What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-05 compared with 2024-02-07 · 130 added, 102 removed, 356 unchanged (39% of the section changed)

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Financial Results

• Revenue was $4.6 billion in 2023, compared to $4.6 billion in 2022.

• Total costs and expenses were $6.0 billion in 2023, compared to $6.0 billion in 2022.

• Net loss was $1.3 billion in 2023, compared to $1.4 billion in 2022 .

• Adjusted EBITDA was $161.6 million in 2023, compared to $377.6 million in 2022.

• Diluted net loss per share was $(0.82) in 2023, compared to $(0.89) in 2022.

• Cash provided by operating activities was $246.5 million in 2023, compared to $184.6 million in 2022.

• Free Cash Flow was $34.8 million in 2023 , compared to $55.3 million in 2022 .

• Revenue was $5.4 billion, compared to $4.6 billion in the prior year, an increase of 16% year-over-year.

• Total costs and expenses were $6.1 billion, compared to $6.0 billion in the prior year.

• Net loss was $0.7 billion, compared to $1.3 billion in the prior year .

• Adjusted EBITDA was $508.6 million, compared to $161.6 million in the prior year.

• Diluted net loss per share was $(0.42), compared to $(0.82) in the prior year.

• Cash provided by operating activities was $413.5 million, compared to $246.5 million in the prior year.

• Free Cash Flow was $218.7 million, compared to $34.8 million in the prior year.

• Cash, cash equivalents, and marketable securities were $3.4 billion as of December 31, 2024.

Business and Macroeconomic Conditions

In 2022, we realigned our priorities and we expect to continue to focus on our three strategic priorities:

We periodically make changes to our business and priorities.

In recent years, we conducted a strategic reprioritization to realign our focus on three strategic priorities:

growing our community and deepening their engagement with our products, accelerating and diversifying our revenue growth, and investing in the future of augmented reality.

We believe that we can be successful in our current operating environment, with various macroeconomic factors impacting our business, by rigorously prioritizing our investments and continuing to engage our community with our products while driving success for our advertising partners.

However, the impact of this strategic reprioritization is difficult to predict.

Macroeconomic factors such as labor shortages and disruptions, supply chain disruptions, inflation, changes in interest and foreign currency exchange rates, banking instability, and other risks and uncertainties continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may cause our advertisers to halt or decrease advertising spending on our platform.

However, the impact of our strategic reprioritization and recent restructurings is difficult to predict.

Macroeconomic factors such as labor shortages and disruptions, supply chain disruptions, inflation, changes in interest and foreign currency exchange rates, banking instability, tariffs, war and other armed conflict, and other risks and uncertainties have in the past and may continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may cause our advertisers to halt or decrease advertising spending on our platform.

Such macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, advertising ecosystem, our customers and their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations.

In addition, competition for advertising dollars has increased and demand growth on our advertising platform has slowed.

We expect to continue to experience increased competition, which may result in reduced advertising demand, and could adversely affect our revenue growth, pricing, business, financial condition, and results of operations.

Demand has also been disrupted by recent changes we made to our advertising platform, and, in the future, we may

continue to experience adverse impacts to our revenue growth as a result of these changes.

We expect to continue to experience increased competition, which may result in reduced advertising demand, and

could adversely affect our revenue growth, pricing, business, financial condition, and results of operations.

Demand has also been disrupted by recent changes we made to our advertising platform, and, in the future, we may continue to experience adverse impacts to our revenue growth as a result of these changes.

Our revenue, particularly in North America, has further been impacted by platform policy changes and restrictions that affected our targeting, measurement, and optimization capabilities, and in turn our ability to measure the effectiveness of advertisements on our services.

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Trends in User Metrics

We define a DAU as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period.

We define a DAU as a registered and logged-in Snapchat user who visits Snapchat through our applications or websites at least once during a defined 24-hour period.

We define ARPU as quarterly revenue divided by the average DAUs.

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31 % 27 % 25 % 21 % 19 % 19 % 16 % 16 % 17 %

In the year ended December 31, 2023, we recorded revenue of $4.6 billion compared to $4.6 billion for the year ended December 31, 2022.

