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Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky.
−Removed: Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in this “Risk Factors” section, together with the other information in this Quarterly Report on Form 10-Q.
+Added: Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this Quarterly Report on Form 10-Q.
If any of the following risks actually occurs (or if any of those listed elsewhere in this Quarterly Report on Form 10-Q occurs), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed.
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We operate in a highly competitive and rapidly changing environment so we must continually innovate our products and evolve our business model for us to succeed.
−Removed: We emphasize rapid innovation and prioritize long-term user engagement over short-term financial conditions or results if we believe that it will benefit the aggregate user experience and will thereby improve our financial performance over the long term.
−Removed: We currently have a history of operating losses but, as a result of our long-term focus, we may prioritize investments and expenses we believe are necessary for our long-term growth over achieving short-term profitability.
−Removed: Investments in our future, including through new products or acquisitions, are inherently risky and may not pay off, which would further delay or hinder our ability to settle the principal and interest payments on the Convertible Notes or other indebtedness when due, and to attain and sustain profitability.
+Added: We emphasize rapid innovation and prioritize long-term user engagement over short-term financial conditions or results if we believe that it will benefit the aggregate user experience and improve our financial performance over the long term.
+Added: Although we recently achieved profitability in certain periods, we have a history of operating losses and, as a result of our long-term focus, we may prioritize investments and expenses we believe are necessary for our long-term growth over achieving short-term profitability.
+Added: Investments in our future, including through new products or acquisitions, are inherently risky and may not pay off, which would adversely affect our ability to settle the principal and interest payments on our outstanding convertible senior notes or other indebtedness when due, and further delay or hinder our ability to attain and sustain profitability.
This in turn would hinder our ability to secure additional financing to meet our current and future financial needs on favorable terms, or at all.
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Our advertising business is most effective when our advertisers succeed.
−Removed: Driving their success requires continual investment in our advertising products and may be hindered by competitive challenges and various legal, regulatory, and operating system changes that make it more difficult for us to achieve and demonstrate a meaningful return for our advertisers.
+Added: Driving their success requires continual investment in our advertising products and may be hindered by competitive challenges and various legal, regulatory, and operating system changes that make it more difficult for us to
+Added: achieve and demonstrate a meaningful return for our advertisers.
For example, on-going changes to privacy laws and mobile operating systems have made it more difficult for us to measure the effectiveness of advertisements on our services, and alternative methods will take time to develop and become more widely adopted by our advertisers, and may not be as effective as prior methods.
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In addition, our advertising business is seasonal and volatile, which could result in fluctuations in our quarterly revenues and operating results, including the expectations of our business prospects.
−Removed: Our business and operations have been, and could in the future be, adversely affected by events beyond our control, such as health epidemics, including the COVID-19 pandemic and macroeconomic factors like labor shortages and supply chain disruptions , impacting the markets and communities in which we and our partners, advertisers, and users operate.
+Added: Our business and operations have been, and could in the future be, adversely affected by events beyond our control, such as health epidemics, including the COVID-19 pandemic, geo-political events (including the conflict in Ukraine), and economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation impacting the markets and communities in which we and our partners, advertisers, and users operate.
Our Community and Competition
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We primarily rely on Google, Apple, and Amazon to operate our service and provide the mobile operating systems for our applications.
−Removed: If these partners do not provide their services as we expect, terminate their services, or change the terms of our agreements or the functionality of their operating systems in ways that are adverse to us, our service may be interrupted and our product experience could be degraded, and these may harm our reputation, increase our costs, or make it harder for us to attain or sustain profitability.
+Added: If these partners do not provide their services as we expect, terminate their services, or change or interpret the terms of our agreements or the functionality of their operating systems in ways that are adverse to us, our service may be interrupted and our product experience could be degraded, and these may harm our reputation, increase our costs, or make it harder for us to attain or sustain profitability.
Many other parts of our business depend on partners, including content partners and advertising partners, so our success depends on our ability to attract and retain these partners.
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Given the complexity of the systems involved and the rapidly changing nature of mobile devices and systems, we expect to encounter issues, particularly if we continue to expand in parts of the world where mobile data systems and connections are less stable.
−Removed: We are also subject to complex and evolving federal, state, and foreign laws and regulations regarding privacy, data protection, content, taxes, and other matters, which are subject to change and have uncertain interpretations.
+Added: We are also subject to complex and evolving federal, state, local, and foreign laws and regulations regarding privacy, data protection, content, taxes, and other matters, which are subject to change and have uncertain interpretations.
Any actual or perceived failure to comply with such legal and regulatory obligations, including in connection with our consent decree with the U.S.
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Our Team and Capital Structure
−Removed: We need to attract and retain a high caliber team, including our Chief Executive Officer and Chief Technology Officer, to maintain our competitive position.
−Removed: We may incur significant costs and expenses in maintaining and growing our team, and may lose valuable members of our team as we compete globally, including with many of our competitors, for key talent.
−Removed: A substantial portion of our employment costs is paid in our common stock, the price of which has been very volatile, and our ability to attract and retain talent may be adversely affected if our shares decline in value.
−Removed: Our two co-founders control over 99% of the voting power of our outstanding capital stock, which means they control substantially all outcomes submitted to stockholders.
+Added: We need to attract and retain a high caliber team to maintain our competitive position.
+Added: We may incur significant costs and expenses in maintaining and growing our team, and may lose valuable members of our team as we compete globally,
+Added: including with many of our competitors, for key talent.
+Added: A substantial portion of our employment costs is paid in our common stock, the price of which has been volatile, and our ability to attract and retain talent may be adversely affected if our shares decline in value.
+Added: Our two co-founders, who serve as our Chief Executive Officer and Chief Technology Officer, control over 99% of the voting power of our outstanding capital stock, which means they control substantially all outcomes submitted to stockholders.
Class A common stockholders have no voting rights, unless required by Delaware law.
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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.
−Removed: We had 306 million DAUs on average in the quarter ended September 30, 2021.
+Added: We had 332 million DAUs on average in the quarter ended March 31, 2022.
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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In addition, because our products typically require high bandwidth data capabilities in order for users to benefit from all of the features and capabilities of our application, many of our users live in countries with high-end mobile device penetration and high bandwidth capacity cellular networks with large coverage areas.
−Removed: We therefore do not expect to experience rapid user growth or engagement in countries with either low smartphone penetration or a lack of well-established and high bandwidth capacity cellular networks.
+Added: We therefore do not expect to experience rapid user growth or engagement in regions with either low smartphone penetration or a lack of well-established and high bandwidth capacity cellular networks.
If our DAU growth rate slows or becomes stagnant, or we have a decline in DAUs, our financial performance will increasingly depend on our ability to elevate user activity or increase the monetization of our users.
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we fail to introduce new and exciting products and services or those we introduce or modify are poorly received;
−Removed: our products fail to operate effectively on the iOS and Android mobile operating systems;
+Added: our products fail to operate effectively on the iOS or Android mobile operating systems;
we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones;
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Those companies have no obligation to test the interoperability of new mobile devices, mobile-device cameras, or related devices with Snapchat, and may produce new products that are incompatible with or not optimal for Snapchat.
−Removed: We have no control over these operating systems, application stores, or hardware, and any changes to these systems or hardware that degrade our products’ functionality, or give preferential treatment to competitive products, or actions by government authorities that impact our access to these systems or hardware, could seriously harm Snapchat usage on mobile devices.
+Added: We have no control over these operating systems, application stores, or hardware, and any changes to these systems or hardware that degrade our products’ functionality, or give preferential treatment to competitive products, or actions by government authorities that impact our access to these systems or hardware, could seriously harm Snapchat usage.
Our competitors that control the operating systems and related hardware our application runs on could make interoperability of our products with those mobile operating systems more difficult or display their competitive offerings more prominently than ours.
−Removed: Additionally, our competitors that control the standards for the application stores for their operating systems could make Snapchat, or certain features of Snapchat, inaccessible for a potentially significant period of time or attempt to violate the terms of our agreements with them.
−Removed: We plan to continue to introduce new products and features regularly and have experienced that it takes time to optimize such products and features to function with these operating systems, hardware, and standards, impacting the popularity of such products, and we expect this trend to continue.
+Added: Additionally, our competitors that control the standards for the application stores for their operating systems could make Snapchat, or certain features of Snapchat, inaccessible for a potentially significant period of time or require us to make changes to maintain access.
+Added: We plan to continue to introduce new products and features regularly, including some features that may only work on the latest systems and hardware, and have experienced that it takes time to optimize such products and features to function with the variety of existing operating systems, hardware, and standards, impacting the popularity of such products, and we expect this trend to continue.
Moreover, our products require high-bandwidth data capabilities.
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The FCC order repealing the open internet rules went into effect in June 2018.
−Removed: 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
−Removed: executive actions to impose state-level open internet rules, and those actions have been or can be expected to be challenged in court.
−Removed: Additionally, U.S.
−Removed: President Biden has recently issued an executive order encouraging the FCC to restore the open internet rules.
+Added: 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.
+Added: More recently, U.S.
+Added: President Biden issued an executive order encouraging the FCC to restore the open internet rules.
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.
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We may not successfully cultivate relationships with key industry participants or develop products that operate effectively with these technologies, systems, networks, regulations, or standards.
−Removed: If it becomes more difficult for our users to access and use Snapchat on their mobile devices, if our users choose not to access or use Snapchat on their mobile devices, or if our users choose to use mobile products that do not offer access to Snapchat, our business and user retention, growth, and engagement could be seriously harmed.
