Snap Coverage Initiation March 2017 Credit Suisse

27 March 2017
Americas/United States
Equity Research
Software
Snap Inc. (SNAP)

Rating OUTPERFORM
Price (24-Mar-17, US$) 22.74 INITIATION
Target price (US$) 30.00
52-week price range (US$)
Market cap (US$ m)
27.09 - 19.54
26,997.23
Weaving a Path Out of the Experimental
Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix)
Budget Friend Zone
Research Analysts
Stephen Ju
■ Event: We initiate coverage of Snap with an Outperform rating and a $30
212 325 8662 target price.
stephen.ju@credit-suisse.com
Christopher Ford
■ Investment Case: While we freely concede that SNAP shares remain a
212 538 8446 concept stock with an investment thesis we expect to play out over the
christopher.ford@credit-suisse.com coming five-plus years, we should receive signals every quarter of its
monetization ramp progress. We believe SNAP shares will be one of the
most volatile in our coverage given its nascent state and high valuation – we
expect it to trade primarily on the growth trajectory and
acceleration/deceleration (i.e., the first and second derivative) suggested by
the latest reported results for Daily Active Users as well as Average Revenue
per Daily Active User. With this in mind, it is an investment we
enthusiastically underwrite given the following key points: (1) we believe
SNAP shares at current levels are exhibiting attractive risk/reward to the
upside, with downside risk of ~21% in our Grey Sky scenario and upside
potential of ~32% to our target, (2) it is a scarce asset that offers advertisers
access to a coveted younger demographic; and (3) Snap is a margin
expansion story with revenue CAGR exceeding cost of sales CAGR. With
this in mind, we also point out that investing in SNAP shares, in our view, is
high-risk/high-reward given the presence of a long list of well-heeled global
competitors, and the potential for the migration and/or the failure to hang on
to its existing user base or scale advertising revenue through ongoing
product development.
■ Valuation: In line with the valuation methodology we have used with the rest
of our coverage universe, we have based our target price for SNAP shares
on DCF, which suggests $30. We have used a weighted average cost of
capital of 11% and a terminal growth rate of 3%.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E
EPS (Excl. ESO) (US$) - 0.93 -0.32 0.01
EPS (CS adj., ) 451391109299.38
-0.53 -0.81 -0.45 -0.09
Prev. EPS (CS adj., US$)
P/E (CS adj.) (x) -42.9 -28.0 -50.1 -263.3
P/E rel. (CS adj., %) -210.5 -150.9 -303.0 -1755.9
Revenue (US$ m) 404.5 1,030.0 1,985.4 3,175.1
EBITDA (US$ m) -459.4 -832.3 -492.2 -43.0
Net Debt (US$ m) -150 -1,794 -1,069 -781
On 24-Mar-2017 the S&P 500 INDEX closed at 2343.98 OCFPS (US$) n.m -0.70 -0.45 -0.13
Daily Mar02, 2017 - Mar24, 2017, 03/02/17 = US$24.48 P/OCF (x) -32.4 -50.6 -169.3
Quarterly EPS Q1 Q2 Q3 Q4 Number of shares (m) 1,187.21 Price/Sales (x) 0.00
2016A - - - - BV/share (Next Qtr., US$) - P/BVPS (x) 0.0
2017E -0.35 -0.21 -0.16 -0.14 Net debt (Next Qtr., US$ m) - Dividend (current, US$) -
2018E -0.16 -0.14 -0.10 -0.06 Dividend yield (%) -
Source: Company data, Thomson Reuters, Credit Suisse estimates
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit
Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report
as only a single factor in making their investment decision.
27 March 2017
Snap Inc. (SNAP)

Price (24 Mar 2017): US$22.74; Rating: OUTPERFORM; Target Price: US$30.00; Analyst: Stephen Ju
Income Statement 12/16A 12/17E 12/18E 12/19E Company Background
Revenue (US$ m) 404.5 1,030.0 1,985.4 3,175.1 Snap Inc. is a camera company that believes reinventing the camera
Sales 404.5 1,030.0 1,985.4 3,175.1 represents our greatest opportunity to improve the way people live
EBITDA (459.4) (832.3) (492.2) (43.0) and communicate.
Operating profit (488.5) (881.0) (549.0) (111.2)
Recurring profit (521.7) (2,964.4) (612.9) (214.6) Blue/Grey Sky Scenario
Cash Flow 12/16A 12/17E 12/18E 12/19E
Cash flow from operations (611) (925) (645) (194)
CAPEX (66) (76) (81) (94)
Free cashflow to the firm (678) (1,001) (726) (288)
Cash flow from investments (1,021) (76) (81) (94)
Net share issue(/repurchase) 1,147 2,645 0 0
Dividends paid 0 0 0 0
Issuance (retirement) of debt 0 0 0 0
Other (5) (0) (0) 0
Cashflow from financing activities 1,142 2,645 (0) 0
Effect of exchange rates 0 0 0 0
Changes in Net Cash/Debt (491) 1,644 (726) (288)
Net debt at end (150) (1,794) (1,069) (781)
Balance Sheet ($US) 12/16A 12/17E 12/18E 12/19E
Assets
Other current assets 867 890 914 939
Total current assets 1,180 3,043 2,558 2,563
Total assets 1,723 3,613 3,152 3,182
Liabilities
Short-term debt 0 0 0 0
Total current liabilities 344 440 505 614
Long-term debt 0 0 0 0
Total liabilities 391 505 583 716
Shareholder equity 1,332 3,108 2,569 2,466
Total liabilities and equity 1,723 3,613 3,152 3,182 Our Blue Sky Scenario (US$) 41.00
Net debt (150) (1,794) (1,069) (781) Given the lack of trading history for SNAP shares, we forgo our
usual P/E or EV/EBITDA-driven analyses and focus instead on what
Per share 12/16A 12/17E 12/18E 12/19E
the potential monetization growth will be over the next three+ years.
No. of shares (wtd avg) 0 1,316 1,436 1,447 Our Blue Sky Target Price of $41 implies a 2020 monetization gap
CS adj. EPS (0.53) (0.81) (0.45) (0.09)
of ~65% relative to Facebook's current levels, which implies that
Prev. EPS (US$)
Snap over the coming three-plus years modestly outpaces Twitter's
Dividend (US$) 0.00 0.00 0.00 0.00
monetization growth.
Free cash flow per share n.m (0.76) (0.51) (0.20)
Earnings 12/16A 12/17E 12/18E 12/19E
Our Grey Sky Scenario (US$) 18.00
Sales growth (%) 589.5 154.6 92.8 59.9
EBIT growth (%) (58.5) (80.3) 37.7 79.7 While Snap has already reached a monetization level in the US
Net profit growth (%) (61.3) (80.0) 38.0 80.8 equivalent to where Twitter was at a similar point in its lifecycle and
EPS growth (%) () (53.2) 44.1 81.0 hence the ~50% mark should serve as a reference point, we present
EBIT margin (%) (120.8) (85.5) (27.7) (3.5) as our Grey Sky the 35% scenario which suggests ~$18. The
implicit assumption here is that Snap over the next three years does
Valuation 12/16A 12/17E 12/18E 12/19E not keep up with Twitter's monetization growth.
EV/Sales (x) 66.37 24.47 13.06 8.26
EV/EBIT (x) (55.0) (28.6) (47.2) (235.7)
P/E (x) (42.9) (28.0) (50.1) (263.3)
Share price performance
Quarterly EPS Q1 Q2 Q3 Q4
2016A - - - -
2017E -0.35 -0.21 -0.16 -0.14
2018E -0.16 -0.14 -0.10 -0.06
On 24-Mar-2017 the S&P 500 INDEX closed at 2343.98

