What changed in this filing

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Item 1A. Risk Factors

2020-10-21 compared with 2020-07-22 · 94 added, 94 removed, 865 unchanged (18% of the section changed)

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If we fail to retain current users or add new users, or if our users engage less with Snapchat, our business would be seriously harmed.

We had 238 million DAUs on average in the quarter ended June 30, 2020.

We had 249 million DAUs on average in the quarter ended September 30, 2020.

We view DAUs as a critical measure of our user engagement, and adding, maintaining, and engaging DAUs have been and will continue to be necessary.

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For example, in 2018, we believe our DAUs declined primarily due to changes in the design of our application and continued performance issues with the Android version of our application.

In addition, if and when we achieve maximum market penetration rates among younger users in developed markets who use smartphones with iOS operating systems, future growth in DAUs will need to come from older users, developing markets, or users with Android operating systems, which may not be possible or may be more difficult or time consuming for us to achieve.

In addition, as we achieve maximum market penetration rates among younger users in developed markets, future growth in DAUs will need to come from older users in those markets, developing markets, or users with Android operating systems, which may not be possible or may be more difficult or time consuming for us to achieve.

While we may experience periods when our DAUs increase due to products and services with short-term popularity, or due to a lack of other events that compete for our users’ attention, such as during the recent COVID-19 pandemic, we may not always be able to attract new users, retain existing users, or maintain or increase the frequency and duration of their engagement if current or potential new users do not perceive our products to be fun, engaging, and useful.

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advertisers and partners display ads that are untrue, offensive, or otherwise fail to follow our guidelines;

our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, or litigation, including settlements or consent decrees, that adversely affect the user experience;

our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience;

technical or other problems frustrate the user experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner;

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The FCC order repealing the open internet rules went into effect in June 2018.

The core aspects of that order have been upheld by the United States Court of Appeals for the District of Columbia Circuit, but remain open to review by the United States Supreme Court.

While a number of states have adopted or are considering legislation or executive actions to impose state-level open internet rules, those actions have been or can be expected to be challenged in court.

The core aspects of that order have been upheld by the United States Court of Appeals for the District of Columbia Circuit, but a number of states have adopted or are considering legislation or executive actions to impose state-level open internet rules, and those actions have been or can be expected to be challenged in court.

We cannot predict whether the FCC order or state initiatives regulating providers will ultimately be upheld, modified, overturned, or vacated by further legal action, federal legislation, or the FCC, or the degree to which such outcomes would adversely affect our business, if at all.

Similarly, the European Union requires equal access to internet content, but as part of its Digital Single Market initiative, the European Union may impose network security, disability access, or 911-like obligations on certain “over-the-top” services if we are considered to be such a service, which could increase our costs.

If the FCC’s repeal of the open internet rules is maintained, state initiatives are modified, overturned, or vacated, or the European Union modifies these open internet rules, mobile and internet providers may be able to limit our users’ ability to access Snapchat or make Snapchat a less attractive alternative to our competitors’ applications.

Similarly, the European Union requires equal access to internet content, but as part of certain initiatives and reviews, the European Union may impose network security, disability access, or 911-like obligations on certain “over-the-top” services or those that qualify as “electronic communication services.” If we are considered to be such services, our costs of doing business could increase and our business could be seriously harmed.

The European Union’s highest court has also recently issued rulings that may limit our ability to engage in certain practices, such as “zero rating.” If the FCC’s repeal of the open internet rules is maintained, state initiatives are modified, overturned, or vacated, or the European Union modifies these open internet rules or limits commercial practices, mobile and internet providers may be able to limit our users’ ability to access Snapchat or make Snapchat a less attractive alternative to our competitors’ applications.

Were that to happen, our ability to retain existing users or attract new users may be impaired, and our business would be seriously harmed.

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For example, greater China represented more than 10% of our revenue for the three months ended June 30, 2020.

Any economic or political instability , whether as a result of the COVID-19 pandemic or otherwise, in a specific country or region may negatively impact the global economy, advertising ecosystem, industry, or our customers and their budgets with us, and our business would be seriously harmed.

Any economic or political instability, whether as a result of the COVID-19 pandemic or otherwise, in a specific country or region may negatively impact the global economy, advertising ecosystem, industry, our customers and their budgets with us, or our ability to forecast our advertising revenue, and our business would be seriously harmed.