+Added: If it becomes more difficult for our users to access and use Snapchat, if our users choose not to access or use Snapchat, or if our users choose to use products that do not offer access to Snapchat, our business and user retention, growth, and engagement could be seriously harmed.
We rely on Google Cloud and Amazon Web Services, or AWS, for the vast majority of our computing, storage, bandwidth, and other services.
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Google and Amazon provide distributed computing infrastructure platforms for business operations, or what is commonly referred to as a “cloud” computing service.
−Removed: We currently run the vast majority of our computing on Google Cloud and AWS, and our systems are not fully redundant on the two platforms.
−Removed: Any transition of the cloud services currently provided by either Google Cloud or AWS to the other platform or to another cloud provider would be difficult to implement and will cause us to incur significant time and expense.
−Removed: We have committed to spend $2.0 billion with Google Cloud over five years and $1.1 billion with AWS over six years, in each case beginning January 2017, and have built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google and AWS.
+Added: We currently run the vast majority of our computing on Google Cloud and AWS, have built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google and AWS, and our systems are not fully redundant on the two platforms.
+Added: Any transition of the cloud services currently provided by either Google Cloud or AWS to the other platform or to another cloud provider would be difficult to implement and would cause us to incur significant time and expense.
Given this, any significant disruption of or interference with our use of Google Cloud or AWS would negatively impact our operations and our business would be seriously harmed.
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Hosting costs also have and will continue to increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Google Cloud, AWS, or similar providers.
−Removed: In addition, each of Google and Amazon may take actions beyond our control that could seriously harm our business, including:
+Added: In addition, Google or Amazon may take actions beyond our control that could seriously harm our business, including:
discontinuing or limiting our access to its cloud platform;
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Google and Amazon each has broad discretion to change and interpret its terms of service and other policies with respect to us, and those actions may be unfavorable to us.
−Removed: They may also alter how we are able to process data on their cloud
+Added: They may also alter how we are able to process data on their cloud platforms.
If Google or Amazon makes changes or interpretations that are unfavorable to us, our business could be seriously harmed.
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Our advertising customers vary from small businesses to well-known brands.
−Removed: Many of our customers only recently started working with us and spend a relatively small portion of their overall advertising budget with us, but some customers have devoted meaningful budgets that contribute to our total revenue.
−Removed: Still, we are not dependent on any individual customer.
+Added: Many of our customers only recently started working with our advertising solutions and spend a relatively small portion of their overall advertising budget with us, but some customers have devoted meaningful budgets that contribute to our total revenue.
In addition, advertisers may view some of our products as experimental and unproven, or prefer certain of our products over others.
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As our business continues to develop, including globally, there may be new or existing advertisers or resellers, or advertisers or resellers from different geographic regions that contribute more significantly to our total revenue.
−Removed: For example, greater China represented more than 10% of our revenue for the three months ended June 30, 2020.
−Removed: 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 or local economy, advertising ecosystem, our customers and their budgets with us, or our ability to forecast our advertising revenue, and our business would be seriously harmed.
−Removed: 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.
+Added: Any economic or political instability, whether as a result of the COVID-19 pandemic, the conflict in Ukraine, or otherwise, in a specific country or region may negatively impact the global or local economy, advertising ecosystem, our customers and their budgets with us, or our ability to forecast our advertising revenue, and our business would be seriously harmed.
+Added: Moreover, we rely heavily on our ability to collect and disclose data and metrics to our advertisers so we can attract new advertisers and retain existing advertisers.
Any restriction, whether by law, regulation, policy, or other reason, on our ability to collect and disclose data and metrics which our advertisers find useful would impede our ability to attract and retain advertisers.
For example, the General Data Protection Regulation, or GDPR, in the European Union, which went into effect in May 2018, expanded the rights of individuals to control how their personal data is collected and processed, and placed restrictions on the use of personal data of younger minors.
−Removed: In addition, the California Consumer Privacy Act, or CCPA, went into effect in January 2020 and places additional requirements on the handling of personal data for us, our partners, and our advertisers.
−Removed: 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.
+Added: In addition, in the United States, the California Consumer Privacy Act, or CCPA, went into effect in January 2020, and the California Privacy Rights Act of 2020, or CPRA, which replaces the CCPA and goes into effect in January 2023, place additional requirements on the handling of personal data for us, our partners, and our advertisers.
+Added: The CCPA and CPRA also provide 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, 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.
−Removed: Changes in the European Union’s Electronic Communications Code, which became 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.
+Added: For example, in the United States, the Commonwealth of Virginia enacted the Consumer Data Protection Act and the State of Colorado enacted the Colorado Privacy Act, both of which take effect January 1, 2023 and may impose obligations similar to or more stringent than those we may face under other data protection laws.
+Added: Further, changes in the European Union’s Electronic Communications Code, which became 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, in April 2021 Apple issued an iOS update that imposes heightened restrictions on our access and use of user data.
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This has resulted in, and in the future is likely to continue to result in, reduced demand and pricing for our advertising products and could seriously harm our business.
−Removed: The impact of these changes on the overall mobile advertising ecosystem, our competitors, our business, and the developers, partners, and advertisers within our community is uncertain, and depending on how we, our competitors, and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed.
+Added: The longer-term impact of these changes on the overall mobile advertising ecosystem, our competitors, our business, and the developers, partners, and advertisers within our community is uncertain, and depending on how we, our competitors, and the overall mobile advertising ecosystem adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed.
+Added: While we implement alternative solutions, we are subject to rules and standards set by the owners of such operating systems which may be unclear, change or be interpreted in a manner adverse to us and require us to halt or change our solutions, any of which could seriously harm our business.
In addition, if we are unable to mitigate these and future developments, and alternative methods do not become widely adopted by our advertisers, then our targeting, measurement, and optimization capabilities will be materially and adversely affected, which would in turn continue to negatively impact our advertising revenue.
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Our advertising revenue could also be seriously harmed by many other factors, including:
−Removed: a diminished or stagnant growth in the total and regional number of DAUs on Snapchat , or our inability to deliver advertisements to all of our users due to hardware, software, or network limitations;
+Added: diminished or stagnant growth, or a decline, in the total and regional number of DAUs on Snapchat;
+Added: our inability to deliver advertisements to all of our users due to hardware, software, or network limitations;
a decrease in the amount of time spent on Snapchat, a decrease in the amount of content that our users share, or decreases in usage of our Camera, Communication, Snap Map, Stories, and Spotlight platforms;
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lack of ad creative availability by our advertising partners;
−Removed: our partners who provide content to us may not renew agreements or devote the resources to create engaging content or do not provide content exclusively to us;
−Removed: decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by our users or partners;
+Added: a decline in our available content, including if our partners who provide content do not renew agreements, devote the resources to create engaging content, or provide content exclusively to us;
+Added: decreases in the perceived quantity, quality, usefulness, or relevance of the content provided by us, our community, 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 systems, that demonstrate the value of our advertisements and other commercial content;
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difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines;
−Removed: the macroeconomic climate and the status of the advertising industry in general, including labor shortages and supply chain disruptions.
+Added: volatility in the equity markets, which may reduce our advertisers’ capacity or desire for aggressive advertising spending towards growth;
+Added: the political, economic, and macro-economic climate and the status of the advertising industry in general, including impacts related to labor shortages, supply chain disruptions, inflation, and as a result of war, terrorism, or armed conflict, including Russia’s invasion of Ukraine.
These and other factors could reduce demand for our advertising products, which may lower the prices we receive, or cause advertisers to stop advertising with us altogether.
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Our two co-founders have control over all stockholder decisions because they control a substantial majority of our voting stock.
−Removed: Our two co-founders, Evan Spiegel and Robert Murphy, control over 99% of the voting power of our outstanding capital stock as of September 30, 2021, and Mr.
−Removed: Spiegel alone can exercise voting control over a majority of our voting power.
+Added: Our two co-founders, Evan Spiegel and Robert Murphy, control over 99% of the voting power of our outstanding capital stock as of March 31, 2022, and Mr.
+Added: Spiegel alone can exercise voting control over a majority of our outstanding capital stock.
As a result, Mr.
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Health epidemics, including the 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.
−Removed: The ongoing global COVID-19 pandemic adversely impacted, and may continue to adversely impact, many aspects of our business.
−Removed: As some of our advertisers experience downturns or uncertainty in their own business operations and revenue because of the economic effects resulting from the spread of COVID-19, they halted or decreased or may halt, decrease, or continue to decrease, temporarily or permanently, their advertising spending or may focus their advertising spending more on other platforms, all of which may result in decreased advertising revenue.
−Removed: Labor shortages and supply chain disruptions continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may also halt or decrease advertising spending.
−Removed: Furthermore, a portion of our advertising revenue is related to in-person events or activities, such as sporting events, music festivals, and in-person learning, which were postponed, cancelled, or limited during the COVID-19 pandemic and may continue to be adversely affected.
+Added: The global COVID-19 pandemic adversely impacted, and may continue to adversely impact, many aspects of our business.
+Added: As some of our advertisers experience downturns or uncertainty in their own business operations and revenue because of the economic effects resulting from the spread of COVID-19 and the emergence of variants, they halted or decreased or may halt, decrease, or continue to decrease, temporarily or permanently, their advertising spending or may focus their advertising spending more on other platforms, all of which may result in decreased advertising revenue.
+Added: shortages, supply chain disruptions, and inflation continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may also halt or decrease advertising spending.
+Added: Furthermore, a portion of our advertising revenue is related to in-person events or activities, such as sporting events, music festivals, and in-person learning, which were postponed, cancelled, or limited during the COVID-19 pandemic.
+Added: While many in-person events and activities have returned, they have not done so at pre-pandemic levels and may continue to be adversely affected.
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.
−Removed: In response to the COVID-19 pandemic, many state, local, and foreign governments 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.
−Removed: Such orders or restrictions, or the perception that such orders or restrictions could occur, continue, or be reimplemented, 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.
−Removed: We implemented and continue a flexible work-from-home policy for substantially all of our employees, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we believe are in our best interests.
−Removed: While most of our operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed, many employees may have additional
−Removed: personal needs to attend to (such as looking after children as a result of school closures or family who become sick), and employees may become sick themselves and be unable to work.
+Added: In response to the COVID-19 pandemic we implemented and continue a flexible work-from-home policy for substantially all of our team members, and we may take further actions that alter our operations as may be required by federal, state, or local authorities, or which we believe are in our best interests.
+Added: While most of our operations have been effectively performed remotely, there is no guarantee that will continue, because our team is dispersed, many team members may have additional personal needs to attend to, and team members may become sick themselves and be unable to work.
Decreased effectiveness of our team could adversely affect our results due to our inability to meet in person with potential advertisers, longer time periods to review and approve ads, longer time to respond to application performance issues or spam, extended timelines for product reviews and a corresponding reduction in innovation, or other decreases in productivity that could seriously harm our business.
−Removed: Furthermore, we may decide to postpone or cancel planned investments in our business in response to changes in our business as a result of the spread of COVID-19, which may impact our user engagement and rate of innovation, either of which could seriously harm our business.
+Added: Furthermore, we may decide to postpone or cancel planned investments in our business in response to changes in our business as a result of the spread of COVID-19 or the emergence of variants, which may impact our user engagement and rate of innovation, either of which could seriously harm our business.
As a result of the COVID-19 pandemic, our partners and community who provide content or services to us may experience delays or interruptions in their ability to create content or provide services, if they are able to do so at all.
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.
−Removed: The effects of the COVID-19 pandemic on user engagement or growth are highly uncertain, and may lead to unpredictable results in the short term and long term, including shorter-term increases in user engagement or growth that may not be indicative of longer-term trends.
−Removed: As physical distancing requirements and shelter-in-place orders continue or are reactivated, and as fewer in-person activities take place, we may experience short-term and long-term disruption to user behavior and our business.
−Removed: 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.
−Removed: 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.
+Added: The effects of the COVID-19 pandemic on user engagement or growth are uncertain, and may lead to unpredictable results in the short term and long term, including shorter-term increases in user engagement or growth that may not be indicative of longer-term trends.
+Added: If physical distancing requirements and shelter-in-place orders continue or are reactivated, and if fewer in-person activities take place, we may experience short-term and long-term disruption to user behavior and our business.
+Added: We may also experience inconsistent or negative engagement as user behavior on our platform changes, including changes in user activity as a result of any physical distancing requirements and shelter-in-place orders.
+Added: 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, which could negatively affect our liquidity in the future.
The global impact of COVID-19 has and continues to rapidly evolve, and we will continue to monitor the situation closely.
−Removed: While there have been vaccines developed and administered, and the spread of COVID-19 may eventually be contained or mitigated, we cannot predict the timing of the vaccine adoption or roll-out globally or the efficacy of such vaccines, including against variants that emerge, and we do not yet know how businesses, advertisers, or our partners will operate in a post COVID-19 environment.
+Added: While there have been vaccines developed and administered, and the spread of COVID-19 may eventually be contained or mitigated, we cannot predict the rate of vaccine adoption, the roll-out globally, or the efficacy of such vaccines, including against variants that emerge, and we do not yet know how businesses, advertisers, or our partners will operate in a post-COVID-19 environment.
Our users may change how they use our products and services in an environment where the perceived risk of COVID-19 and regulations surrounding it have changed.
There may be additional costs or impacts to our business and operations, including when we are able to return to our offices and resume in-person activities, travel, and events.
−Removed: In addition, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will fully recover.
+Added: In addition, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or if or when the global economy will fully recover.
The ultimate impact of the COVID-19 pandemic or a similar health epidemic on our business, operations, or the global economy as a whole remains highly uncertain.
+Added: Exposure to geo-political conflicts and events, including Russia’s invasion of Ukraine, could put our employees and partners at substantial risk, interrupt our operations, increase costs, create additional regulatory burdens, and have significant negative macro-economic effects, any of which could seriously harm our business.
+Added: Significant geo-political conflicts and events, such as Russia’s invasion of Ukraine, have had, and will likely continue to have, a substantial effect on our business and operations.
+Added: We have team members and their families in Ukraine who face substantial personal risk, unprecedented disruption of their lives, and uncertainty as to the future.
+Added: We have been providing emergency assistance and support to these team members and their families, including helping team members to safely relocate when possible.
+Added: We expect to continue this support in the future.
+Added: In addition, we have offices, hardware, and other assets in Ukraine that may be at risk of destruction or theft.
+Added: We have incurred, and will likely continue to incur, costs to
+Added: support our team members and reorganize our operations to address these ongoing challenges.
+Added: In addition, our management has spent significant time and attention on these and related events.
+Added: The ongoing disruptions to our team members, our management, and our operations could seriously harm our business.
+Added: We believe Snapchat remains an important communication tool for family and friends in the region.
+Added: However, in March 2022, we stopped all advertising running in Russia, Belarus, and Ukraine and halted advertising sales to all Russian and Belarusian entities.
+Added: Many countries have placed sanctions and other restrictions on doing business with Russian or Belarusian businesses and certain individuals.
+Added: In response, Russia and Belarus have enacted restrictions and sanctions of their own.
+Added: These new laws, regulations and sanctions are rapidly evolving and may conflict with each other, leading to uncertainty and possible mistakes in compliance.
+Added: Should we violate such existing or similar future sanctions or regulations, we may be subject to substantial monetary fines and other penalties that could seriously harm our business.
+Added: In addition, we may be restricted from offering our products or services in these countries, and any reduction in availability or use could negatively impact our DAU, revenue, or operations.
+Added: We have seen an increase in cyberattacks, which we believe are related to the conflict.
+Added: We may also face retaliatory attacks by governments, entities, or individuals who do not agree with our public expressions of support for Ukraine and our Ukrainian team members.
+Added: Any such attack could cause disruption to our platform, systems, and networks, result in security breaches or data loss, damage our brand, or reduce demand for our services or advertising products.
+Added: In addition, we may face significant costs (including legal and litigation costs) to prevent, correct, or remediate any such breaches.
+Added: We may also be forced to expend additional resources monitoring our platform for evidence of disinformation or misuse in connection with the ongoing conflict.
+Added: The situation in Ukraine continues to evolve rapidly and we will monitor the situation closely.
+Added: It is unclear how long the conflict will last and what the long-term outcome and impact will be.
+Added: On a macro-economic level, the conflict in Ukraine has further disrupted trade, intensified problems in the global supply chain, and contributed to inflationary pressures.
+Added: All of these factors may negatively impact the demand for advertising as companies face limited product availability, restricted sales opportunities, and condensed margins.
+Added: In addition, advertisers may choose to pause advertising their products while the conflict dominates the news cycles and social media content.
+Added: Any pause or reduction in advertising spending in connection with the conflict in Ukraine could negatively impact our revenue and harm our business.
If we do not develop successful new products or improve existing ones, our business will suffer.
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Product innovation is inherently volatile, and if new or enhanced products fail to engage our users, advertisers, or partners, or if we fail to give our users meaningful reasons to return to our application, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, any of which may seriously harm our business in the short term, long term, or both.
−Removed: Additionally, we frequently launch new products and the products that we launch may have technical issues that diminish the
−Removed: performance of our application.
+Added: Additionally, we frequently launch new products and the products that we launch may have technical issues that diminish the performance of our application.
These performance issues or issues that we encounter in the future could impact our user engagement.
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This can create a lag in adoption of new products and new user additions related to new products.
−Removed: We believe this has not hindered our user growth or engagement, but that may be the result of a large portion of our user base being in a younger demographic and more willing to invest the time to learn to use our products most effectively.
+Added: We believe this has not hindered our user growth or engagement, but that may be the result
+Added: of a large portion of our user base being in a younger demographic and more willing to invest the time to learn to use our products most effectively.
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.
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For example, in 2016, we introduced Memories, our cloud storage service for Snaps, which increases our storage costs but does not currently generate revenue.
−Removed: In addition, we have invested and expect to continue to invest in new lines of business, new products, and other initiatives to generate revenue and increase our user base and user activity.
+Added: In addition, we have invested, and expect to continue to invest, in new lines of business, new products, and other initiatives to increase our user base and user activity, and attempt to monetize the platform.
For example, in 2019 we launched Snap Games, a live, multi-player gaming experience, and in November 2020 we launched Spotlight, a new entertainment platform for user-generated content within Snapchat.
−Removed: 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.
+Added: Such new lines of business, new products, and other initiatives may be costly, difficult to operate, increase product liability and litigation risk, 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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If we are not able to maintain or improve our market share, our business could suffer.
−Removed: We face significant competition in almost every aspect of our business both domestically and internationally, especially because our products and services operate across a broad list of categories, including communication, content, games, and augmented reality.
−Removed: Our competitors range 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 that offer, or will offer, products and services that may compete with Snapchat features or offerings.
−Removed: 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.
−Removed: 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.
+Added: We face significant competition in almost every aspect of our business both domestically and internationally, especially because our products and services operate across a broad list of categories, including camera, communication, content, games, and augmented reality.
+Added: Our competitors range from smaller or newer companies to larger more established companies such as Alphabet (including Google and YouTube), Apple, ByteDance (including TikTok), Kakao, LINE, Meta (including Facebook, Instagram, and WhatsApp), Naver (including Snow), Pinterest, Tencent, and Twitter.
+Added: Our competitors also include platforms that offer, or will offer, a variety of products, services, content, and online advertising offerings that compete or may compete with Snapchat features or offerings.
+Added: For example, Instagram, a competing application owned by Meta, has incorporated many of our features, including a “stories” feature that largely mimics our Stories feature and may be directly competitive.
+Added: Meta 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.
We also compete for users and their time, so we may lose users or their attention not only to companies that offer products and services that specifically compete with Snapchat features or offerings, but to companies with products or services that target or otherwise appeal to certain demographics, such as Discord or Roblox.
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We also face competition from traditional and online media businesses for advertising budgets.
−Removed: We compete broadly with the social media offerings of Apple, ByteDance, Facebook, Google, Pinterest, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries.
+Added: We compete broadly with the social media offerings of Alphabet, Apple, ByteDance, Meta, Pinterest, and Twitter, and with other, largely regional, social media platforms that have strong positions in particular countries.
As we introduce new products, as our existing products evolve, or as other companies introduce new products and services, we may become subject to additional competition.
−Removed: In addition, ongoing changes to privacy laws and mobile operating systems have made it more difficult for us to target and measure advertisements effectively.
+Added: In addition, ongoing changes to privacy laws and mobile operating systems have made it more difficult for us to target and measure advertisements effectively, and advertisers may prioritize the solutions of larger, more established companies.
As a result, our competitors may, and in some cases will, acquire and engage users or generate advertising or other revenue at the expense of our own efforts, which would negatively affect our business.
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In addition, advertisers may use information that our users share through Snapchat to develop or work with competitors to develop products or features that compete with us.
−Removed: Certain competitors, including Apple, Facebook, and Google, could use strong or dominant positions in one or more market segments to gain competitive advantages against us in areas where we operate, including by:
+Added: Certain competitors, including Alphabet, Apple, and Meta, could use strong or dominant positions in one or more market segments to gain competitive advantages against us in areas where we operate, including by:
integrating competing social media platforms or features into products they control such as search engines, web browsers, advertising networks, or mobile device operating systems;
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acquisitions or consolidation within our industry segment;
−Removed: our ability to attract, retain, and motivate talented employees, particularly engineers, designers, and sales personnel;
+Added: our ability to attract, retain, and motivate talented team members, particularly engineers, designers, and sales personnel;
our ability to successfully acquire and integrate companies and assets;
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If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers, and partners and seriously harm our business.
−Removed: We have incurred operating losses in the past, and may never achieve or maintain profitability.
+Added: We have incurred operating losses in the past, and may not be able to maintain profitability.
We began commercial operations in 2011 and we have historically experienced net losses and negative cash flows from operations.
−Removed: As of September 30, 2021, we had an accumulated deficit of $8.3 billion and for the three months ended September 30, 2021, we experienced a net loss of $72.0 million.
+Added: As of March 31, 2022, we had an accumulated deficit of $8.6 billion and for the three months ended March 31, 2022, we experienced a net loss of $359.6 million.
We expect our operating expenses to increase in the future as we expand our operations.
−Removed: If our revenue does not grow at a greater rate than our expenses, we will not be able to achieve and maintain profitability.
We may incur significant losses in the future for many reasons, including due to the other risks and uncertainties described in this report.
Additionally, we may encounter unforeseen expenses, operating delays, or other unknown factors that may result in losses in future periods.
−Removed: If our expenses continue to exceed our revenue, our business may be seriously harmed and we may never achieve or maintain profitability.
+Added: If our revenue does not grow at a greater rate than our expenses, our business may be seriously harmed and we may not be able to attain and sustain profitability.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could seriously harm our business.
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As we continue to grow, we cannot guarantee we will continue to attract and retain the personnel we need to maintain our competitive position.
−Removed: We face significant competition in hiring and attracting qualified engineers, designers, and sales personnel, and the recent move by companies to offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations.
+Added: We face significant competition in hiring and attracting qualified engineers, designers, and sales personnel, and the change by companies to offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations.
+Added: In addition, if we choose to no longer offer a remote or hybrid work environment, we may face more difficulty in retaining our workforce.
+Added: Further, labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, the ongoing COVID-19 pandemic, and workforce participation rates.
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.
−Removed: 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.
−Removed: Additionally, many of our current employees received substantial amounts of our capital stock, giving them a substantial amount of personal wealth, which can lead to an increase in attrition.
−Removed: 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.
−Removed: 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.
+Added: As we mature, or if our stock price declines, our equity awards may not be as effective an incentive to attract, retain, and motivate team members.
+Added: Stock price declines may also cause us to offer additional equity awards to our existing team members to aid in retention.
+Added: Conversely, many of our current team members received substantial amounts of our capital stock, giving them a substantial amount of personal wealth, which can lead to an increase in attrition.
+Added: As a result, it may be difficult for us to continue to retain and motivate these team members, and this wealth could affect their decision about whether they continue to work for us.
+Added: Furthermore, if we issue significant equity to attract and retain team members, we would incur substantial additional stock-based compensation expense and the ownership of our existing stockholders would be further diluted.
If we do not succeed in attracting, hiring, and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively and our business could be seriously harmed.
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Accordingly, we believe that investors’ future perceptions and expectations, which can be idiosyncratic and vary widely, and which we do not control, will affect our stock price.
+Added: For example, investors may believe our timing, path, and adoption to increased monetization will be faster or more effective than our current plans or that may actually take place.
You should consider our business and prospects in light of the many challenges we face, including the ones discussed in this report.
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In addition, third parties may attempt to fraudulently induce employees, users, or advertisers to disclose information to gain access to our data or our users’ or advertisers’ data.
−Removed: If any of these events occur, our or our users’ or advertisers’ information
−Removed: could be accessed or disclosed improperly.
+Added: In a hybrid or remote working environment, we and our employees may be more susceptible to such attacks.
+Added: If any of these events occur, our or our users’ or advertisers’ information could be accessed or disclosed improperly.
We have previously suffered the loss of employee information related to an employee error.
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If these third parties fail to implement adequate data-security practices or fail to comply with our terms and policies, our users’ data may be improperly accessed or disclosed.
−Removed: And even if these third parties take all these steps, their networks may still suffer a breach, which could compromise our users’ data.
+Added: And even if these third parties take all of these steps, their networks may still suffer a breach, which could compromise our users’ data.
Any incidents where our users’ or advertisers’ information is accessed without authorization, or is improperly used, or incidents that violate our Terms of Service or policies, could damage our reputation and our brand and diminish our competitive position.
+Added: Governments and regulatory agencies may enact new disclosure requirements when a cybersecurity event occurs, bringing greater attention to such events and causing reputational damage.
In addition, affected users or government authorities could initiate legal or regulatory action against us over those incidents, which could be time-consuming and cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.
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Any of these occurrences could seriously harm our business.
−Removed: We also are or may in the future be subject to many federal, state, and foreign laws and regulations, including those related to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, and taxation.
+Added: Cyberattacks and ransomware attacks are becoming increasingly prevalent and severe.
+Added: To alleviate the financial, operational, and reputational impact of these attacks, it may be preferable to make extortion payments, but we may be unwilling or unable to do so, including, for example, if applicable laws or regulations prohibit such payments.
+Added: Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our platform, systems, and networks or the systems and networks of third parties that support us and our services.
+Added: Any such attack, or the perception that one has occurred, could result in a loss of our users’ or advertisers’ confidence in the security of our platform and damage to our brand, reduce the demand for our products and services, disrupt business operations, result in the exfiltration of proprietary data, including source code, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, claims by our customers or other relevant parties that we have failed to comply with contractual obligations, and seriously harm our business.
+Added: We also are or may in the future be subject to many federal, state, local, and foreign laws and regulations, including those related to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation.
These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could seriously harm our business.
In addition, in December 2014, the U.S.
−Removed: Federal Trade Commission, or the FTC, resolved an investigation into some of our early practices by issuing a final order.
+Added: Federal Trade Commission resolved an investigation into some of our early practices by issuing a final order.
That order requires, among other things, that we establish a robust privacy program to govern how we treat user data.
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We regularly review metrics, including our DAUs and ARPU metrics, to evaluate growth trends, measure our performance, and make strategic decisions.
−Removed: These metrics are calculated using internal company data gathered on an analytics platform that we developed and operate and have not been validated by an independent third party.
+Added: These metrics are calculated using internal company data gathered on an analytics
+Added: platform that we developed and operate and our methodology has not been validated by an independent third party.
While these metrics are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally.
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For instance, if a significant understatement or overstatement of active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.
−Removed: We count a DAU when a user opens the application and only once per user per day.
+Added: We count a DAU when a user opens the application, but only once per user per day.
We have multiple pipelines of user data that we use to determine whether a user has opened the application during a particular day, becoming a DAU.
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However, we believe that we do not capture all data regarding our active users, which may result in understated metrics.
−Removed: 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.
+Added: This generally occurs because of technical issues, for instance 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.
We continually seek to address these technical issues and improve our accuracy, such as comparing our active users and other metrics with data received from other pipelines, including data recorded by our servers and systems.
−Removed: But given the complexity of the systems involved and the rapidly changing nature of
−Removed: 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.
+Added: 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.
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As a result of spamming activities, our users may use our products less or stop using them altogether, and result in continuing operational cost to us.
−Removed: Similarly, terrorists, criminals, and other bad actors may use our products to promote their goals and encourage users to engage in terror and other illegal activities.
+Added: Similarly, terrorists, criminals, and other bad actors may use our products to promote their goals and encourage users to engage in terror and other illegal activities discussed in our Transparency Report.
We expect that as more people use our products, these bad actors will increasingly seek to misuse our products.
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Combating these bad actors requires our teams to divert significant time and focus from improving our products.
−Removed: In addition, we may not be able to control or stop Snapchat from becoming the preferred application of use by these bad actors, which may become public knowledge and seriously harm our reputation or lead to lawsuits or attention from regulators.
+Added: we may not be able to control or stop Snapchat from becoming the preferred application of use by these bad actors, which may become public knowledge and seriously harm our reputation or lead to lawsuits or attention from regulators.
If these activities increase on Snapchat, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.
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GDPR in the European Union, which went into effect in May 2018, placed new data protection obligations and restrictions on organizations and may require us to further change our policies and procedures.
−Removed: If we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be
−Removed: seriously harmed.
−Removed: In addition, the CCPA went into effect in January 2020 and places additional requirements on the handling of personal data.
−Removed: 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.
−Removed: The potential effects of this legislation, including any regulations implementing 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.
+Added: If we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be seriously harmed.
+Added: In addition, the CCPA went into effect in January 2020 and the CPRA, which replaces the CCPA and goes into effect in January 2023, place additional requirements on the handling of personal data.
+Added: The CCPA and CPRA also provide 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.
+Added: The potential effects of this or any other legislation, including any implementing regulations, are or may be 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, federal, and foreign 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.
Changes in the European Union’s Electronic Communications Code, which became 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.
−Removed: The UK’s Age Appropriate Design Code, or AADC, which focuses on online safety and protection of children’s privacy online became effective in September 2021.
+Added: The U.K.’s Age Appropriate Design Code, or AADC, which focuses on online safety and protection of children’s privacy online became effective in September 2021.
Noncompliance with the AADC may result in audits by the U.K.’s Information Commissioner Office, or ICO, the regulatory body set up to uphold information rights, and other EU regulators as noncompliance with the AADC may indicate noncompliance with the GDPR.
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the development and introduction of new or redesigned products or services by us or our competitors;
−Removed: the ability of our data service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service;
+Added: the ability of our cloud service providers to scale effectively and timely provide the necessary technical infrastructure to offer our service;
our ability to attract and retain advertisers in a particular period;
−Removed: 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;
+Added: 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, inflationary pressures, or the conflict in Ukraine;
the number of advertisements shown to users;
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adverse litigation judgments, settlements, or other litigation-related costs, or product recalls;
−Removed: 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;
+Added: changes in the legislative or regulatory environment, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, enforcement by government regulators, including fines, orders, sanctions, 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;
−Removed: changes in domestic and global business or macroeconomic conditions, including as a result of the current COVID-19 pandemic and resulting labor shortages and supply chain disruptions.
+Added: the effect of war or other armed conflict on our workforce, operations, or the global economy;
+Added: changes in domestic and global business or macro-economic conditions, including as a result of the current COVID-19 pandemic or the conflict in Ukraine, and resulting labor shortages, supply chain disruptions, and inflation.
If we are unable to continue to successfully grow our user base and further monetize our products, our business will suffer.
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We focus on growing engagement across our service, and from time to time our efforts may reduce user activity with certain monetizable products in favor of other products we do not currently monetize.
−Removed: If we are not successful in our efforts to grow or effectively monetize our user base, or if we are unable to build and maintain good relations with our advertisers, our user growth and user engagement and our business may be seriously harmed.
+Added: If we are not successful in our efforts to grow or effectively and timely monetize our user base, or if we are unable to build and maintain good relations with our advertisers, our user growth and user engagement and our business may be seriously harmed.
In addition, we may expend significant resources to launch new products that we are unable to monetize, which may seriously harm our business.
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we fail to increase or maintain the amount of time spent on Snapchat, the amount of content that our users share, or the usage of our Camera, Communication, Snap Map, Stories, and Spotlight platforms;
−Removed: partners do not create engaging content for users or renew their agreements with us;
+Added: partners do not create sufficient engaging content for users or renew their agreements with us;
we fail to attract sufficient advertisers to utilize our self-serve platform to make the best use of our advertising inventory;
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It is possible that we may fail to effectively scale and grow our technology infrastructure to accommodate these increased demands.
−Removed: In addition, our business is subject to interruptions, delays, and failures resulting from earthquakes, other natural disasters, terrorism, pandemics, and other catastrophic events.
+Added: In addition, our business is subject to interruptions, delays, and failures resulting from earthquakes, other natural disasters, geo-political conflicts, terrorism, pandemics, and other catastrophic events.
Global climate change could also result in natural disasters occurring more frequently or with more intense effects, which could cause business interruptions.
+Added: Wars or other armed conflicts, including Russia’s invasion of Ukraine, could damage or diminish our access to our technology infrastructure or regional networks, disrupting our services which could seriously harm our business and financial performance.
Substantially all of our network infrastructure is provided by third parties, including Google Cloud and AWS.
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And because we exercise little control over these providers, we are vulnerable to problems with the services they provide.
−Removed: In 2020, we began work on the implementation of a new ERP system.
−Removed: During the first quarter of 2021, we completed the initial phase of our new ERP system implementation and migrated our general ledger, consolidation, and planning processes onto the new system.
+Added: During the first quarter of 2021, we completed the initial phase of our new enterprise resource planning, or ERP, system implementation and migrated our general ledger, consolidation, and planning processes onto the new system.
In connection with this implementation, we modified the design and documentation of our internal control processes and procedures relating to the new system.
−Removed: As part of this implementation, we may experience difficulties
−Removed: in managing our existing systems and processes, which could disrupt our operations, the management of our finances, and the reporting of our financial results.
−Removed: Our failure to complete such system implementation on a timely basis, or its failure to operate in the intended manner, may result in our inability to manage the growth of our business and to accurately forecast and report our results, each of which could seriously harm our business.
+Added: As part of this implementation, 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, which in turn, may result in our inability to manage the growth of our business and to accurately forecast and report our results, each of which could seriously harm our business.
Our business emphasizes rapid innovation and prioritizes long-term user engagement over short-term financial condition or results of operations.
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We will also continue to attempt to find effective ways to show our community new and existing products and alert them to events, holidays, relevant content, and meaningful opportunities to connect with their friends.
−Removed: These methods may provide temporary increases in engagement that may ultimately fail to attract and retain users.
+Added: These methods may provide temporary increases in
+Added: engagement that may ultimately fail to attract and retain users.
Our culture also prioritizes our long-term user engagement over short-term financial condition or results of operations.
−Removed: 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.
+Added: 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 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.
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If we need to license or acquire new intellectual property, we may incur substantial costs.
−Removed: We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with all our employees, consultants, advisors, and any third parties who access or contribute to our proprietary know-how, information, or technology.
+Added: We aim to protect our confidential proprietary information, in part, by entering into confidentiality agreements and invention assignment agreements with our employees, consultants, advisors, and third parties who access or contribute to our proprietary know-how, information, or technology.
We also rely on trademark, copyright, patent, trade secret, and domain-name-protection laws to protect our proprietary rights.
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Foreign data protection, privacy, consumer protection, content regulation, and other laws and regulations are often more restrictive than those in the United States.
−Removed: Foreign governments may censor Snapchat in their countries, restrict access to Snapchat from their countries entirely, impose other restrictions that may affect their citizens’ ability to access Snapchat for an extended period of time or even indefinitely, require data localization, or impose other laws or regulations that we cannot comply with, would be difficult for us to comply with, or would require us to rebuild our products or the infrastructure for our products.
+Added: Foreign governments may censor Snapchat in their countries, restrict access to
+Added: Snapchat from their countries entirely, impose other restrictions that may affect their citizens’ ability to access Snapchat for an extended period of time or even indefinitely, require data localization, or impose other laws or regulations that we cannot comply with, would be difficult for us to comply with, or would require us to rebuild our products or the infrastructure for our products.
Such restrictions may also be implemented or lifted selectively to target or benefit other companies or products, which may result in sudden or unexpected fluctuations in competition in regions where we operate.
+Added: In addition, geo-political disputes, including Russia’s invasion of Ukraine, may cause countries to target and restrict our operations, or to promote other companies’ products in place of ours.
Any restriction on access to Snapchat due to foreign government actions or initiatives, or any withdrawal by us from certain countries because of such actions or initiatives, or any increased competition due to actions and initiatives of foreign governments would adversely affect our DAUs, including by giving our competitors an opportunity to penetrate geographic markets that we cannot access or to which they previously did not have access.