Daily Mar02, 2017 - Mar24, 2017, 03/02/17 = US$24.48
Source: Company data, Thomson Reuters, Credit Suisse estimates
Snap Inc. (SNAP) 2

27 March 2017
Investment Summary: Weaving a Path Out of the

Experimental Budget Friend Zone
We initiate coverage of Snap Inc. with an Outperform rating and a $30 target price. The
key points of our investment thesis are the following:
Attractive Risk/Reward to the Upside
While we generally eschew relative market capitalization arguments as part of the
investment thesis, in the case of Snap, we believe it is entirely appropriate to weigh the
comparison versus Twitter and Facebook.
In that sense, if we are to assume that Snap monetizes its user base at around Twitter's
levels over the longer term, it would serve as a disappointment versus investor
expectations for a greater growth trajectory and should present ~21% downside risk from
Snap's current market capitalization given that it is approaching the former's Daily Active
User levels (already exceeded in the U.S.). On the other hand, if Snap's ad operations
were to succeed in demonstrating ROI to advertisers such that they feel more comfortable
deploying beyond what are currently experimental budgets, then it is entirely possible that
Snap's market capitalization can be ~32% higher based on a range of outcomes as shown
in our sensitivity analysis.
Snap Is a Scarce Asset That Offers Advertisers Access to a Coveted
Demographic
With close to 60% of its U.S. user base under the age of 24 (ages 13-24), we estimate that
it currently has close to 70% of the addressable population domestically. While the
spending power of this age group may be questioned, we submit instead that the more
relevant question should be, "Can brands afford to NOT advertise and raise affinity with
this demographic?"
Margin Expansion Story (Both Gross and Operating), as Revenue CAGR
Exceeds COGS CAGR
Although the negative gross profit dollars in 2016 in Snap's filing may have been
surprising to some investors, we have to call out that gross margin expansion vis-à-vis
increasing monetization will be one of the key drivers of operating margin expansion and
FCF growth primarily, as we expect revenue to grow at a compound annual rate from 2016
to 2021 of 73%, while we expect cost of sales to grow at 36% over the same time period.
This should result in progressive Adjusted EBITDA margin expansion over the coming five
years to reach ~25%.
Snap Inc. (SNAP) 3

27 March 2017
Company Overview
From a mission statement point of view, Snap defines itself as a camera company, but in a
more practical everyday perspective, we view it as a photo messaging/communications
app that also serves a variety of other use cases. Snap currently has 158 million Daily
Active Users who visit the app on average 18 times per day spending 25 to 30 minutes on
the platform.
As shown in the flowchart in Figure 1, the app opens directly to the camera and users can
transition to other features such as Chat and Stories by simply swiping left or right.
Figure 1: Snap Inc.—Navigating the Snapchat App
Add Friends
Home Screen Add friends,
Take Snap by see who has
touching the added you to Stories
camera button, their contacts Friends stories + your own
Chat swipe to access (top) as well as live and
View snaps sent other features professional stories (bottom)
to you or open a
direct
conversation
with a friend
OR Tap
Swipe Swipe Swipe
OR Tap OR Tap
Discover
View professionally
Memories
created content from
View saved content brands/news sites
created within the app, +
exclusively for Snap
view and send
Spectacles content
Source: Company data, Credit Suisse estimates.
As we will reference certain tabs throughout this report, we have compiled the diagram in
Figure 1 to give those who are not as familiar with the app a reference point. With this in
mind, however, the deciding factor for Snap's long-term shareholder value creation really
boils down to its ability to serve its two most important constituents – the consumer as well
as the advertiser.
Snapchat Has High Consumer Engagement Due to Its Sprawling Value
Proposition
A Short Video Is Worth a Thousand Words – and Maybe It Is More Fun Too: We
believe Snapchat's underlying value proposition lies in the fact that it is much easier to
take a short video or picture and send to a contact to communicate versus the text-based
alternatives via SMS or email.
Snap Inc. (SNAP) 4

27 March 2017
While users are already there, Snap also has professionally developed short-form content
with the ability to swipe to view longer-form pieces on the Discover tab with the optionality
to pull the professional content into the Stories tab by subscribing to a channel, thus
creating effectively a newsfeed of videos.
The notion that a messenger/chat app has high utility should be no surprise, but as we
expand the thought process further and look to reconcile with Snapchat's relatively high
~30 minutes per day engagement per user, we have to note that the app cuts across
many of what we believe to be the most popular use cases of the smartphone.
Figure 2: Snap Inc.—Common Smartphone Application Use Cases
Text Messaging
Browsing Internet
Voice/Video Call
Email
Social Networking
Video
Photo/Camera
As shown in Figure 2, when we line up Snapchat's functionalities versus the "house" app
from Apple/iOS as well as the offerings from the more popular operators, it cuts across a
wide range of use cases. While we are not suggesting that as a video offering it is as
robust as Netflix or YouTube, for its user base, the Discover and Stories tabs do serve as
an alternate form of entertainment.
At the time of its launch, Snapchat was for all intents and purposes a photo/video
messaging app, but over the past several years, it has accelerated its product release
cadence – this has been one of the primary drivers of its user growth. In Figure 3, we
layout the correlation between new product releases and Snap's Daily Active User growth.
Snap Inc. (SNAP) 5

27 March 2017
Figure 3: Snap Inc.—Consumer Product Release Timeline and Daily Active

Users
Daily Active Users in millions
On-Demand Geofilters
Face Swap
Chat Stickers
Video + Voice Calling
3D Stickers
Memories
Bitmoji
Geostickers
Publisher Stories Spectacles
Chat Best Friend Emojis Story Playlist
Live Stories Snapcodes Group Chat
Stories Geofilters Trophies Scissors
Android Smart Filters Snapcash Lenses Paintbrush
Snapchat Launched Video Replay Community Geofilters Story Explorer Shazam
2011 2012 2013 2014 2015 2016
39 million 74 million 107 million 158 million

Daily Active Users Daily Active Users Daily Active Users Daily Active Users
As a major part of the investment thesis hinges on user and engagement growth as well
as Snap's ability to retain its users, the product development efforts of CEO Evan Spiegel
and his team are key. Hence we expect to see the chart in Figure 3 continue to show new
and incremental product releases into 2017 and beyond.
Value Proposition to Advertisers to Ramp Over Time—A Closer Look at
Sponsored Creative Tools
Creative Tools started in 2014 with Geofilters and were further enhanced with the launch
of Lenses in 2015, as Snap continues to give users more options for interacting with the
content created on its platform above and beyond just sending a basic picture. While it
may be fairly intuitive that new product development will augur user/engagement growth, it
is also significant for the development of advertising revenue, as Snap has comingled the
natural experience in the app with the ad unit development in order to preserve the user
experience as evidenced in Figure 4 and Figure 5 in the case of Geofilters and Lenses.
Snap Inc. (SNAP) 6