Moreover, we rely heavily on our ability to collect and disclose data and metrics to and for our advertisers to attract new advertisers and retain existing advertisers.

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The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches, which may increase the likelihood and cost of data breach litigation.

The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.

Other state and federal legislative and regulatory bodies are considering similar legislation on how to handle personal data.

The potential effects of this legislation, including any regulations implemented by the legislation, are far-reaching, uncertain, and evolving, and may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.

Other state, federal, and foreign legislative and regulatory bodies have also implemented or may implement similar legislation regarding the handling of personal data.

Changes in the European Union’s Electronic Communications Code, which will become effective in December 2020, may result in the expanded applicability of the European Union’s ePrivacy Directive over parts of our services, requiring us to make changes to how we process and store certain types of communications data of users in the European Union, which could have a material impact on the availability of data we rely on to improve and personalize our products and features.

Furthermore, changes to iOS or Android operating systems’ practices and policies, such as Apple’s upcoming iOS update that may impose heightened restrictions on our access and use of user data, may reduce the quantity and quality of the data and metrics that can be collected or used by us and our partners, and adversely affect our ability to effectively target advertisements to users and demonstrate the value of our advertisements to advertisers, any of which could reduce the demand and pricing for our advertising products and seriously harm our business.

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decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by our users or partners;

changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating system, that demonstrate the value of our advertisements and other commercial content;

changes in our analytics and measurement solutions, including what we are permitted to collect and disclose under the terms of Apple’s and Google’s mobile operating systems, that demonstrate the value of our advertisements and other commercial content;

competitive developments or advertiser perception of the value of our products that change the rates we can charge for advertising or the volume of advertising on Snapchat;

product changes or advertising inventory management decisions we may make that change the type, size, or frequency of advertisements displayed on Snapchat or the method used by advertisers to purchase advertisements;

adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, or litigation;

adverse legal developments relating to advertising, including changes mandated or prompted by legislation, regulation, executive actions, or litigation;

adverse media reports or other negative publicity involving us, our founders, our partners, or other companies in our industry segment;

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Our two co-founders have control over all stockholder decisions because they control a substantial majority of our voting stock.

Our two co-founders, Evan Spiegel and Robert Murphy, own or control voting shares of our capital stock that represent approximately 99% of the voting power of our outstanding capital stock as of June 30, 2020.

Spiegel alone can exercise voting control over a majority of our voting power.

Spiegel was granted RSUs for 37,447,817 shares of Class C common stock that vested on the closing of our initial public offering, or IPO, with such shares delivered to Mr.

Spiegel in quarterly installments over three years beginning in November 2017.

Shares of Class C common stock are entitled to 10 votes per share, so as additional quarterly installments of these Class C shares are delivered to Mr.

Spiegel his voting power will increase, as will the collective voting power held by our co-founders.

As a result, Mr.

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Spiegel and Mr.

Murphy owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders.

Murphy owe a fiduciary duty to our stockholders and must act in good faith in a

manner they reasonably believe to be in the best interests of our stockholders.

As stockholders, even controlling stockholders, Mr.

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Murphy are entitled to vote their shares, and shares over which they have voting control, in their own interests, which may not always be in the interests of our stockholders generally.

We have not elected to take advantage of

the “controlled company” exemption to the corporate governance rules for companies listed on the New York Stock Exchange, or NYSE.

We have not elected to take advantage of the “controlled company” exemption to the corporate governance rules for companies listed on the New York Stock Exchange, or NYSE.

Health epidemics, including the recent COVID-19 pandemic, have had, and could in the future have, an adverse impact on our business, operations, and the markets and communities in which we and our partners, advertisers, and users operate.

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The ongoing global COVID-19 pandemic has adversely impacted, and may continue to adversely impact, many aspects of our business.

As certain of our advertisers experience downturns or uncertainty in their own business operations and revenue because of the economic effects, including resulting from the spread of COVID-19, they have and may halt, whether temporary or permanently, or continue to decrease their advertising spending and may focus their advertising spending more on other platforms, all of which may result in decreased advertising revenue.

We may also experience difficulty forecasting advertising revenue from our partners on our platform.