We recorded revenue of $5.4 billion for the year ended December 31, 2024, compared to revenue of $4.6 billion for the year ended December 31, 2023, an increase of 16% year-over-year.

We monetize our business primarily through advertising.

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Snap Ads may be subject to revenue sharing arrangements between us and the content partner.

We also generate revenue from subscriptions and sales of hardware products, net of allowances for returns.

We also generate revenue from subscriptions and sales of hardware products.

Sales of hardware products are reported net of allowances for returns.

Cost of Revenue

Cost of revenue consists of payments to third-party infrastructure partners for hosting our products, which include expenses related to storage, computing, and bandwidth costs, and payments for content, developer, and advertiser partner costs.

In addition, cost of revenue includes third-party selling costs and personnel-related costs, including salaries, benefits, and stock-based compensation expenses.

Cost of revenue includes payments for infrastructure, content and developer partner costs, and advertiser partner and other costs.

Infrastructure costs primarily consist of payments to th ird-party infrastructure partners for hosting our products, which include expenses related to storage, computing, and bandwidth.

Content and developer partner costs primarily consist of fees paid to our content creators and publisher partners who share content on our platform through revenue sharing arrangements.

Under these arrangements, we pay a portion of the fees we receive from advertisers for Snap Ads that are displayed within partner content on Snapchat.

Advertising partner and other costs primarily consist of payments to third-party partners for fulfillment services, credit card and other transaction processing fees, and other expenses directly related to providing our services.

Cost of revenue includes personnel-related costs, including salaries, benefits, and stock-based compensation expense for our employees engaged in the delivery of our services.

Cost of revenue also includes facilities and other supporting overhead costs, including depreciation and amortization, and inventory costs.

Research and Development Expenses

Research and development expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our engineers, designers, and other employees engaged in the research and development of our products.

In addition, research and development expenses include facilities and other supporting overhead costs, including depreciation and amortization.

Research and development expenses primarily consist of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our engineers, designers, and other employees engaged in the research and development of our products.

Research and development expenses also include facilities and other supporting overhead costs, including depreciation and amortization.

Research and development costs are expensed as incurred.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel-related costs, including salaries, benefits, commissions, and stock-based compensation expense for our employees engaged in sales and sales support, business development, media, marketing, corporate partnerships, and customer service functions.

Sales and marketing expenses primarily consist of personnel-related costs, including salaries, benefits, commissions, and stock-based compensation expense for our employees engaged in sales and sales support, business development, media, marketing, corporate partnerships, and customer service functions.

Sales and marketing expenses also include costs incurred for advertising, market research, tradeshows, branding, marketing, promotional expense, and public relations, as well as facilities and other supporting overhead costs, including depreciation and amortization.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, information technology, human resources, and other administrative teams.

General and administrative expenses primarily consist of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, information technology, human resources, and other administrative teams.

General and administrative expenses also include facilities and supporting overhead costs, including depreciation and amortization, and external professional services.

Interest Income

Interest income consists primarily of interest earned on our cash, cash equivalents, and marketable securities.

Interest income primarily consists of interest earned on our cash, cash equivalents, and marketable securities.

Interest Expense

Interest expense consists primarily of interest expense associated with convertible notes and commitment fees related to our revolving credit facility.

Interest expense primarily consists of interest expense associated with convertible notes and commitment fees related to our revolving credit facility.

Other Income (Expense), Net

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We are subject to income taxes in the United States and numerous foreign jurisdictions.

These foreign jurisdictions have different statutory tax rates than the United States.

Additionally, certain of our foreign earnings may also be taxable in the United States.

Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to domestic income, use of tax credits, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

Our effective tax rates will vary depending on changes in the valuation of our deferred tax assets and liabilities, the relative proportion of foreign to domestic income, use of tax credits, and changes in tax laws.

Adjusted EBITDA

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Revenue for the year ended December 31, 2024 increased $755.3 million compared to the same period in 2023.

In 2023, subscription revenue increased, partially offset by a reduction in advertiser spend and auction-based advertising demand.

