Nine Months Ended September 30,

2017

2016

Cash flows from operating activities

Net loss
$
(3,095,089
)

$
(344,698
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

42,502

18,482

Stock-based compensation

2,458,851

25,075

Deferred income taxes

(14,397
)

(7,231
)
Excess inventory reserve and related asset impairment

21,997

—

Other

(3,714
)

(360
)
Change in operating assets and liabilities, net of effect of acquisitions:

Accounts receivable, net of allowance

(24,513
)

(78,488
)
Prepaid expenses and other current assets

(48,965
)

(14,926
)
Other assets

(8,545
)

450

Accounts payable

4,103

1,656

Accrued expenses and other current liabilities

103,449

(45,475
)
Other liabilities

5,737

1,998

Net cash used in operating activities

(558,584
)

(443,517
)
Cash flows from investing activities

Purchases of property and equipment

(63,306
)

(46,065
)
Purchases of intangible assets

(8,025
)

(572
)
Non-marketable investments

(7,530
)

(5,703
)
Cash paid for acquisitions, net of cash acquired

(352,407
)

(68,096
)
Issuance of notes receivable from officers/stockholders

—

(15,000
)
Repayment of notes receivables from officers/stockholders

—

15,000

Purchases of marketable securities

(3,412,776
)

(1,358,295
)
Sales of marketable securities

441,089

164,003

Maturities of marketable securities

1,831,327

180,805

Change in restricted cash

9,899

(7,048
)
Net cash used in investing activities

(1,561,729
)

(1,140,971
)
Cash flows from financing activities

Proceeds from the exercise of stock options

6,855

576

Stock repurchases from employees for tax withholdings

(367,234
)

—

Proceeds from issuance of Class A common stock in initial public offering, net of underwriting commissions

2,657,797

—

Repurchase of Class B voting common stock and Series FP voting preferred stock

—

(10,593
)
Proceeds from issuances of preferred stock, net of issuance costs

—

1,157,147

Borrowings from revolving credit facility

—

5,000

Principal payments on revolving credit facility

—

(5,000
)
Payments of initial public offering issuance costs

(9,672
)

—

Net cash provided by financing activities

2,287,746

1,147,130

Change in cash and cash equivalents

167,433

(437,358
)
Cash and cash equivalents, beginning of period

150,121

640,810

Cash and cash equivalents, end of period
$
317,554

$
203,452

Supplemental disclosures

Cash paid for income taxes
$
5,437

$
4

Supplemental disclosures of non-cash activities

Issuance of Class B common stock related to acquisitions
$
—

$
96,145

Assumed equity awards in acquisitions
$
3,911

$
—

Purchase consideration liabilities related to acquisitions
$
11,772

$
17,042

Repurchase of Class B voting common stock and Series FP voting preferred stock in exchange for notes receivable from officers/stockholders
$
—

$
13,500

Construction in progress related to financing lease obligations
$
1,107

$
1,024

Net change in accounts payable and accrued expenses and other current liabilities related to property and equipment additions
$
(4,155
)

$
2,395


	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,228,629	$	1,423,121
Marketable securities	2,460,649		2,516,003
Accounts receivable, net of allowance	996,082		1,183,092
Prepaid expenses and other current assets	154,178		134,431
Total current assets	4,839,538		5,256,647
Property and equipment, net	330,010		271,777
Operating lease right-of-use assets	348,970		370,952
Intangible assets, net	202,671		204,480
Goodwill	1,692,061		1,646,120
Other assets	252,973		279,562
Total assets	$	7,666,223	$	8,029,538
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	163,604	$	181,774
Operating lease liabilities	57,893		46,485
Accrued expenses and other current liabilities	716,167		987,340
Total current liabilities	937,664		1,215,599
Convertible senior notes, net	3,745,956		3,742,520
Operating lease liabilities, noncurrent	356,929		386,271
Other liabilities	120,714		104,450
Total liabilities	5,161,263		5,448,840
Commitments and contingencies (Note 8)
Stockholders’ equity
Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 1,412,444 shares issued, 1,361,953 shares outstanding at June 30, 2023, and 3,000,000 shares authorized, 1,371,242 shares issued, 1,319,930 shares outstanding at December 31, 2022.	14		13
Class B voting common stock, $0.00001 par value. 700,000 shares authorized, 22,539 shares issued and outstanding at June 30, 2023, and 700,000 shares authorized, 22,529 shares issued and outstanding at December 31, 2022.	—		—
Class C voting common stock, $0.00001 par value. 260,888 shares authorized, 231,627 shares issued and outstanding at June 30, 2023 and December 31, 2022.	2		2
Treasury stock, at cost. 50,491 and 51,312 shares of Class A non-voting common stock at June 30, 2023 and December 31, 2022, respectively.	(492,500)		(500,514)
Additional paid-in capital	13,934,244		13,309,828
Accumulated deficit	(10,920,639)		(10,214,657)
Accumulated other comprehensive income (loss)	(16,161)		(13,974)
Total stockholders’ equity	2,504,960		2,580,698
Total liabilities and stockholders’ equity	$	7,666,223	$	8,029,538

The numerators and denominators of the basic and diluted net loss per share computations for our common stock are calculated as ~~follows for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(in thousands, except per share data)

Class A Common⁽¹⁾

Class B Common⁽²⁾

Class C Common⁽³⁾

Class A Common

Class B Common⁽²⁾

Class C Common⁽³⁾

Class A Common⁽¹⁾

Class B Common⁽²⁾

Class C Common⁽³⁾

Class A Common

Class B Common⁽²⁾

Class C Common⁽³⁾

Numerator:

Net loss

$
(289,818
)

$
(62,288
)

$
(91,053
)

$
(74,874
)

$
(17,097
)

$
(32,257
)

$
(1,869,782
)

$
(561,713
)

$
(663,594
)

$
(208,815
)

$
(42,329
)

$
(93,554
)
Net loss attributable to common stockholders

$
(289,818
)

$
(62,288
)

$
(91,053
)

$
(74,874
)

$
(17,097
)

$
(32,257
)

$
(1,869,782
)

$
(561,713
)

$
(663,594
)

$
(208,815
)

$
(42,329
)

$
(93,554
)
Denominator:

Basic shares:

Weighted-average common shares - Basic

806,353

173,304

253,336

501,700

114,562

216,139

688,690

206,894

244,420

483,821

98,076

216,763

Diluted shares:

Weighted-average common shares - Diluted

806,353

173,304

253,336

501,700

114,562

216,139

688,690

206,894

244,420

483,821

98,076

216,763

Net loss per share attributable to common stockholders:

Basic

$
(0.36
)

$
(0.36
)

$
(0.36
)

$
(0.15
)

$
(0.15
)

$
(0.15
)

$
(2.71
)

$
(2.71
)

$
(2.71
)

$
(0.43
)

$
(0.43
)

$
(0.43
)
Diluted

$
(0.36
)

$
(0.36
)

$
(0.36
)

$
(0.15
)

$
(0.15
)

$
(0.15
)

$
(2.71
)

$
(2.71
)

$
(2.71
)

$
(0.43
)

$
(0.43
)

$
(0.43
)

~~(1)~~

~~Class A common stock includes the issuance of 160.3 million shares of Class A common stock issued by us in connection with our IPO.~~

follows:

~~(2)~~

Included in the Class B common stock, for all periods presented, is Series D, E, and F preferred stock, which automatically converted to Class B common stock on the closing of the IPO. Series A, A-1, B, and C preferred stock are included in Class B common stock on the automatic conversion of such shares to 163.0 million shares of Class B common stock on the closing of the IPO.


	Three Months Ended June 30,												Six Months Ended June 30,
	2023						2022						2023						2022
	(in thousands, except per share data)
	Class A		Class B		Class C		Class A		Class B		Class C		Class A		Class B		Class C		Class A		Class B		Class C
Numerator:
Net loss	$	(317,491)	$	(5,303)	$	(54,514)	$	(356,314)	$	(5,855)	$	(59,898)	$	(593,302)	$	(9,987)	$	(102,693)	$	(659,409)	$	(10,905)	$	(111,377)
Net loss attributable to common stockholders	$	(317,491)	$	(5,303)	$	(54,514)	$	(356,314)	$	(5,855)	$	(59,898)	$	(593,302)	$	(9,987)	$	(102,693)	$	(659,409)	$	(10,905)	$	(111,377)
Denominator:
Basic shares:
Weighted-average common shares - Basic	1,349,012		22,533		231,627		1,377,870		22,643		231,627		1,338,211		22,527		231,627		1,371,358		22,678		231,627
Diluted shares:
Weighted-average common shares - Diluted	1,349,012		22,533		231,627		1,377,870		22,643		231,627		1,338,211		22,527		231,627		1,371,358		22,678		231,627
Net loss per share attributable to common stockholders:
Basic	$	(0.24)	$	(0.24)	$	(0.24)	$	(0.26)	$	(0.26)	$	(0.26)	$	(0.44)	$	(0.44)	$	(0.44)	$	(0.48)	$	(0.48)	$	(0.48)
Diluted	$	(0.24)	$	(0.24)	$	(0.24)	$	(0.26)	$	(0.26)	$	(0.26)	$	(0.44)	$	(0.44)	$	(0.44)	$	(0.48)	$	(0.48)	$	(0.48)

~~(3)~~

Included in the Class C common stock, for all periods presented, is Series FP preferred stock which automatically converted to Class C common stock on the closing of the IPO. Additionally, 37.4 million shares of Class C common stock related to the CEO award are included in Class C common stock on the closing of the IPO.

The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented:

The following table summarizes the ~~restricted stock~~RSU and RSA activity during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~

Class A
Outstanding
Restricted Stock

Class B
Outstanding
Restricted Stock

Weighted-
Average
Grant Date
Fair Value
per Restricted Stock

(in thousands, except per share data)

Unvested at December 31, 2016

152,114

28,581

$
15.50

Granted⁽¹⁾

50,770

—

$
16.78

Vested

(34,577
)

(16,777
)

$
14.94

Forfeited

(10,026
)

(366
)

$
17.15

Unvested at September 30, 2017

158,281

11,438

$
15.95

2023:

~~(1)~~

~~Includes 1.4 million restricted stock granted in connection with the Placed acquisition.~~


	Class A Number of Shares	Weighted- Average Grant Date Fair Value
	(in thousands, except per share data)
Unvested at December 31, 2022	132,392	$	18.28
Granted	73,470	$	9.22
Vested	(43,429)	$	16.48
Forfeited	(14,043)	$	18.31
Unvested at June 30, 2023	148,390	$	14.32

All RSUs and RSAs vest on the satisfaction of a service-based condition. Total unrecognized compensation cost related to ~~Pre-2017~~outstanding RSUs and RSAs was ~~$818.1 million~~$1.8 billion as of ~~September~~June 30, ~~2017~~2023 and is expected to be recognized over a weighted-average period of ~~2.7 years.~~

All RSUs granted after December 31, 2016 vest on the satisfaction of only a service-based condition (“Post-2017 RSUs”). Total unrecognized compensation cost related to Post-2017 RSUs, including awards granted in connection with the Placed acquisition, was $658.1 million as of September 30, 2017 and is expected to be recognized over a weighted-average period of 4.51.9 years. The service condition for RSUs and RSAs is generally satisfied in equal monthly or quarterly installments over four years, 10% after the first year of service, 20% over the second year, 30% over the third year, and 40% over the fourth year. In limited instances, we have issued Post-2017 RSUs with vesting periods in excess ofthree to four years.

For the nine months ended September 30, 2017, for RSUs issued to employees, we withheld 23.8 million shares of common stock (“net settlement”) and remitted $370.9 million in cash to meet the related tax withholding requirements on behalf of our employees. We will continue to evaluate the net settlement of RSUs that vest in the future.

The table below presents stock option awards that entitle the holder to an additional share of Class A common stock on exercise. The total stock options granted and underlying common stock fair value do not give effect to the additional Class A common stock.

Stock Options

The following table summarizes the stock option award activity under the Stock Plans during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~

Class A
Number
of Shares

Class B
Number
of Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value⁽¹⁾

(in thousands, except per share data)

Outstanding at December 31, 2016

1,266

21,186

$
2.26

6.97

$
682,565

Granted and assumed⁽²⁾

550

—

$
0.64

—

$
—

Exercised

(192
)

(6,978
)

$
0.96

—

$
—

Forfeited

(4
)

—

$
0.72

—

$
—

Outstanding at September 30, 2017

1,620

14,208

$
2.71

6.34

$
409,287

~~(1)~~

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the assessed fair value of our common stock as of December 31, 2016 or the closing market price of our Class A common stock as of September 30, 2017.

2023:

~~(2)~~

~~Amount includes assumed options from Placed, Inc.’s 2011 Equity Incentive Plan, as amended, which are not entitled to an additional share of Class A common stock on exercise.~~


	Class A Number of Shares	Class B Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
	(in thousands, except per share data)
Outstanding at December 31, 2022	2,589	570	$	9.68	4.05	$	9,669
Granted	—	—	$	—
Exercised	(364)	(362)	$	0.57
Forfeited	(46)	—	$	12.37
Outstanding at June 30, 2023	2,179	208	$	12.40	4.08	$	4,953

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of our Class A common stock as of June 30, 2023 and December 31, 2022, respectively.

Total unrecognized compensation cost related to unvested stock options ~~granted and assumed~~ was ~~$36.4~~$0.3 million as of ~~September~~June 30, ~~2017~~2023 and is expected to be recognized over a weighted-average period of ~~2.1~~1.7 years.

Table of Contents

Stock-Based Compensation Expense by Function

Total stock-based compensation expense by function iswas as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016			2023		2022		2023		2022
	(in thousands)									(in thousands)
Cost of revenue	$	1,951	$	128	$	23,882	$	410	Cost of revenue	$	2,365	$	2,849	$	4,250	$	5,295
Research and development		143,303		12,138		1,025,231		17,486	Research and development	217,565		221,650		437,415		404,516
Sales and marketing		27,254		1,251		207,538		2,579	Sales and marketing	57,597		48,577		112,536		90,648
General and administrative		49,194		1,278		1,202,200		4,600	General and administrative	40,416		45,734		78,673		93,795
Total	$	221,702	$	14,795	$	2,458,851	$	25,075	Total	$	317,943	$	318,810	$	632,874	$	594,254

~~2017 Employee Stock Purchase Plan~~

5. Business Acquisitions

2023 Acquisitions

In ~~January 2017, our board~~the six months ended June 30, 2023, aggregate purchase consideration for business acquisitions was $73.1 million, which primarily consisted of ~~directors adopted the 2017 Employee Stock Purchase Plan (“2017 ESPP”). Our stockholders approved the 2017 ESPP~~$56.3 million in ~~February 2017. The 2017 ESPP became effective~~cash and $12.6 million recorded in connection with the IPO. A total of 16,484,690 shares of Class A common stock were initially reserved for issuance under the 2017 ESPP. No shares of our Class A common stock have been purchased under the 2017 ESPP. The number of shares of our Class A common stock reserved for issuance will automatically increase on January 1st of each calendar year, beginning on January 1, 2018 through January 1, 2027, by the lesser of (1) 1.0% of the total number of shares of our common stock outstandingother liabilities on the ~~last day of~~consolidated balance sheet. Of the ~~calendar month before~~aggregate purchase consideration, $42.8 million was allocated to goodwill and the date of the automatic increase, and (2) 15,000,000 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2).

~~4. Business Acquisitions~~

~~Placed, Inc.~~

~~In July 2017, we~~remainder primarily to identifiable intangible assets. The acquired ~~Placed, Inc. (“Placed”), a location-based measurement services company. The purpose of the acquisition was~~assets are expected to enhance our ~~measurement capabilities. The total consideration was $185.9 million, of which $139.6 million represents purchase consideration~~existing platform, technology, and includes $135.2 million in cash paid to sellers, $3.9 million for the fair value of assumed options, and $0.5 million of liabilities due to the sellers. The remaining $46.3 million of total consideration transferred represents compensation for future employment services. The allocation of purchase price is preliminary and is subject to additional information related to the liabilities that existed as of the acquisition date.

~~The preliminary allocation of the total purchase consideration for this acquisition is estimated as follows:~~

Total

(in thousands)

Cash

$
6,919

Trademarks

2,700

Technology

22,400

Customer relationships

11,800

Goodwill

103,995

Net deferred tax liability

(13,520
)
Other assets acquired and liabilities assumed, net

5,296

Total

$
139,590

workforce. The goodwill amount represents synergies related to our existing platform expected to be realized from ~~this~~the business ~~combination~~acquisitions and assembled workforce. The associated goodwill and intangible assets are not deductible for tax purposes.

~~Zenly SAS~~

~~In May 2017,~~

2022 Acquisitions

For the year ended December 31, 2022, we ~~acquired Zenly SAS, a company that develops a location-based application that allows users to see where their friends are on a map. The purpose of the acquisition was~~completed acquisitions to enhance ~~the functionality of~~ our ~~platform.~~existing platform, technology, and workforce. The ~~total~~aggregate purchase consideration ~~paid~~ was ~~$213.3~~$120.5 million, which included $17.7 million in cash, $44.0 million in shares of ~~which $196.1~~our Class A common stock, and $58.8 million ~~represents~~recorded in other liabilities on our consolidated balance sheet. Of the aggregate purchase consideration, $69.3 million was allocated to goodwill and ~~includes $186.8 million in cash paid~~the remainder primarily to the sellers and $9.3 million of liabilities due to the sellers. The remaining $17.2 million of total consideration transferred represents compensation for future employment services. The allocation of purchase price is preliminary and is subject to additional information related to the liabilities that existed as of the acquisition date.