27 March 2017
Figure 4: Snap Inc.—Geofilter Examples Figure 5: Snap Inc.—Lenses Examples
User Applied Sponsored User Applied Sponsored
Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.
We believe this is significantly important to point out that, when using Sponsored
Geofilters or Sponsored Lenses, they do not detract from the natural user experience or
consume an incremental amounts of the user's time – rather, they are merely extensions
of what looks like user-generated activity on the platform. This is not a coincidence either;
Snap has taken explicit steps to intertwine the teams that build the consumer-facing
features with those who develop Snap's ad products.
For Lenses, once the creative has been produced, it is fairly straightforward for a user to
apply and then, triggered by some action (opening their mouth, raising their eyebrows,
etc.) occurring in their video, the Lense is set in motion. Geofilters are applied in a similar
manner but do not require a trigger and can be applied to photos. Snap currently sells
Geofilters for a variety of use cases to advertisers, which are depicted in Figure 6 and can
be purchased for a specific geo-fenced location up to a national campaign.
Figure 6: Snap Inc.—Different Types of Sponsored Geofilter Campaigns
Event Shared Spaces Chain National
Snap Inc. (SNAP) 7

27 March 2017
The On-Demand Geofilters were one of the first products to be rolled out to the Self Serve
API, and we imagine all of their Sponsored Creative Tools will eventually become
available for purchase through the API. Another benefit Sponsored Creative Tools confer
to advertisers is that the message will ultimately be sent to one or more recipients, which
creates an audience they can target for re-engagement with Snap Ads.
While Snap does have the ability to measure Snap-to-Store conversions (i.e., those who
either sent or viewed a particular ad and then went to the store), we have to imagine that it
is mainly brand advertisers purchasing these Sponsored Creatives for now.
Snap Ads
Snap Ads are delivered in multiple places throughout the Stories and Discovery tab,
typically being shown to users after they watch a certain number of videos. Snap Ads can
take the form of a straightforward video or Snap Ads with Attachments, which prompt the
user to swipe up after the initial ad (depicted by red circle in Figure 7) in order to further
engage with the content or take subsequent action such as installing an app. Examples of
the different types of attachments currently available for advertisers are shown in Figure 7.
Figure 7: Snap Inc.—Snap Ads with Attachments
Web View Article App Install Long-Form Video
Snap Inc. (SNAP) 8

27 March 2017
Optionality to Emerge as an Additional Advertising

Platform to Google and Facebook
We freely concede that there are many things that need to happen between where Snap is
now versus where we hope to see it over the coming five years as far as monetization of
its user base is concerned.
Our conversations with advertisers throughout 2016 suggested that the rationale for
deploying ad budgets remained largely experimental and not necessarily ROI-driven. An
additional context from these conversations suggested that advertisers are growing
increasingly concerned that the lion's share of the incremental budgets being spent on
digital/online is going to Google and Facebook, and there is subsequently a desire to
champion the rise of another platform.
Hence we believe the proverbial ball is Snap's to drop, and it will have to give its advertiser
clients not only the ability to find favorable ROI but also the ability to measure. Only then
will it be able to graduate from the test budgets and attract greater dollars – in that case,
our ARPU per DAU and revenue estimates may very well prove to be overly conservative.
As an early data point to that end goal, in November 2016, Snap introduced Goal-Based
Delivery in the U.S., the U.K., Australia, and Canada, which enables advertisers to specify
actions that they wish to bid on in their toolkit beginning with Impressions or Swipes.
In Figure 8 and Figure 9, we lay out simple graphics highlighting Goal-Based Delivery's
importance. Under the prior method of delivery, Snap would have made $0.08 for
delivering four ads, as both advertisers were bidding $0.02 per impression, but with the
rollout of Goal-Based Delivery, (right) they generate $0.24 for delivering four ads, as the
advertiser with a Snap Ad with Attachment is willing to bid $0.10 for impressions on users
'Likely to Swipe'.
Figure 8: Snap Inc.—Prior Method of Delivery Figure 9: Snap Inc.—Goal-Based Delivery
Swipe Swipe
₵2 ₵2
₵2 ₵2 ₵10 ₵10 ₵2 ₵2
Likely to Swipe Unlikely to Swipe Likely to Swipe Unlikely to Swipe
Underpinning the advertisers' willingness to bid more for impressions on users 'Likely to
Swipe' is Snap's targeting and measurement ability – i.e., are the users actually doing
what the advertiser is optimizing the campaign for and can Snap prove that they are. If
Snap is successful implementing Goal-Based Delivery, it opens the platform up to a
number of solutions for advertisers such as App Installs, and as these direct response
budgets are typically uncapped, this could drive meaningful upside relative to our current
estimates.
As we have noted earlier, our conversations with advertisers throughout 2016 suggest that
they are more than happy to spend money on a third platform, as over the past few years
they have become increasingly concerned as budgets and bargaining power coalesce
around Google and Facebook.
Snap Inc. (SNAP) 9

27 March 2017
Figure 10: Sources of Mobile Ad Revenue (ex-China) Growth from 2015 to 2016
USD in billions
3.3 63.7
8.7
9.3
42.5
2015 Mobile Ad Facebook Google Other 2016 Mobile Ad

Spend Contribution Contribution Contribution Spend
Source: Company data, Credit Suisse estimates, Magna Global estimates.
While we do not know exactly what percentage of Google revenue is derived from mobile
vs. desktop, for the purpose of this analysis, we assume ~42% in 2015 and ~45% in 2016
was from mobile, and in which case, it stands to reason that Facebook and Google
accounted for 85% of the incremental mobile ad dollars in 2016. From an advertiser's point
of view, this creates a scenario whereby Google and Facebook can do things such as limit
the ad load growth, which in turn, pushes up the auction pricing and compresses the ROI
the marketers are able to drive for their clients.
However, even if we exclude TV budgets, there is still a ~$120b opportunity from offline
sources.
Figure 11: 2016 Total Global Advertising Spend (ex-China)

USD in billions
163.1 85.2 63.7 46.1 20.2 26.0 27.5
TV Digital - Digital - Newspapers Magazines Radio Out-Of-Home

Desktop Mobile
It is also important to highlight that this is not a winner-take-all scenario in which Snap
must offer an ROI that is better than Facebook or Google to gain meaningful budget
allocations. In terms of the rank order of ROI's available out there – our conversations
suggest that Google Search remains the highest given the inherent intent level – while
Facebook is in second place, the gap to other alternatives remains 2-3x higher.
Snap Inc. (SNAP) 10

27 March 2017
As this is largely an execution story for Snap in demonstrating/measuring the ROI on its
platform going forward, we felt it was prudent to sanity check our ARPU estimates against
what we believe to be the time-adjusted ARPU per daily active user in North America for
Facebook and Twitter when they were in a similar stage of monetizing on mobile – for
Snap, t=1 is 1Q15; for FB, t=1 is 2Q12; and for TWTR, t=1 is 1Q10.
Figure 12: Snap Inc.—North American Average Revenue per Daily Active User vs. Facebook, Twitter
in USD
$8.0
$7.0
$6.0
$5.0
$4.0
7.5 7.2
$3.0 5.8
4.8
$2.0 3.9 4.1 4.0 3.9
3.3 3.0
2.8 2.6 2.8
$1.0 2.1 2.2 2.0 2.1
1.8 1.7
1.2 0.7 0.4 1.4
0.1 0.1 0.2 0.6 0.1 0.2
1.1 0.4 0.2 0.7 1.2 1.1 1.1
$0.0
t=1
t=2
t=3
t=4
t=5
t=6
t=7
t=8
t=9
t=10
t=11
t=12
FB North American ARPU Snap North American ARPU TWTR US ARPU
Snap is currently monetizing at a rate that is slightly better than where Twitter was when it
was at a similar stage but less than that of Facebook in North America. On a go-forward
basis, we believe our estimates are appropriately conservative, as we believe that these
two platforms represent the upper and lower bounds in terms of execution in serving the
needs of its advertisers. With that said, however, the optionality remains for Snap to
monetize along the same trajectory as FB if it is able to make it easy for advertisers to
spend money on its platform, and in that scenario, our long-term ARPU and Revenue
estimates are most likely too low.
Ongoing Expansion of User Base in Key Ad Markets

We have elected to build up our Daily Active User assumptions on a country-by-country
basis, as we believe it is prudent to account for the company's focus on markets where the
total addressable advertising dollars justifies the cost of serving the users as well as to
better account for local and regional competitive landscapes.
Another factor in our consideration is the quality of wireless service in the region, as Snap
has repeatedly suggested it will focus on users with coverage 3G + LTE and higher given
the inherent skew toward video over text, which makes sense, as slower network speeds
will only detract from the overall product experience.
In Figure 13 and Figure 14, we present what we believe to be the current North American
and European DAU breakdown for Snap as well as their largest competitors in the regions.
Snap Inc. (SNAP) 11

27 March 2017
Figure 13: North America Daily Active Users Figure 14: Europe Daily Active Users Comparison,
Comparison, 4Q16 4Q16
in millions in millions
180 262
68
35 52
Facebook Snap Twitter Facebook Snap
Contrary to the Facebook, Snap does not have a mission statement to connect all users in
all regions, and given the incremental cost to serve each user, the company will be
selective about the regions in which it will compete for the user's attention. We expect
Snap to remain in active pursuit of users and ad dollars in North America and Europe but
believe Rest of World expansion will likely be limited to Australia/New Zealand, the Middle
East, Latin America, India, and South Africa.
As we think longer-term about where penetration rates may go in North America and
Europe, we draw on what the company has already seen in Norway, which is its most
penetrated market. In Norway, it has roughly 50% of the addressable smartphone user
base on the platform.
Figure 15: Long-Term Daily Active User Penetration Rate by Region

in millions, unless otherwise stated
2015A 2020E 2025E

North America
Aggregate Population 483 506 530
Addressable Smartphone Users 215 257 302
Snap DAUs 43 102 140
Implied Snap N.A. Penetration 19.8% 39.7% 46.4%
Europe
Snap DAUs 30 91 134
Implied Snap Europe Penetration 9.8% 26.3% 34.9%
ROW
Snap DAUs 19 77 122
Implied Snap ROW Penentration 1.3% 4.5% 6.0%
Snap Inc. (SNAP) 12

27 March 2017
In Norway, it took Snap two years to move from ~33% to its current ~50%, and it is
currently at ~33% in the U.S. and Canada. We conservatively forecast Snap will reach
penetration levels similar to what it currently enjoys in Norway in North America over the
next ten years, with Europe slightly behind. Our DAU assumptions do not include any
contribution from Southeast Asia, as Snap faces significant competition in the region from
LINE, Naver, Kakaotalk, and Wechat, which are already scaled and likely better
resourced/executing for the local user base.
Gross Margin Expansion as Revenue CAGR Exceeds

COGS CAGR
Our estimates currently bake in a scenario for Snap's gross margin to expand from -11.7%
in 2016 to 66.5% by 2021. While a ramp of this magnitude may seem counterintuitive at
first glance, the reason for this is fairly simple – revenue growth exceeds COGS growth.
Within Snap's Cost of Goods Sold, there are several moving pieces: Infrastructure Costs,
Content Measurement and Creation Costs, Partner Revenue Share, and Spectacles Cost
of Goods Sold.
Infrastructure Costs: These include the cost of bandwidth, computing, and storage
payable to third-party cloud providers. (In the past, it used only Google Cloud, but recently
added Amazon Web Services in 2017.) This remains the single largest component of
Snap's cost of goods sold, and we believe this should grow at a trajectory independent of
revenue. Our Infrastructure Cost estimates are driven by three factors: (1) the number of
Daily Active Users, (2) the average time spent on the app per DAU, and (3) the increasing
cost of serving a billion hours. We assume the latter to take a more conservative stance
given the changing use cases for the app – it is inherently less expensive to send a chat
versus a Snap or even to watch a Story.
This line item is the primary reason why Snap reported a negative gross margin in 2016,
and we believe will offer the highest degree of gross margin leverage, as it is largely a
fixed expense, so as ARPU scales above a certain hurdle rate, Snap will produce very
high incremental margins. The trade-off for incurring such a large fixed cost is Snap will
operate with minimal capital expenditures, and as we are ultimately trying to solve for Free
Cash Flow dollars, we remain indifferent and view this as the likely more flexible option.
We project infrastructure costs will grow at a 25% CAGR from 2016 to 2021, and as we
mentioned, Snap incurs these costs on a per-use basis, which is why we believe it will not
elect to pursue users in geographies where the potential ad dollars do not justify the cost.
Content Measurement and Creation Costs: These are predominantly personnel-related
costs and advertising measurement services and made up ~11% of Cost of Goods Sold or
$43 million. We expect this to grow generally in-line with revenue, as the investment thesis
for Snap shares hinges on the ability to provide solutions that make it easier for
advertisers to spend money on the platform as well as measure the ROI. We project these
costs will grow at a 57% CAGR from 2016 to 2021, and the delta relative to our estimated
73% revenue CAGR is meant to signify that the company will likely be able to drive
leverage on the content creation costs as well as have likely pulled forward some of the
cost to expand its measurement capabilities, and revenue is really playing catch-up.
Partner Revenue Share: This represents payments to Snap's content producing partners
for advertising that Snap sold against that partner content and was $57.8 million in 2016.
While partners are allowed to sell advertising directly against their content, which they pay
Snap a revenue share and it is recorded as net revenue, Snap is also allowed to sell
packages – for example, a 'sports package' in which advertisers would interact with Snap
and then have their ads placed across a series of channels showing sports content. As we
think about the trajectory of this piece of the COGS line, we have to imagine that over time
as Snap scales its advertising business, it will prioritize selling ads against its own
inventory (Stories, Sponsored Lenses, and Sponsored Geofilters) and hence have
assumed that the Partner Revenue Share moves from current ~15.8% of Snap Sold
Revenue to ~10.5% of Snap Sold Revenue by 2021.
Snap Inc. (SNAP) 13

27 March 2017
Spectacles Cost of Goods Sold: While we do not know what the component costs for
Spectacles are, we have elected to take the stance that the underlying rationale for
introducing the product was to accelerate content creation for the app that you can
eventually sell native advertising against and hence choose to believe that it is selling
Spectacles at a negative gross margin.
Figure 16: Snap Inc.—Spectacles and Charging Case
We are happy to be wrong here and would view the contribution as nice free cash flow dollars
to have, but believe that the investment thesis for Snap shares is predicated on the advertising
opportunity. We also believe investors would react negatively to misexecution of a new
advertising unit that was made up in the reported results by outperformance in hardware.
Adding this all up, we arrive at a Revenue CAGR from 2016 to 2021 of 73%, which is
nearly double the Cost of Goods Sold CAGR of 36%, which leads to the gross margin
dynamics shown in Figure 17.
Figure 17: Snap Inc.—Estimated Margin Expansion Trajectory

USD in millions, unless otherwise stated
2015A 2016A 2017E 2018E 2019E 2020E 2021E

SNAP Gross Margin -211% -12% 16% 44% 55% 62% 67%
SNAP Gross Profit (124) (47) 160 867 1753 2871 4209
Snap Inc. (SNAP) 14

27 March 2017
Architecture of the Earnings Model

The starting place of our earnings model is the Daily Active Users forecast. Unlike
Facebook, Snap does not have a mission to connect everyone but rather only those users
in ad markets where it can generate meaningful revenue, given there is a cost to serve.
With that in mind, we have isolated our target regions/countries to the following for North
America, Europe, and ROW.
 North America: United States, Canada, and Mexico;
 Europe: UK, Norway, Sweden, Denmark, Germany, Austria, Netherlands,
France, Italy, Spain, Belgium, Turkey, Russia, and Poland; and,
 ROW: Australia, New Zealand, Brazil, Argentina, Saudi Arabia, UAE, Egypt, India,
and South Africa.
With the exception of India, we have excluded nearly all of the Asia-Pacific including
Southeast Asia from consideration, given the presence of local operators such as
Tencent/Wechat, Naver/LINE/Snow, and Kakaotalk.
For each country, we isolated the addressable population down to the smartphone user
base with 3G and LTE wireless service plans and assumed Snap will gain traction
gradually.
Figure 18 summarizes our Daily Active User projections for North America, Europe, and
ROW.
Figure 18: Snap Inc.—Year End Daily Active User Assumptions

DAU in millions
2016A 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Daily Active Users 158.0 191.7 223.8 252.2 281.2 307.5 331.8 356.8 382.6 404.7
North America 68.0 77.0 87.3 96.2 105.4 114.5 121.5 128.7 136.2 142.9
Europe 52.0 64.2 74.1 84.2 95.0 103.8 112.1 120.4 129.1 137.3
Rest of World 39.0 50.4 62.3 71.7 80.8 89.3 98.2 107.7 117.4 124.5
Moving on to the Average Revenue per Daily Active User projection, as we project forward
from the relative comparison we highlight in Figure 12, we assume that Snap follows
Twitter's monetization ramp.
Figure 19: Snap Inc.—Annual Average Revenue per User Assumptions

in USD
2016A 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Annual ARPU $2.78 $5.50 $9.25 $13.01 $17.02 $21.14 $24.89 $28.51 $31.73 $34.68
North America ARPU $5.76 $11.24 $17.94 $24.18 $30.22 $36.26 $41.66 $46.86 $51.55 $55.52
Europe ARPU $0.76 $1.97 $4.89 $8.09 $12.13 $16.34 $20.41 $24.49 $28.16 $31.66
Rest of World ARPU $0.23 $0.91 $2.05 $3.58 $5.36 $7.22 $9.03 $10.83 $12.45 $13.98
Snap Inc. (SNAP) 15

27 March 2017
We also have a relatively small amount of Spectacles revenue – we assume a price

decrease from the current ~$130 to $80 by 2018. (See Figure 20.)
Figure 20: Snap Inc.—Annual Spectacles Assumptions

2016A 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Spectacles Units Sold 0.0 0.3 0.4 0.4 0.5 0.5 0.4 0.4 0.4 0.3
Average Selling Price $130 $130 $78 $78 $78 $78 $78 $78 $78 $78
Spectacles Revenue 4.5 42.2 31.7 34.9 36.6 36.6 34.8 32.2 28.9 26.0
As aforementioned for Cost of Revenue, it is primarily tethered to growth of Daily Active

Users as well as the engagement (visits as well as minutes spent). The other underlying
pieces are shown in Figure 21.
Figure 21: Snap Inc.—Cost of Revenue Key Input Variables and Assumptions
2016A 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Daily Active Users 158.0 191.7 223.8 252.2 281.2 307.5 331.8 356.8 382.6 404.7
Average Time Spent per Day, in minutes 26.3 28.8 29.5 30.3 31.0 31.8 32.6 33.4 34.2 35.1
Total Hours Spent 22023.9 30641.8 37142.0 43690.6 50183.6 56779.7 63202.3 69779.0 76808.1 83834.4
Implied Cost to Serve a Billion Hours 15.5 17.8 18.4 18.4 18.4 18.4 18.4 18.4 18.4 18.4
Total Infrastructure Costs 341.9 545.5 684.8 805.6 925.3 1046.9 1165.3 1286.6 1416.2 1545.8
Spectacles Cost of Goods Sold 5.2 48.6 35.8 38.7 39.9 39.2 36.5 33.4 29.8 26.6
Content Measurement and Creation Cost 43.3 93.8 166.1 235.5 321.8 408.8 501.9 594.2 680.4 756.1
Partner Revenue Share 57.8 124.7 223.9 332.4 466.6 609.5 739.7 864.1 974.3 1063.7
Stock Based Compensation 0.5 52.4 1.9 2.8 3.8 4.7 5.5 6.2 6.7 6.9
Depreciation and Amortization 2.9 4.9 5.7 6.8 6.2 7.7 9.4 11.1 12.9 14.7
Total Cost of Goods Sold 451.7 869.9 1118.2 1421.8 1763.6 2116.8 2458.3 2795.7 3120.3 3413.7
We summarize the rest of our Operating Expense projections in Figure 22 – they currently
reflect an aggressive hiring level of ~350-400 people per quarter at an annualized cost of
~$350,000.
Figure 22: Snap Inc.—Operating Expense Key Input Variables and Assumptions
2016A 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Research and Development 183.7 1646.6 525.0 707.4 911.3 1115.9 1308.3 1495.9 1677.9 1858.0
Sales and Marketing 124.4 617.3 495.1 698.1 880.4 1062.6 1222.3 1345.1 1446.4 1548.6
General and Administrative 165.2 872.4 470.6 570.2 657.5 731.4 793.3 839.7 878.6 908.4
Total Operating Expenses 473.2 3136.3 1490.7 1975.6 2449.3 2910.0 3323.9 3680.8 4002.8 4315.1
Cash Operating Expenses (Less SBC, D&A) 412.3 992.4 1359.4 1796.3 2236.9 2643.2 3008.6 3321.5 3607.2 3892.8
Headcount 1279 2684 4084 5484 6884 8284 9684 11084 12484 13884
Implied Annualized Cost per Employee (000) 322 370 333 328 325 319 311 300 289 280
Quarterly Key Performance Indicators

Our quarterly projections for North American DAUs, North American ARPU, European
DAUs, European ARPU, Total Revenue, and Non-GAAP Cost of Revenue per User are as
shown below:
Snap Inc. (SNAP) 16

27 March 2017
Figure 23: Snap Inc.—Quarterly North American Figure 24: Snap Inc.—Quarterly North American
DAUs and Year-over-Year Growth ARPU and Year-over-Year Growth
in millions in USD
90 60% $4.5 800%

53% 715%
80 48% $4.0 700%
50%
70 42% 42% $3.5 570%
600%
60 40% $3.0
500%
50 30% $2.5 389%
30% 400%
40 $2.0
19% 300%
231%
30 15% 20% $1.5
13%
150% 200%
20 $1.0
100% 90% 85%
10%
10 $0.5 100%
38 40 44 48 54 61 65 68 70 73 75 77 0.1 0.1 0.4 0.7 0.7 1.1 1.8 2.2 1.7 2.1 3.3 4.0
0 0% $0.0 0%
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
We forecast North American Daily Active Users will reach 70 million in 1Q17 versus 68
million in 4Q16 and 54 million in 1Q16. We project North American Average Revenue per
User of $1.68 in 1Q17 compared to $2.15 in 4Q16 and $0.67 a year ago.
Figure 25: Snap Inc.—Quarterly European DAUs and Figure 26: Snap Inc.—Quarterly European ARPU
Year-over-Year Growth and Year-over-Year Growth
in millions in USD
70 63% 70% $0.8 800%

700%
59%
60 60% $0.7 700%
53% 600%
$0.6 600%
50 44% 50%
41%
$0.5 500%
40 40%
$0.4 400%
30 27% 25% 30% 300%
24%
$0.3 300%
20 20%
$0.2 150%150%150% 200%
10 10% $0.1 100%

27 29 30 34 39 46 49 52 55 58 61 64 0.0 0.0 0.1 0.1 0.2 0.3 0.3 0.4 0.6 0.7
0 0% $0.0 0%
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
We forecast European Daily Active Users will reach 55 million in 1Q17 versus 52 million in
4Q16 and 39 million in 1Q16. We project European Average Revenue per User of $0.28 in
1Q17 compared to $0.28 in 4Q16 and $0.07 a year ago.
Snap Inc. (SNAP) 17

27 March 2017
Figure 27: Snap Inc.—Quarterly Total Revenue and Figure 28: Snap Inc.—Non-GAAP Cost of Revenue
Year-over-Year Growth per User and Year-over-Year Growth
USD in millions in USD
450 1400% $1.4 160%

1255% 140%
400 $1.2 140%
1200%
350 120%
1000% $1.0
890%
300 100%
800% $0.8
250 667% 80%
$0.6 60% 59% 58%
200 600%
406% 60%
41% 40% 43%
150 $0.4 34%
286% 400% 40%
100
167%138% $0.2 20%
131% 200%
50 0.3 0.5 0.6 0.6 0.6 0.7 0.8 1.0 1.0 1.0 1.2 1.3
4 5 17 33 39 72 128 166 150 192 305 383 $0.0 0%
0 0%
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
1Q15A
2Q15A
3Q15A
4Q15A
1Q16A
2Q16A
3Q16A
4Q16A
1Q17E
2Q17E
3Q17E
4Q17E
Adding it all up, we project total revenue of $149.9 million, and our estimate for Non-GAAP
gross profit ex-SBC is ($13.9) million, implying a (~9%) Non-GAAP gross margin.
Valuation
In-line with the valuation methodology we have used with the rest of our coverage
universe, we have based our target price for Snap on discounted cash flow analysis, which
suggests $30. We have used a weighted average cost of capital of 11% and a terminal
growth rate of 3%.
Figure 29: Snap Inc.—Discounted Cash Flow Analysis

2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
EBITDA (832.3) (492.2) (43.0) 633.9 1566.1 2597.5 3818.0 5134.3 6466.1 7805.2 9130.5
Net Income (2964.4) (612.9) (214.6) 428.9 1310.7 2302.5 2502.2 3350.6 4277.8 5215.1 6146.1
Depreciation & Amortization 48.7 56.8 68.2 61.8 77.0 93.6 110.9 128.7 146.9 166.5 186.4
Other Non-Cash Charges (Benefits) 2095.2 74.5 111.1 150.6 189.8 221.8 248.4 266.9 275.4 280.8 285.9
Interest Expense (Income) (11.8) (10.6) (7.8) (7.4) (11.4) (20.3) (33.1) (47.8) (67.5) (92.2) (121.9)
Changes in Operating Assets & Liabilities (104.4) (163.6) (159.1) (177.7) (184.6) (138.0) (93.7) (32.8) 47.2 118.7 188.1
Unlevered Cash Flows (936.7) (655.8) (202.1) 456.2 1381.5 2459.5 2734.7 3665.5 4679.9 5688.9 6684.6
Capital Expenditures 76.0 80.7 93.5 105.2 112.0 120.7 123.8 130.0 137.2 139.7 142.2
Unlevered Free Cash Flows (1012.7) (736.5) (295.7) 351.0 1269.5 2338.9 2610.9 3535.5 4542.7 5549.1 6542.4
Y/Y % Change (84.4)% 27.3% 59.9% 218.7% 261.7% 84.2% 11.6% 35.4% 28.5% 22.2% 17.9%
Weighted Average Cost of Capital 11.0%

Perpetual UFCF Growth Rate ("G") 3.0%
2017E
NPV of Unlevered Free Cash Flows 10108.1
Present Value of Terminal Value 29665.6
Enterprise Value 39773.7
Off-Balance Sheet Assets 0.0
Adjusted Enterprise Value 39773.7
Year End Net Debt (Cash) (2631.7)
Equity Value 42405.4
Diluted Shares Outstanding 1428.2
Equity Value Per Share $30
Snap Inc. (SNAP) 18

27 March 2017
As DCF-based target prices are subject to a wide range of variability based on weighted
average cost of capital as well as the terminal growth rates, we present a sensitivity table
based on these two metrics to help investors gauge where target prices could head based
on different inputs.
Figure 30: Snap Inc.—DCF Sensitivity Analysis

Terminal Growth
29.7 2.0% 2.5% 3.0% 3.5% 4.0%
10.0% $32 $34 $35 $38 $40
10.5% $29 $31 $32 $34 $36
11.0% $27 $28 $30 $31 $33
WACC
11.5% $25 $26 $27 $29 $30
12.0% $23 $24 $25 $26 $28
12.5% $22 $23 $23 $24 $25
13.0% $20 $21 $22 $23 $23
Further Thoughts on Valuation: Although our valuation methodology is DCF, we also

present SNAP shares' forward multiples in the context of a wider range of comps in
Figure 31.
Figure 31: Snap Inc.—Comparable Valuation Analysis

EV/EBITDA P/E Price to FCF EV/Sales
Company Name 2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
Snap Inc. NM NM NM NM NM NM NM NM NM 79.6x 31.3x 16.2x
Facebook Inc. 21.9x 16.5x 13.0x 34.8x 28.1x 22.1x 48.4x 36.1x 27.2x 14.0x 10.4x 8.3x
Kakao Corp 23.3x 17.5x 15.0x 68.6x 37.8x 32.6x 40.7x 25.5x 20.5x 3.7x 3.1x 2.8x
Line Corp 34.1x 21.5x 16.4x 131.3x 52.9x 36.8x 48.0x 27.1x 19.8x 6.1x 4.8x 3.9x
NAVER Corp. 21.3x 16.5x 13.9x 33.5x 26.6x 22.4x 26.5x 19.8x 16.3x 6.7x 5.6x 4.7x
Tencent Holdings Ltd. 29.2x 21.8x 17.9x 48.1x 35.4x 28.3x 34.5x 25.5x 21.0x 12.5x 9.0x 7.4x
Twitter, Inc. 12.0x 15.3x 13.2x 26.6x 53.1x 38.5x 19.4x 39.0x 24.9x 3.6x 3.8x 3.6x
Weibo Corporation 65.3x 31.7x 21.2x 60.6x 37.7x 26.3x 75.1x 37.7x 24.7x 15.6x 10.3x 7.7x
Market Cap Weighted Avg. 25.0x 18.6x 14.9x 40.9x 31.4x 24.8x 42.7x 31.8x 24.4x 12.9x 9.5x 7.7x
Blue Sky and Grey Sky Valuation

Given the lack of trading history for SNAP shares (or even operating profit dollars in the
near term), we forgo our usual P/E- or EV/EBITDA-driven analyses and focus instead on
what the potential monetization growth will be over the coming three-plus years.
As we have noted earlier, Facebook and Twitter should be serving as the upper and lower
boundaries of where Snap's ARPU can land – we note that as of 4Q16, Facebook's North
American ARPU (per Daily Active User) stands at about ~$20 per quarter (annualized to
$80 per year), while Twitter is at ~$11 per quarter (annualized to $44 per year).
Snap Inc. (SNAP) 19

27 March 2017
Figure 32: Snap Inc.—DCF Valuation Sensitivity to ARPU Gap Relative to

Facebook
Implied DCF Upside/ 2020E 2020E
Cap Target Downside % Revenue EBITDA
Percent of Facebook's
100.0% $98b $69 203% $9.2b $2.8b
90.0% $87b $61 169% $8.2b $2.4b
current ARPU
80.0% $76b $53 134% $7.3b $1.9b
By 2020
70.0% $65b $45 100% $6.4b $1.5b
60.0% $54b $38 66% $5.5b $1.1b
50.0% $42b $30 31% $4.6b $0.6b
40.0% $31b $22 -3% $3.7b $0.2b
30.0% $20b $14 -38% $2.8b ($0.3b)
In Figure 32, we show how our DCF-based target price should change as a percentage of
Facebook's level of monetization as a target for Snap to reach by the end of 2020. In other
words, what Snap's annual ARPU should be as a percentage of Facebook's current $80.
While Snap has already reached a monetization level in the U.S. equivalent to where
Twitter was at a similar point in its lifecycle and hence the ~50% mark above should serve
as a reference point, we present as our Grey Sky the 35% scenario which suggests ~$18.
The implicit assumption here is that Snap over the coming three-plus years does not keep
up with Twitter's monetization growth.
Our Blue Sky Target Price of $41 implies a 2020 monetization gap of ~65% relative to
Facebook's current levels, which implies that Snap over the coming three-plus years
modestly outpaces Twitter's monetization growth.
Investment Risks
Competition from Larger Online Operators: Snap faces increasingly intensifying
competition for advertising dollars as well as consumer engagement with new product
releases with larger and likely more well-resourced operators such as Facebook,
Instagram, Twitter, and YouTube in North America and Europe as well as LINE, Naver,
Kakaotalk, and Wechat in Asia-Pacific.
Migration of Snap’s Younger User Base to Alternative Platforms and Fast Followers:
The majority of Snap's users are in the 18-34 year old demographic, and as this is a
competitive advantage when trying to attract advertisers, we believe it is prudent to call out
the potential adverse impact to the ability to capture greater ad dollars if Snap were to lose
users in this key demographic to apps such as Snow and Musical.ly.
Failure to Address Advertiser Requests for Better Measurement Capabilities to
Calculate ROI: Snap is still in the process of rolling out tools that enable advertisers to
calculate and measure the ROI on their platform. As we continue to believe that most
advertisers are economically rational in allocating their ad budgets, we believe the ROI
that they are able to measure and derive on Snap relative to alternative platforms will be
the key driver of whether Snap is able to move out of the test budgets.
Lack of Traction in Consumer-Facing New Product Launches: As highlighted, Snap
faces a substantial degree of competition for users as well as time spent with their
products. Failure to drive consumer adoption of new product releases and subsequent
loss of engagement would be negative for user growth and engagement on the platform.
Failure to Scale Advertising Revenue: Failure to attract new advertisers, loss of current
advertisers, or a reduction in budget allocations could adversely affect our ARPU and
advertising revenue estimates. In addition, Snap is still in the early stages of rolling out its
Snap Inc. (SNAP) 20

27 March 2017
API and Self-Serve sales channels, so there is an inherent degree of execution risk as well
as potential for advertiser pushback to buying through those channels, although we
believe the latter is of low probability, as most advertisers are familiar buying inventory that
way for other platforms.
Failure to Reach Target Daily Active Users in North America, Europe, LatAm, and
Other Regions: Our current estimates assume a country-by-country penetration rate,
which, in the long run for the North American and Western Europe markets, is relatively
consistent with Snap's current penetration rate in Norway of ~50%, and failure to achieve
that level of penetration in other markets either because of different competitive dynamics
or other factors would adversely affect our estimates.
Reliance on Third Parties for Infrastructure and Computing Services: Snap relies on
Google Cloud and recently added Amazon Web Services for the vast majority of its
computing, storage, bandwidth, and other services. Potential price hikes or modifications
of the contract terms could affect our estimates.
Management
Evan Spiegel, Co-Founder, Chief Executive Officer, and Director
Snap was founded by Evan Spiegel and Robert Murphy in 2010, and Mr. Spiegel has
served as the chief executive officer and member of the board of directors since the
company was incorporated in 2012. He is responsible for the overall strategic direction
and operations.
Robert Murphy, Co-Founder, Chief Technology Officer, and Director