The increase in advertising revenue was primarily driven by an increase in global advertising impressions volume of approximately 16% compared to the prior year, partially offset by a decrease in the cost per advertising impression of approximately 4%.

The increase in global advertising impressions volume was driven by expanded advertising delivery within Spotlight and Creator Stories and the decrease in the cost per advertising impression was due to inventory growth exceeding advertising demand growth.

The increase in revenue was also driven by higher subscription revenue due to an increase in the number of subscribers.

Cost of Revenue

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Cost of revenue for the year ended December 31, 2024 increased $360.1 million compared to the same period in 2023.

The increase was primarily driven by increased infrastructure costs attributable to DAU growth and investments in machine learning and AI, partially offset by lower content and advertising partner costs and $20.6 million relating to restructuring charges in the prior period.

The increase was primarily driven by a $269.1 million increase in infrastructure costs, attributable to DAU growth of

9% compared to the prior year as well as investments in machine learning and AI.

The increase in infrastructure costs was partially offset by improvements to our cloud infrastructure unit costs resulting from engineering efficiencies and pricing improvements.

Research and Development Expenses

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Research and development expenses for the year ended December 31, 2024 decreased $219.2 million compared to the same period in 2023.

The decrease was primarily driven by lower cash- and stock-based compensation expenses due to decreased headcount compared to the prior period and $78.9 million relating to restructuring charges in the prior period.

The decrease was primarily driven by lower employee compensation, which included a $209.2 million decrease in stock-based compensation expenses.

The lower employee compensation was due to a decrease in research and development headcount compared to the prior year as well as the diminished impact of refresh equity grants relative to the prior year.

The decrease was partially offset by $38.8 million in restructuring charges related to the 2024 restructuring.

Sales and Marketing Expenses

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2024 compared to 2023

Sales and marketing expenses for the year ended December 31, 2023 increased $3.3 million compared to the same period in 2022.

The increase was primarily driven by higher stock-based compensation expenses and increased marketing investments , partially offset by lower cash-based compensation expenses.

The prior period included higher amortization expense from our revision of the useful lives of certain customer relationships and trademarks and $30.8 million relating to restructuring charges .

Sales and marketing expenses for the year ended December 31, 2024 decreased $58.4 million compared to the same period in 2023.

The decrease was primarily driven by lower employee compensation, which included a $39.0 million decrease in stock-based compensation expenses.

The lower employee compensation was primarily due to a decrease in sales and marketing headcount compared to the prior year.

The decrease was partially offset by increased marketing investments, which included a $32.8 million increase in advertising costs, and $19.9 million in restructuring charges related to the 2024 restructuring.

General and Administrative Expenses

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2024 compared to 2023

General and administrative expenses for the year ended December 31, 2023 decreased $95.8 million compared to the same period in 2022.

The decrease was primarily driven by lower personnel expenses, including cash- and stock-based compensation expenses compared to the prior period, and $58.7 million relating to restructuring charges in the prior period.

General and administrative expenses for the year ended December 31, 2024 increased $61.7 million compared to the same period in 2023.

The increase was primarily driven by higher spend on external professional services, increased facilities costs, and $10.3 million in restructuring charges related to the 2024 restructuring.

The increase was partially offset

by a $31.2 million decrease in stock-based compensation expenses, driven by a decrease in general and administrative headcount compared to the prior year.

Interest Income

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(dollars in thousands)

(NM = Not Meaningful)

Interest Income $ 168,394 $ 58,597 $ 5,199 $ 109,797 187 % $ 53,398 NM

Interest Income $ 153,466 $ 168,394 $ 58,597 $ (14,928) (9) % $ 109,797 187 %

2024 compared to 2023

Interest income for the year ended December 31, 2023 increased $109.8 million compared to the same period in 2022, primarily due to higher interest rates on U.S.

government-backed securities, offset by a lower overall invested cash balance.

Interest income for the year ended December 31, 2024 decreased $14.9 million compared to the same period in 2023, primarily driven by lower invested cash balances throughout the year and lower interest rates from macroeconomic events.