~~The preliminary allocation of the total purchase consideration for this acquisition is estimated as follows:~~

Total

(in thousands)

Cash

$
22,610

Technology

23,000

Goodwill

154,353

Net deferred tax liability

(2,418
)
Other assets acquired and liabilities assumed, net

(1,428
)
Total

$
196,117

identifiable intangible assets. The goodwill amount represents synergies related to our existing platform expected to be realized from ~~this~~the business ~~combination and assembled workforce. The associated goodwill and intangible assets are not deductible for tax purposes.~~

~~Other Acquisitions~~

In June 2017, we acquired a component of a business from a social advertising software company that was integrated with our existing advertising platform and adds advertising tools to our advertising customers. In addition, in March 2017, we acquired all outstanding shares of a company that operates a cloud hosted platform for building content online. The company was acquired to enhance the functionality of our platform. The total purchase consideration for these acquisitions ~~was $62.1 million, which included $60.2 million in cash and $1.9 million recorded in other liabilities on the consolidated balance sheets.~~

~~The allocation of the total purchase consideration for the above acquisitions is as follows:~~

Total

(in thousands)

Technology

$
39,000

Customer relationships

500

Goodwill

24,135

Net deferred tax liability

(1,710
)
Other assets acquired and liabilities assumed, net

200

Total

$
62,125

~~The goodwill amount represents synergies related to our existing platform expected to be realized from these business combinations~~ and assembled workforce. Of the ~~technology~~acquired goodwill and intangible assets, ~~and goodwill in the above table, $30.5 million and $11.5~~$101.7 million is deductible for tax ~~purposes, respectively.~~

~~Additional Information on 2017 Acquisitions~~

~~For all acquisitions in 2017, we provided for a combined $147.5 million in the form of RSUs to certain continuing employees of the companies in exchange for future service.~~

In addition, unaudited pro forma results of operations assuming the above acquisitions had taken place at the beginning of each period are not provided because the historical operating results of the acquired entities were not material and pro forma results would not be materially different from reported results for the periods presented.

5.purposes.

6. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2017 are~~2023 were as follows:

Goodwill

(in thousands)

Balance as of December 31, 2016

$
319,137

Goodwill acquired

282,483

Foreign currency translation

11,203

Balance as of September 30, 2017

$
612,823


	Goodwill
	(in thousands)
Balance as of December 31, 2022	$	1,646,120
Goodwill acquired	42,780
Foreign currency translation	3,161
Balance as of June 30, 2023	$	1,692,061

Table of Contents

Intangible assets consisted of the following:


	September 30, 2017									As of June 30, 2023
	Weighted- Average Remaining Useful Life - Years		Gross Carrying Amount		Accumulated Amortization		Net			Weighted- Average Remaining Useful Life - Years	Gross Carrying Amount		Accumulated Amortization		Net
	(in thousands except years)									(in thousands, except years)
Domain names		2.4	$	5,336	$	2,936	$	2,400	Domain names	3.5	$	745	$	(513)	$	232
Trademarks		2.6		5,772		2,355		3,417	Trademarks	0.7	800		(611)		189
Acquired developed technology		4.8		169,555		37,216		132,339
Technology									Technology	3.1	343,095		(177,135)		165,960
Customer relationships		2.2		13,953		2,150		11,803	Customer relationships	5.6	21,000		(8,703)		12,297
Patents		8.0		17,150		2,497		14,653	Patents	8.9	39,373		(17,005)		22,368
Other									Other	0.5	6,000		(4,375)		1,625
			$	211,766	$	47,154	$	164,612			$	411,013	$	(208,342)	$	202,671

~~Operating lease expenses~~Interest expense related to the amortization of debt issuance costs was $1.7 million and $3.4 million for the three and six months ended ~~September~~June 30, ~~2017 and 2016 were $13.5 and $5.6,~~2023, respectively, and ~~$38.2~~$1.7 million and ~~$16.3~~$3.1 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2022, respectively. Contractual interest expense was $2.2 million and ~~2016,~~$4.4 million for the three and six months ended June 30, 2023, respectively, and $2.2 million and $4.2 million for the three and six months ended June 30, 2022, respectively.

•Adjusted EBITDA excludes stock-based compensation expense and ~~related~~ 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

Table of Contents

•Adjusted EBITDA ~~does not reflect~~excludes income tax ~~payments that reduce cash available to us; and~~

benefit (expense).

The following table presents a reconciliation of Free Cash Flow ~~does not reflect our future contractual commitments.~~

to net cash provided by (used in) operating activities, the most comparable GAAP financial measure, for each of the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands)
Free Cash Flow reconciliation:
Net cash provided by (used in) operating activities	$	(81,936)	$	(124,081)	$	69,166	$	3,378
Less:
Purchases of property and equipment	(36,943)		(23,370)		(84,573)		(44,545)
Free Cash Flow	$	(118,879)	$	(147,451)	$	(15,407)	$	(41,167)

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented:


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,				Six Months Ended June 30,
	2017			2016			2017			2016				2023		2022		2023		2022
	(in thousands)													(in thousands)
Adjusted EBITDA reconciliation:													Adjusted EBITDA reconciliation:
Net loss	$	(443,159	)	$	(124,228	)	$	(3,095,089	)	$	(344,698	)	Net loss	$	(377,308)	$	(422,067)	$	(705,982)	$	(781,691)
Add (deduct):													Add (deduct):
Interest income		(6,253	)		(1,938	)		(15,026	)		(3,168	)	Interest income	(43,144)		(8,331)		(81,092)		(11,454)
Interest expense		887			648			2,580			648		Interest expense	5,343		5,549		11,228		10,722
Other (income) expense, net		(1,002	)		1,421			(1,975	)		3,353		Other (income) expense, net	(1,323)		16,910		(12,695)		94,447
Income tax (benefit) expense		(12,300	)		(6,871	)		(15,102	)		(6,783	)	Income tax (benefit) expense	12,093		6,999		18,938		15,509
Depreciation and amortization		17,467			7,437			42,502			18,482		Depreciation and amortization	39,688		79,291		74,908		117,391
Stock-based compensation expense		221,702			14,795			2,458,851			25,075		Stock-based compensation expense	317,943		318,810		632,874		594,254
Payroll tax expense related to stock-based compensation		3,890			132			22,258			132
Spectacles inventory-related charges		39,867			—			39,867			—
Payroll and other tax expense related to stock-based compensation													Payroll and other tax expense related to stock-based compensation	8,229		10,029		24,155		32,480

Adjusted EBITDA	$	(178,901	)	$	(108,604	)	$	(561,134	)	$	(306,959	)	Adjusted EBITDA	$	(38,479)	$	7,190	$	(37,666)	$	71,658

Spectacles inventory-related charges were primarily related to excess inventory reserves and inventory purchase commitment cancellation charges. These charges are non-recurring and not reflective of underlying trends in our business.

~~The following table presents a reconciliation of Free Cash Flow to net cash used in operating activities, the most comparable GAAP financial measure, for each of the periods presented:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(in thousands)

Free Cash Flow reconciliation:

Net cash used in operating activities
$
(194,013
)

$
(216,866
)

$
(558,584
)

$
(443,517
)
Less:

Purchases of property and equipment

(25,948
)

(17,192
)

(63,306
)

(46,065
)
Free Cash Flow
$
(219,961
)

$
(234,058
)

$
(621,890
)

$
(489,582
)

~~Liquidity and Capital Resources~~

Cash, cash equivalents, and marketable securities were $2.3 billion as of September 30, 2017, primarily consisting of cash on deposit with banks and highly liquid investments in U.S. government and agency securities. Our primary source of liquidity is cash generated through financing activities. Our primary uses of cash include operating costs such as personnel-related expenses and the hosting costs of the Snapchat application, acquisitions and investments, and facility-related capital spending. Other than as noted below, there are no known material subsequent events that could have a material impact on our cash or liquidity. We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position.

In July 2016, we entered into a five-year senior unsecured revolving credit facility, or the Credit Facility, with lenders, some of which are affiliated with certain members of the underwriting syndicate for our IPO, that allows us to borrow up to $1.1 billion to fund working capital and general corporate-purpose expenditures. The loan bears interest at LIBOR plus 0.75%, as well as an annual commitment fee of 0.10% on the daily undrawn balance of the facility. No origination fees were incurred at the closing of the Credit Facility. Any amounts outstanding under this facility will be due and payable in July 2021. In December 2016, the amount we are permitted to borrow under the Credit Facility was increased to $1.2 billion. As of September 30, 2017, no amounts were outstanding under the Credit Facility.

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. 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.

As of September 30, 2017, approximately 2% of our cash, cash equivalents, and marketable securities was held outside the United States. These amounts were primarily held in the United Kingdom and are utilized to fund our foreign operations. Cash held outside the United States may be repatriated, subject to certain limitations, and would be available to be used to fund our domestic operations. However, repatriation of funds may result in additional tax liabilities. We believe our existing cash balance in the United States is sufficient to fund our working capital needs.

~~RSU Settlement~~

In July 2017, a total of 15.4 million RSUs that vested between the IPO and the expiration of the lock-up period for our IPO were net-settled. We delivered 5.7 million shares of Class A common stock and 1.8 million shares of Class B common stock to our RSU holders. Additionally, we remitted $162.2 million to satisfy tax withholding and remittance obligations through September 30, 2017, not including tax withholding that was remitted at the IPO, which was $206.6 million. We withheld and remitted income taxes at applicable statutory rates based on the then-current value of the underlying shares. We will continue to evaluate the net settlement of RSUs that vest in the future.

~~The following table sets forth the major components of our consolidated statements of cash flows for the periods presented:~~

Nine Months Ended September 30,

2017

2016

(in thousands)

Net cash used in operating activities
$
(558,584
)

$
(443,517
)
Net cash used in investing activities

(1,561,729
)

(1,140,971
)
Net cash provided by financing activities

2,287,746

1,147,130

Net increase (decrease) in cash
$
167,433

$
(437,358
)
Free Cash Flow ⁽¹⁾
$
(621,890
)

$
(489,582
)
Contingencies

~~(1)~~

~~For information on how we define and calculate Free Cash Flow and a reconciliation to net cash used in operating activities to Free Cash Flow, see “Non-GAAP Financial Measures.”~~

~~Nine Months Ended September 30, 2017 and 2016~~

~~Net Cash Used in Operating Activities~~

Net cash used in operating activities increased $115.1 million in the nine months ended September 30, 2017 compared to the same period in 2016. Net cash used in operating activities was $558.6 million for the nine months ended September 30, 2017, resulting primarily from net loss, adjusted for non-cash items, primarily stock-based compensation expense of $2.5 billion, and a $49.0 million increase in prepaid expenses and other current assets primarily due to timing of prepayments, partially offset by a $103.5 million increase in accrued expenses and other liabilities primarily driven by an increase in accrued hosting costs, accrued compensation costs due to increased headcount, and accruals recorded for the Spectacles inventory purchase commitment cancellation charges.

~~Net Cash Used in Investing Activities~~

Net cash used in investing activities was $1.6 billion for the nine months ended September 30, 2017, an increase of $420.8 million as compared to the prior period, primarily due to the use of $3.4 billion for the purchase of marketable securities and cash paid for acquisitions of $352.4 million, partially offset by cash provided by the sales and maturities of marketable securities of $2.3 billion.

~~Net Cash Provided by Financing Activities~~

Net cash provided by financing activities was $2.3 billion and $1.1 billion, for the nine months ended September 30, 2017 and 2016, respectively. Our financing activities in 2017 consisted of proceeds from the issuance of Class A common stock in our IPO of $2.7 billion, net of underwriting commissions, partially offset by cash used for stock repurchases from employees for minimum tax withholdings of $367.2 million.

~~Free Cash Flow~~

Free Cash Flow was $(621.9) million and $(489.6) million for the nine months ended September 30, 2017 and 2016, respectively, and was composed of net cash used in operating activities, resulting primarily from net loss, adjusted for non-cash items and changes in working capital. Free Cash Flow also included purchases of property and equipment of $63.3 million and $46.1 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements for any of the periods presented.~~

~~Contingencies~~

We are involved in claims, lawsuits, ~~indirect and other~~ tax matters, government investigations, and proceedings arising in the ordinary course of our business. We record a provision for a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. We also disclose material contingencies when we believe that a loss is not probable but reasonably possible. Significant judgment is required to determine both probability and the estimated amount. Such claims, suits, and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. Many of these legal and tax contingencies can take years to resolve. Should any of these estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows.

•our reputation and brand strength relative to our competitors.

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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, ~~expect to incur operating losses in the future,~~ and may ~~never achieve or maintain~~not be able to attain and sustain profitability.

We began commercial operations in 2011 and ~~for all of our history~~ we have historically experienced net losses and negative cash flows from operations. As of ~~December 31, 2016,~~June 30, 2023, we had an accumulated deficit of ~~$1.2 billion and for the year ended December 31, 2016, we experienced a net loss of $514.6 million. As of September 30, 2017, we had an accumulated deficit of $4.3~~$10.9 billion and for the three months ended ~~September~~June 30, ~~2017,~~2023, we ~~experienced~~had a net loss of ~~$443.2~~$377.3 million. We expect our operating expenses to increase in the future as we expand our operations. ~~If our revenue does not grow at a greater rate than our expenses, we will not be able to achieve and maintain profitability.~~ We may incur significant losses in the future for many reasons, including ~~without limitation~~due to the other risks and uncertainties described in this report. Additionally, we may encounter unforeseen expenses, operating delays, or other unknown factors that may result in losses in future periods. If our ~~expenses exceed~~revenue does not grow at a greater rate than our ~~revenue,~~expenses, our business may be seriously harmed and we may ~~never achieve or maintain~~not be able to attain and sustain profitability.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could seriously harm our business.

We depend on the continued services and performance of our key personnel, including ~~Evan~~Mr. Spiegel and ~~Robert~~Mr. Murphy. Although we have entered into employment agreements with Mr. Spiegel and Mr. Murphy, the agreements are at-will, which means that they may resign or could be terminated for any reason at any time. Mr. Spiegel and Mr. Murphy are high profile individuals who have received threats in the past and are likely to continue to receive threats in the future. ~~While~~ Mr. Spiegel, as ~~CEO,~~Chief Executive Officer, has been responsible for our company’s strategic vision and Mr. Murphy, as ~~CTO,~~Chief Technology Officer, developed the Snapchat application’s technical ~~foundation, should~~foundation. Should either of them stop working for us for any reason, it is unlikely that the other co-founder would be able to fulfill all of the responsibilities of the departing ~~co-founder. Nor~~co-founder nor is it likely that we would be able to immediately find a suitable replacement. 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~~

We cannot guarantee we will continue to attract and retain the personnel we need to maintain our competitive position. ~~In particular, we intend to hire a significant number of engineering and sales personnel in the Los Angeles area, and we expect to~~We face significant competition in hiring ~~them~~ and ~~difficulties in~~ attracting qualified engineers, designers, and sales personnel, and the change by companies to ~~move~~offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations. In February 2023, we implemented our return to office plan that still encompasses a hybrid approach, but requires greater in-office attendance. While we intend to continue offering flexible work arrangements based on the different needs of teams across our company on a case-by-case basis, we may face difficulty in hiring and retaining our workforce as a result of this shift to have greater in-office attendance. Further, labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, inflation, other macroeconomic uncertainties, and workforce participation rates. 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 ~~Los Angeles area.~~

success of our business.

As we mature, ~~the incentives~~or if our stock price declines, our equity awards may not be as effective an incentive to attract, retain, and motivate ~~employees provided by our~~team members. Stock price declines may also cause us to offer additional equity awards ~~or by future arrangements, such as through cash bonuses, may not be as effective as~~to our existing team members to aid in ~~the past. Additionally, we have~~retention. Conversely, many of our current ~~employees whose equity ownership in our company gives them a substantial amount of personal wealth. Likewise, we have many current employees with fully vested equity awards who~~team members received substantial amounts of our capital stock, ~~on or after our IPO. Now that the lock-up period has expired, attrition may increase.~~giving them a substantial amount of personal wealth, which can lead to an increase in attrition. As a result, it may be difficult for us to continue to retain and motivate these ~~employees,~~team members, and this wealth could affect their decision about whether they continue to work for us. Furthermore, if we issue significant equity to attract and retain team members, we would incur substantial additional stock-based compensation expense and the ownership of our existing stockholders would be further diluted. 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 have a ~~short operating history and a new~~continually evolving business model, which makes it difficult to evaluate our prospects and future financial results and increases the risk that we will not be successful.

We began commercial operations in 2011 and began meaningfully monetizing Snapchat in 2015. We started transitioning our advertising sales to a self-serve platform in 2017. In June 2022, we launched Snapchat+, a paid subscription product. We have a ~~short operating history~~continually evolving business model, based on using the camera to improve the way that people live and ~~a new business model,~~communicate, which makes it difficult to effectively assess our future prospects. Accordingly, we believe

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that investors’ future perceptions and expectations, which can be idiosyncratic and vary widely, and which we do not control, will affect our stock price. ~~Our business model is based on reinventing the camera~~For example, investors may believe our timing and path to ~~improve the way that people live and communicate.~~increased monetization will be faster or more effective than our current plans or than actually takes place. You should consider our business and prospects in light of the many challenges we face, including the ones discussed in this ~~section.~~

report.

