other requirements; • whether our capital structure is viewed unfavorably, particularly our non-voting Class A common stock and the significant voting control of our co-founders; • additional shares of our common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if we issue shares to satisfy equity-related tax obligations; • stock repurchase programs undertaken by us; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; • announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or the level of user engagement; • changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, inflationary pressures, banking instability, war or other armed conflict, terrorism, or responses to these events; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits, executive actions, or regulatory actions, including interim or final rulings by judicial or regulatory bodies, whether such developments may impact us or our competitors; and • other events or factors, including those resulting from war, incidents of terrorism, pandemics, or responses to these events.
A decrease in the amount or quality of content available on Snapchat, or an interruption in the services provided to us, could lead to a decline in user engagement, which could seriously harm our business.
A decrease in the amount or quality of content available on Snapchat, or an 18 Table of Contents interruption in the services provided to us, could lead to a decline in user engagement, which could seriously harm our business.
If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers, and partners and seriously harm our business. We have incurred operating losses in the past, and may not be able to attain and sustain profitability.
If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers, and partners and seriously harm our business. 21 Table of Contents We have incurred operating losses in the past, and may not be able to attain and sustain profitability.
We believe that our ability to compete effectively depends on many factors, many of which are beyond our control, including: • the usefulness, novelty, performance, and reliability of our products compared to our competitors’ products; • the number and demographics of our DAUs; • the timing and market acceptance of our products, including developments and enhancements of our competitors’ products; • our ability to monetize our products; • the availability of our products to users; • the effectiveness of our advertising and sales teams; • the effectiveness of our advertising products; • our ability to establish and maintain advertisers’ and partners’ interest in using Snapchat; • the frequency, relative prominence, and type of advertisements displayed on our application or by our competitors; • the effectiveness of our customer service and support efforts; • the effectiveness of our marketing activities; • changes as a result of actual or proposed legislation, regulation, executive actions, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us; • acquisitions or consolidation within our industry segment; • our ability to attract, retain, and motivate talented team members, particularly engineers, designers, and sales personnel; • our ability to successfully acquire and integrate companies and assets; • our ability to cost-effectively manage and scale our rapidly growing operations; and • our reputation and brand strength relative to our competitors.
We believe that our ability to compete effectively depends on many factors, many of which are beyond our control, including: • the usefulness, novelty, performance, and reliability of our products compared to our competitors’ products; • the number and demographics of our DAUs; • the timing and market acceptance of our products, including developments and enhancements of our competitors’ products; • our ability to monetize our products and services, including new products and services; • the availability of our products to users; • the effectiveness of our advertising and sales teams; • the effectiveness of our advertising products; • our ability to establish and maintain advertisers’ and partners’ interest in using Snapchat; • the frequency, relative prominence, and type of advertisements displayed on our application or by our competitors; • the effectiveness of our customer service and support efforts; • the effectiveness of our marketing activities; • actual or proposed legislation, regulation, executive actions, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us; • acquisitions or consolidation within our industry segment; • our ability to attract, retain, and motivate talented team members, particularly engineers, designers, and sales personnel; • our ability to successfully acquire and integrate companies and assets; • the security, or perceived security, of our products and data protection measures compared to our competitors' products; • our ability to cost-effectively manage and scale our operations; and • our reputation and brand strength relative to our competitors.
We had 375 million daily active users, or DAUs, on average in the quarter ended December 31, 2022. We view DAUs as a critical measure of our user engagement, and adding, maintaining, and engaging DAUs have been and will continue to be necessary.
We had 414 million daily active users, or DAUs, on average in the quarter ended December 31, 2023. We view DAUs as a critical measure of our user engagement, and adding, maintaining, and engaging DAUs have been and will continue to be necessary.
If these activities increase on Snapchat, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.
If these activities continue on Snapchat, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.
However, in some jurisdictions in which we do business, we do not believe that we owe such taxes, and therefore we currently do not collect 43 Table of Contents and remit such taxes in those jurisdictions or record contingent tax liabilities in respect of those jurisdictions.
However, in some jurisdictions in which we do business, we do not believe that we owe such taxes, and therefore we currently do not collect and remit such taxes in those jurisdictions or record contingent tax liabilities in respect of those jurisdictions.
In addition, our Credit Facility contains operating covenants, including customary limitations on the incurrence of certain indebtedness and liens, restrictions on certain 41 Table of Contents intercompany transactions, and limitations on the amount of dividends and stock repurchases.
In addition, our Credit Facility contains operating covenants, including customary limitations on the incurrence of certain indebtedness and liens, restrictions on certain intercompany transactions, and limitations on the amount of dividends and stock repurchases.
In the U.K., net operating loss carryforwards can be carried forward indefinitely; however, use of such carryforwards in a given year is generally limited to 50% of such year’s taxable income and may be subject to ownership change rules that restrict the use of net operating loss carryforwards.
In the United Kingdom, net operating loss carryforwards can be carried forward indefinitely; however, use of such carryforwards in a given year is generally limited to 50% of such year’s taxable income and may be subject to ownership change rules that restrict the use of net operating loss carryforwards.
These exclusive forum provisions may limit a stockholder’s ability to bring an action in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
These exclusive forum provisions may limit a stockholder’s ability to bring an action in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us 49 Table of Contents and our directors, officers, and other employees.
Any decline in advertising revenue or the collectability of our receivables could seriously harm our business. As a result of the COVID-19 pandemic, our partners and community who provide content or services to us may experience delays or interruptions in their ability to create content or provide services, if they are able to do so at all.
Any decline in advertising revenue or the collectability of our receivables could seriously harm our business. As a result of macroeconomic uncertainties, our partners and community who provide content or services to us may experience delays or interruptions in their ability to create content or provide services, if they are able to do so at all.
Wars or other armed conflicts, including Russia’s invasion of Ukraine, could damage or diminish our access to our technology infrastructure or regional networks, disrupting our services which could seriously harm our business and financial performance. As discussed in these risk factors, substantially all of our network infrastructure is provided by third parties, including Google Cloud and AWS.
Wars or other armed conflicts could damage or diminish our access to our technology infrastructure or regional networks and disrupt our services, which could seriously harm our business and financial performance. As discussed in these risk factors, substantially all of our network infrastructure is provided by third parties, including Google Cloud and AWS.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe may add additional offices as we expand our business to other continents and countries. We believe that our facilities are sufficient for our current needs and that, should it be needed, additional facilities will be available to accommodate the expansion of our business. 50 Table of Contents
Biggest changeWe may add additional offices as we expand our business to other continents and countries. We believe that our facilities are sufficient for our current needs and that, should it be needed, additional facilities will be available to accommodate the expansion of our business.
Item 2. Properties. Our corporate headquarters are located in Santa Monica, California, where we occupy approximately 720,000 square feet. As of December 31, 2022, our global facilities totaled an aggregate of approximately 1.9 million square feet of leased office space. We also maintain offices in multiple locations in North America and internationally in Europe, Asia, and Australia.
Item 2. Properties. Our corporate headquarters are located in Santa Monica, California, where we occupy approximately 718,000 square feet. As of December 31, 2023, our global facilities totaled an aggregate of approximately 1.8 million square feet of leased office space. We also maintain offices in multiple locations in North America and internationally in Europe, Asia, and Australia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeDefendants seek monetary damages and other relief. We believe we have meritorious defenses to these lawsuits, and continue to defend the lawsuits vigorously, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business.
Biggest changeWe believe we have meritorious defenses to these lawsuits, and plan to continue to defend them vigorously, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business.
Regardless of final outcomes, however, any such proceedings, claims, inquiries, and investigations may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary and interim rulings. Item 4. Mine Safety Disclosures. Not applicable. 51 Table of Contents PART II
Regardless of final outcomes, however, any such proceedings, claims, inquiries, and investigations may nonetheless impose a significant burden on management and employees and may come with costly defense costs or unfavorable preliminary and interim rulings. Item 4. Mine Safety Disclosures. Not applicable. 52 Table of Contents PART II
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We believe we have meritorious defenses to the lawsuit, and continue to defend it vigorously, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business.
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Beginning on January 20, 2022, we were named as defendants in various federal and state courts by plaintiffs alleging that the design and use of our platform, and those of our competitors, is addictive and harmful to minor users’ mental health. The majority of cases have been consolidated in either a federal Multi-District Litigation pending in the U.S.
Added
District Court for the Northern District of California (“MDL”) or a California Judicial Council Coordinated Proceeding (“JCCP”) pending in the Complex Division of the Los Angeles County Superior Court. On October 13, 2023, the court in the JCCP litigation issued a ruling dismissing some of the claims against us, but allowing the plaintiffs’ negligence claim to proceed.
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Numerous school districts have filed public nuisance claims based on similar allegations, which also have been consolidated in either the MDL or JCCP. We believe we have meritorious defenses to these lawsuits, and continue to defend them vigorously, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business.
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In June 2023, we entered into a Stipulation of Compromise and Settlement to settle and dismiss the lawsuit, with prejudice, subject to approval by the court and the satisfaction of various conditions. The parties entered an amended Stipulation of Compromise and Settlement in December 2023.
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The settlement would, among other things, modify the conditions for the issuance of the stock dividend.
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While we continue to believe we have meritorious defenses to the lawsuit, we understand 51 Table of Contents that litigation is inherently uncertain and have agreed to the settlement to resolve the disputes, avoid the costs and risks of further litigation, and avoid unwarranted distractions to our management.
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On October 13, 2022, we were named as a defendant in a lawsuit in Los Angeles Superior Court alleging that we should be responsible for the deaths of young people who died from ingesting fatal doses of fentanyl after communicating on Snapchat with drug dealers concerning drug transactions.
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Other similar lawsuits were filed on behalf of other families, which were coordinated with the first-filed case and assigned to the same judge. On January 2, 2024, the judge granted in part and overruled in part our demurrer to the lawsuit, allowing several of the claims to proceed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe program was completed in the fourth quarter of 2022, during which we repurchased, and subsequently retired, 53.9 million shares of our Class A common stock for an aggregate of $500.5 million, representing the entire amount approved by our board of directors and including costs associated with the repurchases.
Biggest changeDuring the fourth quarter of 2023, we repurchased 18.4 million shares of our Class A common stock for an aggregate of $189.4 million, including costs associated with the repurchases. As of December 31, 2023, the remaining availability under the stock repurchase authorization was $310.8 million. (2) Average price paid per share includes costs associated with the repurchases.
Holders of Record As of December 31, 2022, there were 967 stockholders of record of our Class A common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Holders of Record As of December 31, 2023, there were 937 stockholders of record of our Class A common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
The graph assumes that $100 was invested at the market close on March 2, 2017 in our Class A common stock, the S&P 500 Index, and the NYSE Composite, and data for the S&P 500 Index and the NYSE Composite assumes reinvestment of any dividends.
The graph assumes that $100 was invested at the market close on December 31, 2018 in our Class A common stock, the S&P 500 Index, and the NYSE Composite, and data for the S&P 500 Index and the NYSE Composite assumes reinvestment of any dividends.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes stock repurchase activity for the three months ended December 31, 2022 (in thousands, except per share data): Total Number of Shares Purchased (1) Average Price Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value of Shares that May Yet be Repurchased Under the Program (1) October 1 - October 31, 2022 52,891 $ 9.27 52,891 $ — November 1 - November 30, 2022 1,005 10.03 1,005 $ — December 1 - December 31, 2022 — — — $ — Total 53,896 $ 9.29 53,896 $ — (1) In October 2022, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes stock repurchase activity for the three months ended December 31, 2023 (in thousands, except per share data): Total Number of Shares Purchased (1) Average Price Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value of Shares that May Yet be Repurchased Under the Program (1) October 1 - October 31, 2023 7,891 $ 9.46 7,891 $ 425,437 November 1 - November 30, 2023 10,532 $ 10.90 10,532 $ 310,790 December 1 - December 31, 2023 — $ — — $ 310,790 Total 18,423 18,423 (1) In October 2023, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.
The closing price of our Class A common stock as of December 31, 2022 was $8.95 per share as reported on the NYSE. As of December 31, 2022, there were 75 stockholders of record of our Class B common stock and two stockholders of record of our Class C common stock.
The closing price of our Class A common stock as of December 31, 2023 was $16.93 per share as reported on the NYSE. As of December 31, 2023, there were 74 stockholders of record of our Class B common stock and two stockholders of record of our Class C common stock.
Stock Performance Graph This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Snap Inc. under the Securities Act.
Recent Sale of Unregistered Securities and Use of Proceeds None. 53 Table of Contents Stock Performance Graph This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Snap Inc. under the Securities Act.
The following graph shows a comparison from March 2, 2017 (the date our Class A common stock commenced trading on the NYSE) through December 31, 2022 of the cumulative total return for our Class A common stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index), and the NYSE Composite.
The following graph shows a comparison, for the five years ended December 31, 2023, of the cumulative total return for our Class A common stock, the Standard & Poor’s 500 Stock Index ( “ S&P 500 Index ” ), and the NYSE Composite.
The stock price performance of the following graph is not necessarily indicative of future stock price performance.
The stock price performance of the following graph is not necessarily indicative of future stock price performance. Item 6. Reserved. Not required. 54 Table of Contents
Removed
(2) Average price paid per share includes costs associated with the repurchases. 52 Table of Contents Recent Sale of Unregistered Securities and Use of Proceeds None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “Non-GAAP Financial Measures” for additional information and a reconciliation of net loss to Adjusted EBITDA. 60 Table of Contents Discussion of Results of Operations The following table sets forth our consolidated statements of operations data: Year Ended December 31, 2022 2021 2020 (in thousands) Consolidated Statements of Operations Data: Revenue $ 4,601,847 $ 4,117,048 $ 2,506,626 Costs and expenses (1) (2) : Cost of revenue 1,815,342 1,750,246 1,182,505 Research and development 2,109,800 1,565,467 1,101,561 Sales and marketing 1,118,746 792,764 555,468 General and administrative 953,265 710,640 529,164 Total costs and expenses $ 5,997,153 4,819,117 3,368,698 Operating loss (1,395,306) (702,069) (862,072) Interest income 58,597 5,199 18,127 Interest expense (21,459) (17,676) (97,228) Other income (expense), net (42,529) 240,175 14,988 Loss before income taxes (1,400,697) (474,371) (926,185) Income tax benefit (expense) (28,956) (13,584) (18,654) Net loss $ (1,429,653) $ (487,955) $ (944,839) Adjusted EBITDA (3) $ 377,573 $ 616,686 $ 45,163 (1) Stock-based compensation expense included in the above line items: Year Ended December 31, 2022 2021 2020 (in thousands) Stock-based compensation expense: Cost of revenue $ 12,288 $ 17,221 $ 9,367 Research and development 970,746 740,130 533,272 Sales and marketing 203,092 164,241 108,270 General and administrative 201,661 170,543 119,273 Total $ 1,387,787 $ 1,092,135 $ 770,182 (2) Depreciation and amortization expense included in the above line items: Year Ended December 31, 2022 2021 2020 (in thousands) Depreciation and amortization expense: Cost of revenue $ 24,235 $ 19,711 $ 22,205 Research and development 98,041 62,159 37,627 Sales and marketing 67,169 21,772 12,916 General and administrative 12,728 15,499 13,996 Total $ 202,173 $ 119,141 $ 86,744 61 Table of Contents (3) See “Non-GAAP Financial Measures” of this Annual Report on Form 10-K for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Biggest changeSee “Non-GAAP Financial Measures” for additional information and a reconciliation of net loss to Adjusted EBITDA. 60 Table of Contents Discussion of Results of Operations The following table sets forth our consolidated statements of operations data: Year Ended December 31, 2023 2022 2021 (in thousands) Consolidated Statements of Operations Data: Revenue $ 4,606,115 $ 4,601,847 $ 4,117,048 Costs and expenses (1) (2) : Cost of revenue 2,114,117 1,815,342 1,750,246 Research and development 1,910,862 2,109,800 1,565,467 Sales and marketing 1,122,092 1,118,746 792,764 General and administrative 857,423 953,265 710,640 Total costs and expenses 6,004,494 5,997,153 4,819,117 Operating loss (1,398,379) (1,395,306) (702,069) Interest income 168,394 58,597 5,199 Interest expense (22,024) (21,459) (17,676) Other income (expense), net (42,414) (42,529) 240,175 Loss before income taxes (1,294,423) (1,400,697) (474,371) Income tax benefit (expense) (28,062) (28,956) (13,584) Net loss $ (1,322,485) $ (1,429,653) $ (487,955) Adjusted EBITDA (3) $ 161,577 $ 377,573 $ 616,686 (1) Stock-based compensation expense included in the above line items: Year Ended December 31, 2023 2022 2021 (in thousands) Stock-based compensation expense: Cost of revenue $ 9,555 $ 12,288 $ 17,221 Research and development 893,026 970,746 740,130 Sales and marketing 255,688 203,092 164,241 General and administrative 165,735 201,661 170,543 Total $ 1,324,004 $ 1,387,787 $ 1,092,135 (2) Depreciation and amortization expense included in the above line items: Year Ended December 31, 2023 2022 2021 (in thousands) Depreciation and amortization expense: Cost of revenue $ 12,751 $ 24,235 $ 19,711 Research and development 106,278 98,041 62,159 Sales and marketing 26,161 67,169 21,772 General and administrative 23,251 12,728 15,499 Total $ 168,441 $ 202,173 $ 119,141 (3) See “Non-GAAP Financial Measures” in this Annual Report on Form 10-K for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP. 61 Table of Contents The following table sets forth the components of our consolidated statements of operations data for each of the periods presented as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Consolidated Statements of Operations Data: Revenue 100 % 100 % 100 % Costs and expenses: Cost of revenue 46 39 43 Research and development 41 46 38 Sales and marketing 24 24 19 General and administrative 19 21 17 Total costs and expenses 130 130 117 Operating loss (30) (30) (17) Interest income 4 1 — Interest expense (1) — — Other income (expense), net (1) (1) 6 Loss before income taxes (28) (30) (12) Income tax benefit (expense) (1) (1) — Net loss (29) % (31) % (12) % Revenue Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Revenue $ 4,606,115 $ 4,601,847 $ 4,117,048 $ 4,268 — % $ 484,799 12 % 2023 compared to 2022 Revenue for the year ended December 31, 2023 increased $4.3 million compared to the same period in 2022.
We determine revenue recognition by first identifying the contract or contracts with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when, or as, we satisfy a performance obligation.
Revenue Recognition We determine revenue recognition by first identifying the contract or contracts with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when, or as, we satisfy a performance obligation.
The substantial majority of advertising revenue is generated from the display of advertisements on Snapchat through contractual agreements that are either on a fixed fee basis over a period of time or based on the number of advertising impressions delivered. Revenue related to agreements based on the number of impressions delivered is recognized when the advertisement is served.
The substantial majority of advertising revenue is generated from the display of advertisements on Snapchat through contractual agreements that are either based on the number of advertising impressions delivered or on a fixed fee basis over a period of time. Revenue related to agreements based on the number of impressions delivered is recognized when the advertisement is served.
The sale price requirement for conversion was not satisfied as of December 31, 2022 and as a result, the 2026 Notes will not be eligible for optional conversion during the first quarter of 2023. We believe our existing cash balance is sufficient to fund our ongoing working capital, investing, and financing requirements for at least the next 12 months.
The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2026 Notes will not be eligible for optional conversion during the first quarter of 2024. We believe our existing cash balance is sufficient to fund our ongoing working capital, investing, and financing requirements for at least the next 12 months.
Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors,” “Note Regarding Forward-Looking Statements,” and “Note Regarding User Metrics and Other Data.” The following generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Risk Factors,” “Note Regarding Forward-Looking Statements,” and “Note Regarding User Metrics and Other Data.” The following generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026, of which $838.5 million remains outstanding as of December 31, 2022.
In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026, of which $838.5 million remains outstanding as of December 31, 2023.
In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025, of which $284.1 million remains outstanding as of December 31, 2022.
In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025, of which $284.1 million remains outstanding as of December 31, 2023.
Such macroeconomic factors may also 54 Table of Contents negatively impact, in the short-term or long-term, the global economy, advertising ecosystem, our customers and their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations. In addition, competition for advertising dollars has increased and demand growth on our advertising platform has slowed.
Such macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, advertising ecosystem, our customers and their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations. In addition, competition for advertising dollars has increased and demand growth on our advertising platform has slowed.
For a discussion of the limitations associated with using Adjusted EBITDA rather than GAAP measures and a reconciliation of this measure to net loss, see “Non-GAAP Financial Measures.” Liquidity and Capital Resources Cash, cash equivalents, and marketable securities were $3.9 billion as of December 31, 2022, primarily consisting of cash on deposit with banks and highly liquid investments in U.S. government and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper.
For a discussion of the limitations associated with using Adjusted EBITDA rather than GAAP measures and a reconciliation of this measure to net loss, see “Non-GAAP Financial Measures.” Liquidity and Capital Resources Cash, cash equivalents, and marketable securities were $3.5 billion as of December 31, 2023, primarily consisting of cash on deposit with banks and highly liquid investments in U.S. government and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper.
Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and 71 Table of Contents circumstances change, such as the closing of a tax audit or the refinement of an estimate.
Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.
On the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. Loss Contingencies We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business.
On the conclusion of the measurement period or final determination of the 70 Table of Contents values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations. Loss Contingencies We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business.
The sale price requirement for conversion was not satisfied as of December 31, 2022 and as a result, the 2025 Notes will not be eligible for optional conversion during the first quarter of 2023.
The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2025 Notes will not be eligible for optional conversion during the first quarter of 2024.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time.
Our investing activities in the year ended December 31, 2022 consisted of purchases of marketable securities of $3.5 billion, partially offset by maturities of marketable securities of $2.5 billion.
Our investing activities for the year ended December 31, 2022 consisted of purchases of marketable securities of $3.5 billion, partially offset by maturities of marketable securities of $2.5 billion.
Discussion of historical items and year-to-year comparisons between 2021 and 2020 that are not included in this discussion can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 4, 2022.
Discussion of historical items and year-to-year comparisons between 2022 and 2021 that are not included in this discussion can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 1, 2023.
We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position. As of December 31, 2022, approximately 6% of our cash, cash equivalents, and marketable securities was held outside the United States.
We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position. As of December 31, 2023, approximately 3% of our cash, cash equivalents, and marketable securities was held outside the United States.
Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts, the introduction of new features, 66 Table of Contents products, and acquisitions, and continued user engagement.
Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts, the introduction of new features, products, and acquisitions, and continued user engagement.
These and other risks and uncertainties are further described in the sections titled "Competition" in Part I, Item 1. Business, and “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
These and other risks and uncertainties are further described in the sections titled “Competition” in Part I, Item 1. Business, and “Risk Factors” in Part I, Item 1A in this Annual Report on Form 10-K.
We monetize our business primarily through advertising. Our advertising products include Snap Ads and AR Ads. We measure our business using ARPU because it helps us understand the rate at which we are monetizing our daily user base. ARPU was $3.47 in the fourth quarter of 2022, compared to $4.06 in the fourth quarter of 2021.
We monetize our business primarily through advertising. Our advertising products include Snap Ads and AR Ads. We measure our business using ARPU because it helps us understand the rate at which we are monetizing our daily user base. ARPU was $3.29 in the fourth quarter of 2023, compared to $3.47 in the fourth quarter of 2022.
Adjusted EBITDA We define Adjusted EBITDA as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.
Adjusted EBITDA We define Adjusted EBITDA as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time.
We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position. 65 Table of Contents In October 2022, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.
We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position. In October 2023, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.
On the Credit Facility, loans bear interest, at our option, at a rate equal to (i) a term secured overnight financing rate, or SOFR, plus 0.75% or the base rate, if selected by us, for loans made in U.S. dollars, (ii) the Sterling overnight index average plus 0.7826% for loans made in Sterling, and (iii) foreign indices as stated in the credit agreement plus 0.75% for loans made in other permitted foreign currencies.
Loans bear interest, at our option, at a rate equal to (i) a term secured overnight financing rate, or SOFR, plus 0.75% or the 65 Table of Contents base rate, if selected by us, for loans made in U.S. dollars, (ii) the Sterling overnight index average plus 0.7826% for loans made in Sterling, or (iii) foreign indices as stated in the credit agreement plus 0.75% for loans made in other permitted foreign currencies.
Free Cash Flow 2022 compared to 2021 Free Cash Flow was $55.3 million for the year ended December 31, 2022 and was composed of net cash provided by operating activities, resulting primarily from net loss, adjusted for non-cash items and changes in working capital.
Free Cash Flow 2023 compared to 2022 Free Cash Flow was $34.8 million for the year ended December 31, 2023, compared to $55.3 million for the year ended December 31, 2022. Free Cash Flow in all periods was composed of net cash provided by operating activities, resulting primarily from net loss, adjusted for non-cash items and changes in working capital.
The Credit Facility also contains an annual commitment fee of 0.10% on the daily undrawn balance of the facility. As of December 31, 2022, we had $40.1 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.
The Credit Facility also contains an annual commitment fee of 0.10% on the daily undrawn balance of the facility. As of December 31, 2023, we had $49.6 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.
Macroeconomic factors such as labor shortages, supply chain disruptions, inflation, changes in interest and foreign currency exchange rates, and other risks and uncertainties, including the COVID-19 pandemic and the conflict in Ukraine, continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may cause our advertisers to halt or decrease advertising spending on our platform.
Macroeconomic factors such as labor shortages and disruptions, supply chain disruptions, inflation, changes in interest and foreign currency exchange rates, banking instability, and other risks and uncertainties continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may cause our advertisers to halt or decrease advertising spending on our platform.
Snap Ads may be subject to revenue sharing arrangements between us and the media partner. We also generate revenue from sales of hardware products. This revenue is reported net of allowances for returns.
Snap Ads may be subject to revenue sharing arrangements between us and the content partner. We also generate revenue from subscriptions and sales of hardware products, net of allowances for returns.
We consider the exclusion of certain non-cash and non-recurring expenses in calculating Adjusted EBITDA to provide a useful measure for period-to-period comparisons of our business and for investors and others to evaluate our operating results in the same manner as does our management.
We consider the exclusion of these items in calculating Adjusted EBITDA to provide a useful measure for period-to-period comparisons of our business and for investors and others to evaluate our operating results in the same manner as does our management.
Overview of Full Year 2022 Results Our key user metrics and financial results for fiscal year 2022 are as follows: User Metrics • Daily Active Users, or DAUs, increased 17% year-over-year to 375 million in Q4 2022. • Average revenue per user, or ARPU, was $3.47 in Q4 2022, compared to $4.06 in Q4 2021.
Overview of Full Year 2023 Results Our key user metrics and financial results for fiscal year 2023 are as follows: User Metrics • Daily Active Users, or DAUs, increased 10% year-over-year to 414 million in Q4 2023. • Average revenue per user, or ARPU, was $3.29 in Q4 2023, compared to $3.47 in Q4 2022.
Our financing activities for the year ended December 31, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million and repurchases of our Class A common stock for an aggregate of $1.0 billion, representing the entire amount approved by our board of directors and including costs associated with the repurchases.
Our financing activities for the year ended December 31, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million and repurchases of our Class A common stock for an aggregate of $1.0 billion.
Net Cash Provided By (Used In) Investing Activities 2022 compared to 2021 Net cash used in investing activities was $1.1 billion for the year ended December 31, 2022, compared to net cash provided by investing activities of $90.2 million for the year ended December 31, 2021.
Net Cash Provided by (Used in) Investing Activities 2023 compared to 2022 Net cash provided by investing activities was $571.0 million for the year ended December 31, 2023, compared to net cash used in investing activities of $1.1 billion for the year ended December 31, 2022.
These charges are non-recurring and not reflective of underlying trends in our business. See Note 18 to our consolidated financial statements included in the "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for more information. Contingencies We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business.
See Note 18 to our consolidated financial statements included in the “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for more information. Contingencies We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business.
In May 2022, we entered into a five-year senior unsecured revolving credit facility, or Credit Facility, with certain lenders that allows us to borrow up to $1.05 billion to fund working capital and general corporate-purpose expenditures. The prior revolving credit facility entered into in July 2016 (as amended) was terminated concurrently with the entry into the Credit Facility.
In May 2022, we entered into a five-year senior unsecured revolving credit facility, or Credit Facility, with certain lenders that allows us to borrow up to $1.05 billion to fund working capital and general corporate-purpose expenditures.