Interest Expense

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2024 compared to 2023

Interest expense for the year ended December 31, 2023 increased $0.6 million compared to the same period in 2022.

Interest expense for all periods consists primarily of amortization of debt issuance costs and contractual interest expense.

Interest expense for the year ended December 31, 2024 decreased $0.5 million compared to the same period in 2023.

Interest expense for all periods primarily consists of amortization of debt issuance costs and contractual interest expense.

Other Income (Expense), Net

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Other expense, net for the year ended December 31, 2024 was $16.8 million, compared to other expense, net of $42.4 million for the same period in 2023 .

Other expense, net for the current year was primarily a result of $28.4 million in unrealized losses on strategic investments and $6.7 million in total losses on publicly traded securities classified as marketable securities.

Other expense, net in the comparable period in 2022 was primarily a result of $101.3 million in total losses on publicly traded securities primarily classified as marketable securities, offset by $19.9 million in unrealized gains and $45.9 million in realized gains on strategic investments.

Other expense, net for the current year was primarily the result of $7.4 million in net losses on strategic investments and a $6.7 million net loss on extinguishment associated with the Note Repurchases, which is discussed within Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Other expense, net in the prior year was primarily the result of $27.1 million in net losses on strategic investments and $6.7 million in net losses on publicly traded securities classified as marketable securities.

Income Tax Benefit (Expense)

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Net loss for the year ended December 31, 2024 was $697.9 million, compared to $1,322.5 million for the same period in 2023.

The decrease in net loss was primarily the result of the changes in revenues and expenses discussed above.

Adjusted EBITDA for the year ended December 31, 2024 was $508.6 million, compared to $161.6 million for the same period in 2023.

The decrease in Adjusted EBITDA was attributable to increased cost of revenue and sales and marketing expenses, partially offset by decreased research and development and general and administrative expenses.

The increase in Adjusted EBITDA was attributable to increased revenue, lower research and development expenses, and lower sales and marketing expenses, partially offset by higher cost of revenue and general and administrative expenses.

For a discussion of the limitations associated with using Adjusted EBITDA rather than GAAP measures, and a reconciliation of this measure to net loss, see “Non-GAAP Financial Measures.”

Liquidity and Capital Resources

Capital Resources

Cash, cash equivalents, and marketable securities were $3.4 billion as of December 31, 2024, primarily consisting of cash on deposit with banks and highly liquid investments in U.S.

government and agency securities, publicly traded equity securities, corporate debt securities, certificates of deposit, and commercial paper.

government and agency securities, money market funds, corporate debt securities, certificates of deposit, commercial paper, and publicly traded equity securities.

Our primary source of liquidity is cash generated through financing activities.

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We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position.

In October 2023, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.

During the fourth quarter of 2023, we repurchased 18.4 million shares of our Class A common stock for an aggregate of $189.4 million, including costs associated with the repurchases.

As of December 31, 2023, the remaining availability under the stock repurchase authorization was $310.8 million.

As of December 31, 2024, approximately 3% of our cash, cash equivalents, and marketable securities was held outside the United States.

These amounts were primarily held in Canada and the United Kingdom and are utilized to fund our international 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.

In May 2022, we entered into a five-year senior unsecured revolving credit facility, or Credit Facility, with certain lenders that allows us to borrow up to $1.05 billion to fund working capital and general corporate-purpose expenditures.

Loans bear interest, at our option, at a rate equal to (i) a term secured overnight financing rate, or SOFR, plus 0.75% or the

base rate, if selected by us, for loans made in U.S.

Loans bear interest, at our option, at a rate equal to (i) a term secured overnight financing rate, or SOFR, plus 0.75% or the base rate, if selected by us, for loans made in U.S.

dollars, (ii) the Sterling overnight index average plus 0.7826% for loans made in Sterling, or (iii) foreign indices as stated in the credit agreement plus 0.75% for loans made in other permitted foreign currencies.

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As of December 31, 2024, we had $80.7 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.

Material Cash Requirements

Convertible Notes

In May 2024, we entered into a purchase agreement for the sale of an aggregate of $750.0 million principal amount of convertible senior notes due in 2030.