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In the past, we have experienced, and we expect that we will continue to experience, media, legislative, and regulatory scrutiny.
−Removed: Unfavorable publicity regarding us, our privacy practices, product changes, product quality, litigation, employee matters, or regulatory activity, or regarding the actions of our founders, our partners, our users, or other companies in our industry, could seriously harm our reputation and brand.
+Added: Unfavorable publicity regarding us, our privacy practices, product changes, product quality, illicit use of our product, litigation, employee matters, or regulatory activity, or regarding the actions of our founders, our partners, 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 base or growth rates, any of which could seriously harm our business.
Expanding and operating in international markets requires significant resources and management attention.
−Removed: If we are not successful in expanding and operating our business in international markets, we may incur significant costs, damage our brand, or need to lay off employees in those markets, any of which may seriously harm our business.
−Removed: We have expanded to new international markets, which may have very different cultures and commercial, legal, and regulatory systems than where we predominately operate, and are growing our operations in existing international markets.
−Removed: In connection with our international expansion and growth, we have also hired new employees in many of these markets.
+Added: If we are not successful in expanding and operating our business in international markets, we may incur significant costs, damage our brand, or need to lay off team members in those markets, any of which may seriously harm our business.
+Added: We have expanded to new international markets and are growing our operations in existing international markets, which may have very different cultures and commercial, legal, and regulatory systems than where we predominately operate.
+Added: In connection with our international expansion and growth, we have also hired new team members in many of these markets.
This international expansion may:
−Removed: impede our ability to continuously monitor the performance of all of our employees;
−Removed: result in hiring of employees who may not yet fully understand our business, products, and culture;
+Added: impede our ability to continuously monitor the performance of all of our team members;
+Added: result in hiring of team members who may not yet fully understand our business, products, and culture;
cause us to expand in markets that may lack the culture and infrastructure needed to adopt our products.
−Removed: These issues may eventually lead to layoffs of employees in these markets and may harm our ability to grow our business in these markets.
+Added: These issues may eventually lead to turnover or layoffs of team members in these markets and may harm our ability to grow our business in these markets.
In addition, scaling our business to international markets imposes complexity on our business, and requires additional financial, legal, and management resources.
We may not be able to manage growth and expansion effectively, which could damage our brand, result in significant costs, and seriously harm our business.
+Added: Additionally, as we increase the number of our team members internationally, we are exposed to political, social, and economic instability in additional countries and regions.
+Added: For example, we have team members in Ukraine, and the current conflict and instability in the region has disrupted our operations and negatively impacted our team members and our business.
Our products are highly technical and may contain undetected software bugs or hardware errors, which could manifest in ways that could seriously harm our reputation and our business.
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Furthermore, from time to time we may introduce new products or make other business changes, including in areas where we currently do not compete, which could increase our exposure to patent, copyright, trademark, trade secret, and other intellectual property rights claims from competitors and non-practicing entities.
−Removed: We have been subject to, and expect to
−Removed: continue to be subject to, claims and legal proceedings from holders of patents, trademarks, copyrights, trade secrets, and other intellectual property rights alleging that some of our products or content infringe their rights.
+Added: We have been subject to, and expect to continue to be subject to, claims and legal proceedings from holders of patents, trademarks, copyrights, trade secrets, and other intellectual property rights alleging that some of our products or content infringe their rights.
For example, in January 2020, You Map, Inc.
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District Court for the District of Delaware against us, our subsidiary Zenly, and certain of our respective employees alleging that we misappropriated various trade secrets regarding map technology used in Snapchat’s and Zenly’s map products and that the Snapchat and Zenly applications infringe a You Map patent.
−Removed: While we believe we have meritorious defenses to these claims, an unfavorable outcome in these and other similar lawsuits could seriously harm our business.
+Added: we believe we have meritorious defenses to these claims, an unfavorable outcome in these and other similar lawsuits could seriously harm our business.
If these or other matters continue in the future or we need to enter into licensing arrangements, which may not be available to us or on terms favorable to us, it may increase our costs and decrease the value of our products, and our business could be seriously harmed.
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Because we have millions of users, class-action lawsuits against us that are purportedly filed by or on behalf of users typically claim enormous monetary damages in the aggregate even if the alleged per-user harm is small or non-existent.
−Removed: For example, in November 2020, a putative class filed an action against us in Illinois, alleging that we violated Illinois’ Biometric Information Privacy Act with respect to many Illinois users of Snapchat and that we are liable to those users for statutory damages.
−Removed: This lawsuit was dismissed, and we believe we have meritorious defenses to this and other putative class actions.
−Removed: However, an unfavorable outcome in these lawsuits could seriously harm our business.
+Added: For example, in November 2020, a putative class filed an action against us in Illinois, alleging that we violated Illinois’ Biometric Information Privacy Act, or BIPA, with respect to many Illinois users of Snapchat and that we are liable to those users for statutory damages.
+Added: We compelled arbitration, which the court granted, dismissing the case and ordering the parties to arbitrate the matter;
+Added: that ruling compelling arbitration was recently upheld on appeal.
+Added: Some plaintiffs’ attorneys have also indicated a desire to initiate arbitrations against us, arguing that we violated BIPA, in some cases on behalf of large numbers of Illinois users.
+Added: We believe we have meritorious defenses to these lawsuits and arbitrations, but an unfavorable outcome in these lawsuits or arbitrations could seriously harm our business.
Similarly, because we have a large number of stockholders, class-action lawsuits on securities theories typically claim enormous monetary damages in the aggregate even if the alleged loss per stockholder is small.
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We may also receive unfavorable preliminary, interim, or final rulings in the course of litigation.
−Removed: For example, in May 2017, we, certain of our officers and directors, and the underwriters of our IPO were named as defendants in securities class actions in federal and state courts purportedly brought on behalf of purchasers of our Class A common stock, which were settled and approved by such federal and state courts in early 2021.
+Added: For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock.
+Added: The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s App Tracking Transparency framework would have on our business.
+Added: We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business.
We may face lawsuits, incur liability, or need to seek licenses based on information posted to our products.
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For example, in April 2019, the European Union passed a directive expanding online platform liability for copyright infringement and regulating certain uses of news content online, which member states were required to implement by June 2021.
−Removed: In addition, legislation in Germany may impose significant fines for failure to comply with certain content removal and disclosure obligations.
+Added: In addition, legislation in Germany may impose significant fines for failure to comply with certain content removal and
+Added: disclosure obligations.
Numerous other countries in Europe, the Middle East, Asia-Pacific, and Latin America are considering or have implemented similar legislation imposing penalties for failure to remove certain types of content or follow certain processes.
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For example, the CDA was amended in 2018, and the U.S.
−Removed: Congress and the Executive branch have proposed further changes or amendments each
−Removed: year since 2019, including among other things proposals that would narrow CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether.
+Added: Congress and the Executive branch have proposed further changes or amendments each year since 2019, including among other things proposals that would narrow CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether.
Such changes could decrease or change our protections from liability for third-party content in the United States.
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In addition, as our international operations and sales continue to grow, we are subject to a variety of risks inherent in doing business internationally, including:
−Removed: political, social, and economic instability;
−Removed: risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, and unexpected changes in laws, regulatory requirements, and enforcement;
+Added: political, social, and economic instability, including war and other armed conflicts;
+Added: risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, rights of publicity, content, data protection, intellectual property, health and safety, competition, protection of minors, consumer protection, employment, money transmission, import and export restrictions, gift cards, electronic funds transfers, anti-money laundering, advertising, algorithms, encryption, and taxation, and unexpected changes in laws, regulatory requirements, and enforcement;
potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities;
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Bribery Act, and similar laws in other jurisdictions;
−Removed: export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control.
+Added: export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security, the Treasury Department’s Office of Foreign Assets Control, or other similar foreign regulatory bodies.
If we are unable to expand internationally and manage the complexity of our global operations successfully, our business could be seriously harmed.
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We plan to continue to make acquisitions and strategic investments in other companies, which could require significant management attention, disrupt our business, dilute our stockholders, and seriously harm our business.
−Removed: As part of our business strategy, we have made and intend to make acquisitions to add specialized employees and complementary companies, products, and technologies, as well as investments in public and private companies in furtherance of our strategic objectives.
+Added: As part of our business strategy, we have made and intend to make acquisitions to add specialized team members and complementary companies, products, and technologies, as well as investments in public and private companies in furtherance of our strategic objectives.
Our ability to acquire and successfully integrate larger or more complex companies, products, and technologies is unproven.
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We may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition or investment transaction, including accounting charges.
−Removed: We may also incur unanticipated liabilities that we assume as a result of acquiring companies.
+Added: We may also incur unanticipated liabilities and litigation exposure that we assume as a result of acquiring companies.
We may have to pay cash, incur debt, or issue equity securities to pay for any acquisition or investment, any of which could seriously harm our business.
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For example, if we develop a reputation for being a difficult acquirer or having an unfavorable work environment, or target companies view our non-voting Class A common stock unfavorably, we may be unable to source and close acquisition targets.
−Removed: In addition, members of the new U.S.
+Added: In addition, members of the U.S.
administration and Congress have proposed new legislation that could limit, hinder, or delay the acquisition process and target opportunities.
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Goodwill is required to be tested for impairment at least annually.
−Removed: As of September 30, 2021, we had recorded a total of $1.7 billion of goodwill and intangible assets, net related to our acquisitions.