If the security of our ~~security~~information technology systems or data is compromised or if our platform is subjected to attacks that frustrate or thwart our users’ ability to access our products and services, our users, advertisers, and partners may cut back on or stop using our products and services altogether, which could seriously harm our business.

In the ordinary course of business, we collect, store, use, and share personal data and other sensitive information, including proprietary and confidential business data, trade secrets, third-party sensitive information, and intellectual property (collectively, sensitive information). Our efforts to protect ~~the~~our sensitive information, including information that our users, advertisers, and partners have shared with us, may be unsuccessful due to the actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance, or other factors. ~~In addition,~~We and the third parties on which we rely may ~~attempt~~be subject to a variety of evolving threats, including social-engineering attacks (for example by fraudulently ~~induce~~inducing employees, users, or ~~users~~advertisers to disclose information to gain access to our sensitive information, including data or our users’ ~~data. If any~~or advertisers’ data), malware, viruses, hacking, and other threats. While certain of these ~~events~~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 orprominence and value of our ~~users’ information could~~sensitive data, we believe that we are an attractive target for these sorts of attacks.

In particular, severe ransomware attacks are becoming increasingly prevalent. To alleviate the financial, operational, and reputational impact of these attacks, it may be ~~accessed or disclosed improperly. We have previously suffered the loss of employee information related~~preferable to ~~an employee error. Our Privacy Policy governs how~~make extortion payments, but we may ~~use~~be unwilling or unable to do so, including, for example, if applicable laws or regulations prohibit such payments. And, even if we make such payments, cyber threat actors may still disclose data, engage in further extortion, or otherwise harm our systems or data. Moreover, we permit a hybrid work environment, which has increased risks to our information technology systems and ~~share~~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.

In addition, cyber threat actors have also increased the complexity of their attempts to compromise user accounts, despite our defenses and detection mechanisms to prevent these account takeovers. User credentials may be obtained through breaches of third-party platforms and services, password stealing malware, social engineering, or other tactics and techniques, and used to launch coordinated attacks. Some of these attacks may be hard to detect at scale and may result in cyber threat actors using our service to spam or abuse other users, access user personal data, further compromise additional user accounts, or to compromise employee account credentials or social engineer employees into granting further access to systems.

We may rely on third-party service providers and technologies to operate critical business systems to process sensitive information ~~that~~in a variety of contexts, including cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery, and other functions. We may also rely on third-party service providers to provide other products or services to operate our ~~users have provided us. Some~~business. Additionally, some advertisers and partners may store sensitive information that we share with them. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place despite their contractual representations to implement such measures and our third-party service provider vetting process. If these third parties fail to implement adequate ~~data-security~~data security practices or fail to comply with our terms and policies, our ~~users’~~sensitive data may be improperly accessed or ~~disclosed.~~disclosed, and we may experience adverse consequences. And even if these third parties take all of these steps, their networks may still suffer a breach, which could compromise our ~~users’~~sensitive data.

While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.

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. We are also reliant on third-party and open source software that may contain bugs, vulnerabilities, or errors that could be exploited or disclosed before a patch or fix is available.

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.

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We may expend significant resources or modify our business activities to adopt additional measures designed to protect against security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our systems and sensitive information. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. Additionally, we may be unable to detect vulnerabilities in other parts of our systems, including in our products, because such threats and techniques change frequently, are often sophisticated in nature, and may not be detected until after a security incident has occurred.

We have previously suffered the loss of sensitive information related to employee error and vendor breaches. Any ~~incidents where~~security incident experienced by us or our ~~users’ information is accessed without authorization, or is improperly used, or incidents that violate our Terms of Service or policies,~~third-party partners could damage our reputation and our brand, and diminish our competitive position. Applicable privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly and the failure to comply with these legal requirements could lead to adverse consequences. Governments and regulatory agencies may also enact new disclosure requirements for cybersecurity events. In addition, affected users or government authorities could initiate legal or regulatory action against us, ~~over those incidents,~~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. We could also experience loss of user or advertiser confidence in the security of our platform, additional reporting requirements or oversight, restrictions on processing sensitive information, claims by our partners or other relevant parties that we have failed to comply with contractual obligations or our policies, and indemnification obligations. We could also spend material resources to investigate or correct the incident and to prevent future incidents. Maintaining the trust of our users is important to sustain our growth, retention, and user engagement. Concerns over our privacy and security practices, whether actual or unfounded, could damage our reputation and brand and deter users, advertisers, and partners from using our products and services. Any of these occurrences could seriously harm our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are ~~also subject~~sufficient to ~~many federal, state, and foreign laws and regulations, including those~~protect us from liabilities, damages, or claims related to our data privacy ~~rights of publicity, content, data protection, content regulation, intellectual property, health~~ and ~~safety, competition, protection of minors, consumer protection, employment, and taxation. These laws and regulations are constantly evolving and may~~security obligations. We cannot be ~~interpreted, applied, created,~~sure that our insurance coverage will be adequate or ~~amended in a manner that could seriously harm our business.~~

~~In addition, in December 2014, the U.S. Federal Trade Commission,~~sufficient to protect us from or ~~the FTC, resolved an investigation into some~~to mitigate liabilities arising out of our ~~early~~privacy and security practices, ~~by issuing a final order. That order requires, among other things,~~ that ~~we establish a robust privacy program~~such coverage will continue to govern how we treat user data. During the 20-year term of the order, we must complete bi-annual independent privacy audits. In addition, in June 2014, we entered into a 10-year assurance of discontinuance with the Attorney General of Maryland implementing similar practices, including measures to prevent minors under the age of 13 from creating accounts and providing annual compliance reports. Violating existingbe available on commercially reasonable terms or at all, or that such coverage will pay future ~~regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could seriously harm our business.~~

claims.

Our user metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.

We regularly review and share metrics, including our ~~Daily Active Users~~DAUs and ARPU metrics, with our investors, advertisers, and partners to evaluate growth trends, measure our performance, and make strategic decisions. These metrics are calculated using internal company data gathered on an analytics platform that we developed and ~~have~~operate and our methodology has not been validated by an independent third party. While these ~~numbers~~metrics are 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.~~globally that may require significant judgment and are subject to technical errors. For example, ~~we believe that~~ there ~~are~~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. 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.

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 may exclude those users ~~and~~from age demographics or estimate their ages based on a sample of the self-reported ages we do have. If our ~~Daily Active Users~~users provide us with incorrect or incomplete information regarding their age or other attributes, then our estimates may prove inaccurate and fail to meet investor or advertiser expectations.

~~In the past we have relied on third-party analytics providers to calculate~~

Errors or inaccuracies in our metrics ~~but today~~or data could also result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of active users were to occur, we ~~rely primarily on~~may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our analytics platform that we developed and operate. For example, before June 2015, we used a third party that counted a Daily Active User when the application was opened or a notification was received via the application on any device.growth strategies. We ~~now use an analytics platform that we developed and operate and we~~ count a ~~Daily Active User only~~DAU when a user opens the application, ~~and~~but only once per user per day. ~~We believe this methodology more 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~~becoming a ~~Daily Active User.~~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 our application.

~~Additionally, to align our pre-June 2015 Daily Active Users with this new methodology,~~ However, we reduced our pre-June 2015 Daily Active Users by 4.8%, the amount by which we estimated the data generated by the third party was overstated. Since this adjustment is an estimate, the actual pre-June 2015 Daily Active Users may be higher or lower than our reported numbers. As a result, our metrics may not be comparable to prior periods.

~~Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement~~believe

Table of Daily Active Users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies. We believe Contents

that we do not capture all data regarding our ~~Daily Active Users.~~active users, which may result in understated metrics. This generally occurs because of technical issues, ~~like~~for instance when our systems do not record data from ~~every~~a user’s ~~Snapchat application. We also seek to identify missed activity~~application or when ~~data is lost or not captured, which may result in understated metrics. For example,~~ a user ~~may open~~opens the Snapchat application and ~~contact~~contacts our servers but is not be recorded as ~~a Daily Active User.~~an active user. We ~~are~~ continually ~~seeking~~seek to address these technical issues and improve our accuracy, such as comparing our ~~Daily Active Users~~active users and other metrics with data received from other pipelines, including data recorded by our servers and systems. But given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to ~~continue.~~continue, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable. If advertisers, partners, or investors do not perceive our user, geographic, or other demographic metrics, or measurements of advertising effectiveness to be accurate, ~~representations of our user base,~~ or if we discover material inaccuracies in our ~~user, geographic, or other demographic~~ metrics, our reputation may be seriously harmed. ~~And at the same time,~~Our advertisers and partners may also be less willing to allocate their budgets or resources to Snapchat, which could seriously harm our business. In addition, we ~~measure our Daily Active Users~~calculate average DAUs for a particular quarter by ~~calculating~~adding the ~~daily average~~number of ~~users across~~DAUs on each day of that quarter and dividing that sum by the number of days in that quarter. This calculation may mask any individual days or months within the quarter that are significantly higher or lower than the quarterly average. For example, although Daily Active Users grew by 7% from 143 million Daily Active Users for the quarter ended June 30, 2016 to 153 million Daily Active Users for the quarter ended September 30, 2016, the growth in Daily Active Users was relatively flat in the latter part of the quarter ended September 30, 2016.

~~Mobile malware, viruses, hacking and phishing attacks, spamming, and improper~~

Improper or illegal use of Snapchat could seriously harm our business and reputation.

~~Mobile malware, viruses, hacking, and phishing attacks have become more prevalent in our industry, have occurred on our systems in~~

We cannot be certain that the ~~past, and may occur on our systems in the future. Because of our prominence, we believe~~technologies that we ~~are an attractive target for these sorts of attacks. Although it is difficult~~have developed to ~~determine what, if any, harm may directly result~~repel spamming attacks will be able to eliminate all spam messages from ~~an interruption or attack, any failure to maintain performance, reliability, security, and availability of~~ our ~~products and technical infrastructure to the satisfaction of our users may seriously harm our reputation and our ability to retain existing users and attract new users.~~

~~In addition, spammers~~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. ~~We cannot be certain that the technologies that we have developed to repel spamming attacks will be able to eliminate all spam messages from our products.~~ Our actions to combat spam may also ~~require diversion of~~divert significant time and focus ~~of our engineering team~~ from improving our products. As a result of spamming activities, our users may use our products less or stop using them altogether, and result in continuing operational cost to us.

Similarly, ~~terror~~terrorists, criminals, and other ~~criminal groups~~bad actors may use our products to promote their goals and encourage users to engage in terror and other illegal ~~activities.~~activities discussed in our Transparency Report. We expect that as more people use our products, these ~~groups~~bad actors will increasingly seek to misuse our products. Although we invest resources to combat these activities, including by suspending or terminating accounts we believe are violating our Terms of Service and Community Guidelines, we expect these ~~groups~~bad actors will continue to seek ways to act inappropriately and illegally on Snapchat. Combating these ~~groups~~bad actors requires our ~~engineering team~~teams to divert significant time and focus from improving our products. In addition, we may not be able to control or stop Snapchat from becoming the preferred application of use by these ~~groups,~~bad actors, which may ~~become public knowledge and~~ seriously harm our reputation or lead to lawsuits or attention from regulators. If these activities ~~increase~~continue on Snapchat, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.

Because we store, process, and use data, some of which contains personal ~~information,~~data, we are subject to complex and evolving federal, state, local and foreign laws, regulations, executive actions, rules, contractual obligations, policies, and ~~regulations~~other obligations regarding privacy, data protection, content, and other matters. Many of these ~~laws and regulations~~obligations are subject to change and uncertain interpretation, and our actual or perceived failure to comply with such obligations could result in investigations, claims, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, or other adverse consequences, any of which could seriously harm our business.

In Europe, the Middle East, and Africa, our major markets have laws, regulations, and regulatory/industry standards that govern privacy, security, online safety and data protection.

For example, in Europe, under GDPR or similar laws, companies may face temporary or definitive bans on data processing and other corrective actions, fines of up to 20 million Euros or 4% of annual global revenue, whichever is greater, or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests. Additionally, the transfer of personal data from Europe and other jurisdictions to the United States, has recently also been under increased regulatory pressure and scrutiny. In particular, the European Economic Area, or EEA, and the UK have significantly limited the lawful basis on which personal data can be transferred to the United States (and other countries they believe provide inadequate privacy

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protections) and increased the assessments required to do so. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border transfer laws, or adopt similar laws. We have attempted to structure our operations in a manner designed to help us partially avoid some of these concerns (e.g., Snap Inc. receives Snapchat consumer data directly from European consumers and is directly subject to GDPR; a structure designed to seek to avoid any requirement for additional transfer protections under the GDPR in this context); however, we still transfer some data from the EEA and UK to the United States using currently legal mechanisms. Some of these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. 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. Some European regulators have sought to restrict some companies’ data processing activities, including our competitors, from transferring certain personal data out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations, which would materially impact such companies’ and, if subject to similar restrictions, our, operations and revenues. Additionally, companies like us that transfer personal data outside of the EU to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups.

Additionally, in Europe, the European Union has new legislative initiatives, such as the DSA, which requires further change to our products, policies, and procedures. We have been designated as one of the “providers of very large online platforms” and are therefore subject to significant compliance deadlines starting in August 2023. Current national laws that implement the ePrivacy Directive are likely to be replaced or updated when the ePrivacy Regulation enters into force, which will significantly increase fines for non-compliance once in effect and could also have a material impact on the availability of data we rely on to improve and personalize our products and features. Moreover, the United Kingdom’s Age Appropriate Design Code, or UK AADC, and incoming Online Safety Bill focus on online safety and protection of children’s privacy online, both of which require us to change our services and incur costs to do so. Furthermore, the proposed EU AI Act related to artificial intelligence, or AI, could, if adopted, impose onerous obligations related to the use of AI-related systems and may require us to change our products or business practices to comply with such obligations. Moreover, in the EEA, the Collective Redress Directive (effective June 2023) will allow collective actions to be brought by a representative body against businesses if they breach legislation intended to protect EU consumers, including for data protection matters, which could increase our costs and liability in the EEA market.

In Asia-Pacific, or APAC, our major markets are following closely behind Europe in introducing or updating their laws and regulations governing privacy, security, online safety and data protection, which will increase the complexity of compliance and our costs and liabilities in these jurisdictions. India’s IT Rules, introduced in 2021, require large technology companies like ours to appropriately moderate online content and provide government agencies with access, and have ultimately led to a ban of certain platforms. India has also introduced a new comprehensive privacy and data protection law (Digital Personal Data Protection Bill) under which we will be required to meet GDPR style obligations for Indian consumer data. Australia’s recent Online Safety Act and existing Assistance and Access Act have similarly placed significant focus on appropriate moderation, take down and government access. Australia is working on updates to its Privacy Act 1988 and a new Privacy Legislation Amendment (Enhancing Online Privacy and Other Measures (Bill) 2021 (Online Privacy Bill) that will impose more stringent obligations on us and other social / technology companies. Other APAC countries also have privacy laws that apply to our operations, such as South Korea’s Personal Information Protection Law, Japan’s Act on the Protection of Personal Information, and Singapore’s Personal Data Protection Act. Other foreign legislative and regulatory bodies in the Americas have enacted or may enact (or update) similar legislation regarding the handling of personal data, or conduct additional investigations into specific companies or the industry as a whole that could alter the existing regulatory environment in a manner that would be adverse to us. For example, these legislative updates or investigations could arise from Canada’s Personal Information Protection and Electronic Documents Act, and various related provincial laws, Canada’s Anti-Spam Legislation, and Brazil’s General Personal Data Protection Law, or LGPD.

In the United States, federal, state, and local governments have enacted numerous privacy, security, and data protection laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws. For example, the CCPA, as amended by the CPRA (which went into effect in January 2023), expands the requirements for handling personal data of California residents and provides for civil penalties for violations and a private right of action for data breaches, which may increase the likelihood and cost of data breach litigation. Several states have recently passed comprehensive privacy laws that have

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gone into effect or will go into effect by 2025, and some states have enacted or are considering enacting laws for the protection of consumer health data which may be interpreted broadly to apply to categories of data that would not otherwise be considered health data under other privacy laws. In addition, the privacy of children’s personal data collected online, and use of social media platforms, generally, are also becoming increasingly scrutinized. In addition to the federal Children’s Online Privacy Protection Act, or COPPA, California’s Age-Appropriate Design Code Act, which is modeled after the UK AADC, goes into effect in 2024. Other states have passed, or have proposed, various laws to restrict or govern the use of social media platforms by teens, including laws prohibiting showing them ads, requiring age verification, limiting the use of their personal data, and requiring parental consent or providing for other parental rights. These new laws may result in restrictions on the use of certain of our products or services by teens and decrease DAUs or user engagement in those states. The interpretation, implementation, and enforcement, including through private rights of action, of these increasingly complex, onerous, or divergent laws and regulations with respect to privacy, security, data protection, and our industry are uncertain and may further complicate compliance efforts, lead to fragmentation of the service, and may increase legal risk and compliance costs for us and our third-party partners.