The net proceeds from the issuance of the 2030 Notes were $671.5 million, net of debt issuance costs and the 2030 Capped Call Transactions discussed further in Note 7 in our consolidated financial statements.

The 2030 Notes mature on May 1, 2030 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was not satisfied as of December 31, 2024 and as a result, the 2030 Notes will not be eligible for optional conversion during the first quarter of 2025.

As of December 31, 2024, the outstanding principal of the 2030 Notes was $750.0 million.

In February 2022, we entered into a purchase agreement for the sale of an aggregate of $1.50 billion principal amount of convertible senior notes due in 2028.

The net proceeds from the issuance of the 2028 Notes were $1.31 billion, net of debt issuance costs and the 2028 Capped Call Transactions discussed further in Note 7.

The net proceeds from the issuance of the 2028 Notes were $1.31 billion, net of debt issuance costs and the 2028 Capped Call Transactions discussed further in Note 7 in our consolidated financial statements.

The 2028 Notes mature on March 1, 2028 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was not satisfied as of December 31, 2024 and as a result, the 2028 Notes will not be eligible for optional conversion during the first quarter of 2025.

As of December 31, 2024, the outstanding principal of the 2028 Notes was $1.50 billion.

In April 2021, we entered into a purchase agreement for the sale of an aggregate of $1.15 billion principal amount of convertible senior notes due in 2027.

The net proceeds from the issuance of the 2027 Notes were $1.05 billion, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 7.

The net proceeds from the issuance of the 2027 Notes were $1.05 billion, net of debt issuance costs and the 2027 Capped Call Transactions discussed further in Note 7 in our consolidated financial statements.

The 2027 Notes mature on May 1, 2027 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was not satisfied as of December 31, 2024 and as a result, the 2027 Notes will not be eligible for optional conversion during the first quarter of 2025.

In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025, of which $284.1 million remains outstanding as of December 31, 2023.

The net proceeds from the issuance of the 2025 Notes were $888.6 million, net of debt issuance costs and the 2025 Capped Call Transactions discussed further in Note 7.

As of December 31, 2024, the outstanding principal of the 2027 Notes was $1.15 billion.

In April 2020, we entered into a purchase agreement for the sale of an aggregate of $1.0 billion principal amount of convertible senior notes due in 2025.

The net proceeds from the issuance of the 2025 Notes were $888.6 million, net of debt issuance costs and the 2025 Capped Call Transactions discussed further in Note 7 in our consolidated financial statements.

The 2025 Notes mature on May 1, 2025 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2025 Notes will not be eligible for optional conversion during the first quarter of 2024.

In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026, of which $838.5 million remains outstanding as of December 31, 2023.

The net proceeds from the issuance of the 2026 Notes were $1.15 billion, net of debt issuance costs and the 2026 Capped Call Transactions discussed further in Note 7.

The sale price requirement for conversion was not satisfied as of December 31, 2024 and as a result, the 2025 Notes will not be eligible for optional conversion until February 1, 2025.

On or after February 1, 2025, the 2025 Notes are convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

The 2025 Notes are convertible at a conversion rate of 46.1233 shares of Class A common stock per $1,000 principal amount of 2025 Notes, which is equivalent to a conversion price of approximately $21.68 per share of our Class A common stock.

As of December 31, 2024, the outstanding principal of the 2025 Notes was $36.2 million.

In August 2019, we entered into a purchase agreement for the sale of an aggregate of $1.265 billion principal amount of convertible senior notes due in 2026.

The net proceeds from the issuance of the 2026 Notes were $1.15 billion, net of debt issuance costs and the 2026 Capped Call Transactions discussed further in Note 7 in our consolidated financial statements.

The 2026 Notes mature on August 1, 2026 unless repurchased, redeemed, or converted in accordance with their terms prior to such date.

The sale price requirement for conversion was not satisfied as of December 31, 2023 and as a result, the 2026 Notes will not be eligible for optional conversion during the first quarter of 2024.