+Added: As of March 31, 2022, we had recorded a total of $1.9 billion of goodwill and intangible assets, net related to our acquisitions.
An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets.
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The manner in which we fund these tax liabilities may cause us to spend substantial funds or dilute stockholders, either of which may have an adverse effect on our financial condition.
−Removed: When our employee equity awards vest, we withhold taxes and remit them to relevant taxing authorities on behalf of employees.
−Removed: To fund the withholding and remittance obligations for equity awards, we have either used our existing cash or sold a portion of vested equity awards on behalf of our employees near the applicable settlement dates in an amount that is substantially equivalent to the number of shares of common stock that we would withhold in connection with these settlements.
+Added: When our employee equity awards vest, we withhold taxes and remit them to relevant taxing authorities on behalf of team members.
+Added: To fund the withholding and remittance obligations for equity awards, we have either used our existing cash or sold a portion of vested equity awards on behalf of our team members near the applicable settlement dates in an amount that is substantially equivalent to the number of shares of common stock that we would withhold in connection with these settlements.
In the future, we may also sell equity on our behalf and use the proceeds to fund the withholding and remittance obligations for equity awards.
Any of these methods may have an adverse effect on our financial condition.
−Removed: If we sell shares on behalf of our employees, although those newly issued shares should not be dilutive, such sales to the market could result in a decline to our stock price.
+Added: If we sell shares on behalf of our team members, although those newly issued shares should not be dilutive, such sales to the market could result in a decline to our stock price.
If we use our existing cash, or if our cash reserves are not sufficient, we may choose to issue equity securities or borrow funds under our revolving credit facility.
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If we elect to satisfy tax withholding and remittance obligations in whole or in part by drawing on our revolving credit facility, our interest expense and principal repayment requirements could increase significantly, which could seriously harm our business.
−Removed: We do not have manufacturing capabilities and depend on contract manufacturers.
−Removed: If we encounter problems with our contract manufacturers or if the manufacturing process stops or is delayed for any reason, we may not deliver our physical products, such as Spectacles, to our customers on time, which may seriously harm our business.
−Removed: We have limited manufacturing experience for our physical products, such as Spectacles, and we do not have any internal manufacturing capabilities.
−Removed: Instead, we rely on contract manufacturers to build our physical products.
−Removed: Our contract manufacturers are vulnerable to capacity constraints and reduced component availability, and our control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply, or if we introduce a new product or feature, is limited.
−Removed: In addition, we have limited control over our manufacturers’ quality systems and controls, and therefore must rely on our manufacturers to manufacture our products to our quality and performance standards and specifications.
+Added: There are numerous risks associated with our internal and contract manufacturing of our physical products and components.
+Added: If we encounter problems with either our internal or contract manufacturing, we may not deliver our products within specifications or on time, which may seriously harm our business.
+Added: Manufacturing processes are highly complex, require advanced and costly equipment, and must be continuously modified to improve yields and performance.
+Added: We rely on suppliers and contract manufacturers in connection with the production of our own physical products and components.
+Added: We and our contract manufacturers are all vulnerable to capacity constraints and reduced component availability, and have limited control over delivery schedules, manufacturing yields, and costs, particularly when components are in short supply, or if we introduce a new product or feature.
+Added: In addition, we have limited control over our suppliers’ and manufacturers’ quality systems and controls, and therefore must rely on them to meet our quality and performance standards and specifications.
Delays, component shortages, including custom components that are manufactured for us at our direction, global trade conditions and agreements, and other manufacturing and supply problems could impair the distribution of our products and ultimately our brand.
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Section 301 tariffs on certain imports from China, which may adversely affect our products and seriously harm our business.
−Removed: Furthermore, any adverse change in our contract manufacturers’ financial or business condition or our relationship with our contract manufacturers could disrupt our ability to supply our products to our retailers and distributors.
−Removed: If we are required to change our contract manufacturers or assume internal manufacturing operations, we may lose revenue, incur increased costs, and damage our reputation and brand.
−Removed: Qualifying a new contract manufacturer and commencing production is expensive and time-consuming.
−Removed: In addition, if we experience increased demand for our products, we may need to increase our component purchases, contract-manufacturing capacity, and internal test and quality functions.
−Removed: The inability of our contract manufacturers to provide us with adequate supplies of high-quality products could delay our order fulfillment, and may require us to change the design of our products to meet this increased demand.
−Removed: Any redesign would require us to re-qualify our products with any applicable regulatory bodies, which would be costly and time-consuming.
+Added: Furthermore, any adverse change in our suppliers’ or contract manufacturers’ financial or business condition or our relationship with them could disrupt our ability to supply our products.
+Added: If we change our suppliers or contract manufacturers, or shift to more internal manufacturing operations, we may lose revenue, incur increased costs, and damage our reputation
+Added: Qualifying and commencing operations with a new supplier or contract manufacturer is expensive and time-consuming.
+Added: In addition, if we experience increased demand for our products, we may need to increase our material or component purchases, internal or contract-manufacturing capacity, and internal test and quality functions.
+Added: The inability of our suppliers or contract manufacturers to provide us with adequate high-quality materials and products could delay our order fulfillment, and may require us to change the design of our products to meet this increased demand.
+Added: Any redesign may require us to re-qualify our products with any applicable regulatory bodies or customers, which would be costly and time-consuming.
This may lead to unsatisfied customers and users and increase costs to us, which could seriously harm our business.
−Removed: Components used in our physical products may fail as a result of a manufacturing, design, or other defect over which we have no control, and render our devices inoperable.
−Removed: We rely on third-party component suppliers to provide some of the functionalities needed to operate and use our physical products, such as Spectacles.
−Removed: Any errors or defects in that third-party technology could result in errors in our physical products that could seriously harm our business.
−Removed: If these components have a manufacturing, design, or other defect, they can cause our products to fail and render them permanently inoperable.
+Added: As we increase or acquire additional manufacturing capacity, we are subject to many complex and evolving environmental, health, and safety laws, regulations, and rules in each jurisdiction in which we operate.
+Added: If we fail to comply with any such laws and regulations, then we could incur regulatory penalties, fines, and legal liabilities, suspension of production, significant compliance requirements, alteration of our manufacturing processes, or restrictions on our ability to modify or expand our facilities, any of which could seriously harm our business.
+Added: In addition, any errors or defects in any parts or technology incorporated into our products could result in product failures that could seriously harm our business.
+Added: Further, any defect in manufacturing, design, or other could cause our products to fail or render them permanently inoperable.
For example, the typical means by which our Spectacles product connects to mobile devices is by way of a Bluetooth transceiver located in the Spectacles product.
If the Bluetooth transceiver in our Spectacles product were to fail, it would not be able to connect to a user’s mobile device and Spectacles would not be able to deliver any content to the mobile device and the Snapchat application.
−Removed: As a result, we may have to replace these products at our sole cost and expense.
−Removed: Should we have a widespread problem of this kind, the reputational damage and the cost of replacing these products could seriously harm our business.
+Added: As a result, we may have to replace these products at our sole cost and expense, face litigation, or be subject to other liabilities.
+Added: Should we have a widespread problem of this kind, the reputational damage and the cost of replacing these products, or other liabilities, could seriously harm our business.
+Added: Some of our products are in regulated industries.
+Added: Clearances to market regulated products can be costly and time-consuming, and we may not be able to obtain these clearances or approvals on a timely basis, or at all, for future products.
The FDA and other state and foreign regulatory agencies regulate Spectacles.
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Government authorities, primarily the FDA and corresponding regulatory agencies, regulate the medical device industry.
−Removed: Unless there is an exemption, we must
−Removed: 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.
+Added: 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.
−Removed: 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.
−Removed: We have faced inventory risk with respect to our physical products, such as Spectacles.
−Removed: We have been and may in the future be exposed to inventory risks related to our physical products, such as Spectacles, as a result of rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns, changes in consumer tastes with respect to our products, and other factors.
+Added: 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 federal, state, or foreign agency regulations, or if we are subject to enforcement actions such as fines, civil penalties, injunctions, product recalls, or failure to obtain regulatory clearances or approvals.
+Added: We have faced inventory risk with respect to our physical products.
+Added: We have been and may in the future be exposed to inventory risks related to our physical products as a result of rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns, changes in consumer tastes with respect to our products, and other factors.
We try to accurately predict these trends and avoid overstocking or understocking inventory.
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Failure to manage our inventory, supplier commitments, or customer expectations could seriously harm our business.
+Added: We have a remote or hybrid work environment, and intend to continue such an environment into the future, which may increase our costs and negatively impact our operations.
+Added: During the COVID-19 pandemic most of our employees have been working in a remote or hybrid environment, and we intend to continue offering flexible work arrangements in the future, even after the COVID-19 pandemic subsides.
+Added: While we have been largely successful in conducting most of our operations remotely, there is no guarantee that we will continue to be as effective under a remote or hybrid work structure into the future.
+Added: In addition, we may incur significant costs to accommodate a hybrid environment, as we may need to expend resources to keep both an office environment and remote work environment available to our employees.
+Added: A remote or hybrid environment may also make our systems and technology more susceptible to cyberattacks, viruses, and other intrusions as we will have a more distributed employee technology and
+Added: network structure.
+Added: Any such issues caused or amplified by a remote or hybrid work environment could increase our costs and negatively impact our operations.