The increase was primarily driven by higher personnel expenses, including increased cash- and stock-based compensation expense, marketing investments, and $30.8 million relating to restructuring charges . The increase was also due to higher amortization expense, which resulted from our revision of the useful lives of certain customer relationships and trademarks .
The increase was primarily driven by higher stock-based compensation expenses and increased marketing investments , partially offset by lower cash-based compensation expenses. The prior period included higher amortization expense from our revision of the useful lives of certain customer relationships and trademarks and $30.8 million relating to restructuring charges .
Net Cash Provided By (Used In) Financing Activities 2022 compared to 2021 Net cash provided by financing activities was $306.7 million for the year ended December 31, 2022, compared to net cash provided by financing activities of $1.1 billion for the year ended December 31, 2022 and 2021, respectively.
Net Cash Provided by (Used in) Financing Activities 2023 compared to 2022 Net cash used in financing activities was $458.8 million for the year ended December 31, 2023, compared to net cash provided by financing activities of $306.7 million for the year ended December 31, 2022.
Sales and Marketing Expenses Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Sales and Marketing Expenses $ 1,118,746 $ 792,764 $ 555,468 $ 325,982 41 % $ 237,296 43 % 2022 compared to 2021 Sales and marketing expenses for the year ended December 31, 2022 increased $326.0 million compared to the same period in 2021.
Sales and Marketing Expenses Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Sales and Marketing Expenses $ 1,122,092 $ 1,118,746 $ 792,764 $ 3,346 — % $ 325,982 41 % 2023 compared to 2022 Sales and marketing expenses for the year ended December 31, 2023 increased $3.3 million compared to the same period in 2022.
Cost of Revenue Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Cost of Revenue $ 1,815,342 $ 1,750,246 $ 1,182,505 $ 65,096 4 % $ 567,741 48 % 2022 compared to 2021 Cost of revenue for the year ended December 31, 2022 increased $65.1 million compared to the same period in 2021.
Cost of Revenue Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Cost of Revenue $ 2,114,117 $ 1,815,342 $ 1,750,246 $ 298,775 16 % $ 65,096 4 % 2023 compared to 2022 Cost of revenue for the year ended December 31, 2023 increased $298.8 million compared to the same period in 2022.
Other Income (Expense), Net Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Other Income (Expense), Net $ (42,529) $ 240,175 $ 14,988 $ (282,704) (118) % $ 225,187 1,502 % 2022 compared to 2021 Other expense, net for the year ended December 31, 2022 was $42.5 million, compared to other income, net of $240.2 million for the same period in 2021, an increase in other expense, net of $282.7 million.
Other Income (Expense), Net Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Other Income (Expense), Net $ (42,414) $ (42,529) $ 240,175 $ 115 — % $ (282,704) (118) % 2023 compared to 2022 Other expense, net for the year ended December 31, 2023 was $42.4 million, compared to other expense, net of $42.5 million for the same period in 2022 .
The following table sets forth the major components of our consolidated statements of cash flows for the periods presented: Year Ended December 31, 2022 2021 2020 (dollars in thousands) Net cash provided by (used in) operating activities $ 184,614 $ 292,880 $ (167,644) Net cash provided by (used in) investing activities (1,062,275) 90,227 (729,864) Net cash provided by (used in) financing activities 306,714 1,065,073 922,791 Change in cash, cash equivalents, and restricted cash $ (570,947) $ 1,448,180 $ 25,283 Free Cash Flow (1) $ 55,308 $ 223,005 $ (225,476) (1) For information on how we define and calculate Free Cash Flow and a reconciliation to net cash provided by (used in) operating activities to Free Cash Flow, see “Non-GAAP Financial Measures.” Net Cash Provided By (Used In) Operating Activities 2022 compared to 2021 Net cash provided by operating activities was $184.6 million for the year ended December 31, 2022, compared to net cash provided by operating activities of $292.9 million for the year ended December 31, 2021, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $1.4 billion, depreciation and amortization expense of $202.2 million, and losses on debt and equity securities, net of $36.8 million.
We believe our existing cash balance in the United States is sufficient to fund our working capital needs. 66 Table of Contents The following table sets forth the major components of our consolidated statements of cash flows for the periods presented: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Net cash provided by (used in) operating activities $ 246,521 $ 184,614 $ 292,880 Net cash provided by (used in) investing activities 570,954 (1,062,275) 90,227 Net cash provided by (used in) financing activities (458,789) 306,714 1,065,073 Change in cash, cash equivalents, and restricted cash $ 358,686 $ (570,947) $ 1,448,180 Free Cash Flow (1) $ 34,794 $ 55,308 $ 223,005 (1) For information on how we define and calculate Free Cash Flow and a reconciliation to net cash provided by (used in) operating activities to Free Cash Flow, see “Non-GAAP Financial Measures.” Net Cash Provided by (Used in) Operating Activities 2023 compared to 2022 Net cash provided by operating activities was $246.5 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $184.6 million for the year ended December 31, 2022, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $1.3 billion and depreciation and amortization expense of $168.4 million.
General and Administrative Expenses Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) General and Administrative Expenses $ 953,265 $ 710,640 $ 529,164 $ 242,625 34 % $ 181,476 34 % 2022 compared to 2021 General and administrative expenses for the year ended December 31, 2022 increased $242.6 million compared to the same period in 2021.
General and Administrative Expenses Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) General and Administrative Expenses $ 857,423 $ 953,265 $ 710,640 $ (95,842) (10) % $ 242,625 34 % 2023 compared to 2022 General and administrative expenses for the year ended December 31, 2023 decreased $95.8 million compared to the same period in 2022.
Adjusted EBITDA for the year ended December 31, 2022 was $377.6 million, compared to $616.7 million for the same period in 2021. The decrease in Adjusted EBITDA was attributable to increased cost of revenue and overall operating expenses, partially offset by increased revenues.
Adjusted EBITDA for the year ended December 31, 2023 was $161.6 million, compared to $377.6 million for the same period in 2022. The decrease in Adjusted EBITDA was attributable to increased cost of revenue and sales and marketing expenses, partially offset by decreased research and development and general and administrative expenses.
Other expense, net for the current year was primarily a result of $101.3 million total losses on publicly traded securities primarily classified as marketable securities, offset by $19.9 million unrealized gains and $45.9 million realized gains on strategic investments.
Other expense, net for the current year was primarily a result of $28.4 million in unrealized losses on strategic investments and $6.7 million in total losses on publicly traded securities classified as marketable securities.
We generate substantially all of our revenues by offering various advertising products on Snapchat, which include Snap Ads and AR Ads, referred to as advertising revenue.
We generate substantially all of our revenues by offering various advertising products on Snapchat, which include Snap Ads and AR Ads, referred to as advertising revenue. AR Ads include Sponsored Lenses, which allow users to interact with an advertiser’s brand by enabling branded augmented reality experiences.
Other income, net in the comparable period in 2021 was primarily a result of $207.7 million of unrealized gains and $27.8 million of realized gains on strategic investments, an d $59.4 million of unrealized gains on publicly traded securities reclassified from strategic investments to marketable securities in the fourth quarter, partially offset by an induced conversion expense related to the Convertible Notes of $41.5 million. 64 Table of Contents Income Tax Benefit (Expense) Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Income Tax Benefit (Expense) $ (28,956) $ (13,584) $ (18,654) $ (15,372) 113 % $ 5,070 (27) % Effective Tax Rate (2.1) % (2.9) % (2.0) % 2022 compared to 2021 Income tax expense was $29.0 million for the year ended December 31, 2022 , compared to $13.6 million for the same period in 2021 .
Other expense, net in the comparable period in 2022 was primarily a result of $101.3 million in total losses on publicly traded securities primarily classified as marketable securities, offset by $19.9 million in unrealized gains and $45.9 million in realized gains on strategic investments. 64 Table of Contents Income Tax Benefit (Expense) Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Income Tax Benefit (Expense) $ (28,062) $ (28,956) $ (13,584) $ 894 3 % $ (15,372) (113) % Effective Tax Rate (2.2) % (2.1) % (2.9) % 2023 compared to 2022 Income tax expense was $28.1 million for the year ended December 31, 2023 , compared to $29.0 million for the same period in 2022 .
Net Loss and Adjusted EBITDA Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Net Loss $ (1,429,653) $ (487,955) $ (944,839) $ (941,698) (193) % $ 456,884 (48) % Adjusted EBITDA $ 377,573 $ 616,686 $ 45,163 $ (239,113) (39) % $ 571,523 1,265 % 2022 compared to 2021 Net loss for the year ended December 31, 2022 was $1,429.7 million, compared to $488.0 million for the same period in 2021.
Net Loss and Adjusted EBITDA Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Net Loss $ (1,322,485) $ (1,429,653) $ (487,955) $ 107,168 7 % $ (941,698) (193) % Adjusted EBITDA $ 161,577 $ 377,573 $ 616,686 $ (215,996) (57) % $ (239,113) (39) % 2023 compared to 2022 Net loss for the year ended December 31, 2023 was $1,322.5 million, compared to $1,429.7 million for the same period in 2022.
Free Cash Flow also included purchases of property and equipment of $69.9 million for the year ended December 31, 2021. See “Non-GAAP Financial Measures.” Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
See “Non-GAAP Financial Measures.” Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance.
We had 375 million DAUs on average in the fourth quarter of 2022, an increase of 56 million, or 17%, from the fourth quarter of 2021. 55 Table of Contents Quarterly Average Daily Active Users (in millions) Global YOY growth: 17% 20% 17% 18% 22% 22% 23% 23% 20% 18% 18% 19% 17% North America (1) Europe (2) YOY growth: 9% 10% 9% 7% 6% 5% 6% 7% 6% 5% 4% 4% 3% 12% 14% 12% 10% 10% 9% 10% 11% 11% 10% 10% 11% 12% (1) North America includes Mexico, the Caribbean, and Central America.
Quarterly Average Daily Active Users (1) (in millions) Global YOY growth: 20% 18% 18% 19% 17% 15% 14% 12% 10% (1) Numbers may not foot due to rounding. 56 Table of Contents North America (2) Europe (3) YOY growth: 6% 5% 4% 4% 3% 3% 2% 1% —% 11% 10% 10% 11% 12% 10% 9% 7% 4% (2) North America includes Mexico, the Caribbean, and Central America.
(2) Europe includes Russia and Turkey. 56 Table of Contents Rest of World YOY growth: 36 % 45 % 37 % 43 % 55 % 57 % 55 % 49 % 41 % 36 % 35 % 34 % 31 % Monetization In the year ended December 31, 2022, we recorded revenue of $4.6 billion compared to revenue of $4.1 billion for the year ended December 31, 2021, an increase of 12% year-over-year.
(3) Europe includes Russia and Turkey. Rest of World YOY growth: 41 % 36 % 35 % 34 % 31 % 27 % 25 % 21 % 19 % Monetization In the year ended December 31, 2023, we recorded revenue of $4.6 billion compared to $4.6 billion for the year ended December 31, 2022.
While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates.
Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates.
Financial Results • Revenue increased 12% year-over-year to $4.6 billion in 2022. • Total costs and expenses were $6.0 billion in 2022, compared to $4.8 billion in 2021. • Net loss was $1.4 billion in 2022, compared to $488.0 million in 2021 . • Diluted net loss per share was $(0.89) in 2022, compared to $(0.31) in 2021. • Adjusted EBITDA was $377.6 million in 2022, compared to $616.7 million in 2021. • Cash provided by operating activities was $184.6 million in 2022, compared to $292.9 million in 2021. • Free Cash Flow was $55.3 million in 2022 , compared to $223.0 million in 2021 . • Cash, cash equivalents, and marketable securities were $3.9 billion as of December 31, 2022. • In the third quarter of 2022, we initiated a strategic reprioritization plan, which included a reduction of our global employee headcount by approximately 20%.
Financial Results • Revenue was $4.6 billion in 2023, compared to $4.6 billion in 2022. • Total costs and expenses were $6.0 billion in 2023, compared to $6.0 billion in 2022. • Net loss was $1.3 billion in 2023, compared to $1.4 billion in 2022 . • Adjusted EBITDA was $161.6 million in 2023, compared to $377.6 million in 2022. • Diluted net loss per share was $(0.82) in 2023, compared to $(0.89) in 2022. • Cash provided by operating activities was $246.5 million in 2023, compared to $184.6 million in 2022. • Free Cash Flow was $34.8 million in 2023 , compared to $55.3 million in 2022 . • Cash, cash equivalents, and marketable securities were $3.5 billion as of December 31, 2023.
The sale price requirement for conversion was not satisfied as of December 31, 2022 and as a result, the 2028 Notes will not be eligible for optional conversion during the first quarter of 2023.
The 2028 Notes mature on March 1, 2028 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2028 Notes will not be eligible for optional conversion during the first quarter of 2024.
The sale price requirement for conversion was not satisfied as of December 31, 2022 and as a result, the 2027 Notes will not be eligible for optional conversion during the first quarter of 2023.
The 2027 Notes mature on May 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date. The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2027 Notes will not be eligible for optional conversion during the first quarter of 2024.
The increase was primarily driven by higher personnel expenses, including increased cash- and stock-based compensation expenses, and $78.9 million relating to restructuring charges.
The decrease was primarily driven by lower cash- and stock-based compensation expenses due to decreased headcount compared to the prior period and $78.9 million relating to restructuring charges in the prior period.
Interest Expense Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Interest Expense $ (21,459) $ (17,676) $ (97,228) $ (3,783) 21 % $ 79,552 (82) % 2022 compared to 2021 Interest expense for the year ended December 31, 2022 increased $3.8 million, compared to the same period in 2021 primarily due to increases in amortization of debt issuance costs.
Interest Expense Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Interest Expense $ (22,024) $ (21,459) $ (17,676) $ (565) 3 % $ (3,783) 21 % 2023 compared to 2022 Interest expense for the year ended December 31, 2023 increased $0.6 million compared to the same period in 2022.
In February 2022, we entered into a purchase agreement for the sale of an aggregate of $1.5 billion principal amount of convertible senior notes due in 2028, the full amount of which is outstanding as of December 31, 2022.
In February 2022, we entered into a purchase agreement for the sale of an aggregate of $1.5 billion principal amount of convertible senior notes due in 2028. The net proceeds from the issuance of the 2028 Notes were $1.31 billion, net of debt issuance costs and the 2028 Capped Call Transactions discussed further in Note 7.
The increase was primarily driven by higher personnel expenses, higher other administrative expenses, and $58.7 million relating to restructuring charges. 63 Table of Contents Interest Income Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) (NM = Not Meaningful) Interest Income $ 58,597 $ 5,199 $ 18,127 $ 53,398 NM $ (12,928) (71) % 2022 compared to 2021 Interest income for the year ended December 31, 2022 increased $53.4 million compared to the same period in 2021.
The decrease was primarily driven by lower personnel expenses, including cash- and stock-based compensation expenses compared to the prior period, and $58.7 million relating to restructuring charges in the prior period. 63 Table of Contents Interest Income Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) (NM = Not Meaningful) Interest Income $ 168,394 $ 58,597 $ 5,199 $ 109,797 187 % $ 53,398 NM 2023 compared to 2022 Interest income for the year ended December 31, 2023 increased $109.8 million compared to the same period in 2022, primarily due to higher interest rates on U.S. government-backed securities, offset by a lower overall invested cash balance.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
Our investing activities for the year ended December 31, 2021 consisted of cash provided by the sales and maturities of marketable securities of $2.9 billion, partially offset by the purchase of marketable securities of $2.4 billion and cash paid for acquisitions of $310.9 million.
Our investing activities in the year ended December 31, 2023 consisted primarily of maturities of marketable securities of $2.4 billion and sales of marketable securities of $459.5 million, partially offset by purchases of marketable securities of $2.0 billion and purchases of property and equipment of $211.7 million.
The following table presents a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP financial measure, for each of the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Free Cash Flow reconciliation: Net cash provided by (used in) operating activities $ 184,614 $ 292,880 $ (167,644) Less: Purchases of property and equipment (129,306) (69,875) (57,832) Free Cash Flow $ 55,308 $ 223,005 $ (225,476) The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Adjusted EBITDA reconciliation: Net loss $ (1,429,653) $ (487,955) $ (944,839) Add (deduct): Interest income (58,597) (5,199) (18,127) Interest expense 21,459 17,676 97,228 Other (income) expense, net 42,529 (240,175) (14,988) Income tax (benefit) expense 28,956 13,584 18,654 Depreciation and amortization 186,434 119,141 86,744 Stock-based compensation expense 1,353,283 1,092,135 770,182 Payroll and other tax expense related to stock-based compensation 44,213 107,479 50,309 Restructuring charges (1) 188,949 — — Adjusted EBITDA $ 377,573 $ 616,686 $ 45,163 (1) Restructuring charges in 2022 were composed primarily of severance and related charges of $97.1 million, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization.
Some of these limitations are that: • Free Cash Flow does not reflect our future contractual commitments; • Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; • Adjusted EBITDA excludes stock-based compensation expense and payroll and other tax expense related to stock-based compensation, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and • Adjusted EBITDA excludes income tax benefit (expense). 68 Table of Contents The following table presents a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP financial measure, for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Free Cash Flow reconciliation: Net cash provided by (used in) operating activities $ 246,521 $ 184,614 $ 292,880 Less: Purchases of property and equipment (211,727) (129,306) (69,875) Free Cash Flow $ 34,794 $ 55,308 $ 223,005 The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Adjusted EBITDA reconciliation: Net loss $ (1,322,485) $ (1,429,653) $ (487,955) Add (deduct): Interest income (168,394) (58,597) (5,199) Interest expense 22,024 21,459 17,676 Other (income) expense, net 42,414 42,529 (240,175) Income tax (benefit) expense 28,062 28,956 13,584 Depreciation and amortization 159,999 186,434 119,141 Stock-based compensation expense 1,319,783 1,353,283 1,092,135 Payroll and other tax expense related to stock-based compensation 39,324 44,213 107,479 Restructuring charges (1) 40,850 188,949 — Adjusted EBITDA $ 161,577 $ 377,573 $ 616,686 (1) Restructuring charges in 2023 relating to the wind down of our AR Enterprise business were composed primarily of cash severance, stock-based compensation expense, and charges related to the revision of the useful lives and disposal of certain acquired intangible assets.
In April 2021, we entered into a purchase agreement for the sale of an aggregate of $1.15 billion principal amount of convertible senior notes due in 2027, the full amount of which is outstanding as of December 31, 2022.
In April 2021, we entered into a purchase agreement for the sale of an aggregate of $1.15 billion principal amount of convertible senior notes due in 2027. The net proceeds from the issuance of the 2027 Notes were $1.05 billion, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 7.
We determine collectability by performing ongoing credit evaluations and monitoring customer accounts receivable balances. Sales tax, including value added tax, is excluded from reported revenue.
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We determine collectability by performing ongoing credit evaluations and monitoring customer accounts receivable balances. Sales tax, including value added tax, is excluded from reported revenue.
Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets We estimate the fair value of assets acquired and liabilities assumed in a business combination. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.
Total restructuring charges included in our consolidated statements of operations for the year ended December 31, 2022 were $188.9 million, consisting primarily of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization.
Restructuring charges in 2022 relating to the strategic reprioritization plan were composed primarily of severance and related charges of $97.1 million, stock-based compensation expense, lease exit and related charges, impairment charges, contract termination charges, and intangible asset amortization. These charges are not reflective of underlying trends in our business.
Net cash provided by operating activities for the year ended December 31, 2022 was also impacted by an increase in the accounts receivable balance of $119.8 million due to the timing of collections.
Net cash provided by operating activities for the year ended December 31, 2023 was also driven by a $95.0 million increase in accounts payable and a $62.1 million increase in accrued expenses and other current liabilities, primarily due to the timing of payments, partially offset by a $98.1 million increase in accounts receivables due to the timing of collections and an increase in billings in the period.
The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our consolidated financial statements are described below. Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.
Our actual results could differ from these estimates. The critical accounting estimates, assumptions, and judgments that we believe to have the most significant impact on our consolidated financial statements are described below.
Research and Development Expenses Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Research and Development Expenses $ 2,109,800 $ 1,565,467 $ 1,101,561 $ 544,333 35 % $ 463,906 42 % 2022 compared to 2021 Research and development expenses for the year ended December 31, 2022 increased $544.3 million compared to the same period in 2021.
The increase was primarily driven by increased infrastructure costs attributable to DAU growth and investments in machine learning and AI, partially offset by lower content and advertising partner costs and $20.6 million relating to restructuring charges in the prior period. 62 Table of Contents Research and Development Expenses Year Ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Research and Development Expenses $ 1,910,862 $ 2,109,800 $ 1,565,467 $ (198,938) (9) % $ 544,333 35 % 2023 compared to 2022 Research and development expenses for the year ended December 31, 2023 decreased $198.9 million compared to the same period in 2022.
The program was completed in the fourth quarter of 2022, during which we repurchased, and subsequently retired, 53.9 million shares of our Class A common stock for an aggregate of $500.5 million, representing the entire amount approved by our board of directors and including costs associated with the repurchases.
During the fourth quarter of 2023, we repurchased 18.4 million shares of our Class A common stock for an aggregate of $189.4 million, including costs associated with the repurchases. As of December 31, 2023, the remaining availability under the stock repurchase authorization was $310.8 million.
We had $3.7 billion in commitments, as of December 31, 2022, primarily due within 3 years. Critical Accounting Policies and Estimates We prepare our financial statements in accordance with GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
We had $3.0 billion in commitments, as of December 31, 2023, primarily due within three years. For additional discussion on our leases, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Critical Accounting Policies and Estimates We prepare our financial statements in accordance with GAAP.
Free Cash Flow also included purchases of property and equipment of $129.3 million for the year ended December 31, 2022. Free Cash Flow was $223.0 million for the year ended December 31, 2021 and was composed of net cash provided by operating activities, resulting primarily from net loss, adjusted for non-cash items and changes in working capital.
Free Cash Flow also 67 Table of Contents included purchases of property and equipment of $211.7 million for the year ended December 31, 2023, compared to $129.3 million for the year ended December 31, 2022.
DAUs are broken out by geography because markets have different characteristics .
DAUs are broken out by geography because markets have different characteristics . We had 414 million DAUs on average in the fourth quarter of 2023, an increase of 39 million, or 10%, from the fourth quarter of 2022.
Revenue increased due to a combination of growth in advertisers and auction-based advertising demand and optimization efficiencies.
In 2023, subscription revenue increased, partially offset by a reduction in advertiser spend and auction-based advertising demand.
Removed
The following table sets forth the components of our consolidated statements of operations data for each of the periods presented as a percentage of revenue: Year Ended December 31, 2022 2021 2020 Consolidated Statements of Operations Data: Revenue 100 % 100 % 100 % Costs and expenses: Cost of revenue 39 43 47 Research and development 46 38 44 Sales and marketing 24 19 22 General and administrative 21 17 21 Total costs and expenses 130 117 134 Operating loss (30) (17) (34) Interest income 1 — 1 Interest expense — — (4) Other income (expense), net (1) 6 1 Loss before income taxes (30) (12) (37) Income tax benefit (expense) (1) — (1) Net loss (31) % (12) % (38) % Revenue Year Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Revenue $ 4,601,847 $ 4,117,048 $ 2,506,626 $ 484,799 12 % $ 1,610,422 64 % 2022 compared to 2021 Revenue for the year ended December 31, 2022 increased $484.8 million compared to the same period in 2021.
Added
Demand has also been disrupted by recent changes we made to our advertising platform, and, in the future, we may 55 Table of Contents continue to experience adverse impacts to our revenue growth as a result of these changes.
Removed
The increase in cost of revenue was primarily driven by the growth in revenue share due to the overall increase in revenue and higher mix of revenue subject to revenue share, increased infrastructure costs attributable to DAU growth, and 62 Table of Contents $20.6 million relating to restructuring charges.
Added
Interest expense for all periods consists primarily of amortization of debt issuance costs and contractual interest expense.
Removed
The increase was offset by infrastructure cost efficiencies and lower content costs.
Added
Our financing activities for the year ended December 31, 2023 consisted primarily of $189.4 million of repurchases of our Class A common stock and $270.4 million of deferred payments for acquisitions completed in prior periods.
Removed
The increase was primarily a result of higher interest rates on U.S. government-backed securities and a higher overall invested cash balance.
Added
Additionally, we recognized an income tax benefit of $5.7 million relating to the wind down, which is included in the income tax (benefit) expense line item above.
Removed
The increase was primarily attributable to the partial valuation allowance releases on our deferred tax assets in the prior period due to deferred tax liabilities acquired in business acquisitions, as well as the capitalization of research and development expenditures under Section 174 of the Internal Revenue Code.
Added
For the periods presented, revenue for arrangements where we are the agent was not material. Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets We estimate the fair value of assets acquired and liabilities assumed in a business combination.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, due to fluctuations in exchange rates resulting from the current macroeconomic environment, and in particular, a strengthening of the U.S. dollar in relation to the Euro and British Pound, we have, and may in the future experience negative impacts to 72 Table of Contents our revenue and operating expenses denominated in currencies other than the U.S. dollar.
Biggest changeHowever, due to fluctuations in exchange rates, we have experienced, and may in the future experience, negative impacts to our revenue and operating expenses denominated in currencies other than the U.S. dollar. The functional currency of our material operating entities is the U.S. dollar.
In August 2019, we issued the 2026 Notes with an aggregate principal amount of $1.265 billion, of which $838.5 million remains outstanding as of December 31, 2022. We carry the 2026 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In August 2019, we issued the 2026 Notes with an aggregate principal amount of $1.265 billion, of which $838.5 million remains outstanding as of December 31, 2023. We carry the 2026 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In April 2020, we issued the 2025 Notes with an aggregate principal amount of $1.0 billion, of which $284.1 million remains outstanding as of December 31, 2022. We carry the 2025 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In April 2020, we issued the 2025 Notes with an aggregate principal amount of $1.0 billion, of which $284.1 million remains outstanding as of December 31, 2023. We carry the 2025 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In April 2021, we issued the 2027 Notes with an aggregate principal amount of $1.15 billion, the full amount of which is outstanding as of December 31, 2022. We carry the 2027 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In April 2021, we issued the 2027 Notes with an aggregate principal amount of $1.15 billion, the full amount of which is outstanding as of December 31, 2023. We carry the 2027 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In February 2022, we issued the 2028 Notes with an aggregate principal amount of $1.5 billion, the full amount of which is outstanding as of December 31, 2022. We carry the 2028 Notes at face value less the unamortized debt issuance costs on our consolidated balance sheets.
In February 2022, we issued the 2028 Notes with an aggregate principal amount of $1.5 billion, the full amount of which is outstanding as of December 31, 2023. We carry the 2028 Notes at face value less the unamortized debt issuance 71 Table of Contents costs on our consolidated balance sheets.
We had marketable securities totaling $2.5 billion and $1.7 billion at December 31, 2022 and December 31, 2021, respectively. Our cash and cash equivalents consist of cash in bank accounts and marketable securities consisting of U.S. government debt and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper.
We had marketable securities totaling $1.8 billion and $2.5 billion at December 31, 2023 and December 31, 2022, respectively. Our cash and cash equivalents consist of cash in bank accounts and marketable securities consisting of U.S. government debt and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risk and foreign currency risk as follows: Interest Rate Risk We had cash and cash equivalents totaling $1.4 billion and $2.0 billion at December 31, 2022 and December 31, 2021, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risk and foreign currency risk as follows: Interest Rate Risk We had cash and cash equivalents totaling $1.8 billion and $1.4 billion at December 31, 2023 and December 31, 2022, respectively.
The functional currency of our material operating entities is the U.S. dollar. For all periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses. As we grow operations, our exposure to foreign currency risk will likely become more significant.
For the periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses. As we grow operations, our exposure to foreign currency risk will likely become more significant. For the periods presented, we did not enter into any foreign currency exchange contracts.
For all periods presented, we did not enter into any foreign currency exchange contracts. We may, however, enter into foreign currency exchange contracts for purposes of hedging foreign exchange rate fluctuations on our business operations in future operating periods as our exposures are deemed to be material.
We may, however, enter into foreign currency exchange contracts for purposes of hedging foreign exchange rate fluctuations on our business operations in future operating periods as our exposures are deemed to be material. For additional discussion on foreign currency risk, see “Risk Factors” elsewhere in this Annual Report on Form 10-K. 72 Table of Contents
Removed
For additional discussion on foreign currency risk, see “Risk Factors” elsewhere in this Annual Report on Form 10-K. 73 Table of Contents

Other SNAP 10-K year-over-year comparisons