The sale price requirement for conversion was not satisfied as of December 31, 2024 and as a

result, the 2026 Notes will not be eligible for optional conversion during the first quarter of 2025.

As of December 31, 2024, the outstanding principal of the 2026 Notes was $249.8 million.

Contractual Commitments

We have non-cancelable contractual agreements primarily related to the hosting of our data processing, storage, and other computing services, as well as lease, content and developer partner, and other commitments.

We had $4.9 billion in commitments as of December 31, 2024, primarily due within three years.

For additional discussion on our leases, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Stock Repurchases

In October 2024, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock.

We did not repurchase any shares under this program in the fourth quarter of 2024.

Accordingly, as of December 31, 2024, the remaining availability under the stock repurchase authorization was $500.0 million.

Contingencies

We are involved in claims, lawsuits, 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.

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.

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We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position.

As of December 31, 2023, approximately 3% of our cash, cash equivalents, and marketable securities was held outside the United States.

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.

Sources and Uses of Cash and Related Trends

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

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2024 2023 2022

(dollars in thousands)

(in thousands)

Net cash provided by (used in) operating activities $ 413,480 $ 246,521 $ 184,614

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Net Cash Provided by (Used in) Operating Activities

2023 compared to 2022

Net cash provided by operating activities was $246.5 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $184.6 million for the year ended December 31, 2022, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $1.3 billion and depreciation and amortization expense of $168.4 million.

Net cash provided by operating activities for the year ended December 31, 2023 was also driven by a $95.0 million increase in accounts payable and a $62.1 million increase in accrued expenses and other current liabilities, primarily due to the timing of payments, partially offset by a $98.1 million increase in accounts receivables due to the timing of collections and an increase in billings in the period.

Net cash provided by operating activities was $413.5 million for the year ended December 31, 2024, compared to net cash provided by operating activities of $246.5 million for the year ended December 31, 2023, resulting primarily from our net loss, adjusted for non-cash items, including stock-based compensation expense of $1,041.0 million and depreciation and amortization expense of $158.1 million.

Net cash provided by operating activities for the year ended December 31, 2024 was also driven by a $150.4 million increase in accrued expenses and other current liabilities, offset by a

$100.7 million decrease in accounts payable and a $94.0 million increase in accounts receivables due to the timing of collections and an increase in billings in the period.

Net Cash Provided by (Used in) Investing Activities

2023 compared to 2022

Net cash provided by investing activities was $571.0 million for the year ended December 31, 2023, compared to net cash used in investing activities of $1.1 billion for the year ended December 31, 2022.

Our investing activities in the year ended December 31, 2023 consisted primarily of maturities of marketable securities of $2.4 billion and sales of marketable securities of $459.5 million, partially offset by purchases of marketable securities of $2.0 billion and purchases of property and equipment of $211.7 million.

Our investing activities for the year ended December 31, 2022 consisted of purchases of marketable securities of $3.5 billion, partially offset by maturities of marketable securities of $2.5 billion.

Net cash used in investing activities was $717.1 million for the year ended December 31, 2024, compared to net cash provided by investing activities of $571.0 million for the year ended December 31, 2023.

Our investing activities for the year ended December 31, 2024 primarily consisted of purchases of marketable securities of $2.3 billion and purchases of property and equipment of $194.8 million, partially offset by maturities of marketable securities of $1.4 billion and sales of marketable securities of $354.3 million.

Our investing activities for the year ended December 31, 2023 primarily consisted of maturities of marketable securities of $2.4 billion and sales of marketable securities of $459.5 million, partially offset by purchases of marketable securities of $2.0 billion and purchases of property and equipment of $211.7 million.

Net Cash Provided by (Used in) Financing Activities

2023 compared to 2022

Net cash used in financing activities was $458.8 million for the year ended December 31, 2023, compared to net cash provided by financing activities of $306.7 million for the year ended December 31, 2022.

Our financing activities for the year ended December 31, 2023 consisted primarily of $189.4 million of repurchases of our Class A common stock and $270.4 million of deferred payments for acquisitions completed in prior periods.

