Snap Inc Q4 FY2024 earnings call

• Daily active users reached 453 million in Q4, up 39 million y-o-y. Content viewers and time spent watching content grew. - Revenue increased 14% y-o-y to $1.56 billion due to direct response advertising and Snapchat+ subscription growth. - Improved profitability with $276 million adjusted EBITDA in Q4. - Tested Simple Snapchat with over 25 million users, seeing encouraging engagement metrics. - Focused on fostering creator ecosystem, with over 1 billion snaps shared monthly from community creators. - Augmented reality initiatives, including new AI lenses and expanded developer ecosystem. - Advertising platform progress with strong demand for Pixel Purchase and App Purchase Optimizations, and lead generation product enhancements.

In Q4, total revenue was $1.56 billion, up 14% year-over-year. Advertising revenue was $1.41 billion, up 10% year-over-year. Other revenue, primarily driven by Snapchat+ subscription, more than doubled year-over-year to $143 million in Q4. North America revenue grew 8% y-o-y, Europe grew 20% y-o-y, and Rest of World grew 35% y-o-y. Adjusted EBITDA in Q4 was $276 million.

• Q1 2025 guidance: DAU expected ~459 million, revenue range $1.325 billion - $1.36 billion, adjusted EBITDA range $40 million - $75 million. - Infrastructure cost per DAU expected $0.82 - $0.87 in 2025. - Plan to grow full-time headcount 8% - 10% in 2025, with adjusted operating expenses between $2.7 billion - $2.75 billion. - Testing smart budget optimization feature in Q1 for SMB clients.

Q: Can you talk about the early results around Simple Snap now that it's rolled out to more than 25 million users? Are you seeing any differences across user GEOs? And how are you managing any user or advertiser budget disruption or impact associated with the rollout?

A: Evan Spiegel said they're seeing encouraging testing results with engagement metrics, but still working on migrating story ad demand and clawing back engagement losses with certain user cohorts. No specific differences across GEOs mentioned in terms of impact yet.

Q: You're the only mobile ad platform that's built a robust subscription business in Snap+. I think it's now like almost 10% of total revenues and it's by far your fastest driver of growth. I guess, Evan, how should we think about the growth potential in terms of not just subscribers and ARPU, but what are the features that you can add that would make this an even more meaningful product going forward? And then given everything that's happened with DeepSeek and sort of China-based AI in terms of innovations over the course of the past couple of weeks, just curious how you think the cost curve may be changing for AI and how that impacts the Snap cost structure over the coming year?

A: Evan Spiegel said on Snapchat+ they're focused on core engagement loop of snapping and possible price increases. On DeepSeek, he noted it validates models becoming commoditized and more efficient, with Snap in early experimentation phase with open source work.

Q: Can you provide any color on what you've seen around engagement and advertiser behavior since TikTok went dark in the app stores? And hopefully, we'll get an answer one way or another on TikTok resolution soon. But how does it affect the way you think about priorities for the year? And where do you expect to be most nimble? Will it be on Simple Snapchat?

A: Evan Spiegel said not drawing too many conclusions from TikTok dark period, but overall uncertainty benefits their business. Priority is supporting advertisers and creators, with focus on creator creation flywheel and public content ecosystem growth.

Q: I'd love to just dig into small and medium-sized advertiser growth more. You noted it was the biggest contributor to ad revenue in 2024 in the letter and Snap Promote remains a big part of that. Could you just talk a little bit more about what the team is doing to leverage that growth, helping them expand beyond Snap Promote, build full ads manager accounts, and start to get a little bit more sophisticated on the platform? And then you talked a little bit last quarter about how that Snap Promote list goes sort of straight into the go-to-market team to help facilitate that. Any other initiatives that you'd highlight to help accelerate that growth or other ad products in general that you see that group really ticking up with that -- with ticking up strongly?

A: Derek Andersen said SMB growth driven by performance DR ad products, improved go-to-market operations, simplified ad-buying experience. Testing smart budget optimization feature in Q1 and investing in resources to scale SMB segment.

Q: What if anything is factored into your Q1 revenue and user growth guides as it relates to the rollout of Simple Snapchat? Is it fair to say we're just too early for that to be meaningfully impacting results right now? And/or that maybe it could kind of occur later in the quarter?

A: Derek Andersen said nothing material factored into Q1 guides around Simple Snapchat; it's about business momentum like DR and SMB strength.

Q: Could you please comment on the overall demand environment as you see it for both across brand and DR? And then anything that jumped out to you that was in terms of demand trends, it was specifically muted trends that you saw or strength? And then my second question is on compute costs. And I think this was asked a bit earlier, but let me try it one more time. When you think about efficiency gains in your compute costs over the next year, two years or three years, how are you thinking about where you'd realize them the most? And how are you positioned to realize those gains?

A: Derek Andersen said vertical demand best where product market fit exists, with DR verticals like retail, CPG, health and wellness seeing growth. On compute costs, efficiency gains from team innovation, cloud partner SKU migration, and scale leading to better pricing.

Q: I kind of on the upper funnel brand side, continued weakness there. Could you talk a little bit about from a category perspective? Are you continuing to see pressure in the same category as you talked about food and beverage in the past, but has that broadened out or does that roughly similar? And where do you see the opportunities? Are there new categories that there are potential opportunities there on the upper funnel brand side? And then the second one on the lower funnel side, a nice progress on doubling the number of advertisers. Could you talk about just the typical ramp period for those advertisers in terms of getting to kind of what a maybe a full run rate because that the volume increase is great? The question is, should we see continued momentum there on the direct response side and on the lower funnel side from that volume increase?

A: Derek Andersen said upper funnel weakness concentrated in few large advertisers, focusing on product innovation like Sponsored Snaps and partnerships. Lower funnel growth driven by active advertisers, with focus on ease of getting started and DR ad stack performance.

Q: On Sponsored Snaps. The reach some of the advertisers are seeing on the early campaigns looks very strong. Can you talk about the go-to-market strategy this year for Sponsored Snap? How fast can you ramp the adoption of this in 2025? And then second one on DR ads, we're seeing companies like Meta and others deploy kind of GPUs to improve relevance beyond areas like creative iterations for the AI products. How do you think about that opportunity to kind of deploy additional compute and drive performance for our Snap's DRI products?

A: Evan Spiegel said they'll start with Pixel Purchase GBB for Sponsored Snaps, maintaining relevance, and expand later. On DR ads, Snap benefits from broader ML platform investments, experimenting with techniques like sequence models for improved relevance.