Additionally, several states and localities have enacted statutes banning or restricting the collection of biometric information. For example, the Illinois Biometric Information Privacy Act, or BIPA, regulates the collection, use, safeguarding, and storage of biometric information. BIPA provides for substantial penalties and statutory damages and has generated significant class-action activity. In November 2020, a putative class filed an action against us in Illinois, alleging that we violated BIPA. Other legal proceedings alleging similar claims followed. Although we maintain the position that our technologies implicated by these proceedings do not collect any biometric information, we have settled these disputes to avoid potentially costly litigation and have implemented a BIPA consent flow in Snapchat in an abundance of caution. Additionally, several states and localities have enacted measures related to the use of AI and machine learning in products and services.

In addition, privacy advocates and industry groups have proposed, and may propose in the future, standards with which we are legally or contractually obligated to comply. Moreover, we may also be bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We may also publish privacy policies, marketing materials and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. If these policies, materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Many of these obligations are becoming increasingly stringent and subject to rapid change and uncertain interpretation. Preparing for and complying with these obligations requires us to devote significant resources. These obligations may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. In addition, these obligations may require us to change our business model. 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. For example, privacy regulators have targeted some of our competitors, including by investigating their data processing activities and issuing large fines. Such enforcement actions may cause us to revise our business plans and operations. Moreover, we believe a number of investigations into other technology companies are currently being conducted by federal, state, and foreign legislative and regulatory bodies. 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 may at times fail, or be perceived to have failed, in our efforts to comply with our privacy, security, and data protection obligations. Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations. If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with applicable privacy, security, or data protection obligations, we could face significant consequences, including but not limited to: government enforcement actions (such as investigations, claims, audits, penalties, etc.), litigation (including class-action litigation), additional reporting requirements or oversight, bans on processing personal data, and orders to destroy or not use personal data. Any of these events could have a material adverse effect on our business, including loss of users and advertisers, inability to process personal data or operate in certain jurisdictions, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm our business.

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We ~~are~~have in the past been subject to enforcement actions, investigations, proceedings, orders, or various government inquiries regarding our data privacy and security practices and processing. For example, in December 2014, the U.S. Federal Trade Commission resolved an investigation into some of our early practices by issuing a ~~variety~~final order. That order requires, among other things, that we establish a robust privacy program to govern how we treat user data. During the 20-year term of ~~laws~~the order, we must complete biennial independent privacy audits. In addition, in June 2014, we entered into a 10-year assurance of discontinuance with the Attorney General of Maryland implementing similar practices, including measures to prevent minors under the age of 13 from creating accounts and ~~regulations in the United States~~providing annual compliance reports. Violating existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other ~~countries~~penalties that involve matters central to our business, including user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation, and online-payment services. These laws can be particularly restrictive in countries outside the United States. Both in the United States and abroad, these laws and regulations constantly evolve and remain subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. Because we store, process, and use data, some of which contains personal information, we are subject to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, content, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in investigations, claims, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm our business.

Several proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect our business. The General Data Protection Regulation in the European Union, which will go into effect on May 25, 2018, may require us to change our policies and procedures and, if we are not compliant, may seriously harm our business.

Our financial condition and results of operations will fluctuate from quarter to quarter, which makes them difficult to predict.

Our quarterly results of operations have fluctuated in the past and will fluctuate in the future. Additionally, we have a limited operating history with the current scale of our business, which makes it difficult to forecast our future results. As a result, you should not rely on our past quarterly results of operations as indicators of future performance. You should take into account the risks and uncertainties frequently encountered by companies in rapidly evolving ~~markets.~~market segments. 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 ~~such as Spectacles,~~ by us or our competitors;

•the ability of our ~~data~~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;~~

grows or as a result of unpredictable events such as labor shortages and disruptions, supply chain disruptions, banking instability, inflationary pressures, or the conflict in Ukraine;

•restructuring or other charges and unexpected costs or other operating expenses;

•the number of advertisements shown to users;

•we fail to maintain good relationships with advertisers or attract new ~~advertisers;~~advertisers, or

demonstrate to advertisers the effectiveness of advertising on Snapchat; or

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•the content on Snapchat does not maintain or gain popularity.

We cannot assure you that we will effectively manage our growth.

Our employee headcount and the scope and complexity of our business have increased significantly, with the number of full-time employees increasing from 600 as of December 31, 2015 to 1,859 as of December 31, 2016. We expect headcount growth to continue for the foreseeable future.

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. If our operations or the number of third-party relationships continues to grow, our information-technology systems and our internal controls and procedures may not adequately support our operations. In addition, some members of our management do not have significant experience managing large global business operations, so our management may not be able to manage such growth effectively. To effectively manage our growth, we must continue to improve our operational, financial, and management processes and systems and effectively expand, train, and manage our employee base.

However, the actions we take to achieve such improvements may not have the intended effect and may instead result in disruptions, employee turnover, declines in revenue, and other adverse effects.

As our organization continues to ~~grow~~mature and we are required to implement more complex organizational management structures, we may also find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products. This could negatively affect our business performance and seriously harm our business.

In August 2022, we announced a plan to reduce our global employee headcount by approximately 20%. The headcount reduction was part of a broader strategic reprioritization to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow. 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. This headcount reduction and strategic reprioritization could disrupt our operations, adversely impact employee retention and morale, adversely impact our reputation as an employer, which could make it more difficult for us to retain existing employees and hire new employees in the future, distract management, and seriously harm our business.

Our costs ~~are growing rapidly,~~may increase faster than our revenue, which could seriously harm our business or increase our losses.

Providing our products to our users is costly, and we expect our expenses, including those related to people and hosting, to grow in the future. This expense growth will continue as we broaden our user base, as users increase the number of connections and amount of content they consume and share, as we develop and implement new product features that require more computing infrastructure, and as we ~~hire additional employees at a rapid pace to support potential future growth.~~grow our business. Historically, our costs have increased each year due to these factors, and we expect to continue to incur increasing costs. Our costs are based on development and release of new products and the addition of users and may not be offset by a corresponding growth ofin our revenue. We ~~expect to~~will continue to invest in our global infrastructure to provide our products quickly and reliably to all users around the world, including in countries where we do not expect significant short-term monetization, if any. Our expenses may be greater than we anticipate, and our investments to make our business and our technical infrastructure more efficient may not succeed and may outpace monetization efforts. In addition, we expect to increase marketing, sales, and other operating expenses to grow and expand our operations and to remain competitive. Increases in our costs without a corresponding increase in our revenue would increase our losses and could seriously harm our ~~business.~~

business and financial performance.

Our business depends on our ability to maintain and scale our technology infrastructure. Any significant disruption to our service could damage our reputation, result in a potential loss of users and decrease in user engagement, and seriously harm our business.

Our reputation and ability to attract, retain, and serve users depends on the reliable performance of Snapchat and our underlying technology infrastructure. We have in the past experienced, and may in the future experience, interruptions in the availability or performance of our products and services from time to time. Our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could seriously harm our business. If Snapchat is unavailable when users attempt to access it, or if it does not load as quickly as they expect, users may not return to Snapchat as often in the future, or at all. As our user base and the volume and types of information shared on Snapchat ~~continue to~~ grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs. It is possible that we may fail to effectively scale and grow our technology infrastructure to accommodate these increased demands. In addition, our business is subject to interruptions, delays, and failures resulting from earthquakes, other natural disasters, geo-political conflicts, terrorism, pandemics, and

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other catastrophic events.

~~A substantial portion~~ Global climate change could also result in natural disasters occurring more frequently or with more intense effects, which could cause business interruptions. Wars or other armed conflicts, including the conflict in 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.~~parties, including Google Cloud and AWS. Any disruption or failure in the services we receive from these providers could harm our ability to handle existing or increased traffic and could seriously harm our business. Any financial or other difficulties these providers face may seriously harm our business. And because we exercise little control over these providers, we are vulnerable to problems with the services they provide.

We periodically augment and enhance our financial systems and we may experience difficulties in managing our systems and processes, which could disrupt our operations, the management of our finances, and the reporting of our financial results, which in turn, may result in our inability to manage the growth of our business and to accurately forecast and report our results, each of which could seriously harm our business.

Our business emphasizes rapid innovation and prioritizes long-term user engagement over short-term financial condition or results of operations. That strategy may yield results that sometimes don’t align with the market’s expectations. If that happens, our stock price may be negatively affected.

Our business is growing and becoming more complex, and our success depends on our ability to quickly develop and launch new and innovative products. We believe our culture fosters this goal. Our focus on ~~complexity~~innovations and quick reactions could result in unintended outcomes or decisions that are poorly received by our users, advertisers, or partners. ~~For example, we~~We have made, and expect to continue to make, significant investments to develop and launch ~~Spectacles~~new products and services and we ~~are not yet able to determine whether~~cannot assure you that users will purchase or use ~~Spectacles~~such new products and services in the future. We will also continue to attempt to find effective ways to show our community new and existing products and alert them to events, holidays, relevant content, and meaningful opportunities to connect with their friends. These methods may provide temporary increases in engagement that may ultimately fail to attract and retain users. Our culture also prioritizes our long-term user engagement over short-term financial condition or results of operations. We frequently make decisions that may reduce our short-term revenue or profitability if we believe that the decisions benefit the aggregate user experience and ~~will thereby~~ improve our financial performance over the long term. 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. These decisions may not produce the long-term benefits that we expect, in which case our user growth and engagement on our service or on certain platforms, our relationships with advertisers and partners, and our business could be seriously harmed.

If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our business may be seriously harmed. If we need to license or acquire new intellectual property, we may incur substantial costs.

We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with ~~all~~ our employees, consultants, advisors, and ~~any~~ third parties who access or contribute to our proprietary know-how, information, or technology. We, however, cannot assure you that these agreements will be effective in controlling access to, or preventing unauthorized distribution, use, misuse, misappropriation, reverse engineering, or disclosure of our proprietary information, know-how, and trade secrets. These agreements may be breached, and we may not have adequate remedies for any such breach. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how can be difficult, expensive, and time-consuming, and the outcome can be unpredictable. Furthermore, these agreements do not prevent our competitors or partners from independently developing offerings that are substantially equivalent or superior to ours.

We also rely on trademark, copyright, patent, trade secret, and ~~domain-name-protection~~domain-name protection laws to protect our proprietary rights. In the United States and internationally, we have filed various applications to protect aspects of our intellectual property, and we currently hold a number of issued patents, trademarks, and copyrights in multiple jurisdictions. In the future, we may acquire additional patents or patent portfolios, which could require significant cash expenditures. However, third parties may knowingly or unknowingly infringe our proprietary rights, third parties may challenge proprietary rights held by us, third parties may design around our proprietary rights or independently develop competing technology, and pending and future trademark, copyright, and patent applications may not be approved. ~~In addition, effective~~

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Moreover, we cannot ensure that the claims of any granted patents will be sufficiently broad to protect our technology or platform and provide us with competitive advantages. Additionally, failure to comply with applicable procedural, documentary, fee payment, and other similar requirements could result in abandonment or lapse of the affected patent, trademark, or copyright application or registration.

Moreover, a portion of our intellectual property has been acquired or licensed from one or more third parties. While we have conducted diligence with respect to such acquisitions and licenses, because we did not participate in the development or prosecution of much of the acquired intellectual property, we cannot guarantee that our diligence efforts identified and remedied all issues related to such intellectual property, including potential ownership errors, potential errors during prosecution of such intellectual property, and potential encumbrances that could limit our ability to enforce such intellectual property rights.

Further, the laws of certain foreign countries do not provide the same level of protection of corporate proprietary information and assets such as intellectual property, trade secrets, know-how, and records as the laws of the United States. For instance, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection. As a result, we may ~~not~~ be ~~available~~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 ~~every country in which we operate~~protecting and defending our intellectual property or ~~intend to operate our business.~~proprietary rights abroad. In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, and, if such defenses, counterclaims, and countersuits are successful, we could lose valuable intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could impair the functionality of our platform, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform, or harm our reputation and brand. In addition, we may be required to license additional technology from third parties to develop and market new platform features, which may not be on commercially reasonable terms, or at all, and would adversely affect our ability to compete. Although we have taken measures to protect our proprietary rights, there can be no assurance that others will not offer products, brands, content, or concepts that are substantially similar to ours and compete with our business. In addition, we regularly contribute software source code under open-source licenses and have made other technology we developed available under other open licenses, and we include open-source software in our products. From time to time, we may face claims from third parties claiming ownership of, or demanding release of, the open-source software or derivative works that we have developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation and could require us to make our software source code freely available, seek licenses from third parties to continue offering our products for certain uses, or cease offering the products associated with such software unless and until we can re-engineer them to avoid infringement, which may be very costly. For example, in January 2017, Vaporstream, Inc. filed a complaint against us in the U.S. District Court for the Central District of California. The complaint, which seeks injunctive relief among other remedies, alleges that certain Snapchat features infringe several Vaporstream patents. While we believe their claims are meritless, an unfavorable outcome in this litigation could seriously harm our business. If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations. Any of these events could seriously harm our business.

Some of our software and systems contain open source software, which may pose particular risks to our proprietary applications.

We use software licensed to us by third-party developers under “open source” licenses in connection with the development or deployment of our products and expect to continue to use open source software in the future. 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. While we employ practices designed to monitor our compliance with the licenses of third-party open source software and to avoid using the open source software in a manner that would put our valuable proprietary source code at risk, there is a risk that we could have used, or may in the future use, open source software in a manner which could require us to release our proprietary source code to users of our software or to the public, require us to license our proprietary software for purposes of making modifications or derivative works, or prohibit us from charging fees for the use of our proprietary software. This could result in loss of revenue, and allow our competitors to create similar offerings with lower development costs, and ultimately could result in a loss of our competitive advantages. Furthermore, there is an increasing number of open source software license types, almost none of which have been tested in a court of law, resulting in guidance regarding the proper legal interpretation of such licenses and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our products. If we were to receive a claim of non-compliance with the terms of any of our open source licenses, we may be required to publicly release certain portions of our proprietary source code or expend substantial time and resources to re-engineer some or all of our software, which may divert resources away from our product development efforts and, as a result, adversely affect our business. In addition, we could be required to seek licenses from third parties to continue offering our products for certain uses, or cease offering the products associated with such software, which may be costly.

In addition, our use of open source software may present greater risks than use of other third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual

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protections regarding infringement claims or the quality of the code. 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. In addition, the public availability of such software may make it easier for others to compromise our systems. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have an adverse effect on our business.

If our users do not continue to contribute content or their contributions are not perceived as valuable to other users, we may experience a decline in user growth, retention, and engagement on Snapchat, which could result in the loss of advertisers and revenue.

Our success depends on our ability to provide Snapchat users with engaging content, which in part depends on the content contributed by our users. If users, including influential users such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets, and brands, do not continue to contribute engaging content to Snapchat, our user growth, retention, and engagement may decline. That, in turn, may impair our ability to maintain good relationships with our advertisers or attract new advertisers, which may seriously harm our ~~business and financial performance.~~

~~Foreign~~business.

Differing government initiatives ~~to restrict access to Snapchat~~and restrictions in ~~their countries~~regions in which our products and services are offered could seriously harm our business.

Foreign data protection, privacy, consumer protection, content regulation, and other laws and regulations are often more restrictive than those in the United States. In addition, federal, state and local governments in the United States have taken increasingly divergent approaches to legislating, regulating, and taking enforcement action with respect to technologies that are related to our products and services, including considering or passing laws and regulations that are different than those applicable to other regions in the United States. Foreign governments may censor Snapchat in their countries, restrict access to Snapchat from their countries entirely, ~~impose laws on us that require data localization, or~~ impose other restrictions that may affect their citizens’ ability to access Snapchat for an extended period of time or even ~~indefinitely. If foreign governments think we are violating their~~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. Federal, state, or local governments in the United States may take, or attempt, similar steps. Such restrictions may also be implemented or lifted selectively to target or benefit other ~~reasons, they~~companies or products, which may ~~seek~~result in sudden or unexpected fluctuations in competition in regions where we operate. In addition, geo-political disputes, including the conflict in Ukraine, may cause countries to target and restrict our operations, or to promote other companies’ products in place of ours. Any restriction on access to Snapchat ~~which~~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 ~~give~~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. 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. For example, access to Google, which currently powers our infrastructure, is restricted in China, and we do not know if we will be able to enter the market in a manner acceptable to the Chinese government.

Our users may increasingly engage directly with our partners and advertisers instead of through Snapchat, which may negatively affect our ~~advertising~~ revenue and seriously harm our business.

~~We allow partners to display their advertisements on Snapchat.~~

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. The more our users engage with third-party websites and applications, the ~~partner’s website directly. When users visit a partner’s website,~~less engagement we ~~do not deliver advertisements to these websites. So, if our partners’ websites draw users away~~may get from ~~Snapchat,~~them, which would adversely affect the ~~sort of user activity that generates advertising opportunities may decline, which~~revenue we could ~~negatively affect our advertising revenue.~~earn from them. Although we believe that Snapchat reaps significant long-term benefits from increased user engagement onwith content on Snapchat provided by our partners, these benefits may not offset the possible loss of advertising revenue, in which case our business could be seriously harmed.

If events occur that damage our ~~reputation and~~ brand ~~our ability to expand our user base, advertisers, and partners may be impaired, and~~or reputation, our business may be seriously harmed.

We have developed a brand that we believe has contributed to our success. We also believe that maintaining and enhancing our brand is critical to expanding our user base, advertisers, and partners. Because many of our users join Snapchat on the invitation or recommendation of a friend or family member, one of our primary focuses is on ensuring that our users continue to view Snapchat and our brand favorably so that these referrals continue. Maintaining and enhancing our brand will depend largely on our ability to continue to provide useful, novel, fun, reliable, trustworthy, and innovative products, which we may not do successfully. We may introduce new products, make changes to existing products and

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services, or require our users to agree to new terms of service related to new and existing products that users do not like, which may negatively affect our ~~brand.~~brand in the short-term, long-term, or both. Additionally, our partners’ actions may affect our brand if users do not appreciate what those partners do on Snapchat. In the past, we have experienced, and we expect that in the future we will continue to experience, media, legislative, and regulatory scrutiny of our decisions regarding user privacy or other issues, which may seriously harm our reputation and brand. We may also fail to adequately support the needs of our users, advertisers, or partners, which could erode confidence in our brand. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business may be seriously harmed.

~~Unfavorable~~

In the past, we have experienced, and we expect that we will continue to experience, media, ~~coverage could seriously harm our business.~~

Welegislative, and ~~our founders receive a high degree of media coverage globally.~~regulatory scrutiny. Unfavorable publicity regarding us, ~~for example,~~ our privacy or security practices, product changes, product quality, illicit use of our product, litigation, employee matters, or regulatory activity, or regarding the actions of our founders, our partners, or our users, or other companies in our industry, could seriously harm our ~~reputation. Such negative~~reputation and brand. Negative publicity and scrutiny could also adversely affect the size, demographics, engagement, and loyalty of our user base, as well as parental perception of our industry or Snapchat in particular, and result in decreased revenue, fewer app installs (or increased app un-installs), or ~~slower user~~declining engagement or growth rates, including among teens who need parental approval for use of our products, any of which could seriously harm our business.

Expanding and operating in international markets requires significant resources and management attention. If we are not successful in expanding and operating our business in international markets, we may incur significant costs, damage our brand, or need to lay off ~~employees~~team members in those markets, any of which may seriously harm our ~~reputation and~~ business.

We have ~~rapidly~~ expanded to new international markets ~~including areas~~and are growing our operations in existing international markets, which may have very different cultures and commercial, legal, and regulatory systems than where we ~~do not yet understand the full scope of commerce and culture.~~predominantly operate. In connection with ~~this rapid~~our international expansion and growth, we have also hired new ~~employees~~team members in many of these markets. This ~~rapid~~international expansion may:

•impede our ability to continuously monitor the performance of all of our ~~international employees;~~

team members;

•result in hiring of ~~employees~~team members who may not yet fully understand our business, products, and culture; ~~and~~

•cause us to expand in markets that may lack the culture and infrastructure needed to adopt our products.

These issues may eventually lead to turnover or layoffs of ~~employees~~team members in these markets and may harm our ability to grow our business in these markets.

~~We have spent and anticipate spending substantial funds in connection with the tax liabilities on the settlement of RSUs. The manner in which we fund these tax liabilities may have an adverse effect~~ In addition, scaling our business to international markets imposes complexity on our business, and requires additional financial, ~~condition.~~

~~Given~~legal, and management resources. We may not be able to manage growth and expansion effectively, which could damage our brand, result in significant costs, and seriously harm our business. For example, in August 2022, we announced a plan to reduce our global employee headcount by approximately 20%. The headcount reduction was part of a broader strategic reprioritization by the ~~large number~~company to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow. As a result of ~~RSUs that initially settled in connection with our IPO, we expended approximately $206.6 million~~the strategic reprioritization, in the ~~three months~~year ended ~~March~~December 31, ~~2017~~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. This headcount reduction and strategic reprioritization could disrupt our operations, adversely impact employee retention and morale, adversely impact our reputation as an employer, which could make it more difficult for us to ~~satisfy tax withholding~~retain existing employees and remittance obligations. To settle these RSUs, we net-settled the awards by delivering an aggregate of approximately 14.6 million shares of Class A common stock and Class B common stock to RSU holders and withholding an aggregate of approximately 12.1 million shares of Class A common stock and Class B common stock. For the three months ended September 30, 2017, we expended approximately $162.0 million to satisfy tax withholding and remittance obligations. We withheld and remitted income taxes at applicable statutory rates based on the then-current value of the underlying shares.

~~To fund the withholding and remittance obligations~~hire new employees in the future, distract management, and seriously harm our business.

Additionally, because we ~~may sell equity securities near~~have team members internationally, we are exposed to political, social, and economic instability in additional countries and regions. For example, we have team members in Ukraine, and the applicable settlement dates in an amount that is substantially equivalent to the number of shares of common stock that we withhold in connection with these net settlements, such that the newly issued shares should not be dilutive. However,current conflict and instability in the event that we issue equity securities, we cannot assure you that we will be able to successfully match the proceeds to the amount of this tax liability. In addition, any such equity financing could result in a decline inregion has disrupted our ~~stock price. If we elect not to fully fund tax withholding~~operations and ~~remittance obligations through the issuance of equity or we are unable to complete such an offering due to market conditions or otherwise, we may choose to borrow funds under~~negatively impacted our ~~Credit Facility, use a substantial portion of~~team members and our existing cash, or rely on a combination of these alternatives. In the event that we elect to satisfy tax withholding and remittance obligations in whole or in part by drawing on our Credit Facility, our interest expense and principal repayment requirements could increase significantly, which could have an adverse effect on our financial condition or results of operations.

business.

Our products are highly technical and may contain undetected software bugs or hardware errors, which could manifest in ways that could seriously harm our reputation and our business.

Our products are highly technical and complex. Snapchat, ~~and Spectacles,~~our other products, or ~~any other~~ products we may introduce in the future, may contain undetected software bugs, hardware errors, and other vulnerabilities. These bugs and errors can manifest in any number of ways in our products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products. 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. While we maintain an application security program designed to detect bugs and vulnerabilities in our products prior to their launch and a bug bounty program to allow security researchers to assist us in identifying vulnerabilities in our products before they are exploited by malicious threat

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actors, there is no guarantee that we will be able to discover every vulnerability or threat to our products. We may be unable to detect bugs, vulnerabilities or threats because no testing can reveal all bugs and vulnerabilities in highly technical and complex products that are constantly evolving, cyber threat actors are developing sophisticated and often undisclosed exploit development tools and techniques, and vulnerabilities in open source and third-party software that may be included in our products are disclosed daily. Any errors, bugs, or vulnerabilities discovered in our products or code after release could damage our reputation, result in a security incident (and all the attendant risks), drive away users, lower revenue, and expose us to claims or regulatory investigations, any of which could seriously harm our business.

Spectacles, as an eyewear product, is regulated by the U.S. Food and Drug Administration, or the FDA, and may malfunction in a way that ~~physically harms~~results in physical harm to a user or others around the user. We offer a limited one-year warranty in the United States and a limited two-year warranty in Europe, and any such defects discovered in our products after commercial release could result in a loss of sales and users, which could seriously harm our business. Any errors, bugs, or vulnerabilities discovered in our code after release could damage our reputation, drive away users, lower revenue, and expose us to damages claims, any of which could seriously harm our business.

We could also face claims for product liability, tort, or breach of warranty. In addition, our product contracts with users contain provisions relating to warranty disclaimers and liability limitations, which may not be upheld. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and seriously harm our reputation and our business. In addition, if our liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be seriously harmed.

~~As our business expands, we~~

We have been, are currently, and may ~~offer credit to our partners to stay competitive, and as a result we may be exposed to credit risk of some of our partners, which may seriously harm our business.~~

As our business continues to grow and expand, we may decide to engage in business with some of our partners on an open credit basis. While we may monitor individual partner payment capability when we grant open credit arrangements and maintain allowances we believe are adequate to cover exposure for doubtful accounts, we cannot assure investors these programs will be effective in managing our credit risks in the future especially as we expand our business internationally and engage with partners that we may not be familiar with. If we are unable to adequately control these risks, our business could be seriously harmed.

~~We may~~ be subject to regulatory inquiries, investigations, and proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a way that could seriously harm our business.

~~It is possible that a~~

We have been, are currently, and may in the future be subject to inquiries, investigations, and proceedings instituted by government entities. We regularly report information about our business to federal, state, and foreign regulators in the ordinary course of operations. For example, many companies in our industry have received additional information requests from the U.S. Equal Employment Opportunity Commission, and companies with operations in California, including us, have received additional information requests and notices of cause from the California Civil Rights Department (formerly the California Department of Fair Employment and Housing) regarding employment practices, including pay equity. These actions, including any potential unfavorable outcomes, and our compliance with any associated regulatory ~~inquiry might force~~orders, consent decrees, or settlements, may require us to change our policies or practices. And were we to violate existing or future regulatory orders or consent decrees, we might incur substantial monetary fines and other penalties that could seriously harm our business. In addition, it is possible that future orders issued by, or enforcement actions initiated by, regulatory authorities could cause us to incur substantial costs or require us to change our business practices, ~~in a way that could seriously harm our business.~~

For example, in December 2014, the FTC resolved an investigation into some of our early practices by issuing a final order. That order requires, among other things, that we establish a robust privacy program to govern how we treat user data. During the 20-year term of the order, we must complete bi-annual independent privacy audits. In addition, in June 2014, we entered into a 10-year assurance of discontinuance with the Attorney General of Maryland implementing similar practices, including measures to prevent minors under the age of 13 from creating accounts and providing annual compliance reports. Violating existing or future regulatory orders or consent decrees could 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 ~~penalties that~~expenses, any of which could seriously harm our business. ~~Similarly, we may be subject to additional general inquiries from time to time, which may seriously harm our business.~~

We are currently, and expect to be in the future, party to patent lawsuits and other intellectual property claims that are expensive and time-consuming. If resolved adversely, these lawsuits and claims could seriously harm our business.

Companies in the mobile, camera, communication, media, internet, and other technology-related industries own large numbers of patents, copyrights, trademarks, trade secrets, and other intellectual property rights, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicing entities” and other entities that own patents, copyrights, trademarks, trade secrets, and other intellectual property rights often attempt to aggressively assert their rights to extract value from technology companies. Furthermore, from time to time we may introduce new products or make other business changes, including in areas where we currently do not compete, which could increase our exposure to patent, copyright, trademark, trade secret, and other intellectual property rights claims from competitors and non-practicing entities. ~~From time to time, we receive letters from patent holders alleging that some of our products infringe their patent rights and from trademark holders alleging infringement of their trademark rights.~~ We have been subject to, ~~litigation with respect to third-party patents, trademarks,~~ and ~~other intellectual property and we~~ expect to continue to be subject to, claims and legal proceedings from holders of patents, trademarks, copyrights, trade secrets, and other intellectual property ~~litigation.~~

rights alleging that some of our products or content infringe their rights. For example, in January 2020, You Map, Inc. filed a lawsuit in the U.S. District Court for the District of Delaware against us, our subsidiary Zenly, and certain of our respective employees alleging that we misappropriated various trade secrets regarding map technology used in Snapchat’s and Zenly’s map products and that the Snapchat and Zenly applications infringe a You Map patent. While we believe we have meritorious defenses to these claims, an unfavorable outcome in these and other similar lawsuits could seriously harm our business. If these or other matters continue in the future or we need to enter into licensing arrangements, which may not be available to us or on terms favorable to us, it may increase our costs and decrease the value of our products, and our business could be seriously harmed. If a third party does not offer us a license to its intellectual property on commercially reasonable terms, or at all, we may be required to develop, acquire or license alternative, non-infringing technology, which could require significant time, effort, and expense, and may ultimately not be successful. Any of these events would adversely affect our business.

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Moreover, we may not be aware if our platform is infringing, misappropriating, or otherwise violating third-party intellectual property rights, and third parties may bring claims alleging such infringement, misappropriation, or violation. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products and there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued. Moreover, the law continues to evolve and be applied and interpreted by courts in novel ways that we may not be able to adequately anticipate, and such changes may subject us to additional claims and liabilities. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. Intellectual property claims, whether or not successful, could divert management time and attention away from our business and harm our reputation and financial condition. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on our business.

We rely on a variety of statutory and common-law frameworks for the content we host and provide our users, including the Digital Millennium Copyright Act, ~~or DMCA,~~ the Communications Decency Act, or CDA, and the fair-use doctrine. The DMCA limits, but does not necessarily eliminate, our potential liability for caching, hosting, listing, or linking to third-party content that may include materials that infringe copyrights or other rights. The CDA further limits our potential liability for content uploaded onto Snapchat by third parties. And the fair-use doctrine (and related doctrines in other countries) limits our potential liability for featuring third-party intellectual property content produced by us for purposes such as reporting, commentary, and parody. However, each of these statutes and doctrines is subject to uncertain judicial interpretation and regulatory and legislative amendments. For example, ~~there are currently efforts underway~~the U.S. Congress amended the CDA in ~~Congress to amend the CDA~~2018 in ways that could expose some Internet platforms to an increased risk of litigation. In addition, the U.S. Congress and the Executive branch have proposed further changes or amendments each year since 2019 including, among other things, proposals that would narrow the CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether. Some U.S. states have also enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections. Some of these state-specific laws grant individuals a private right of action to sue to enforce these laws, with statutory damages. Although such state laws have been or can be expected to be challenged in court, if these laws were upheld or if additional similar laws or the changes or amendments to the CDA proposed by the U.S. Congress and the Executive branch were enacted, such changes may decrease the protections provided by the CDA and expose us to lawsuits, penalties, and additional compliance obligations. If courts begin to interpret the CDA more narrowly than they have historically done, this could expose us to additional lawsuits and potential judgments and seriously harm our business. Moreover, some of these statutes and doctrines that we rely on provide protection only or primarily in the United States. If the rules around these doctrines change, if international jurisdictions refuse to apply similar protections, or if a court were to disagree with our application of those rules to our service, we could incur liability or be required to make significant changes to our products, business practices, or operations, and our business could be seriously harmed.

From time to time, we are involved in class-action lawsuits and other litigation matters that are expensive and ~~time-consuming. If resolved adversely, lawsuits~~time-consuming and ~~other litigation matters~~ could seriously harm our business.

We are involved in numerous lawsuits, including putative class-action lawsuits brought by users ~~many~~and investors, some of which may claim statutory damages. We anticipate that we will continue to be a target for lawsuits in the future. Because we have millions of users, ~~the plaintiffs in~~ class-action ~~cases filed~~lawsuits against us that are purportedly filed by or on behalf of users typically claim enormous monetary damages in the aggregate even if the alleged per-user harm is small or non-existent. For example, ~~beginning~~in November 2020, a putative class filed an action against us in Illinois, alleging that we violated an Illinois statute concerning the handling of biometric data, which we settled. Other plaintiffs have chosen to pursue a strategy of joining with other plaintiffs to bring a large number of individual claims, rather than pursuing a class action. For example, a sizable number of plaintiffs have sued us and other technology companies alleging that social media platforms are addictive and harmful to minor users' mental health. Other plaintiffs have argued that we should be legally responsible for fentanyl overdoses or poisoning if communications about a drug transaction occurred on ~~May 16, 2017,~~our platform.

Similarly, because we have a large number of stockholders, class-action lawsuits on securities theories typically claim enormous monetary damages in the aggregate even if the alleged loss per stockholder is small. For example, in November 2021, we, and certain of our officers, ~~and directors, and the underwriters of our IPO~~ were named as defendants in a securities ~~class actions~~class-action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock. The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s App Tracking Transparency, or ATT, framework would have on our business. In August 2022, we, and certain of our directors, were

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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 June 2023, we entered into a Stipulation of Compromise and Settlement to settle and dismiss the lawsuit, subject to approval by the court and the satisfaction of various conditions.

We believe we have meritorious defenses to these lawsuits, but litigation is inherently uncertain and an unfavorable outcome could seriously harm our business. Any litigation to which we are a party may result in an onerous or unfavorable judgment that ~~may~~might not be reversed on appeal, or we may decide to settle lawsuits on ~~similarly unfavorable~~adverse terms. Any such negative outcome could result in payments of substantial monetary damages or fines, or changes to our products or business practices, and accordingly our business could be seriously harmed. Although the results of lawsuits and claims cannot be predicted with certainty, management does not believe that the final outcome of those matters that we currently face will seriously harm our business. ~~However,~~Even if the outcome of any such litigation or claim is favorable, defending ~~these claims~~against such lawsuits is costly and can impose a significant burden on management and ~~employees, and we~~employees. We may also receive unfavorable preliminary, interim, or final rulings in the course of litigation.

We may face lawsuits, incur liability, or need to seek licenses based on information posted to our products.

We have faced, currently face, and will continue to face claims relating to information that is published or made available on our products, including Snapchat. In particular, the nature of our business exposes us to claims related to defamation, intellectual property rights, rights of publicity and privacy, and personal injury torts. For example, we do not monitor or edit the vast majority of content that is communicated through Snapchat, and such content has, and may in the future, expose us to lawsuits. Specifically, we are currently facing several lawsuits alleging that we are liable for allowing users to communicate with each other, and that those communications sometimes result in harm. In addition, other lawsuits allege that the design of our platform and those of our competitors is addictive and harmful to minor users’ mental health. We believe we have meritorious defenses to these lawsuits, but litigation is inherently uncertain and unfavorable outcomes could seriously harm our business.

This risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions may be less than the protection that exists in the United States. For example, in April 2019, the European Union passed a directive expanding online platform liability for copyright infringement and regulating certain uses of news content online, which member states were required to implement by June 2021. In addition, legislation in Germany may impose significant fines for failure to comply with certain content removal and disclosure obligations. Numerous other countries in Europe, the Middle East, Asia-Pacific, and Latin America are considering or have implemented similar legislation imposing penalties for failure to remove certain types of content or follow certain processes.

In the United States, there have been various Congressional and Executive branch efforts to remove or restrict the scope of the protections available to online platforms under Section 230 of the CDA, and some U.S. states have also enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections. For example, the CDA was amended in 2018, and the U.S. Congress and the Executive branch have proposed further changes or amendments each year since 2019, including among other things proposals that would narrow CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether. Such changes could decrease or change our protections from liability for third-party content in the United States.

We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages, or license costs. We could also face fines or orders restricting or blocking our services in particular geographies as a result of content hosted on our services. If any of these events occur, we may incur significant costs or be required to make significant changes to our products, business practices, or operations and our business could be seriously harmed.

We plan to continue expanding our international operations where we have limited operating experience and may be subject to increased business and economic risks that could seriously harm our business.

We plan to continue expanding our business operations abroad and to enter new international markets and expand our operations in existing international markets, where we have limited or no experience in marketing, selling, and deploying our products and advertisements. Our limited experience and infrastructure in such markets, or the lack of a critical mass of users in such markets, may make it more difficult for us to effectively monetize any increase in DAUs in those markets, and may increase our costs without a corresponding increase in revenue. If we fail to deploy or manage our operations in international markets successfully, our business may suffer. We do not currently enter into foreign currency exchange contracts, which means our business, financial condition, and operating results may be impacted by fluctuations

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in the exchange rates of the currencies in which we do business. In the future, as our international operations increase, or more of our revenue agreements or operating expenses are denominated in currencies other than the U.S. dollar, these impacts may become material. In 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;

•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. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions; and

•export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security, the Treasury Department’s Office of Foreign Assets Control, or other similar foreign regulatory bodies.

If we are unable to expand internationally and manage the complexity of our global operations successfully, our business could be seriously harmed.

Exposure to United Kingdom political developments, including the effect of its withdrawal from the European Union, could be costly and difficult to comply with and could harm our business.

We have based a significant portion of our European operations in the United Kingdom and have licensed a portion of our intellectual property to one of our United Kingdom subsidiaries. These operations continue to face risks and potential disruptions related to the withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit.” Although the United Kingdom and the European Union have entered into a trade and cooperation agreement, the long-term nature of the United Kingdom’s relationship with the European Union remains unclear. For example, Brexit has led to, and may continue to result in, divergent laws and regulations, such as with respect to data protection and data transfer laws, that could be costly and complicate compliance efforts. While we continue to monitor these developments, the full effect of Brexit on our operations is uncertain and our business could be harmed by trade disputes or political differences between the United Kingdom and the European Union in the future.

We plan to continue to make acquisitions and strategic investments in other companies, which could require significant management attention, disrupt our business, dilute our stockholders, and seriously harm our business.

As part of our business strategy, we have made and intend to make acquisitions to add specialized team members and complementary companies, products, and technologies, as well as investments in public and private companies in

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furtherance of our strategic objectives. Our ability to acquire and successfully integrate larger or more complex companies, products, and technologies is unproven. In the future, we may not be able to find other suitable acquisition or investment candidates, and we may not be able to complete acquisitions or investments on favorable terms, if at all. Our previous and future acquisitions and investments may not achieve our goals, and any future acquisitions or investments we complete could be viewed negatively by users, advertisers, partners, or investors. 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. For example, future or past business transactions could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. We may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition or investment transaction, including accounting charges. We may also incur unanticipated liabilities and litigation exposure that we assume as a result of acquiring companies. We may have to pay cash, incur debt, or issue equity securities to pay for any acquisition or investment, any of which could seriously harm our business.

Selling or issuing equity to finance or carry out any such acquisition or investment would also dilute our existing stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

In addition, it generally takes several months after the closing of an acquisition to finalize the purchase price allocation. 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.

The strategic investments we make in public and private companies around the world range from early-stage companies still defining their strategic direction to mature companies with established revenue streams and business models. Many of the instruments in which we invest are non-marketable and illiquid at the time of our initial investment, and our ability to realize a return on our investment, if any, is typically dependent on the issuer participating in a liquidity event, such as a public offering or acquisition. We doare not always able to achieve a return on our investments in a timely fashion, if at all, even for those companies that have achieved a liquidity event. To the extent any of the companies in which we invest are not successful, which can include failures to achieve business objectives as well as bankruptcy, we could recognize an impairment or lose all or part of our investment.

Our acquisition and investment strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions. For example, if we develop a reputation for being a difficult acquirer or having an unfavorable work environment, or target companies view our non-voting Class A common stock unfavorably, we may be unable to source and close acquisition targets. In addition, members of the U.S. administration and Congress have proposed new legislation that could limit, hinder, or delay the acquisition process and target opportunities. If we are unable to consummate key acquisition transactions essential to our corporate strategy, it may limit our ability to grow or compete effectively and our business may be seriously harmed.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings, which could seriously harm our business.

Under U.S. generally accepted accounting principles, or GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of June 30, 2023, we had recorded a total of $1.9 billion of goodwill and intangible assets, net related to our acquisitions. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such material charges may seriously harm our business.

We have spent and may continue to spend substantial funds in connection with the tax liabilities on the settlement of equity awards. The manner in which we fund these tax liabilities may cause us to spend substantial funds or dilute stockholders, either of which may have an adverse effect on our financial condition.

When our employee equity awards vest, we withhold taxes and remit them, along with any employee and employer social security contributions, to relevant taxing authorities on behalf of team members and, where applicable, their employers. To fund the withholding and remittance obligations for equity awards, we have either used our existing cash or sold a portion of vested equity awards on behalf of our team members near the applicable settlement dates in an

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amount that is substantially equivalent to the number of shares of common stock that we would withhold in connection with these settlements. In the future, we may also sell equity on our behalf and use the proceeds to fund the withholding and remittance obligations for equity awards. Any of these methods may have an adverse effect on our financial condition.

If we sell shares on behalf of our team members, although those newly issued shares should not be dilutive, such sales to the market could result in a decline to our stock price. If we use our existing cash, or if our cash reserves are not sufficient, we may choose to issue equity securities or borrow funds under our revolving credit facility. In such an event, we cannot assure you that we will be able to successfully match the proceeds of any such equity financing to the then applicable tax liability, and any such equity financing could result in a decline in our stock price and be dilutive to existing stockholders. 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 ~~capabilities~~of our physical products and ~~depend on a single contract manufacturer.~~components. If we encounter problems with ~~this~~either our internal or contract ~~manufacturer or if the~~ manufacturing, ~~process stops or is delayed for any reason,~~ we may not deliver our ~~hardware~~ products ~~such as Spectacles, to our customers~~within specifications or on time, which may seriously harm our business.

~~We have limited manufacturing experience for our only physical product, Spectacles,~~

Manufacturing processes are highly complex, require advanced and ~~we do not have any internal manufacturing capabilities. Instead, we~~costly equipment, and must be continuously modified to improve yields and performance. We rely on ~~one~~suppliers and contract ~~manufacturer to build Spectacles. Our~~manufacturers in connection with the production of our own physical products and components. We and our contract ~~manufacturer is~~manufacturers are all vulnerable to capacity constraints and reduced component availability, and ~~our~~have limited control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply, or if we introduce a new product or ~~feature, is limited.~~feature. In addition, we have limited control over our ~~manufacturer’s~~suppliers’ and manufacturers’ quality systems and controls, and therefore must rely on ~~our manufacturer~~them to ~~manufacture our products to~~meet our quality and performance standards and specifications. Delays, component shortages, including custom components that are manufactured for us at our direction, global trade conditions and agreements, and other manufacturing and supply problems could impair the distribution of our products and ultimately our brand. For example, the United States has threatened tougher trade terms with China and other countries, leading to the imposition, or potential future imposition, of substantially higher U.S. Section 301 tariffs on certain imports from China, which may adversely affect our products and seriously harm our business.

Furthermore, any adverse change in our suppliers’ or contract ~~manufacturer’s~~manufacturers’ financial or business condition or our relationship with ~~the contract manufacturer~~them could disrupt our ability to supply our ~~products to our retailers and distributors.~~products. If we ~~are required~~change our suppliers or contract manufacturers, or shift to ~~change our~~

~~contract manufacturer or assume~~more internal manufacturing operations, we may lose revenue, incur increased costs, and damage our reputation and brand. Qualifying and commencing operations with a new supplier or contract manufacturer ~~and commencing production~~ is expensive and time-consuming. In addition, if we experience increased demand for our products, we may need to increase our material or component purchases, internal or contract-manufacturing capacity, and internal test and quality functions. The inability of our suppliers or contract manufacturers to provide us with adequate ~~supplies of~~ high-quality materials and products could delay our order fulfillment, and may require us to change the design of our products to meet this increased demand. Any redesign ~~would~~may require us to re-qualify our products with any applicable regulatory bodies or customers, which would be costly and time-consuming. This may lead to unsatisfied customers and users and increase costs to us, which could seriously harm our business.

~~Components used~~ As we increase or acquire additional manufacturing capacity, we are subject to many complex and evolving environmental, health, and safety laws, regulations, and rules in ~~our products may fail as a result of a manufacturing, design, or other defect over~~each jurisdiction in which we ~~have no control,~~operate. If we fail to comply with any such laws and ~~render~~regulations, then we could incur regulatory penalties, fines, and legal liabilities, suspension of production, significant compliance requirements, alteration of our ~~devices inoperable.~~

~~We rely~~manufacturing processes, or restrictions on ~~third-party component suppliers~~our ability to ~~provide some~~modify or expand our facilities, any of ~~the functionalities needed to operate and use~~which could seriously harm our ~~products, such as Spectacles. Any~~business.

In addition, any errors or defects in ~~that third-party~~any parts or technology incorporated into our products could result in ~~errors in our products~~product failures that could seriously harm our business. ~~If these components have a~~Further, any defect in manufacturing, design, or other ~~defect, they can~~could cause our products to fail ~~and~~or render them permanently inoperable. For example, the typical means by which our Spectacles product connects to mobile devices is by way of a Bluetooth transceiver located in the Spectacles product. If the Bluetooth transceiver in our Spectacles product were to fail, it would not be able to connect to a user’s mobile device and Spectacles would not be able to deliver any content to the mobile device and the Snapchat application. As a result, we ~~would~~may have to replace these products at our sole cost and ~~expense.~~expense, face litigation, or be subject to other liabilities. Should we have a widespread problem of this kind, the reputational damage and the cost of replacing these products, or other liabilities, could seriously harm our business.

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Some of our products are in regulated industries. Clearances to market regulated products can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all, for future products.

The FDA and other state and foreign regulatory agencies regulate Spectacles. We may develop future products that are regulated as medical devices by the ~~FDA.~~FDA or regulated by other governmental agencies. Government authorities, primarily the FDA and corresponding regulatory agencies, regulate the medical device industry. Unless there is an exemption, we must obtain regulatory approval from the FDA and corresponding agencies, or other applicable governmental authorities, before we can market or sell a new regulated product or make a significant modification to an existing product. Obtaining regulatory clearances to market a medical device or other regulated products can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all, for future products. Any delay in, or failure to receive or maintain, clearance or approval for any ~~medical device~~ products under development could prevent us from launching new products. We could seriously harm our business and the ability to sell our products if we experience any product problems requiring ~~FDA~~ reporting to governmental authorities, if we fail to comply with applicable ~~FDA and other~~federal, state, or foreign agency regulations, or if we are subject to enforcement actions such as fines, civil penalties, injunctions, product recalls, or failure to obtain ~~FDA or other~~ regulatory clearances or approvals.

We ~~may face~~have faced inventory risk with respect to our ~~Spectacles~~physical products.

We have been and may ~~continue to~~in the future be exposed to inventory risks related to ~~Spectacles~~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 ~~Spectacles~~our products, and other factors. We try to accurately predict these trends and avoid overstocking or understocking inventory. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. The acquisition of certain types of inventory or components may require significant lead-time and prepayment and they may not be returnable. Failure to manage our inventory, supplier commitments, or customer expectations could ~~adversely affect our operating results.~~

~~Our offices are dispersed in various cities, and we do not have a designated headquarters office, which may negatively affect employee morale and could~~ seriously harm our business.

Risks Related to Credit and Financing

We have ~~many offices, both domestic~~offered and ~~abroad, with~~may continue to offer credit to our principal offices being located in the Los Angeles area. But we do not have one designated headquarters office; we instead have many office buildings that are dispersed throughout the area. This diffuse structure may prevent us from fostering positive employee moralepartners to stay competitive, and ~~encouraging social interaction among our employees and different business units. Moreover, because our office buildings are dispersed throughout the area,~~as a result we may be ~~unable~~exposed to ~~adequately oversee employees and business functions. If we cannot compensate for these and other issues caused by this geographically dispersed office structure, we~~credit risk of some of our partners, which may ~~lose employees, which could~~ seriously harm our business.

We ~~may face lawsuits or incur liability based on information retrieved from or transmitted over the internet and then posted to Snapchat.~~

~~We have faced, currently face, and will continue to face claims relating to information that is published or made available on Snapchat. In particular, the nature~~engage in business with some of our ~~business exposes us~~partners on an open credit basis. While we attempt to ~~claims related~~monitor individual partner payment capability when we grant open credit arrangements and maintain allowances we believe are adequate to ~~defamation, intellectual property rights, rights of publicity and privacy, and personal injury torts. For example,~~cover exposure for doubtful accounts, we ~~do not monitor or edit~~cannot assure investors these programs will be effective in managing our credit risks in the ~~vast majority of content that appears on Snapchat.~~future. This ~~risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions~~ may be ~~unclear~~especially true as our business grows and ~~where~~expands, we engage with partners that have limited operating history, or we engage with partners that we may not be ~~less protected under local laws than~~familiar with. If we are ~~in the United States. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages. If any of~~unable to adequately control these ~~events occur,~~risks, our business could be seriously harmed.

~~We plan~~

Operating our business requires a significant amount of cash, and we may not have sufficient cash flow from our business to ~~continue expanding our operations abroad where we have limited operating experience~~pay the Convertible Notes, and any other debt when due, which may ~~be subject to increased business and economic risks that could~~ seriously harm our business.

~~We plan~~

Our ability to ~~continue expanding~~make principal or interest payments on, or to refinance, the Convertible Notes or other indebtedness depends on our future performance, which is subject to many factors beyond our control. Our business operations abroad and translating our products into other languages. Snapchat is currently available in more than 20 languages, and we have offices in more than ten countries. We plan to enter new international markets where we have limited or no experience in marketing, selling, and deploying our products. If we fail to deploy or manage ourmay not generate sufficient cash flow from operations in ~~international markets successfully, our business may suffer. In~~ the future asto service our international operations increase, or more of our expenses are denominated in currencies other than the U.S. dollar, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we dodebt and business. ~~In addition, we are subject to a variety of risks inherent in doing business internationally, including:~~

~~political, social, and economic instability;~~

~~risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, 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;

~~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. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions; and~~

~~export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control.~~

If we are unable to ~~expand internationally and manage the complexity~~generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, obtaining additional debt financing, or issuing additional equity securities, any of ~~our global operations successfully, our business could~~which may be ~~seriously harmed.~~

~~New legislation~~on terms that ~~would change U.S.~~are not favorable to us or, ~~foreign taxation of international business activities or other tax-reform policies could seriously harm our business.~~

Reforming the taxation of international businesses has been a priority for U.S. politicians, and key members of the legislative and executive branches have proposed a wide variety of potential changes. Certain changes to U.S. tax laws, including limitations on the ability to defer U.S. taxation on earnings outside of the United States until those earnings are repatriated to the United States, could affect the tax treatment of our foreign earnings, as well as cash and cash equivalent balances we maintain outside the United States. Due to the large and expanding scale of our international business activities, any changes in the ~~U.S.~~case of equity securities, highly dilutive to our stockholders. The Convertible Notes will mature beginning in May 2025, unless earlier converted, redeemed, or ~~foreign taxation of such activities may increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm our business.~~

Exposure to United Kingdom political developments, including the outcome of the referendum on membership in the European Union, could be costly and difficult to comply with and could seriously harm our business.

In June 2016, a referendum was passed in the United Kingdom to leave the European Union, commonly referred to as “Brexit.” This decision creates an uncertain political and economic environment in the United Kingdom and other European Union countries, even though the formal process for leaving the European Union may take years to complete. This formal process began in March 2017, when the United Kingdom served notice to the European Council under Article 50 of the Treaty of Lisbon. We have licensed a portion of our intellectual property to one of our United Kingdom subsidiaries and intend to base a significant portion of our non-U.S. operations in the United Kingdom. The long-term nature of the United Kingdom’s relationship with the European Union is unclear and there is considerable uncertainty when any relationship will be agreed and implemented. The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the United Kingdom. In particular, it is unclear whether the United Kingdom will enact data protection laws or regulations designed to be consistent with the pending EU General Data Protection Regulation and how data transfers to and from the United Kingdom will be regulated. Brexit could also have the effect of disrupting the free movement of goods, services, and people between the United Kingdom, the European Union, and elsewhere. The full effect of Brexit is uncertain and depends on any agreements the United Kingdom may make to retain access to European Union markets. Consequently, no assurance can be given about the impact of the outcome and our business, including operational and tax policies, may be seriously harmed or require reassessment if our European operations or presence become a significant part of our business.

~~We plan to continue to make acquisitions, which could require significant management attention, disrupt our business, dilute our stockholders, and seriously harm our business.~~

~~As part of our business strategy, we have made and intend to make acquisitions to add specialized employees and complementary companies, products, and technologies.~~repurchased. Our ability to ~~acquire~~repay or refinance the Convertible Notes or our other indebtedness will depend on various factors, including the available capital markets, our business, and ~~successfully integrate larger or more complex companies, products, and technologies is unproven~~. ~~In the future, we~~our financial condition at such time. We may not be able to ~~find other suitable acquisition candidates, and we may not be able to complete acquisitions~~engage in any of these activities or on ~~favorable~~desirable terms, ~~if at all. Our previous~~which could result in a default on our debt obligations. In addition, our existing and future ~~acquisitions~~debt agreements, including the Convertible Notes and Credit Facility, may ~~not achieve our goals, and~~contain restrictive covenants that may prohibit us from adopting any ~~future acquisitions we complete could be viewed negatively by users, advertisers, partners, or investors. In addition, if we fail~~of these alternatives. Our failure to ~~successfully close transactions or integrate new teams, or integrate the products and technologies associated~~comply with these ~~acquisitions into~~covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our ~~company, our business could be seriously harmed. Any integration process may require significant time~~debt, and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may also incur unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt, or issue equity securities to pay for any acquisition, any of which couldwould seriously harm our business. Selling equity to finance any such acquisitions would also dilute our stockholders. Incurring debt would increase our fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

In addition, holders of the Convertible Notes have the right to require us to repurchase all or a portion of the Convertible Notes on ~~average, it has historically taken us approximately one year after~~ the ~~closing~~occurrence of ~~an acquisition~~a fundamental change at a repurchase price equal to ~~finalize~~100% of the ~~purchase price allocation. Therefore, it is possible~~principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental

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change repurchase date. Further, if a make-whole fundamental change as defined in each of the indentures governing the Convertible Notes, or the Indentures, occurs prior to the maturity date of the Convertible Notes, we will in some cases be required to increase the conversion rate for a holder that ~~our valuation~~elects to convert its Convertible Notes in connection with such make-whole fundamental change. On the conversion of ~~an acquisition may change and result in unanticipated write-offs or charges, impairment~~the Convertible Notes, unless we elect to deliver solely shares 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.~~

~~Our acquisition strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions. Issuing shares of~~ Class A common stock to ~~fund an acquisition would cause economic dilution~~settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to ~~existing stockholders but not voting dilution. If we develop a reputation~~make cash payments for the Convertible Notes being ~~a difficult acquirer or having an unfavorable work environment, or target companies view our non-voting Class A common stock unfavorably,~~converted. However, we may not have enough available cash or be ~~unable~~able to ~~consummate key acquisition transactions essential~~obtain financing at the time we are required to ~~our corporate strategy and our business may be seriously harmed.~~

make such repurchases of the Convertible Notes surrendered or pay cash with respect to the Convertible Notes being converted.

If we default on our credit obligations, our operations may be interrupted and our business could be seriously harmed.

We have a Credit Facility that we may draw on to finance our operations, acquisitions, and other corporate ~~purposes, such as funding our tax-withholding and remittance obligations in connection with settling RSUs.~~purposes. If we default on these credit obligations, our lenders may:

•require repayment of any outstanding amounts drawn on our Credit Facility;

•terminate our Credit Facility; ~~and~~

•require us to pay significant damages.

If any of these events occur, our operations may be interrupted and our ability to fund our operations or obligations, as well as our business, could be seriously harmed. 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. Our ability to comply with these covenants may be affected by events beyond our control, and breaches of these covenants could result in a default under the Credit Facility and any future financial agreements into which we may enter. If not waived, defaults could cause our outstanding indebtedness under our outstanding Convertible Notes or our Credit Facility, ~~and~~including any future financing agreements that we may enter into, to become immediately due and payable. For more information on our Credit Facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

We cannot be certain that additional financing will be available on reasonable terms when needed, or at all, which could seriously harm our business.

We have historically incurred net losses and negative cash flow from operations, and we may not attain and sustain profitability in future periods. As a result, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, our credit rating, the condition of the capital markets, and other factors. To the extent we use available funds or draw on our Credit Facility, we may need to raise additional funds and we cannot assure investors that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our existing stockholders may experience dilution. In the event that we are unable to obtain additional financing on favorable terms, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business. In addition, our ability to draw on our Credit Facility relies on our lenders under that facility's continued operation and ability to fund.

Risks Related to Taxes

New legislation that would change U.S. or foreign taxation of business activities, including the imposition of tax based on gross revenue, could seriously harm our business, or the financial markets and the market price of our Class A common stock.

Reforming the taxation of international businesses has been a priority for politicians at a global level, and a wide variety of changes have been proposed or enacted. Due to the large and expanding scale of our international business activities, any changes in the taxation of such activities may increase our tax expense, the amount of taxes we pay, or both, and seriously harm our business. For example, legislation commonly referred to as the Tax Cuts and Jobs Act, which was enacted in December 2017, significantly reformed the U.S. Internal Revenue Code of 1986, as amended, or the Code. The Tax Cuts and Jobs Act lowered U.S. federal corporate income tax rates, changed the utilization of future net operating loss carryforwards, allowed for the expensing of certain capital expenditures, eliminated the option to currently deduct research and development expenditures and requires taxpayers to capitalize and amortize U.S.-based and non-U.S.-based research

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and development expenditures over five and fifteen years, respectively, and put into effect significant changes to U.S. taxation of international business activities. In August 2022, the Inflation Reduction Act, or the IRA, was enacted, the provisions of which include a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a 1% excise tax on certain share buybacks by public corporations that would be imposed on such corporations. 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.

In addition, many jurisdictions and intergovernmental organizations have been discussing or are in the process of implementing proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the jurisdictions in which we do business and in which our users are located. Some jurisdictions have enacted, and others have proposed, in each case potentially on a temporary basis pending the implementation of the “two-pillar solution” described below, taxes based on gross receipts applicable to digital services regardless of profitability. In addition, the Organisation for Economic Co-operation and Development, or the OECD, has led international efforts to devise, and to implement on a permanent basis, a two-pillar solution to address the tax challenges arising from the digitalization of the economy. Pillar One focuses on nexus and profit allocation, and Pillar Two provides for a global minimum effective corporate tax rate of 15%. Pillar One would apply to multinational enterprises with annual global revenue above 20 billion euros and profitability above 10%, with the revenue threshold potentially reduced to 10 billion euros in the future. Based on these thresholds, we currently expect to be outside the scope of the Pillar One proposals, though we anticipate that we will be subject to Pillar One in the future if our global revenue exceeds the Pillar One thresholds. In December 2021, the OECD published detailed rules that define the scope of the Pillar Two global minimum effective tax rate proposal. A number of countries, including the United Kingdom, are currently proposing or have enacted legislation to implement core elements of the Pillar Two proposal by the start of 2024, and the European Union has adopted a Council Directive which requires certain Pillar Two rules to be transposed into member states’ national laws from such time. Based on our current understanding of the minimum revenue thresholds contained in the proposed Pillar Two rules, we expect that we may be within their scope and so their implementation could impact the amount of tax we have to pay.

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.

Our income tax obligations are based on our corporate operating structure and third-party and intercompany arrangements, including the manner in which we develop, value, and use our intellectual property and the valuations of our intercompany transactions. The tax laws applicable to our international business activities, including the laws of the United States and other jurisdictions, are subject to change and uncertain interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or transfer pricing, which could increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm our business. Taxing authorities may also determine that the manner in which we operate our business is not consistent with how we report our income, which could increase our effective tax rate and the amount of taxes we pay and seriously harm our business. In addition, our future income taxes could fluctuate because of earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. We are subject to regular review and audit by U.S. federal and state and foreign tax authorities. Any adverse outcome from a review or audit could seriously harm our business. In addition, determining our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements for such ~~period or~~ periods and may seriously harm our business.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited, each of which could seriously harm our business.

As of December 31, ~~2016,~~2022, we had U.S. federal net operating loss carryforwards of approximately ~~$73.7 million~~$7.4 billion and state net operating loss carryforwards of approximately ~~$146.3 million.~~$4.6 billion, as well as U.K. net operating loss carryforwards of approximately $3.6 billion. We also accumulated U.S. federal and state research tax credits of $691.5 million and $430.7 million, respectively, as of December 31, 2022. Under Sections 382 and 383 of ~~the Internal Revenue Code of 1986, as amended, or~~ the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an ~~“ownership~~

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“ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. In the event that ~~it is determined that we have in the past experienced an ownership change, or if~~ we experience one or more ownership changes as a result of ~~future~~ transactions in our stock, then we may be limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn.

For U.S. federal income tax purposes, net operating losses arising in tax years beginning before January 1, 2018 can be carried forward to the earlier of the next subsequent twenty tax years or until such losses are fully utilized; net operating losses arising in tax years beginning after December 31, 2017 are not subject to the twenty-year limitation. In addition, for tax years beginning after December 31, 2020, our use of net operating losses arising in tax years beginning after December 31, 2017, may not exceed 80% of such year's taxable income. U.S. federal research tax credits can be carried forward to the earlier of the next subsequent twenty tax years or until such credits are fully utilized, and use of those credits generally cannot exceed 75% of the net income tax liability for any given tax year. 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.

Any limitations on the ability to use our net operating loss carryforwards and other tax assets, as well as the timing of any such use, could seriously harm our business.

~~If our goodwill or intangible assets become impaired, we~~

Our operating results may be negatively affected if we are required to pay additional sales and use tax, value added tax, or other transaction taxes, and we could be subject to liability with respect to all or a portion of past or future sales.

We currently collect and remit sales and use, value added and other transaction taxes in certain of the jurisdictions where we do business based on our assessment of the amount of taxes owed by us in such 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 ~~a significant charge~~contingent tax liabilities in respect of those jurisdictions. A successful assertion that we are required to ~~earnings, which could~~pay additional taxes in connection with sales of our products and solutions, or the imposition of new laws or regulations or the interpretation of existing laws and regulations requiring the payment of additional taxes, would result in increased costs and administrative burdens for us. If we are subject to additional taxes and determine to offset such increased costs by collecting and remitting such taxes from our customers, or otherwise passing those costs through to our customers, companies may be discouraged from purchasing our products and solutions. Any increased tax burden may decrease our ability or willingness to compete in relatively burdensome tax jurisdictions, result in substantial tax liabilities related to past or future sales or otherwise seriously harm our business.

Under U.S. generally accepted accounting principles, or GAAP, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of September 30, 2017 and December 31, 2016, we had recorded a total of $777.4 million and $395.1 million, respectively, of goodwill and intangible assets, net related to our acquisitions. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such material charges may seriously harm our business.

~~We cannot be certain that additional financing will be available on reasonable terms when needed, or at all, which could seriously harm our business.~~

We have incurred net losses and negative cash flow from operations for all prior periods, and we may not achieve or maintain profitability. As a result, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. To the extent we use available funds or draw on our Credit Facility, we may need to raise additional funds and we cannot assure investors that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our Class A common stock, and our existing stockholders may experience dilution. In the event that we are unable to obtain additional financing on favorable terms, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business.

Payment transactions using Snapcash or future products may subject us to additional regulatory requirements and other risks that could be costly and difficult to comply with and could seriously harm our business.

Our users can use Snapchat to send cash to other users using our Snapcash feature. Depending on how our Snapcash product evolves or whether we develop additional commerce products in the future, we may be subject to a variety of laws and regulations in the United States, Europe, and elsewhere, including those governing money transmission, gift cards, and other prepaid access instruments, electronic funds transfers, anti-money laundering, counter-terrorist financing, gambling, banking and lending, and import and export restrictions. Although we currently use the service of a third party to provide the Snapcash feature, these laws may apply to us in some jurisdictions. To increase flexibility in how our use of Snapcash may evolve and to mitigate regulatory uncertainty, we may be required to apply for certain money-transmitter licenses in the United States, which may generally require us to demonstrate compliance with many domestic laws in these areas. Our efforts to comply with these laws and regulations could be costly and divert management’s time and effort and may still not guarantee compliance. If we are found to violate any of these legal or regulatory requirements, we may be subject to monetary fines or other penalties, such as a cease-and-desist order, or we may be required to make product changes, any of which could seriously harm our business. Moreover, the Snapcash product is not enabled on Snapchat by default, and our users must manually enable the feature within the application, which may prevent the Snapcash product from gaining traction with our users or becoming a material part of our business. We have not recognized revenue related to Snapcash to date.

~~In addition, we may be subject to a variety of additional risks as a result of Snapcash, including:~~

~~increased costs and diversion of management time and effort and other resources to deal with bad transactions or customer disputes;~~

~~potential fraudulent or otherwise illegal activity by users or third parties;~~

~~restrictions on the investment of consumer funds used to make Snapcash transactions; and~~

~~additional disclosure and reporting requirements.~~

~~If any of these risks occurs, our business may be seriously harmed.~~

Risks Related to Ownership of Our Class A Common Stock

Holders of Class A common stock have no voting rights. As a result, holders of Class A common stock will not have any ability to influence stockholder decisions.

Class A common stockholders have no voting rights, unless required by Delaware law. As a result, all matters submitted to stockholders will be decided by the vote of holders of Class B common stock and Class C common stock. As of ~~September~~June 30, ~~2017,~~2023, Mr. Spiegel and Mr. Murphy control ~~approximately 95.0%~~over 99% of the voting power of our capital stock, and Mr. Spiegel alone may exercise voting ~~power,~~control over our outstanding capital stock. Mr. Spiegel and ~~potentially either one of them~~Mr. Murphy voting together, or in many instances, Mr. Spiegel acting alone, will have ~~the ability to~~ control ~~the outcome of~~over all matters submitted to our stockholders for approval. In addition, because our Class A common stock carries no voting rights (except as required by Delaware law), the issuance of the Class A common stock in future offerings, in future stock-based acquisition transactions, ~~and~~or to fund employee equity incentive programs could prolong the duration of Mr. Spiegel’s and Mr. Murphy’s current relative ownership of our voting power and their ability to elect certain directors and to determine the outcome of all matters submitted to a vote of our stockholders. This concentrated control eliminates other stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely affected.

We cannot predict the impact our capital structure and the concentrated control by our founders may have on our stock price or our business.

Although other U.S.-based companies have publicly traded classes of non-voting stock, to our knowledge, ~~no other public~~we were the first company ~~has listed~~to only list non-voting stock on a U.S. stock exchange. We cannot predict whether this structure, combined with the concentrated control by Mr. Spiegel and Mr. Murphy, will result in a lower trading price or greater fluctuations in the trading price of our Class A common stock, or will result in adverse publicity or other adverse

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consequences. In addition, some indexes ~~are considering whether to~~have indicated they will exclude non-voting stock, like our Class A common stock, from their membership. For example, ~~in July 2017,~~ FTSE Russell, a provider of widely followed stock indexes, ~~stated that it plans to require~~requires new constituents of its indexes to have at least five percent of their voting rights in the hands of public stockholders. ~~In addition, in July 2017,~~The S&P Dow Jones, another provider of widely followed stock indexes, ~~stated that~~previously excluded companies with multiple share classes, ~~will not be eligible for certain of their indexes.~~but recently reversed course to remove that exclusion. As a result, our Class A common stock ~~will likely~~is not be eligible for stock indexes with these ~~stock indexes.~~or similar restrictions. We cannot assure you that other stock indexes will not take a similar approach to FTSE Russell ~~or S&P Dow Jones~~ in the future. Exclusion from indexes could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.

Additionally, the exclusion of our Class A common stock from these indexes may limit the types of investors who invest in our Class A common stock and could make the trading price of our Class A common stock more volatile.

Because our Class A common stock is non-voting, we and our stockholders are exempt from certain provisions of U.S. securities laws. This may limit the information available to holders of our Class A common stock.

Because our Class A common stock is non-voting, significant holders of our common stock are exempt from the obligation to file reports under Sections 13(d), 13(g), and 16 of the Exchange Act. These provisions generally require periodic reporting of beneficial ownership by significant stockholders, including changes in that ownership. For example, ~~in November 2017,~~we believe that Tencent Holdings Limited, ~~notified us that it,~~ together with its affiliates, ~~acquired 145,778,246 shares~~holds greater than 10% of our ~~non-voting~~ Class A common stock ~~via open market purchases.~~based in part on Tencent Holdings Limited’s public reporting. As a result of our ~~ownership~~capital structure, ~~Tencent and Snap~~holders are not obligated to disclose changes in ~~Tencent’s~~ ownership of our Class A common stock, so there can be no assurance that you, or we, will be notified of any such changes. Our directors and officers are required to file reports under Section 16 of the Exchange Act. Our significant stockholders, other than directors and officers, are exempt from the “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. As such, stockholders will be unable to bring derivative claims for disgorgement of profits for trades by significant stockholders under Section 16(b) of the Exchange Act unless the significant stockholders are also directors or officers.

Since our Class A common stock is our only class of stock registered under Section 12 of the Exchange Act and that class is non-voting, we are not required to file proxy statements or information statements under Section 14 of the Exchange Act, unless a vote of the Class A common stock is required by applicable law. Accordingly, legal causes of action and remedies under Section 14 of the Exchange Act for inadequate or misleading information in proxy statements may not be available to holders of our Class A common stock. If we do not deliver any proxy statements, information statements, annual reports, and other information and reports to the holders of our Class B common stock and Class C common stock, then we will similarly not provide any of this information to holders of our Class A common stock. Because we are not required to file proxy statements or information statements under Section 14 of the Exchange Act, any proxy statement, information statement, or notice of our annual meeting may not include all information under Section 14 of the Exchange Act that a public company with voting securities registered under Section 12 of the Exchange Act would be required to provide to its stockholders. 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 ~~will be~~are instead included in our ~~Form 10-K, rather than a proxy statement.~~Annual Report. 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. If we take any action in an extraordinary meeting of stockholders where the holders of Class A common stock are not entitled to vote, we will not be required to provide the information required under Section 14 of the Exchange Act. Nor will we be required to file a preliminary proxy statement under Section 14 of the Exchange Act. Since that information is also not required in a Form 10-K, holders of Class A common stock may not receive the information required under Section 14 of the Exchange Act with respect to extraordinary meetings of stockholders. In addition, we are not subject to the “say-on-pay” and “say-on-frequency” provisions of the Dodd–Frank Act. As a result, our stockholders do not have an opportunity to provide a non-binding vote on the compensation of our executive officers. Moreover, holders of our Class A common stock will be unable to bring matters before our annual meeting of stockholders or nominate directors at such meeting, nor can they submit stockholder proposals under Rule 14a-8 of the Exchange Act.

The trading price of our Class A common stock has been and will likely continue to be volatile.

The trading price of our Class A common stock has been and is likely to continue to be volatile. ~~Shares of Class A common stock were sold in our IPO in March 2017 at a price of $17.00 per share. Since then,~~From July 1, 2021 to June 30, 2023, the trading price of our Class A common stock ~~has~~ ranged from ~~$11.28~~$7.33 to ~~$29.44 through September 30, 2017.~~$83.34. Declines or volatility in our trading price could make it more difficult to attract and retain talent, adversely impact employee retention and morale, and has required, and may continue to require, us to issue more equity to incentivize team members which is likely

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to dilute stockholders. 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 ~~securities analysts,~~ investors and the financial community;

•the accuracy of our ~~plans to not provide quarterly or annual~~ financial guidance or projections;

•any forward-looking financial or operating information we may provide, ~~to the public or securities analysts,~~ any changes in this information, or our failure to meet expectations based on this information;

•actions of ~~securities analysts~~investors who initiate or maintain coverage of us, changes in financial estimates by any ~~securities analysts~~investors who follow our company, or our failure to meet these estimates or the expectations of investors;

~~whether investors~~•significant acquisitions or ~~analysts view~~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 ~~RSU-related~~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;


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.00001 per share	SNAP	New York Stock Exchange

☐
☒			Large accelerated filer		☐	Accelerated filer
☐
☒	Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	☐		Smaller reporting company
☒ ☐			Emerging growth company


		~~Page~~
					Page
Note Regarding Forward-Looking Statements				3
Note Regarding User Metrics and Other Data				4 5

			PART I - FINANCIAL INFORMATION
Item 1.			~~Consolidated~~ Financial Statements ~~(unaudited)~~		6
			Consolidated ~~Balance Sheets~~Statements of Cash Flows		6
			Consolidated Statements of Operations		7
			Consolidated Statements of Comprehensive Income (Loss)		8
	Consolidated Balance Sheets		9
	Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity			9 10
			Notes to Consolidated Financial Statements		10 11
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		23 24
Item 3.			Quantitative and Qualitative Disclosures About Market Risk		38 39
Item 4.			Controls and Procedures		39 40

			PART II - OTHER INFORMATION
Item 1.			Legal Proceedings		40 41
Item 1A.			Risk Factors		40 41
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		67 81
Item 3.			Defaults Upon Senior Securities		67 82
Item 4.			Mine Safety Disclosures		67 82
Item 5.			Other Information		67 82
Item 6.			Exhibits		69 83
Signatures					70 84

	September 30, 2017			December 31, 2016
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	317,554		$	150,121
Marketable securities		1,980,514			837,247
Accounts receivable, net of allowance		194,971			162,659
Prepaid expenses and other current assets		54,692			29,958
Total current assets		2,547,731			1,179,985
Property and equipment, net		143,112			100,585
Intangible assets, net		164,612			75,982
Goodwill		612,823			319,137
Other assets		74,102			47,103
Total assets	$	3,542,380		$	1,722,792
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	15,207		$	8,419
Accrued expenses and other current liabilities		280,957			148,325
Total current liabilities		296,164			156,744
Other liabilities		70,946			47,134
Total liabilities		367,110			203,878
Commitments and contingencies (Note 6)
Stockholders’ equity
Convertible voting preferred stock, Series A, A-1, and B, $0.00001 par value. No shares and 146,962 shares authorized, issued, and outstanding at September 30, 2017 and December 31, 2016, respectively. Liquidation preference of $95,175 at December 31, 2016.		—			1
Convertible non-voting preferred stock, Series C, $0.00001 par value. No shares and 16,000 shares authorized, issued, and outstanding at September 30, 2017 and December 31, 2016, respectively. Liquidation preference of $54,543 at December 31, 2016.		—			—
Convertible non-voting preferred stock, Series D, E, and F, $0.00001 par value. No shares and 83,851 shares authorized, issued, and outstanding at September 30, 2017 and December 31, 2016, respectively.		—			2
Series FP convertible voting preferred stock, $0.00001 par value. No shares and 260,888 shares authorized at September 30, 2017 and December 31, 2016, respectively. No shares and 215,888 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively.		—			2
Class A non-voting common stock, $0.00001 par value. 3,000,000 shares authorized, 858,546 shares issued and outstanding at September 30, 2017, and 1,500,000 shares authorized, 504,902 shares issued and outstanding at December 31, 2016.		9			5
Class B voting common stock, $0.00001 par value. 700,000 shares authorized, 127,302 shares issued and outstanding at September 30, 2017, and 1,500,000 shares authorized, 31,469 shares issued and outstanding at December 31, 2016.		1			—
Class C voting common stock, $0.00001 par value. 260,888 shares authorized, 215,888 shares issued and outstanding at September 30, 2017, and 260,888 shares authorized and no shares issued and outstanding at December 31, 2016.		2			—
Additional paid-in capital		7,470,272			2,728,823
Accumulated other comprehensive income (loss)		11,682			(2,057	)
Accumulated deficit		(4,306,696	)		(1,207,862	)
Total stockholders’ equity		3,175,270			1,518,914
Total liabilities and stockholders’ equity	$	3,542,380		$	1,722,792

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	Three and Nine Months Ended September 30,
	2017		2016
	(in thousands)
Convertible voting preferred stock, Series A, A-1 and B		—		146,962
Convertible non-voting preferred stock, Series C		—		16,000
Stock options		31,106		46,198
Unvested RSUs not subject to a performance condition		169,719		188
Shares subject to repurchase		—		540


	Three and Six Months Ended June 30,
	2023	2022
	(in thousands)
Stock options	2,387	4,022
Unvested RSUs and RSAs	148,390	94,323
Convertible Notes (if-converted)	89,379	89,379

	Class A Outstanding Restricted Stock			Class B Outstanding Restricted Stock			Weighted- Average Grant Date Fair Value per Restricted Stock
	(in thousands, except per share data)
Unvested at December 31, 2016		152,114			28,581		$	15.50
Granted⁽¹⁾		50,770			—		$	16.78
Vested		(34,577	)		(16,777	)	$	14.94
Forfeited		(10,026	)		(366	)	$	17.15
Unvested at September 30, 2017		158,281			11,438		$	15.95

	Total
	(in thousands)
Cash	$	6,919
Trademarks		2,700
Technology		22,400
Customer relationships		11,800
Goodwill		103,995
Net deferred tax liability		(13,520	)
Other assets acquired and liabilities assumed, net		5,296
Total	$	139,590

	Goodwill
	(in thousands)
Balance as of December 31, 2016	$	319,137
Goodwill acquired		282,483
Foreign currency translation		11,203
Balance as of September 30, 2017	$	612,823


	December 31, 2016									As of December 31, 2022
	Weighted- Average Remaining Useful Life - Years		Gross Carrying Amount		Accumulated Amortization		Net			Weighted- Average Remaining Useful Life - Years	Gross Carrying Amount		Accumulated Amortization		Net
	(in thousands except years)									(in thousands, except years)
Domain names		3.0	$	5,000	$	2,157	$	2,843	Domain names	4.0	$	954	$	(690)	$	264
Trademarks		2.6		3,072		1,829		1,243	Trademarks	1.2	800		(478)		322
Non-compete agreements		0.3		243		226		17
Acquired developed technology		4.1		83,137		20,569		62,568
Technology									Technology	3.1	340,375		(178,427)		161,948
Customer relationships		1.0		3,752		2,569		1,183	Customer relationships	5.7	21,000		(6,641)		14,359
Patents		9.2		9,450		1,322		8,128	Patents	9.1	39,373		(14,912)		24,461
Other									Other	1.0	$	6,000	$	(2,874)	$	3,126
			$	104,654	$	28,672	$	75,982			$	408,502	$	(204,022)	$	204,480

	Estimated Amortization
	(in thousands)
Remainder of 2017	$	10,222
2018		39,723
2019		35,897
2020		29,515
2021		22,588
Thereafter		26,667
Total	$	164,612


	Estimated Amortization
	(in thousands)
Remainder of 2023	$	38,047
2024	64,047
2025	47,972
2026	23,543
2027	14,163
Thereafter	14,899
Total	$	202,671


	As of June 30, 2023						As of December 31, 2022
	Principal		Unamortized Debt Issuance Costs		Net Carrying Amount		Principal		Unamortized Debt Issuance Costs		Net Carrying Amount

	(in thousands)
2025 Notes	$	284,105	$	(1,197)	$	282,908	$	284,105	$	(1,521)	$	282,584
2026 Notes	838,482		(4,052)		834,430		838,482		(4,698)		833,784
2027 Notes	1,150,000		(8,177)		1,141,823		1,150,000		(9,239)		1,140,761
2028 Notes	1,500,000		(13,205)		1,486,795		1,500,000		(14,609)		1,485,391
Total	$	3,772,587	$	(26,631)	$	3,745,956	$	3,772,587	$	(30,067)	$	3,742,520

	Operating Leases
	(in thousands)
Remainder of 2017	$	10,221
2018		49,415
2019		58,211
2020		58,531
2021		57,089
Thereafter		190,106
Total minimum lease payments	$	423,573

	Financing Leases
	(in thousands)
Remainder of 2017	$	1,170
2018		4,726
2019		4,796
2020		4,947
2021		5,091
Thereafter		25,953
Total minimum lease payments	$	46,683

	Minimum Commitment
	(in thousands)
Remainder of 2017	$	137,486
2018		535,666
2019		603,787
2020		675,000
2021		750,000
Thereafter		33,333
Total minimum commitments	$	2,735,272

	Fair Value
	September 30, 2017		December 31, 2016
	(in thousands)
Cash and cash equivalents
Cash	$	186,056	$	150,121
U.S. government securities		50,260	—
U.S. government agency securities		81,238	—
Total cash and cash equivalents	$	317,554	$	150,121
Marketable securities
U.S. government securities	$	1,448,732	$	505,333
U.S. government agency securities		531,782		331,914
Total marketable securities	$	1,980,514	$	837,247


	June 30, 2023
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Estimated Fair Value
	(in thousands)
Cash	$	1,138,085	$	—	$	—	$	1,138,085
Level 1 securities:
U.S. government securities	1,843,481		50		(15,175)		1,828,356
U.S. government agency securities	233,783		4		(866)		232,921
Level 2 securities:
Corporate debt securities	238,807		14		(1,186)		237,635
Commercial paper	144,678		—		—		144,678
Certificates of deposit	58,887		—		—		58,887
Total	$	3,657,721	$	68	$	(17,227)	$	3,640,562


	December 31, 2022
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Estimated Fair Value
	(in thousands)
Cash	$	1,325,946	$	—	$	—	$	1,325,946
Level 1 securities:
U.S. government securities	1,630,224		109		(9,484)		1,620,849
U.S. government agency securities	175,269		19		(188)		175,100
Level 2 securities:
Corporate debt securities	309,942		32		(1,462)		308,512
Commercial paper	290,589		—		—		290,589
Certificates of deposit	157,965		—		(1)		157,964
Total	$	3,889,935	$	160	$	(11,135)	$	3,878,960

	Changes in Accumulated Other Comprehensive Income (Loss) by Component
	Marketable Securities			Foreign Currency Translation			Total
	(in thousands)
Balance at December 31, 2016	$	44		$	(2,101	)	$	(2,057	)
OCI before reclassifications⁽¹⁾		(422	)		14,150			13,728
Amounts reclassified from AOCI ⁽²⁾		11			—			11
Net current period OCI		(411	)		14,150			13,739
Balance at September 30, 2017	$	(367	)	$	12,049		$	11,682


	As of June 30, 2023		As of December 31, 2022
	(in thousands)
Property and equipment, net:
United States	$	234,292	$	214,857
United Kingdom	67,521		36,774
Rest of world (1)	28,197		20,146
Total property and equipment, net	$	330,010	$	271,777

	As of September 30, 2017		As of December 31, 2016
	(in thousands)
Property and equipment, net:
United States	$	126,232	$	98,254
Rest of the world ⁽¹⁾		16,880		2,331
Total property and equipment, net	$	143,112	$	100,585

~~(1)~~	~~North America includes Mexico and the Caribbean.~~
		Quarterly Average Daily Active Users (in millions)
		Global


			YOY growth:			9%			7%			6%			5%			6%			7%			6%			5%			4%			4%			3%			3%			2%						12%			10%			10%			9%			10%			11%			11%			10%			10%			11%			12%			10%			9%

~~(1)~~	~~North America includes Mexico and the Caribbean.~~
		Quarterly Average Revenue per User
		Global

	Total		Less than 1 Year (Remainder of 2017)		1-3 Years (2018 and 2019)		3-5 Years (2020 and 2021)		After 5 Years (Thereafter)
	(in thousands)
Operating leases	$	423,573	$	10,221	$	107,626	$	115,620	$	190,106
Financing leases		46,683		1,170		9,522		10,038		25,953
Hosting commitments		2,706,266		126,187		1,121,746		1,425,000		33,333
Other commitments		29,006		11,299		17,707		—		—
Total contractual commitments	$	3,205,528	$	148,877	$	1,256,601	$	1,550,658	$	249,392

		Incorporated by Reference
Exhibit Number	Description	Schedule Form	File Number	Exhibit	Filing Date

10.1+	Offer Letter, by and between Snap Inc. and Michael O’Sullivan, dated July 24, 2017.

10.2+	Advisor Agreement, by and between Snap Inc. and Christopher T. Handman, dated July 20, 2017.

10.3#	Amendment to Google Cloud Platform License Agreement, among and between Snap Inc., Snap Group Limited and Google Inc., dated September 18, 2017.

10.4#	Google Cloud Platform Discount Addendum, among and between Snap Inc., Snap Group Limited and Google Inc., dated September 29, 2017.

10.5	Forms of global restricted stock unit grant notice and award agreement under the Snap Inc. 2017 Equity Incentive Plan.	S-8	333-219899	10.1	August 10, 2017

10.6+	Option Agreement Amendment, by and between Snap Inc. and Tim Sehn, dated November 7, 2017.

10.7+	Amended and Restated Offer Letter, by and between Snap Inc. and Lara Sweet, dated November 6, 2017.

31.1	Certification of the Chief Executive Officer of Snap Inc. pursuant to Rule 13a-14/Rule 15d-14(d) under the Securities Exchange Act of 1934, as amended.

31.2	Certification of the Chief Financial Officer of Snap Inc. pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.

32.1*	Certification of the Chief Executive Officer and Chief Financial Officer of Snap Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

	~~SNAP INC.~~
			SNAP INC.
~~Date: November 7, 2017~~		~~/s/ Andrew Vollero~~
Date: July 25, 2023			~~Andrew Vollero~~ /s/ Derek Andersen
	Derek Andersen
		Chief Financial Officer
			(Principal Financial Officer)

Date: ~~November 7, 2017~~ July 25, 2023		/s/ ~~Lara Sweet~~ Rebecca Morrow
			~~Lara Sweet~~ Rebecca Morrow
			Chief Accounting Officer
			(Principal Accounting Officer)

Number of Shares Outstanding

Class A common stock, $0.00001 par value

~~863,056,520~~1,368,643,619 shares outstanding as of ~~October 31, 2017~~
July 21, 2023

Class B common stock, $0.00001 par value

~~125,316,628~~22,537,089 shares outstanding as of ~~October 31, 2017~~
July 21, 2023

Class C common stock, $0.00001 par value

~~215,887,848~~231,626,943 shares outstanding as of ~~October 31, 2017~~
July 21, 2023