Risks Related to Credit and Financing
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If we default on our credit obligations, our operations may be interrupted and our business could be seriously harmed.
−Removed: We have a Credit Facility that we may draw on to finance our operations, acquisitions, and other corporate purposes, such as funding our tax-withholding and remittance obligations in connection with settling equity awards.
+Added: We have a Credit Facility that we may draw on to finance our operations, acquisitions, and other corporate purposes.
If we default on these credit obligations, our lenders may:
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Our ability to comply with these covenants may be affected by events beyond our control, and breaches of these covenants could result in a default under the Credit Facility and any future financial agreements into which we may enter.
−Removed: If not waived, defaults could cause our outstanding indebtedness under our Credit Facility and any future financing agreements that we may enter into to become immediately due and payable.
+Added: If not waived, defaults could cause our outstanding indebtedness under our outstanding Convertible Notes or our Credit Facility, including any future financing agreements that we may enter into, to become immediately due and payable.
For more information on our Credit Facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”
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taxation of international business activities.
−Removed: However, the new U.S.
+Added: However, the current U.S.
administration has indicated a desire to reform the Code, including by potentially increasing U.S.
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The tax laws applicable to our international business activities, including the laws of the United States and other jurisdictions, are subject to change and uncertain interpretation.
−Removed: The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or transfer pricing, which could increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm our business.
+Added: The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or transfer pricing, which could increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm
+Added: our business.
Taxing authorities may also determine that the manner in which we operate our business is not consistent with how we report our income, which could increase our effective tax rate and the amount of taxes we pay and seriously harm our business.
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In addition, determining our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain.
−Removed: Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements for such period or periods and may seriously harm our business.
+Added: Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements for such periods and may seriously harm our business.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited, each of which could seriously harm our business.
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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.
−Removed: As of September 30, 2021, Mr.
+Added: As of March 31, 2022, Mr.
Spiegel and Mr.
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These provisions generally require periodic reporting of beneficial ownership by significant stockholders, including changes in that ownership.
−Removed: For example, in November 2017, Tencent Holdings Limited notified us that it, together with its affiliates, acquired 145,778,246 shares of our non-voting Class A common stock via open market purchases.
−Removed: As a result of our capital structure, neither we nor Tencent is obligated to disclose changes in Tencent’s ownership of our Class A common stock, so there can be no assurance that you, or we, will be notified of any such changes.
+Added: For example, we believe that Tencent Holdings Limited, together with its affiliates, holds greater than 10% of our Class A common stock based in part on Tencent Holdings Limited’s public reporting.
+Added: As a result of our capital structure, holders are not obligated to disclose changes in ownership of our Class A common stock, so there can be no assurance that you, or we, will be notified of any such changes.
Our directors and officers are required to file reports under Section 16 of the Exchange Act.
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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.
−Removed: Since then, the trading price of our Class A common stock has ranged from $4.82 to $83.34 through September 30, 2021.
−Removed: Declines or volatility in our trading price could make it more difficult to attract and retain talent, adversely impact employee retention and morale, and may require us to issue more equity to incentivize employees which could dilute stockholders.
+Added: Since then, the trading price of our Class A common stock has ranged from $4.82 to $83.34 through March 31, 2022.
+Added: Declines or volatility in our trading price could make it more difficult to attract and retain talent, adversely impact employee retention and morale, and may require us to issue more equity to incentivize team members which could dilute stockholders.
The market price of our Class A common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including:
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changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors;
−Removed: price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;
+Added: price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole, the COVID-19 pandemic, inflationary pressures, war, such as Russia’s invasion of Ukraine, armed conflict, incidents of terrorism, or responses to these events;
lawsuits threatened or filed against us;
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In the past, stockholders have filed securities class-action litigation following periods of market volatility.
−Removed: For example, in May 2017, we, certain of our officers and directors, and the underwriters of our IPO were named as defendants in securities class actions in federal and state courts purportedly brought on behalf of purchasers of our Class A common stock, which were settled and approved by such federal and state courts in early 2021.
+Added: For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock.
+Added: The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s ATT framework would have on our business.
+Added: We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business.
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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On conversion of the Convertible Notes, we have the option to pay or deliver, as the case may be, cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock.
−Removed: If we elect to settle our conversion obligation in shares of our Class A common stock or a combination of cash and shares of our Class A common stock, any sales in the public market of our Class A common stock issuable on such conversion could adversely affect prevailing market prices of our Class A common stock.
−Removed: In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated
−Removed: conversion of the Convertible Notes into shares of our Class A common stock, any of which could depress the market price of our Class A common stock.
−Removed: We may also engage in exchanges, or we may repurchase or induce conversions, of the Convertible Notes in the future.
+Added: If we elect to settle our conversion
+Added: obligation in shares of our Class A common stock or a combination of cash and shares of our Class A common stock, any sales in the public market of our Class A common stock issuable on such conversion could adversely affect prevailing market prices of our Class A common stock.
+Added: In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our Class A common stock, any of which could depress the market price of our Class A common stock.
+Added: We may also engage in exchanges, repurchase, or induce conversions, of the Convertible Notes in the future.
Holders of the Convertible Notes that participate in any of these exchanges, repurchases, or induced conversions may enter into or unwind various derivatives with respect to our Class A common stock or sell shares of our Class A common stock in the open market to hedge their exposure in connection with these transactions.
8 unchanged sentences
The Convertible Notes are convertible at the option of the holder.
−Removed: In the event the conditions for optional conversion of the 2025 Notes, 2026 Notes, or 2027 Notes by holders continue to be met before the close of business on the business day immediately preceding February 1, 2025, May 1, 2026, or February 1, 2027, respectively, holders of the applicable Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option.
+Added: In the event the conditions for optional conversion of the 2025 Notes, 2026 Notes, 2027 Notes, or 2028 Notes by holders are met before the close of business on the business day immediately preceding February 1, 2025, May 1, 2026, February 1, 2027, or December 1, 202 7 , respectively, holders of the applicable Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option.
If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we may settle all or a portion of our conversion obligation in cash, which could adversely affect our liquidity.
4 unchanged sentences
The counterparties to these hedging positions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock or purchasing or selling our Class A common stock in secondary market transactions prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes or following any repurchase of Convertible Notes by us on any fundamental change repurchase date or otherwise).
−Removed: This activity could cause or avoid an increase or a decrease in the market price of our Class A common stock or the Convertible Notes.
+Added: This activity could cause or avoid an increase or a decrease in the
+Added: market price of our Class A common stock or the Convertible Notes.
In addition, if any such hedging positions fail to become effective, the counterparties to these hedging positions or their respective affiliates may unwind their hedge positions, which could adversely affect the value of our Class A common stock.
25 unchanged sentences
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.
−Removed: As of September 30, 2021, we had outstanding a total of 1.3 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.
−Removed: In addition, as of September 30, 2021, 92.0 million shares of Class A common stock and 0.7 million shares of Class B common stock were subject to outstanding stock options and RSUs.
−Removed: All of our outstanding shares are eligible for sale in the public market, except approximately 375.8 million shares (including options exercisable and RSAs subject to forfeiture as of September 30, 2021) held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.
+Added: As of March 31, 2022, we had outstanding a total of 1.4 billion shares of Class A common stock, 22.7 million shares of Class B common stock, and 231.6 million shares of Class C common stock.
+Added: In addition, as of March 31, 2022, 74.4 million shares of Class A common stock and 0.6 million shares of Class B common stock were subject to outstanding stock options and RSUs.
+Added: As a result of our capital structure, holders who are not required to file reports under Section 16 of the Exchange Act are not obligated to disclose changes in ownership of our Class A common stock, so there can be no assurance that you, or we, will be notified of any such changes.
+Added: All of our outstanding shares are eligible for sale in the public market, except approximately 372.9 million shares (including options exercisable and RSAs subject to forfeiture as of March 31, 2022) 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.
In addition, we have reserved shares for issuance under our equity incentive plans.
−Removed: We may also issue shares of our Class A common stock or securities convertible into our Class A common stock from time to time in connection with a financing, acquisition, investment, or otherwise.
+Added: We may also issue shares of our
+Added: Class A common stock or securities convertible into our Class A common stock from time to time in connection with a financing, acquisition, investment, or otherwise.
When these shares are issued and subsequently sold, it would be dilutive to existing stockholders and the trading price of our Class A common stock could decline.
18 unchanged sentences
By complying with public disclosure requirements, our business and financial condition are more visible, which we believe may result in increased threatened or actual litigation, including by competitors and other third parties.
−Removed: For example, in May 2017, we, certain of our officers and directors, and the underwriters of our IPO were named as defendants in securities class actions in federal and state courts purportedly brought on behalf of purchasers of our Class A common stock, which were settled and approved by such federal and state courts in early 2021.
+Added: For example, in November 2021, we, and certain of our officers, were named as defendants in a securities class action lawsuit in federal court purportedly brought on behalf of purchasers of our Class A common stock.
+Added: The lawsuit alleges that we and certain of our officers made false or misleading statements and omissions concerning the impact that Apple’s ATT framework would have on our business.
+Added: We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously
+Added: harm our business.
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.
11 unchanged sentences
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.
−Removed: 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.
+Added: In such an 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.
−Removed: Unregistered Sales of Equity Securities and Use of Proceeds
−Removed: Defaults Upon Senior Securities
−Removed: Mine Safety Disclosures
−Removed: 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.