Our financing activities for the year ended December 31, 2022 consisted primarily of net proceeds of $1.5 billion from the issuance of the 2028 Notes, offset by the purchase of the 2028 Capped Call Transactions of $177.0 million and repurchases of our Class A common stock for an aggregate of $1.0 billion.

Net cash used in financing activities was $428.6 million for the year ended December 31, 2024, compared to net cash used in financing activities of $458.8 million for the year ended December 31, 2023.

Our financing activities for the year ended December 31, 2024 primarily consisted of the Note Repurchases for $859.0 million, repurchases of our Class A common stock for $311.1 million, and the purchase of the 2030 Capped Call Transactions for $68.9 million, partially offset by the issuance of the 2030 Notes for net proceeds of $740.4 million and the termination of the 2025 Capped Call Transactions for proceeds of $62.7 million.

Our financing activities for the year ended December 31, 2023 primarily consisted of $189.4 million of repurchases of our Class A common stock and $270.4 million of deferred payments for acquisitions completed in prior periods.

Free Cash Flow

2023 compared to 2022

Free Cash Flow was $218.7 million for the year ended December 31, 2024, compared to $34.8 million for the year ended December 31, 2023.

Free Cash Flow in all periods was composed of net cash provided by operating activities, resulting primarily from net loss, adjusted for non-cash items and changes in working capital.

Free Cash Flow also

included purchases of property and equipment of $211.7 million for the year ended December 31, 2023, compared to $129.3 million for the year ended December 31, 2022.

Free Cash Flow also included purchases of property and equipment of $194.8 million for the year ended December 31, 2024, compared to $211.7 million for the year ended December 31, 2023.

See “Non-GAAP Financial Measures.”

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Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss);

excluding interest income;

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), excluding interest income;

interest expense;

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We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.

We believe that both Free Cash Flow and Adjusted EBITDA provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making.

transparency with respect to key metrics used by our management for financial and operational decision-making.

We are presenting the non-GAAP measures of Free Cash Flow and Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.

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Adjusted EBITDA $ 508,605 $ 161,577 $ 377,573

(1) Restructuring charges in 2024 are primarily related to cash severance, stock-based compensation expense, and other charges associated with the 2024 restructuring.

Restructuring charges in 2023 relating to the wind down of our AR Enterprise business were composed primarily of cash severance, stock-based compensation expense, and charges related to the revision of the useful lives and disposal of certain acquired intangible assets.

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See Note 18 to our consolidated financial statements included in the “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for more information.

Contingencies

We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business.

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.

We had $3.0 billion in commitments, as of December 31, 2023, primarily due within three years.

For additional discussion on our leases, see Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

We prepare our financial statements in accordance with GAAP.

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For the periods presented, revenue for arrangements where we are the agent was not material.

Business Combinations and Valuation of Goodwill and Other Acquired Intangible Assets

We estimate the fair value of assets acquired and liabilities assumed in a business combination.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement.

Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, useful lives, and discount rates.

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

During the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

On the conclusion of the measurement period or final determination of the

values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Valuation of Assets

The valuation and impairment assessment of certain assets requires significant judgment and assumptions such as the estimation of future cash flows, discount rates, useful lives, and market data of comparable assets, among others.

We measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our strategic investments in privately held equity securities without readily determinable fair values.

We adjust the carrying value of these equity securities to fair value upon observable transactions for identical or similar investments of the same issuer or upon impairment.

All strategic investments are reviewed periodically for impairment.

When indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using a market approach or an income approach, which requires judgment and the use of unobservable inputs, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others.

We also evaluate the recoverability of our property and equipment, operating lease right-of-use assets, and intangible assets, excluding goodwill, when events or changes indicate the carrying amount of an asset may not be recoverable.

Events and changes in circumstances considered in determining whether the carrying value of long-lived assets may not be recoverable include significant changes in performance relative to expected operating results, significant changes in asset use, and significant negative industry or economic trends and changes in our business strategy.

Recoverability of these assets is measured by comparison of their carrying amount to future undiscounted cash flows to be generated.

If impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Loss Contingencies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis