What changed in this filing

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Item 1A. Risk Factors

2022-10-21 compared with 2022-07-22 · 115 added, 92 removed, 1010 unchanged (17% of the section changed)

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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.

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.

Although we have 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.

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 sustain profitability.

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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.

We believe that this impact on our targeting, measurement, and optimization capabilities has

negatively affected our operating results.

We believe that this impact on our targeting, measurement, and optimization capabilities has negatively affected our operating results.

In addition, our advertising business is seasonal, volatile, and cyclical, which could result in fluctuations in our quarterly revenues and operating results, including the expectations of our business prospects.

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 geo-political events, including the conflict in Ukraine.In addition, macro-economic factors like labor 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, and harm our business.

In addition, macro-economic factors like labor 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, and harm our business.

Our Community and Competition

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

We had 347 million DAUs on average in the quarter ended June 30, 2022.

We had 363 million DAUs on average in the quarter ended September 30, 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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For the years ended December 31, 2021, 2020, and 2019, advertising revenue accounted for approximately 99%, 99%, and 98% of total revenue, respectively.

We expect this trend to continue for the foreseeable future.

Even though we are exploring other revenue streams, such as subscription models, we still expect this trend to continue for the foreseeable future.

Although we try to establish longer-term advertising commitments with advertisers, most advertisers do not have long-term advertising commitments with us, and our efforts to establish long-term commitments may not succeed.

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our inability, or perceived inability, to measure the effectiveness of our advertising or target the appropriate audience for advertisements;

our inability to collect and disclose data or access a user’s identifier for advertising or similar deterministic identifier that new and existing advertisers may find useful;

our inability to collect and disclose data or access a user’s identifier for advertising or similar deterministic identifiers that new and existing advertisers may find useful;

difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines;

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

Our two co-founders, Evan Spiegel and Robert Murphy, control over 99% of the voting power of our outstanding capital stock as of June 30, 2022, and Mr.

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, 2022, and Mr.

Spiegel alone can exercise voting control over a majority of our outstanding capital stock.

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In addition, in October 2016, we issued a dividend of one share of non-voting Class A common stock to all our equity holders, which will prolong our co-founders’ voting control because our co-founders are able to liquidate their holdings of non-voting Class A common stock without diminishing their voting control.

Furthermore, in July 2022, we announced the future declaration and payment of a special dividend of one share of Class A Common stock on each outstanding share of Snap’s common stock, which will be subject to certain triggering conditions.

Furthermore, in July 2022, our board of directors approved the future declaration and payment of a special dividend of one share of Class A Common stock on each outstanding share of Snap’s common stock, subject to certain triggering conditions.

In the future, our board of directors may, from time to time, decide to issue additional special or regular stock dividends in the form of Class A common stock, and if we do so our co-founders’ control could be further prolonged.

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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.

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.

In addition, there is no guarantee that a future outbreak of this or any other widespread epidemic 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.

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We expect to continue this support in the future.

In addition, we have offices, hardware, and other

assets in Ukraine that may be at risk of destruction or theft.

We have incurred, and will likely continue to incur, costs to support our team members and reorganize our operations to address these ongoing challenges.

In addition, we have offices, hardware, and other assets in Ukraine that may be at risk of destruction or theft.

We have incurred, and will likely continue to incur, costs to

support our team members and reorganize our operations to address these ongoing challenges.

In addition, our management has spent significant time and attention on these and related events.

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

The short- and long-term impact of any major change, like our 2018 application redesign and the rewrite of our application for Android users in 2019, or even a less significant change such as a refresh of the application or a feature change, is difficult to predict.

In August 2022, we announced a strategic reprioritization in which we will substantially reduce or eliminate investments not directly connected to our top priorities of community growth, revenue growth, and augmented reality.

The short- and long-term impact of any major change, like our 2018 application redesign, the rewrite of our application for Android users in 2019, and our strategic reprioritization in 2022, or even a less significant change such as a refresh of the application or a feature change, is difficult to predict.

Although we believe that these decisions will benefit the aggregate user experience and improve our financial performance over the long term, we may experience disruptions or declines in our DAUs or user activity broadly or concentrated on certain portions of our application.

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Because our products created new ways of communicating, they have often required users to learn new behaviors to use our products, or to use our products repeatedly to receive the most benefit.

These new behaviors, such as swiping and tapping in the Snapchat application, are not always intuitive to users.

This can create a lag in adoption of new products and new user

additions related to new products.

These new behaviors, such as swiping and tapping

in the Snapchat application, are not always intuitive to users.

This can create a lag in adoption of new products and new user additions related to new products.

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.

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Such new lines of business, new products, and other initiatives may be costly, difficult to operate and monetize, 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 addition, new products or features that we launch may ultimately prove unsuccessful and may be eliminated in the future.

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.

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.

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.

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If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers, and partners and seriously harm our business.

We have incurred operating losses in the past, and may not be able to maintain profitability.

We have incurred operating losses in the past, and may not be able to attain and sustain profitability.

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

As of June 30, 2022, we had an accumulated deficit of $9.1 billion and for the six months ended June 30, 2022, we experienced a net loss of $422.1 million.

As of September 30, 2022, we had an accumulated deficit of $9.4 billion and for the three months ended September 30, 2022, we experienced a net loss of $359.5 million.

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

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In addition, if we choose to no longer offer a remote or hybrid work environment, we may face more difficulty in retaining our workforce.

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.

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 COVID-19 pandemic, and workforce participation rates.

In addition, if our reputation were to be harmed, whether as a result of our strategic reprioritization in 2022, media, legislative, or regulatory scrutiny or otherwise, it could make it more difficult to attract and retain personnel that are critical to the success of our business.

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

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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.

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.

For example, investors may believe our timing and path to increased monetization will be faster or more effective than our current plans or than actually takes place.

You should consider our business and prospects in light of the many challenges we face, including the ones discussed in this report.

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And, even if we make such payments, cyber threat actors may still disclose data, engage in further extortion, or otherwise harm our systems or data.

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.

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 their systems or networks are free from exploitable defects or bugs that could result in a breach of or disruption to our platform, systems, and networks or the systems and networks of third parties that support us and our services.

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

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User credentials may be obtained through breaches of non-Snap platforms and services, password stealing malware, social engineering, or other tactics and techniques and used to launch coordinated attacks.

These attacks may involve using our service to spam or abuse other users, download user personal data, further compromise additional user accounts, or to compromise employee account credentials or social engineer employees into granting further access to our systems.

Some of these attacks may be hard to detect at scale and may result in cyber threat actors using our service to spam or abuse other users, download user personal data, further compromise additional user accounts, or to compromise employee account credentials or social engineer employees into granting further access to our systems.

If these cyber threat actors are successful or there is a perception that such an attack has occurred, we may be required to notify our users and regulators, and such attacks may disrupt our business operations and users’ access to the platform, harm other users, expose us to legal liabilities, and cause us to lose the trust of our users.

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

We regularly review metrics, including our DAUs and ARPU metrics, to evaluate growth trends, measure our performance, and make strategic decisions.

We regularly review and share metrics, including our DAUs and ARPU metrics, with our investors, advertisers, and partners to evaluate growth trends, measure our performance, and make strategic decisions.

These metrics are calculated using internal company data gathered on an analytics platform that we developed and 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.

While these metrics are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring how our products are used across large populations globally that may require significant judgment and are subject to technical errors.

For example, there may be individuals who have multiple Snapchat accounts, even though we forbid that in our Terms of Service and implement measures to detect and suppress that behavior.

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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.

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.

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 metrics, our reputation may be seriously harmed.

If advertisers, partners, or investors do not perceive our user, geographic, other demographic metrics, or measurements of advertising effectiveness to be accurate, or if we discover material inaccuracies in our metrics, our reputation may be seriously harmed.

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

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Many of these laws, regulations, and executive actions are subject to change and uncertain interpretation, and could result in investigations, claims, changes to our business practices, increased cost of operations, and declines in user growth, retention, or engagement, any of which could seriously harm our business.

We are subject to a variety of laws, regulations, and executive actions that involve matters central to our business, including user privacy, security, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation, and online-payment services.

We are subject to a variety of laws, regulations, and executive actions that involve matters central to our business, including user privacy, security, rights of publicity, data protection, content and content moderation, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation, and online-payment services.

These laws, regulations, and executive actions can be particularly restrictive in countries outside the United States.

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

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.

If we are not compliant with GDPR requirements, we may be subject to significant fines and our business may be seriously harmed.

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.

GDPR in the European Union, which went into effect in May 2018, placed new data protection obligations and restrictions on organizations.

This has now been followed by the Digital Services Act, or DSA, which requires further change to our products, policies, and procedures by late 2023 or early 2024.

If we are not compliant with the requirements of GDPR and DSA, as well as similar laws in our other markets, we may be subject to significant fines and our business may be seriously harmed.

In addition, the CCPA went into effect in January 2020 and the CPRA, which expands the requirements for handling personal data of California residents, goes into effect in January 2023.

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 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.

In 2022, Virginia, Colorado, Connecticut, and Utah also passed privacy laws that go into effect in 2023.

The potential effects of these laws 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.

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The ICO continues to engage with industry leaders to interpret and maintain compliance with the AADC.

California’s Age-Appropriate Design Code, which is modeled after the AADC, goes into effect in 2024 and non-compliance with the law could result in regulatory action, including injunctions and statutory civil penalties.

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

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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, labor shortages, supply chain disruptions, or the conflict in Ukraine;

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

the number of advertisements shown to users;

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increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive;

our ability to maintain operating margins, cash used in operating activities, and Free Cash Flow;

our ability to maintain operating margins, cash provided by operating activities, and Free Cash Flow;

our ability to accurately forecast consumer demand for our physical products and adequately manage inventory;

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

fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our balance sheet;

fluctuations in the market values of our portfolio investments and interest rates or impairments of any assets on our consolidated balance sheet;

changes in our effective tax rate;

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This could negatively affect our business performance and seriously harm our business.

On August 31, 2022, we announced a plan to reduce our global employee headcount by approximately 20%.

The headcount reduction is part of a broader strategic reprioritization to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow.

As a result of the strategic reprioritization, in the quarter ended September 30, 2022, we incurred pre-tax charges of $154.6 million, primarily consisting of severance and related charges, stock-based compensation expense, lease exit and related charges, impairment charges, and contract termination charges.

We expect to incur total restructuring charges of up to $190 million, primarily through December 31, 2022.

This headcount reduction and strategic reprioritization could disrupt our operations, adversely impact employee retention and morale, adversely impact our reputation as an employer, which could make it more difficult for us to retain existing employees and hire new employees in the future, distract management, and seriously harm our business.

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

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As our user base and the volume and types of information shared on Snapchat grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs.

It is possible that we may fail to effectively scale and grow our technology infrastructure to accommodate these increased demands.

It is possible that we may fail to effectively scale and grow our technology infrastructure

to accommodate these increased demands.

In addition, our business is subject to interruptions, delays, and failures resulting from earthquakes, other natural disasters, geo-political conflicts, terrorism, pandemics, and 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.

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.

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.

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.

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.

Beginning in 2021, we implemented a new enterprise resource planning system, or ERP, and migrated our general ledger, consolidation, and planning processes onto the new system.

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

Our business emphasizes rapid innovation and prioritizes long-term user engagement over short-term financial condition or results of operations.

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For instance, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection.

As a result, we may be exposed to material risks of theft of our proprietary information and other intellectual property, including technical data, manufacturing processes, data sets, or other sensitive information, and we may also encounter significant problems in protecting and defending our intellectual property or proprietary rights abroad.

property or proprietary rights abroad.

In any of these cases, we may be required to expend significant time and expense to prevent infringement or to enforce our rights.

Although we have taken measures to protect our proprietary rights, there can be

no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business.

Although we have taken measures to protect our proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to ours and compete with our business.

If we are unable to protect our proprietary rights or prevent unauthorized use or appropriation by third parties, the value of our brand and other intangible assets may be diminished, and competitors may be able to more effectively mimic our service and methods of operations .

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Because many of our users join Snapchat on the invitation or recommendation of a friend or family member, one of our primary focuses is on ensuring that our users continue to view Snapchat and our brand favorably so that these referrals continue.

Maintaining and enhancing our brand will

depend largely on our ability to continue to provide useful, novel, fun, reliable, trustworthy, and innovative products, which we may not do successfully.

Maintaining and enhancing our brand will depend largely on our ability to continue to provide useful, novel, fun, reliable, trustworthy, and innovative products, which we may not do successfully.

We may introduce new products, make changes to existing products and services, or require our users to agree to new terms of service related to new and existing products that users do not like, which may negatively affect our brand in the short term, long term, or both.

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We may not be able to manage growth and expansion effectively, which could damage our brand, result in significant costs, and seriously harm our business.

For example, on August 31, 2022, we announced a plan to reduce our global employee headcount by approximately 20%.

The headcount reduction is part of a broader strategic reprioritization by the company to focus on our top priorities, improve cost efficiencies, and drive toward profitability and positive free cash flow.

We expect to incur total restructuring charges of up to $190 million, primarily through December 31, 2022.

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.

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Congress and the Executive branch have proposed further changes or amendments each year since 2019 including, among other things, proposals that would narrow the CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether.

states have also enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections.

states have also

enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections.

Although such state laws have been or can be expected to be challenged in court, if these laws were upheld or if additional similar laws or the changes or amendments to the CDA proposed by the U.S.

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If courts begin to interpret the CDA more narrowly than they have historically done, this could expose us to additional lawsuits and potential judgments and seriously harm our business.

The United States Supreme Court recently agreed to hear a case concerning the scope of CDA protection;

an eventual ruling in that case might narrow the judicial interpretation of the statute, exposing us to additional lawsuits and potential judgments that could seriously harm our business.

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

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We anticipate that we will continue to be a target for lawsuits in the future.

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.

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.

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.

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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.

We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business.

In August 2022, we, and certain of our directors, were named as defendants in a class action lawsuit in federal court purportedly brought on behalf of Class A stockholders, alleging that a transaction between the Company’s co-founders and the Company, in which the co-founders agreed to employment agreements and we agreed to amend our certificate of incorporation and issue a stock dividend if certain conditions were met, was not advantageous to the stockholders and constituted a breach of fiduciary duty.

We believe we have meritorious defenses to these lawsuits, but litigation is inherently uncertain and 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, we do not monitor or edit the vast majority of content that is communicated through Snapchat, and such content may expose us to lawsuits.

We are currently facing several lawsuits alleging that we are liable for allowing users to communicate with each other, and that those communications sometimes result in harm.

Other lawsuits allege that the design of our platform and those of our competitors is addictive and harmful to minor users’ mental health, sometimes resulting in negative mental health outcomes.

We believe we have meritorious defenses to these lawsuits, but litigation is inherently uncertain and unfavorable outcomes could seriously harm our business.

This risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions may be less than the protection that exists in the United States.

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Numerous other countries in Europe, the Middle East, Asia-Pacific, and Latin America are considering or have implemented similar legislation imposing penalties for failure to remove certain types of content or follow certain processes.

In the United States, there have been various Congressional and Executive branch efforts to remove or restrict the scope of the protections available to online platforms under Section 230 of the CDA.

In the United States, there have been various Congressional and Executive branch efforts to remove or restrict the scope of the protections available to online platforms under Section 230 of the CDA, and s ome U.S.

states have also enacted or proposed legislation that would undercut, or conflict with, the CDA’s protections .

For example, the CDA was amended in 2018, and the U.S.

Congress and the Executive branch have proposed further changes or amendments each year since 2019, including among other things proposals that would narrow CDA immunity, expand government enforcement power relating to content moderation concerns, or repeal the CDA altogether.

The United States Supreme Court recently agreed to hear a case concerning the scope of CDA protection;

an eventual ruling in that case might narrow the judicial interpretation of the statute, exposing us to additional lawsuits and potential judgments that could seriously harm our business.

Such changes could decrease or change our protections from liability for third-party content in the United States.

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If we fail to deploy or manage our operations in international markets successfully, our business may suffer.

In the future, as our international operations increase, or more of our expenses are denominated in currencies other than the U.S.

dollar, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do

We do not currently enter into foreign currency exchange contracts, which means our business, financial condition, and operating results may be impacted by fluctuations in the exchange rates of the currencies in which we do business.

In the future, as our international operations increase, or more of our revenue agreements or operating expenses are denominated in currencies other than the U.S.

dollar, these impacts may become material.

In addition, as our international operations and sales continue to grow, we are subject to a variety of risks inherent in doing business internationally, including:

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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.

Our ability to acquire and successfully integrate larger or more complex companies, products, and technologies is unproven.

In the future, we may not be able to find other suitable acquisition or investment candidates, and we may not be able to complete acquisitions or investments on favorable terms, if at all.

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Our acquisition and investment strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions.

For example, if we develop a reputation for being a difficult acquirer or having an unfavorable work environment, or target companies view our non-voting Class A common stock unfavorably, we may be unable to source and close acquisition targets.

For example, if we develop a reputation for being a difficult acquirer or having an

unfavorable work environment, or target companies view our non-voting Class A common stock unfavorably, we may be unable to source and close acquisition targets.

In addition, members of the U.S.

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

As of June 30, 2022, we had recorded a total of $1.9 billion of goodwill and intangible assets, net related to our acquisitions.

As of September 30, 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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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.

If we use our existing cash, or if our cash reserves are not sufficient, we may choose to issue equity securities or borrow funds under our revolving credit facility.

In such an event, we cannot assure you that we will be able to successfully match the proceeds of any such equity financing to the then applicable tax liability, and any such equity financing could result in a decline in our stock price and be dilutive to existing stockholders.

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Qualifying and commencing operations with a new supplier or contract manufacturer is expensive and time-consuming.

In addition, if we experience increased demand for our products, we may need to increase our material or component purchases, internal or contract-manufacturing capacity, and internal test and quality functions.

In addition, if we experience increased demand for our products, we may need to increase our material or

component purchases, internal or contract-manufacturing capacity, and internal test and quality functions.

The inability of our suppliers or contract manufacturers to provide us with adequate 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.

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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.

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.

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

We have incurred net losses and negative cash flow from operations in prior periods, and we may not maintain profitability.

We have historically incurred net losses and negative cash flow from operations, and we may not attain and sustain profitability in future periods.

As a result, we may need additional financing.

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taxation of international business activities.

However, the current U.S.

administration has indicated a desire to reform the Code, including by potentially increasing U.S.

federal corporate income tax rates, and it is currently unclear what, if any, changes to the Code will be enacted and how that may affect our business or the financial markets and the market price of our Class A common stock.

In August 2022, the Inflation Reduction Act, or the IRA, was enacted, the provisions of which include a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a one percent excise tax on certain share buybacks by public corporations that would be imposed on such corporations.

Pending further guidance, it is possible that the IRA could increase our future tax liability, which could in turn adversely impact our business and future profitability.

In addition, many jurisdictions and intergovernmental organizations have been discussing proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the jurisdictions in which we do business and in which our users are located.

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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.

The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or transfer pricing, which could increase our worldwide effective tax rate and the amount of taxes we pay and seriously harm

our business.

Taxing authorities may also determine that the manner in which we operate our business is not consistent with how we report our income, which could increase our effective tax rate and the amount of taxes we pay and seriously harm our business.

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As a result, all matters submitted to stockholders will be decided by the vote of holders of Class B common stock and Class C common stock.

As of June 30, 2022, Mr.

As of September 30, 2022, Mr.

Spiegel and Mr.

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In addition, S&P Dow Jones, another provider of widely followed stock indexes, has stated that companies with multiple share classes will not be eligible for certain of their indexes.

As a result, our Class A common stock is likely not eligible for these stock indexes.

As a result, our Class A common stock is not eligible for these stock indexes.

We cannot assure you that other stock indexes will not take a similar approach to FTSE Russell or S&P Dow Jones in the future.

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But some information required in a proxy statement or information statement is not required in any other public filing.

For example, we will not be required to comply with the proxy access rules under Section 14 of the Exchange Act.

For example, we will not be required to comply with the proxy access rules or the “pay versus performance” disclosure rules under Section 14 of the Exchange Act.

If we take any action in an extraordinary meeting of stockholders where the holders of Class A common stock are not entitled to vote, we will not be required to provide the information required under Section 14 of the Exchange Act.

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

Since then, the trading price of our Class A common stock has ranged from $4.82 to $83.34 through June 30, 2022.

Since then, the trading price of our Class A common stock has ranged from $4.82 to $83.34 through September 30, 2022.

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.

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changes in operating performance and stock market valuations of technology companies in our industry segment, including our partners and competitors;

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;

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, armed conflict, including Russia’s invasion of Ukraine, incidents of terrorism, or responses to these events;

lawsuits threatened or filed against us;

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

We may not realize the anticipated long-term stockholder value of our stock repurchase program and any failure to repurchase our Class A common stock after we have announced our intention to do so may negatively impact our stock price.

In July 2022, our Board of Directors authorized a stock repurchase program of up to $500 million of our Class A common stock.

Repurchases of Class A common stock may be made from time to time, either through open market transactions (including pre-set trading plans) or through other transactions in accordance with applicable securities laws.

Repurchases have been authorized for the next 12 months but the program may be modified, suspended, or terminated at any time.

We may not realize the anticipated long-term stockholder value of any stock repurchase program undertaken by us and any failure to repurchase our Class A common stock after we have announced our intention to do so may negatively impact our stock price.

Our board of directors has in the past and may from time to time in the future authorize stock repurchase programs, pursuant to which repurchases of Class A common stock may be made either through open market transactions (including pre-set trading plans) or through other transactions in accordance with applicable securities laws.

Any repurchase programs may be modified, suspended, or terminated at any time.

Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price.

The existence of a stock repurchase program could cause our stock price to trade higher than it otherwise would be and could potentially reduce the market liquidity for our stock.

Although our stock repurchase program is intended to enhance long-term stockholder value, there is no assurance it will do so because the market price of our Class A common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of this program.

Repurchasing our Class A common stock will reduce the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of the stock repurchase program.

Although stock repurchase programs are intended to enhance long-term stockholder value, there is no assurance they will do so because the market price of our Class A common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of any such program.

Repurchasing our Class A common stock reduces the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of any stock repurchase program.

Conversions or exchanges of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise affect the market price of our Class A common stock.

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The Convertible Notes are convertible at the option of the holder.

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

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.

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Murphy on the company;

our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

our board of directors has the right to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

our certificate of incorporation prohibits cumulative voting in the election of directors.

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For example, the Indentures require us, at the holders’ election, to repurchase the Convertible Notes for cash on the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts its Convertible Notes in connection with a make-whole fundamental change.

takeover of us may trigger the requirement that we repurchase the Convertible Notes or increase the conversion rate, which could make it more costly for a third party to acquire us.

A takeover of us may trigger the requirement that we repurchase the Convertible Notes or increase the conversion rate, which could make it more costly for a third party to acquire us.

The Indentures also prohibit us from engaging in a merger or acquisition unless, among other things, the surviving entity assumes our obligations under the Convertible Notes and the Indentures.

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

As of June 30, 2022, we had outstanding a total of 1.4 billion shares of Class A common stock, 22.6 million shares of Class B common stock, and 231.6 million shares of Class C common stock.

In addition, as of June 30, 2022, 91.5 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.

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.

All of our outstanding shares are eligible for sale in the public market, except approximately 371.0 million shares (including options exercisable and RSAs subject to forfeiture as of June 30, 2022) held by directors, executive officers, and other affiliates that are subject to volume limitations under Rule 144 of the Securities Act.

As of September 30, 2022, we had outstanding a total of 1.4 billion shares of Class A common stock, 22.6 million shares of Class B common stock, and 231.6 million shares of Class C common stock.

In addition, as of September 30, 2022, 94.2 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.

there can be no assurance that you, or we, will be notified of any such changes.

All of our outstanding shares are eligible for sale in the public market, except approximately 371.2 million shares (including options exercisable and RSAs subject to forfeiture as of September 30, 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.

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If we are unable to maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our Class A common stock may be seriously harmed.

We are required to maintain internal control over financial reporting, perform system and process evaluation and testing of those internal controls to allow management to report on their effectiveness, report any material weaknesses in such internal controls, and obtain an opinion from our independent registered public accounting firm regarding the effectiveness of such internal controls as required by Section 404 of the Sarbanes-Oxley Act, all of which is time-consuming, costly, and complicated.

We are required to maintain adequate internal control over financial reporting, perform system and process evaluation and testing of those internal controls to allow management to report on their effectiveness, report any material weaknesses in such internal controls, and obtain an opinion from our independent registered public accounting firm regarding the effectiveness of such internal controls as required by Section 404 of the Sarbanes-Oxley Act, all of which is time-consuming, costly, and complicated.

If we are unable to comply with these requirements in a timely manner, if we assert that our internal control over financial reporting is ineffective, if we identify material weaknesses in our internal control over financial reporting, or if our independent registered public accounting firm is unable to express an opinion or expresses a qualified or adverse opinion about the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected.

addition, we could become subject to investigations by the NYSE, the SEC, and other regulatory authorities, which could require additional financial and management resources.

In addition, we could become subject to investigations by the NYSE, the SEC, and other regulatory authorities, which could require additional financial and management resources.

The requirements of being a public company may strain our resources, result in more litigation, and divert management’s attention.

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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.

We believe we have meritorious defenses to this lawsuit, but an unfavorable outcome could seriously harm our business.

Additionally, in August 2022, we, and certain of our directors, were named as defendants in a class action lawsuit in federal court purportedly brought on behalf of Class A stockholders, alleging that a transaction between our co-founders and us, in which our co-founders agreed to employment agreements and we agreed to amend our certificate of incorporation and issue a stock dividend if certain conditions were met, was not advantageous to the stockholders and constituted a breach of fiduciary duty.

We believe we have meritorious defenses to these lawsuits, but litigation is inherently uncertain and an unfavorable outcome could seriously 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.

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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.

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 .

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

What changed 10-Q

Item 1A. Risk Factors