As certain of our advertisers experience downturns or uncertainty in their own business operations and revenue because of the economic effects, including resulting from the spread of COVID-19, they have halted or decreased or may halt or decrease or continue to decrease, whether temporarily or permanently, their advertising spending and may focus their advertising spending more on other platforms, all of which may result in decreased advertising revenue.

Furthermore, a portion of our advertising revenue is related to in-person events or activities, such as sporting events, music festivals, the Olympics, and in-person learning that have been or may be postponed or cancelled.

A decline in advertising revenue or the collectability of our receivables could seriously harm our business.

In addition, the unpredictability of the COVID-19 pandemic may make it difficult to forecast our advertising revenue, and although we may benefit in the shorter term from changes in the current advertising landscape, any increases may not be indicative of longer-term trends.

Any decline in advertising revenue or the collectability of our receivables could seriously harm our business.

The COVID-19 pandemic has been declared a global emergency.

In response to the COVID-19 pandemic, many state, local, and foreign governments have put in place, and others in the future may put in place, quarantines, executive orders, shelter-in-place orders, physical distancing requirements, and similar government orders and restrictions in order to control the spread of the disease.

In response to the COVID-19 pandemic, many state, local, and foreign governments have put in place, and others in the future may put in place, quarantines, executive actions, shelter-in-place orders, physical distancing requirements, and similar government orders and restrictions in order to control the spread of the disease.

Such orders or restrictions, or the perception that such orders or restrictions could occur, have resulted in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions, and cancellation or postponement of events, among other effects that could negatively impact productivity and disrupt our operations and those of our partners, advertisers, and users.

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A decrease in the amount or quality of content available on Snapchat, or an interruption in the services provided to us, could lead to a decline in user engagement, which could seriously harm our business.

The effects of the COVID-19 pandemic on user engagement are highly uncertain, and may lead to unpredictable results in the short-term and long-term.

As shelter-in-place orders continue or are reactivated, and there are fewer in-person activities, we may experience short-term and long-term disruption to user behavior and our business.

We may also experience inconsistent or negative engagement as user behavior on our platform changes, including changes in user activity as a result of continued shelter-in-place orders.

The effects of the COVID-19 pandemic on user engagement are highly uncertain, and may lead to unpredictable results in the short term and long term, including shorter-term increases in user engagement that may not be indicative of longer-term trends.

As physical distancing requirements and shelter-in-place orders continue or are reactivated, and there are fewer in-person activities, we may experience short-term and long-term disruption to user behavior and our business.

We may also experience inconsistent or negative engagement as user behavior on our platform changes, including changes in user activity as a result of continued physical distancing requirements and shelter-in-place orders.

In addition, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be difficult to assess or predict, the COVID-19 pandemic has resulted in, and may continue to result in, significant volatility and disruption of global financial markets, reducing our ability to access capital, which could negatively affect our liquidity in the future.

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We do not yet know the full extent of potential delays or impacts on our business, operations, or the global economy as a whole.

While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future

outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.

While the spread of COVID-19 may eventually be contained or mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.

If we do not develop successful new products or improve existing ones, our business will suffer.

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We may introduce significant changes to our existing products or develop and introduce new and unproven products and services, including technologies with which we have little or no prior development or operating experience.

These new products and updates may fail to increase the engagement of our users, advertisers, or partners, may subject us to increased regulatory scrutiny or compliance requirements, and may even result in short-term or long-term decreases in such engagement by disrupting existing user, advertiser, or partner behavior or by introducing performance and quality issues.

These new products and updates may fail to increase the engagement of our users, advertisers, or partners, may subject us to increased regulatory requirements or scrutiny, and may even result in short-term or long-term decreases in such engagement by disrupting existing user, advertiser, or partner behavior or by introducing performance and quality issues.

For example, beginning in 2017, we started transitioning our advertising sales to a self-serve platform, which decreased average advertising prices.

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To the extent that future users, including those in older demographics, are less willing to invest the time to learn to use our products, and if we are unable to make our products easier to learn to use, our user growth or engagement could be affected, and our business could be harmed.

We may develop new products that increase user engagement and costs without increasing revenue.

We may also develop new products or initiatives that increase user engagement and costs without increasing revenue.

For example, in 2016, we introduced Memories, our cloud storage service for Snaps, which increases our storage costs but does not currently generate revenue.

