#1Snap Inc. Q3 2019 Earnings Slides October 22, 2019#2Forward-Looking Statements & Non-GAAP Financial Measures This presentation contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this presentation, including statements regarding guidance, our future results of operations or financial condition, business strategy and plans, user growth and engagement, product initiatives, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "going to," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this presentation on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. These forward-looking statements are subject to risks, uncertainties, and other factors, including those described in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent quarterly report on Form 10-Q filed with the SEC, which is available on the SEC's website at www.sec.gov. Additional information will be made available in our quarterly report on Form 10-Q for the quarter ended September 30, 2019 and other filings that we make from time to time with the SEC. In addition, the forward-looking statements in this presentation relate only to events as of the date on which the statements are made and are based on information available to us as of the date of this presentation. We undertake no obligation to update any forward-looking statements made in this presentation to reflect events or circumstances after the date of this presentation or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments. This presentation includes certain non-GAAP financial measures. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. A reconciliation of GAAP to non-GAAP measures is provided in the appendix of this presentation. 2#3Third Quarter Financial Highlights Revenue Operating Performance Cash ● Revenue increased 50% YoY to $446 million. ● ● Average revenue per user increased 33% YoY to $2.12. Gross margin¹ increased to 51%, compared to 36% in Q3 2018. Operating margin improved to (51)%, compared to (109) % in Q3 2018. Net loss improved $98 million YoY to $(227) million. Adjusted EBITDA improved $96 million YoY to $(42) million. Adjusted EBITDA margin² improved to (9)%, compared to (46) % in Q3 2018. Operating cash flow improved $56 million YoY to $(76) million. Free Cash Flow improved $75 million YoY to $(84) million. Ending cash and marketable securities increased $1.1 billion QoQ to $2.3 billion. ¹Excludes stock-based compensation expense and related payroll tax expense, depreciation and amortization, and certain other non-cash or non-recurring items impacting net income (loss) from time to time. 2We define Adjusted EBITDA margin as Adjusted EBITDA divided by GAAP revenue. See Appendix for reconciliation of net loss to Adjusted EBITDA. 3#4Business Highlights We added 7 million Daily Active Users in the third quarter and saw increased engagement across key metrics: DAUS were 210 million in Q3 2019, compared to 203 million in Q2 2019 and 186 million in Q3 2018. DAUS were up sequentially and year-over-year in each of North America, Europe, and Rest of World. DAUS were up sequentially and year-over-year on each of iOS and Android platforms. ● ● ● We continue to invest in our Discover platform, with a particular focus on building a sustainable premium content ecosystem: Total daily time spent by Snapchatters watching Discover increased by 40% year-over-year. In Q3 2019, more than 100 Discover channels reached a monthly audience of over 10 million viewers. Our new horror-thriller Snap Original "Dead of Night" has reached over 14 million unique viewers since its premiere in September. In Q3 2019, we added over 50 new channels internationally across 8 markets, and time spent on premium content internationally increased by more than 55% year-over-year. We continue to invest in our augmented reality platform: At the end of Q3 2019, over 600,000 Lenses had been created by our community through Lens Studio, up from 500,000 at the end of Q2 2019. Now more than 15% of the Snaps sent every day with Lenses feature Lenses made by Snapchatters using Lens Studio, with top-performing Community Lenses reaching billions of views on Snapchat. ● We continue to build on our Snap Games platform to better enhance the gaming experience for our large and engaged community: In Q3 2019, we partnered with SYBO Games and launched a new multiplayer game called Subway Surfers Airtime, which was an exclusive release on Snapchat and an expansion of their hit franchise, Subway Surfers. 4#5Business Highlights (Continued) We continue to build and improve Snap Kit, our set of developer tools that allow our partners to bring Snapchat features into their services: In September, over 100 million Snapchatters interacted with Snaps generated by our Creative Kit partner platforms. We doubled the number of apps integrated with Snap Kit since Q1 2019. ● We strengthened our ad platform products and capabilities to drive improved outcomes for advertisers: We announced Dynamic Ads, which allows advertisers to automatically create ads in real-time based on product catalogs that can contain hundreds of thousands of products. ● ● We announced that advertisers can now add swipe actions to their Commercials campaigns, allowing Snapchatters to swipe up to access a web page, view a long-form video, or view a Lens. The maximum duration of Snap Ads has been extended to enable advertisers to tell more detailed brand stories through our video ad products. 5#6Revenue by Geography (in millions, unaudited) QUARTERLY REVENUE $262 $45 $40 $177 Q2'18 $298 $40 $50 $207 Q3'18 $390 $58 $62 $269 Q4'18 $320 $47 $47 $226 Q1'19 $388 $67 $61 $260 Q2'19 $446 $62 $69 $316 Q3'19 50% North America¹ $1,076 $138 $163 TRAILING TWELVE MONTHS (TTM) $775 Europe² TTM Q3'18 44% 43% 36% 39% 48% 53% YOY Change Total revenue for geographic reporting is apportioned to each region based on our determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity. This allocation is consistent with how we determine ARPU. ¹North America includes Mexico, the Caribbean, and Central America. 2Europe includes Russia and Turkey. Rest of World $1,544 $235 $239 $1,071 TTM Q3'19 43% REVENUE UP 50% YOY AND 15% QOQ; TRAILING TWELVE MONTHS REVENUE INCREASED 43% TO $1.5 BILLION 6#7Average Daily Active Users (DAU) (in millions, unaudited) GLOBAL 188 Q2'18 EUROPE 2 61 Q2'18 186 Q3'18 59 Q3'18 186 Q4'18 60 Q4'18 +13% 190 Q1'19 +9% 61 Q1'19 203 Q2'19 64 Q2'19 210 Q3'19 65 Q3'19 NORTH AMERICA ¹ 80 Q2'18 47 79 REST OF WORLD Q2'18 Q3'18 47 Q3'18 79 GLOBAL DAU INCREASED 13% YoY Q4'18 47 Q4'18 +6% 80 Q1'19 +28% 49 Q1'19 83 Q2'19 56 Q2'19 84 Q3'19 61 Q3'19 We define a Daily Active User, or DAU, as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. We calculate average Daily Active Users for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter. ¹North America includes Mexico, the Caribbean, and Central America. 2Europe includes Russia and Turkey. 7#8Average Revenue Per User (ARPU) (unaudited) GLOBAL $1.40 Q2'18 EUROPE ² $0.66 Q2'18 $1.60 Q3'18 $0.85 Q3'18 $2.09 Q4'18 $1.04 Q4'18 +33% $1.68 Q1'19 +24% $0.77 Q1'19 $1.91 Q2'19 $0.95 Q2'19 $2.12 Q3'19 $1.05 Q3'19 NORTH AMERICA¹ $2.21 Q2'18 $0.96 $2.62 REST OF WORLD Q2'18 Q3'18 $0.84 Q3'18 $3.38 Q4'18 $1.24 Q4'18 +43% $2.81 Q1'19 +21% $0.97 Q1'19 $3.14 GLOBAL ARPU INCREASED 33% YOY NORTH AMERICA ARPU INCREASED 43% YOY, A 23 PPT INCREASE FROM Q3 2018 Q2'19 $1.20 Q2'19 $3.75 Q3'19 $1.01 Q3'19 We define ARPU as quarterly revenue divided by the average Daily Active Users. For purposes of calculating ARPU, revenue by user geography is apportioned to each region based on our determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity. ¹North America includes Mexico, the Caribbean, and Central America. 2Europe includes Russia and Turkey. 8#9Cost of Revenue¹ COST OF REVENUE AS A % OF REVENUE Gross Margin¹ 70% 30% Q2'18 64% 36% Q3'18 52% 48% Q4'18 -15 PPTS 61% 39% Q1'19 54% 46% Q2'19 49% 51% Q3'19 Total Non-GAAP Exclusions¹ COST OF REVENUE COMPOSITION (in millions, unaudited) Infrastructure Cost Revenue Share Cost Other $184 $25 $24 $136 Q2'18 $8 ¹Excludes stock-based compensation expense and related payroll tax expense, depreciation and amortization, and certain other non-cash or non-recurring items impacting net income (loss) from time to time. $191 $25 $26 $140 Q3'18 $7 $202 $28 $39 $134 Q4'18 $11 +14% $196 $25 $35 $136 Q1'19 $8 COST OF REVENUE INCREASED 14% YOY, WHILE REVENUE INCREASED 50% YOY $208 $24 $37 $146 Q2'19 $8 $217 $26 $45 $146 Q3'19 $6 9#10Operating Expenses¹ OPERATING EXPENSES AS A % OF REVENUE 94% Q2'18 82% Q3'18 61% Q4'18 -21 PPTS 77% Q1'19 67% Q2'19 61% Q3'19 Total Non-GAAP Exclusions¹ OPERATING EXPENSES COMPOSITION (in millions, unaudited) Research and Development Sales and Marketing General and Administrative $247 $75 $75 $97 Q2'18 $182 ¹Excludes stock-based compensation expense and related payroll tax expense, depreciation and amortization and certain other non-cash or non-recurring items impacting net income (loss) from time to time. Refer to Appendix for description of Reduction in Force Charges and Lease Exit Charges. $246 $82 $68 $95 Q3'18 $178 $238 $80 $75 $84 Q4'18 $133 OPERATING EXPENSES INCREASED 11% YOY AND 5% QOQ, WHILE REVENUE INCREASED 50% YOY AND 15% QOQ +11% $248 $82 $75 $91 Q1'19 $185 $259 $87 $81 $91 Q2'19 $219 $271 $83 $96 $92 Q3'19 $180 10#11Net Loss & Adjusted EBITDA¹ (in millions, unaudited) NET LOSS Q2'18 (136)% $(353) Operating Margin Q3'18 (109)% $(325) Q4'18 (50)% $(192) Q1'19 (99)% $(310) Q2'19 (79)% $(255) Q3'19 (51)% $(227) ADJUSTED EBITDA 2 We define Adjusted EBITDA margin as Adjusted EBITDA divided by GAAP revenue. ³We define Adjusted EBITDA leverage as the year over year change in Adjusted EBITDA divided by the year over year change in GAAP revenue. Adjusted EBITDA Leverage³ Q2'18 (64)% $(169) 31% Adjusted EBITDA Margin² Q3'18 (46)% $(138) 45% Q4'18 (13)% $(50) 104% Q1'19 ADJUSTED EBITDA IMPROVED $96 MILLION YOY, WHILE ADJUSTED EBITDA MARGIN IMPROVED 37 PPTS YOY (39)% $(123) 105% Q2'19 (20)% $(79) 72% Q3'19 (9)% $(42) '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 and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. See Appendix for reconciliation of net loss to Adjusted EBITDA. 65% 11#12Diluted Net Loss Per Share & Common Shares Outstanding Plus Shares Underlying Stock-Based Awards (in millions, except per share data, unaudited) DILUTED NET LOSS PER SHARE Q2'18 $(0.27) Q3'18 $(0.25) Q4'18 $(0.15) Q1'19 $(0.23) Q2'19 $(0.19) ¹Shares underlying stock-based awards include restricted stock units, restricted stock awards, and outstanding stock options. Q3'19 $(0.16) COMMON SHARES OUTSTANDING PLUS SHARES UNDERLYING STOCK-BASED AWARDS Common Shares Outstanding Shares Underlying Stock-Based Awards¹ 1,479 206 1,273 Q2'18 1,476 185 1,291 Q3'18 1,507 DILUTED NET LOSS PER SHARE DECREASED 34% YOY 89 1,318 Q4'18 1,544 209 1,335 Q1'19 1,553 181 1,372 Q2'19 1,565 176 1,389 Q3'19 12#13Free Cash Flow¹ (in millions, unaudited) YoY Change Q2'18 $(199) $(35) $(234) (2)% Q3'18 $(133) $(26) $(159) 28% Q4'18 $(126) $(23) $(149) 25% Q1'19 $(66) $(12) $(78) 71% Cash Used in Operating Activities Numbers throughout presentation may not foot due to rounding. 'We define Free Cash Flow as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. See Appendix for reconciliation of net cash used in operating activities to Free Cash Flow. Q2'19 $(96) $(8) $(103) 56% OPTIMIZING LONG-TERM FREE CASH FLOW; FREE CASH FLOW IMPROVED 47% YOY Capital Expenditures Q3'19 $(76) $(8) $(84) 47% 13#14Financial Guidance The following forward-looking statements reflect our expectations for the fourth quarter of 2019 as of October 22, 2019, and are subject to substantial uncertainty. This guidance assumes, among other things, that no business acquisitions, investments, restructurings, or legal settlements are concluded in the quarter. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed in "Forward-Looking Statements & Non-GAAP Financial Measures." Q4 2019 Outlook • Revenue is expected to be between $540 million and $560 million, compared to $390 million in Q4 2018. Adjusted EBITDA is expected to be between breakeven and $20 million, compared to $(50) million in Q4 2018. ● 14#15Appendix#16Non-GAAP Financial Measures Reconciliation (in thousands, unaudited) Free Cash Flow Reconciliation Net cash used in operating activities Less: Purchases of property and equipment Free Cash Flow¹ Adjusted EBITDA Reconciliation Net loss Add (deduct): Interest income Interest expense Other (income) expense, net Income tax (benefit) expense Depreciation and amortization Stock-based compensation expense Payroll tax expense related to stock-based compensation Lease exit charges Adjusted EBITDA² $ $ $ $ June 30, 2018 September 30, 2018 (199,346) $ (34,901) (234,247) $ June 30, 2018 (353,310) $ (132,543) $ September 30, 2018 (6,600) 930 61 1,077 22,514 156,371 5,997 3,928 (169,032) $ (26,285) (158,828) $ (325,148) $ (7,011) 919 Three Months Ended December 31, 2018 7,625 244 24,898 126,809 3,947 29,340 (138,377) $ (126,054) $ (22,741) (148,795) $ Three Months Ended December 31, 2018 (191,668) $ (7,513) 1,111 3,715 (352) 22,682 121,772 March 31, 2019 2,015 (2,125) (50,363) $ (66,178) $ (11,814) (77,992) $ March 31, 2019 (310,407) $ (7,816) 756 1,127 279 23,319 162,556 6,737 (123,449) $ June 30, 2019 (95,789) $ (7,633) (103,422) $ June 30, 2019 September 30, 2019 (7,446) 809 (44,085) 1,078 (255,174) $ 22,660 195,574 7,871 September 30, 2019 (76,149) (7,938) (84,087) (78,713) $ (227,375) (10,317) 8,654 1,481 (1,296) 20,646 161,228 4,604 (42,375) ¹ We define Free Cash Flow as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. 2We 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 and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time. Lease exit charges were related to our exit of various operating leases prior to the end of the contractual lease term. The lease exit charges primarily include the present value of our remaining lease obligation on the cease use dates that occurred during the quarter, net of estimated sublease income. These charges are non-recurring and not reflective of underlying trends in our business. 1#17Non-GAAP Financial Measures Reconciliation (Continued) (in thousands, except per share amounts, unaudited) Non-GAAP Net Loss Reconciliation Net loss Amortization of intangible assets Stock-based compensation expense Payroll tax expense related to stock-based compensation Gain on divestiture Lease exit charges Income tax adjustments Non-GAAP net loss¹ Weighted-average common shares - Diluted Non-GAAP diluted net loss per share reconciliation GAAP diluted net loss per share Non-GAAP adjustment to net loss Non-GAAP diluted net loss per share¹ $ $ $ $ June 30, 2018 (353,310) $ 10,754 156,371 5,997 3,928 (339) (176,599) $ 1,294,846 September 30, 2018 June 30, 2018 (0.27) $ 0.13 (0.14) $ (325,148) $ 10,610 126,809 3,947 29,340 (253) (154,695) $ 1,309,918 September 30, 2018 (0.25) $ 0.13 (0.12) $ Three Months Ended December 31, 2018 (191,668) $ 10,441 121,772 2,015 (2,125) 84 (59,481) $ 1,324,858 Three Months Ended December 31, 2018 March 31, 2019 (0.14) $ 0.10 (0.04) $ (310,407) $ 10,369 162,556 6,737 (115) (130,860) $ 1,340,615 March 31, 2019 (0.23) $ 0.13 (0.10) $ June 30, 2019 (255,174) $ 9,048 195,574 7,871 (39,883) September 30, 2019 376 (82,188) $ 1,362,544 June 30, 2019 (227,375) 6,915 161,228 4,604 (0.19) $ 0.13 (0.06) $ 200 (54,428) 1,392,864 September 30, 2019 ¹ We define Non-GAAP Net Loss as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and related payroll tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-recurring items include lease exit charges as described in the preceding slide. Non-GAAP Net Loss and weighted average diluted shares are then used to calculate Non-GAAP diluted net loss per share. (0.16) 0.12 (0.04) 2#18Note Regarding User Metrics and Other Data We define a Daily Active User, or DAU, as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. We calculate average Daily Active Users for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter. We also break out Daily Active Users by geography because certain markets have a greater revenue opportunity and lower bandwidth costs. We define average revenue per user, or ARPU, as quarterly revenue divided by the average DAUS. For purposes of calculating ARPU, revenue by user geography is apportioned to each region based on our determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity. This allocation differs from our components of revenue disclosure in the notes to our consolidated financial statements, where revenue is based on the billing address of the advertising customer. Unless otherwise stated, statistical information regarding our users and their activities is determined by calculating the daily average of the selected activity for the most recently completed quarter. While these metrics are determined based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally. For example, there may be individuals who have multiple Snapchat accounts, even though we forbid that in our Terms of Service and implement measures to detect and suppress that behavior. We have not determined the number of such multiple accounts. Our user metrics are also affected by technology on certain mobile devices that automatically runs in the background of our Snapchat application when another phone function is used, and this activity can cause our system to miscount the user metrics associated with such account. Changes in our products, infrastructure, mobile operating systems, or metric tracking system, or the introduction of new products, may impact our ability to accurately determine active users or other metrics and we may not determine such inaccuracies promptly. We believe that we don't capture all data regarding all our active users. For example, technical issues may result in data not being recorded from every user's application. While we believe this underreporting is generally immaterial, we are unable to precisely determine the level of underreporting and for some periods the underreporting may be material. We continually seek to address these technical issues and improve our accuracy, but given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect underreporting to continue. We do not adjust our reported metrics to reflect this underreporting. Some of our demographic data may be incomplete or inaccurate. For example, because users self-report their dates of birth, our age-demographic data may differ from our users' actual ages. And because users who signed up for Snapchat before June 2013 were not asked to supply their date of birth, we exclude those users and estimate their ages based on a sample of the self-reported ages we do have. If our DAUS provide us with incorrect or incomplete information regarding their age or other attributes, then our estimates may prove inaccurate and fail to meet investor expectations. 3#19Note Regarding User Metrics and Other Data (Continued) We currently use an analytics platform that we developed and operate and we count a DAU only when a user opens the application and only once per user per day. We believe this methodology accurately measures our user engagement. We have multiple pipelines of user data that we use to determine whether a user has opened the application during a particular day and thus is a DAU. This provides redundancy in the event one pipeline of data were to become unavailable for technical reasons, and also gives us redundant data to help measure how users interact with Snapchat. If we fail to maintain an effective analytics platform, our metrics calculations may be inaccurate. We regularly review, have adjusted in the past, and are likely in the future to adjust our processes for calculating our internal metrics to improve their accuracy. As a result of such adjustments, our DAUs or other metrics may not be comparable to those in prior periods. Our measures of DAUs may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology or data used. 4