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For example, in 2019 we launched Snap Games, a live, multi-player gaming experience, on Snapchat.

There is no guarantee that such new lines of business, new products, and other initiatives will succeed or provide positive returns on our investment.

Such new lines of business, new products, and other initiatives may be costly, difficult to operate, and divert management’s attention, and there is no guarantee that they will be positively received by our community or provide positive returns on our investment.

In certain cases, new products that we develop may require regulatory approval prior to launch, or may require us to comply with additional regulations or legislation.

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We face significant competition in almost every aspect of our business both domestically and internationally.

This ranges from smaller or newer companies to larger more established companies such as Apple, Facebook (including Instagram and WhatsApp), Google (including YouTube), Twitter, Kakao, LINE, Naver (including Snow), Bytedance (including TikTok), and Tencent, which provide their users with a variety of products, services, content, and online advertising offerings, and advertising-supported video on demand platforms (such as Quibi) that offer, or will offer, products and services that may compete with Snapchat features or offerings.

For example, Instagram, a competing application owned by Facebook, has

incorporated many of our features, including a “stories” feature that largely mimics our Stories feature and may be directly competitive.

This ranges from smaller or newer companies to larger more established companies such as Apple, ByteDance (including TikTok),

Facebook (including Instagram and WhatsApp), Google (including YouTube), Kakao, LINE, Naver (including Snow), Tencent, and Twitter which provide their users with a variety of products, services, content, and online advertising offerings, and advertising-supported video on demand platforms (such as Quibi) that offer, or will offer, products and services that may compete with Snapchat features or offerings.

For example, Instagram, a competing application owned by Facebook, has incorporated many of our features, including a “stories” feature that largely mimics our Stories feature and may be directly competitive.

Facebook has introduced, and likely will continue to introduce, more private ephemeral products into its various platforms which mimic other aspects of Snapchat’s core use case.

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the effectiveness of our marketing activities;

changes as a result of actual or proposed legislation, regulatory authorities, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;

changes as a result of actual or proposed legislation, regulation, executive actions, or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on us;

acquisitions or consolidation within our industry segment;

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We have incurred operating losses in the past, and may never achieve or maintain profitability.

We began commercial operations in 2011 and for all of our history we have experienced net losses and, prior to the quarter ended June 30, 2020, negative cash flows from operations.

As of June 30, 2020, we had an accumulated deficit of $7.6 billion and for the three months ended June 30, 2020, we experienced a net loss of $326.0 million.

We began commercial operations in 2011 and we have historically experienced net losses and negative cash flows from operations.

As of September 30, 2020, we had an accumulated deficit of $7.8 billion and for the three months ended September 30, 2020, we experienced a net loss of $199.9 million.

We expect our operating expenses to increase in the future as we expand our operations.

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In particular, because we are headquartered in Los Angeles, we face significant competition in hiring and attracting qualified engineers, designers, and sales personnel to move to the Los Angeles area.

In addition, if our reputation were to be harmed, whether as a result of media, legislative, or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.

As we mature, or if our stock price declines, our equity awards may not be as effective an incentive to attract, retain, and motivate employees.

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As a result, it may be difficult for us to continue to retain and motivate these employees, and this wealth could affect their decision about whether they continue to work for us.

Additionally, if we issue significant equity to attract and retain employees, we would incur substantial additional stock-based compensation expense and the ownership of our existing stockholders would be further diluted.

Furthermore, if we issue significant equity to attract and retain employees, 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 effectively and our business could be seriously harmed.

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Our efforts to protect the information that our users 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, third parties may attempt to fraudulently induce employees or users to disclose information to gain access to our data or our users’

In addition, third parties may attempt to fraudulently induce employees or users to disclose information to gain access to our data or our users’ data.

If any of these events occur, our or our users’ information could be accessed or disclosed improperly.

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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.

However, we believe that we do not capture all data regarding our active users, which may result in understated metrics.

However, we believe that we do not capture

all data regarding our active users, which may result in understated metrics.

This generally occurs because of technical issues, like when our systems do not record data from a user’s application or when a user opens the Snapchat application and contacts our servers but is not recorded as an active user.

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But given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect these issues to continue, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable.

If advertisers, partners, or investors do not perceive our user,

geographic, or other demographic metrics 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.

If advertisers, partners, or investors do not perceive our user, geographic, or other demographic metrics 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.

Our advertisers and partners may also be less willing to allocate their budgets or resources to Snapchat, which could seriously harm our business.

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If these activities increase 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, 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.

We are subject to a variety of laws and regulations in the United States and other countries that involve matters central to our business, including user privacy, security, 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, regulations, and executive actions regarding privacy, data protection, content, and other matters.

Many of these laws, regulations, and executive actions 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.

We are subject to a variety of laws, regulations, and executive actions in the United States and other countries that involve matters central to our business, including user privacy, security, 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, regulations, and executive actions can be particularly restrictive in countries outside the United States.

Both in the United States and abroad, these laws, regulations, and executive actions constantly evolve, remain subject to significant change, and may be issued with limited advance notice.

For example, an executive order was recently issued prohibiting certain transactions with a Chinese-owned company, with the prohibition becoming effective 45 days after the date of the order.

In addition, the application and interpretation of these laws, regulations, and executive actions are often uncertain, particularly in the new and rapidly evolving industry in which we operate.

Several proposals have recently been adopted or are currently pending before, and we believe a number of investigations into other technology companies are currently being conducted by, federal, state, and foreign legislative and regulatory bodies that could significantly affect our business.

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The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches, which may increase the likelihood and cost of data breach litigation.

The potential effects of this legislation are far-reaching and may require us, our partners, and advertisers to modify data processing practices and

policies and to incur substantial costs and expenses in an effort to comply.

We expect other state and federal legislative and regulatory bodies may enact 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.

The potential effects of this legislation , including any regulations implemented the legislation, are far-reaching , uncertain, and evolving, and may require us, our partners, and advertisers to modify data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Other state and federal legislative and regulatory bodies have enacted or may enact 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.

C hanges in the E uropean Union’s Electronic Communications Cod e, which will become effective in December 2020, may result in the expanded applicability of the European Union’s ePrivacy Directiv e over parts of our services, requiring us to make changes to how we process and store certain types of communications data of users in the European Union, which could have a material impact on the availability of data we rely on to improve and personalize our products and features.

Furthermore, in December 2018, the Australian government passed the Assistance and Access Bill 2018 that provides Australian law enforcement authorities with mechanisms to make requests for electronic communication, even if the data is end-to-end encrypted like in Snapchat, which may create new obligations for companies providing communication services and make their data less secure .

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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;

seasonal or other fluctuations in spending by our advertisers and product usage by our users, each of which may change as our product offerings evolve or as our business grows or as a result of unpredictable events such as the COVID-19 pandemic;

the number of advertisements shown to users;

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system failures or breaches of security or privacy, and the costs associated with such breaches and remediations;

inaccessibility of Snapchat, or certain features within Snapchat, due to third-party actions;

inaccessibility of Snapchat, or certain features within Snapchat, due to third-party or governmental actions;

stock-based compensation expense;

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adverse litigation judgments, settlements, or other litigation-related costs, or product recalls;

changes in the legislative or regulatory environment, including with respect to privacy and data protection, or enforcement by government regulators, including fines, orders, or consent decrees;

changes in the legislative or regulatory environment, including with respect to privacy and data protection, enforcement by government regulators, including fines, orders, or consent decrees, or the issuance of executive orders or other similar executive actions that may adversely affect our revenues or restrict our business;

fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;

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changes in accounting standards, policies, guidance, interpretations, or principles;

changes in domestic and global business or macroeconomic conditions.

changes in domestic and global business or macroeconomic conditions, including as a result of the current COVID-19 pandemic.

If we are unable to successfully grow our user base and further monetize our products, our business will suffer.

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And because we exercise little control over these providers, we are vulnerable to problems with the services they provide.

In 2020, we began work on the implementation of a new enterprise financial planning and reporting system.

In 2020, w e began work on the implementation of a new enterprise financial planning and reporting system .

As we plan for and implement such new financial planning system, we may experience difficulties in managing our existing systems and processes, which could disrupt our operations, the management of our finances , and the reporting of our financial results.

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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.

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In the past, we have experienced, and we expect that we will continue to experience, media, legislative, and regulatory scrutiny.

Unfavorable publicity regarding us, our privacy practices, product changes, product quality, litigation, or regulatory activity, or regarding the actions of our partners, our users, or other companies in our industry, could seriously harm our reputation and brand.

Unfavorable publicity regarding us, our privacy practices, product changes, product quality, litigation, employee matters, or regulatory activity, or regarding the actions of our partners, our users, or other companies in our industry, could seriously harm our reputation and brand.

Negative publicity and scrutiny could also adversely affect the size, demographics, engagement, and loyalty of our user base and result in decreased revenue, fewer app installs (or increased app un-installs), or declining user growth rates, any of which could seriously harm our business.

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Our business may not generate sufficient cash flow from operations in the future to service our debt and business.

If we are unable to 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 which may be on terms that are not favorable to us or, in the

case of equity securities, highly dilutive to our stockholders.

Our ability to refinance the Convertible Notes or our other indebtedness will depend on various factors, including the available capital markets, our business, and our financial condition at such time.

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We have been and may in the future be subject to investigations and inquiries from government entities.

These investigations and inquiries, and our compliance with any associated regulatory orders or consent decrees, may require us to change our policies or practices, subject us to monetary fines or other penalties or sanctions, divert management’s attention, and require us to incur significant legal and other expenses, any of which could seriously harm our business.

These investigations and inquiries, and our compliance with any associated regulatory orders or consent decrees, may require us to change our policies or practices, subject us to substantial monetary fines or other penalties or sanctions, result in increased operating costs, divert management’s attention, harm our reputation, and require us to incur significant legal and other expenses, any of which could seriously harm our business.

For example, in the past, we responded to subpoenas and requests for information made by staff from the U.S.

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We have been subject to, and expect to continue to be subject to, claims and legal proceedings from holders of patents, trademarks, copyrights, and other intellectual property rights alleging that some of our products or content infringe their rights.

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 sought injunctive relief among other remedies, alleged that certain Snapchat features infringe several Vaporstream patents.

In April 2020, the case was dismissed pursuant to a settlement agreement .

In addition, in April 2018, Blackberry Limited filed a lawsuit against us alleging that we infringe six of its patents.

This lawsuit was recently dismissed after four of the patents were ruled to be invalid;

For example, in April 2018, Blackberry Limited filed a lawsuit against us alleging that we infringe six of its patents.

This lawsuit was dismissed in November 2019 after four of the patents were ruled to be invalid;

however, Blackberry Limited has appealed the ruling to the U.S.

Court of Appeals for the Federal Circuit.

Court of Appeals for the Federal Circuit, and a hearing is expected to be held before March 31, 2021.

Likewise, in January 2020, You Map, Inc.

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However, each of these statutes and doctrines is subject to uncertain judicial interpretation and regulatory and legislative amendments.

For example, Congress amended the CDA in 2018 in ways that could expose some Internet platforms to an increased risk of litigation, and members of Congress and the Department of Justice proposed further amendments in 2019 and 2020.

Moreover, some of these statutes and doctrines provide protection only or primarily in the United States.

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In January 2020, we entered into a preliminary agreement to settle the federal and state securities class actions.

The settlement agreement was preliminarily approved by the federal court in April 2020, and a hearing for preliminary approval of the agreement by the state court has been scheduled for October 2020.

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

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This risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions may be unclear or evolving and where we may be less protected under local laws than we are in the United States.

In addition, there have been various Congressional efforts to restrict the scope of the protections available to online platforms under Section 230 of the CDA, including an amendment in 2018 and more recent proposed amendments, which could decrease or change our protections from liability for third-party content in the United States.

In addition, there have been various efforts to restrict the scope of the protections available to online platforms under Section 230 of the CDA, including an amendment in 2018 and more recent proposed amendments by members of Congress and the Department of Justice, which 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.

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Goodwill is required to be tested for impairment at least annually.

As of June 30, 2020, we had recorded a total of $862.5 million of goodwill and intangible assets, net related to our acquisitions.

As of September 30, 2020, we had recorded a total of $907.9 million 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.

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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.

We may develop future products that are regulated as medical devices by the 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 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 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, if we fail to comply with applicable FDA and other 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.

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 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 reporting to governmental authorities, if we fail to comply with applicable 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 regulatory clearances or approvals.

We have faced inventory risk with respect to our Spectacles products.

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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 June 30, 2020, Mr.

As of September 30, 2020, Mr.

Spiegel and Mr.

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Spiegel and Mr.

Murphy vote together, or if Mr.

Spiegel acts alone, they will have control over all matters submitted to our stockholders for approval.

Murphy voting together, or in many instances, Mr.

Spiegel acting alone, will have control 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, or to fund employee equity incentive programs could prolong the duration of Mr.

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Shares of Class A common stock were sold in our IPO in March 2017 at a price of $17.00 per share.

Since then, the trading price of our Class A common stock has ranged from $4.82 to $29.44 through June 30, 2020.

Since then, the trading price of our Class A common stock has ranged from $4.82 to $29.44 through September 30, 2020.

For example, as of December 31, 2018, the trading price of our Class A common stock had declined 68% since our IPO in March 2017 but as of December 31, 2019, the trading price of our Class A common stock had increased 196% compared to the trading price on December 31, 2018.

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lawsuits threatened or filed against us;

developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies;

developments in new legislation and pending lawsuits, executive actions, or regulatory actions, including interim or final rulings by judicial or regulatory bodies;

other events or factors, including those resulting from war, incidents of terrorism, pandemics, or responses to these events.

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In January 2020, we entered into a preliminary agreement to settle the federal and state securities class actions.

The settlement agreement was preliminarily approved by the federal court in April 2020, and a hearing for preliminary approval of the agreement by the state court has been scheduled for October 2020.

Any litigation could subject us to substantial costs, divert resources and the attention of management from our business, and seriously harm our business.

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Spiegel and Mr.

Murphy control all stockholder decisions.

Murphy control all stockholder decisions, and Mr.

Spiegel alone may exercise voting control over our outstanding capital stock.

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If our existing stockholders, including employees and service providers who obtain equity, sell, or indicate an intention to sell, substantial amounts of our Class A common stock in the public market, the trading price of our Class A common stock could decline.

As of June 30, 2020, we had outstanding a total of 1.2 billion shares of Class A common stock, 24.2 million shares of Class B common stock, and 234.4 million shares of Class C common stock.

In addition, as of June 30, 2020, 148.2 million shares of Class A common stock, 1.2 million shares of Class B common stock, and 3.1 million shares of Class C common stock were subject to outstanding stock options and RSUs.

All of our outstanding shares are eligible for sale in the public market, except approximately 402.7 million shares (including options exercisable and RSAs subject to forfeiture as of June 30, 2020) held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.

As of September 30, 2020, we had outstanding a total of 1.2 billion shares of Class A common stock, 23.6 million shares of Class B common stock, and 231.6 million shares of Class C common stock.

In addition, as of September 30, 2020, 137.9 million shares of Class A common stock and 1.0 million shares of Class B common stock were subject to outstanding stock options and RSUs.

All of our outstanding shares are eligible for sale in the public market, except approximately 395.8 million shares (including options exercisable and RSAs subject to forfeiture as of September 30, 2020) held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.

Our employees, other service providers, and directors are subject to our quarterly trading window closures.

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In January 2020, we entered into a preliminary agreement to settle the federal and state securities class actions.

Shareholder litigation can subject us to substantial costs and divert resources and the attention of management from our business.

If those claims are successful, our business could be seriously harmed.

The settlement agreement was preliminarily approved by the federal court in April 2020, and a hearing for preliminary approval of the agreement by the state court has been scheduled for October 2020.

Shareholder litigation can subject us to substantial costs and divert resources and the attention of management from our business and, if the claims are successful, our business could be seriously harmed.

Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources, impose large defense costs, and seriously harm our business.

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any action asserting a claim against us that is governed by the internal-affairs doctrine.

Our certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

These exclusive-forum provisions, if permitted by applicable law, may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

If a court were to find either exclusive-forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business .

This provision would not apply to actions brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all Securities Act claims, which means both courts have jurisdiction to entertain such claims.

To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.

These exclusive forum provisions may limit a stockholder’s ability to bring an action in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring an action in a venue other than those designated in the exclusive forum provisions.

In such instance, we would expect to vigorously assert the validity and enforceability of our exclusive forum provisions, which may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

If a court were to find either exclusive forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosures

Not applicable.

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-Q

Item 1A. Risk Factors