Robert Murphy is a co-founder of Snap and currently serves as the chief technology officer
in addition to his role as a member of the board of directors. Mr. Murphy received a BS in
mathematical and computational science from Stanford University.
Imran Khan, Chief Strategy Officer

Imran Khan has been the chief strategy officer of Snap since January 2015. Before joining
Snap, Mr. Khan was a managing director, head of global internet investment banking at
Credit Suisse from May 2011 until January 2015. From March 2004 until May 2011, Mr.
Khan was an equity research analyst at J.P. Morgan Securities Inc. where he was also a
managing director, head of global internet and U.S. entertainment equity research. Mr.
Khan received a B.S.B.A. in finance and economics from the University of Denver.
Andrew Vollero, Chief Financial Officer

Andrew Vollero has served as Snap's chief financial officer since February 2016 after
having previously served as the vice president, finance, since August 2015. From
September 2000 through August 2015, Mr. Vollero held various roles at Mattel, Inc. – from
September 2005 until August 2015, he served as the senior vice president, corporate
strategy, development & investor relations, and from September 2000 until September
2005, he served as the division CFO, senior vice president, finance and strategy. Mr.
Vollero received a B.A. in mathematics and economics from Yale University and a Master
of Science in management from Oxford University.
Snap Inc. (SNAP) 21

27 March 2017
Chris Handman, General Counsel

Chris Handman has served as the general counsel of Snap since May 2014. From March
2000 to April 2014, Mr. Handman was a partner in the Supreme Court and Appellate
Litigation group at Hogan Lovells LLP in Washington, D.C. Prior to that, Mr. Handman
served as a law clerk for Judge Patricia M. Wald of the U.S. Court of Appeals for the D.C.
Circuit and Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of
Columbia. Mr. Handman received his J.D. from Yale Law School and received a B.A. in
both political science and international relations from American University.
Timothy Sehn, Senior Vice President Engineering

Timothy Sehn has served as Snap's senior vice president of engineering since September
2013. Prior to Snap, Mr. Sehn worked at Amazon.com from September 2003 until
September 2013 where he held numerous positions including director of software
development from September 2010 until his departure in September 2013. Mr. Sehn
received a B.A.Sc. from the University of Waterloo.
Steven Horowitz, Vice President Engineering

Steven Horowitz has served as Snap's vice president of engineering since January 2015.
Prior to joining Snap, Mr. Horowitz served as senior vice president of software engineering
at Motorola Mobility, LLC from December 2012 through January 2015. From January 2009
through November 2012, Mr. Horowitz was the chief technology officer at Quotient
Technology, Inc. Prior to that, he held positions at Google, Microsoft, and Apple. Mr.
Horowitz received a B.A. from the University of Michigan, Ann Arbor. Mr. Horowitz remains
a member of the board of directors for Quotient Technology, Inc.
Snap Inc. (SNAP) 22

27 March 2017
Figure 33: Snap Inc.—Quarterly Income Statement

2016A 2017E 2018E
1Q16A 2Q16A 3Q16A 4Q16A 1Q17E 2Q17E 3Q17E 4Q17E 1Q18E 2Q18E 3Q18E 4Q18E
Total Revenue 38.8 71.8 128.2 165.7 149.9 191.7 305.2 383.3 372.7 420.7 536.9 655.1
Cost of Revenue 75.8 94.8 127.8 153.4 216.4 183.9 219.4 250.1 244.1 260.0 290.6 323.5
Gross Profit (37.0) (23.0) 0.4 12.3 (66.6) 7.8 85.7 133.1 128.6 160.7 246.3 331.5
Product Development 28.1 36.1 54.6 65.0 1322.4 94.8 110.6 118.9 117.2 119.3 137.7 150.8
Marketing and Sales 14.7 24.6 34.7 50.4 338.1 84.6 93.8 100.8 103.6 114.0 126.2 151.3
General and Administrative 24.0 32.3 42.2 66.7 596.0 84.3 90.1 102.0 114.2 114.7 117.9 123.8
Total Operating Expenses 66.8 92.9 131.4 182.1 2256.5 263.7 294.5 321.7 335.0 348.0 381.8 425.9
Operating Income (103.8) (115.9) (131.0) (169.7) (2323.0) (255.9) (208.7) (188.5) (206.4) (187.3) (135.5) (94.4)
Interest Income 0.4 0.9 1.9 1.5 1.2 4.3 3.9 3.6 3.3 3.1 2.8 2.6
Interest Expense 0.0 0.0 (0.6) (0.8) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3)
Other Income (1.0) (0.9) (1.4) (1.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pretax Income (104.5) (115.9) (131.1) (170.2) (2322.1) (251.9) (205.1) (185.2) (203.4) (184.5) (133.0) (92.1)
Income Tax (0.1) 0.0 6.9 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net income (104.6) (115.9) (124.2) (169.9) (2322.1) (251.9) (205.1) (185.2) (203.4) (184.5) (133.0) (92.1)
Basic EPS to Common ($3.07) ($0.21) ($0.17) ($0.16) ($0.17) ($0.16) ($0.11) ($0.08)
Basic Shares Outstanding 756.0 1172.6 1175.5 1178.5 1181.4 1184.4 1187.3 1190.3
Diluted EPS ($2.35) ($0.18) ($0.14) ($0.13) ($0.14) ($0.13) ($0.09) ($0.06)
Shares Outstanding 987.5 1422.3 1425.2 1428.2 1431.1 1434.1 1437.0 1440.0
EBITDA Reconciliation
Operating Income (103.8) (115.9) (131.0) (169.7) (2323.0) (255.9) (208.7) (188.5) (206.4) (187.3) (135.5) (94.4)
Stock-Based Compensation 5.5 4.7 14.8 6.8 2060.0 7.7 12.2 15.3 14.0 15.8 20.1 24.6
Pro Forma Operating Income (98.3) (111.1) (116.2) (163.0) (263.0) (248.3) (196.5) (173.2) (192.4) (171.5) (115.4) (69.8)
Depreciation and Amortization 5.0 6.0 7.4 10.6 11.8 11.7 12.2 13.0 13.3 13.9 14.6 15.1
Adjusted EBITDA (93.2) (105.1) (108.7) (152.3) (251.2) (236.5) (184.4) (160.2) (179.1) (157.6) (100.8) (54.7)
Pro Forma Net Income (99.0) (111.2) (109.4) (163.2) (262.1) (244.3) (192.9) (169.9) (189.4) (168.7) (112.8) (67.5)
Adjusted EPS - Diluted ($0.35) ($0.21) ($0.16) ($0.14) ($0.16) ($0.14) ($0.10) ($0.06)
Y/Y % Change
Total Revenue 889.7% 1254.7% 666.5% 406.4% 286.3% 166.9% 138.0% 131.3% 148.7% 119.5% 76.0% 70.9%
Cost of Revenue 265.2% 133.4% 127.3% 136.8% 185.6% 94.1% 71.7% 63.1% 12.8% 41.4% 32.4% 29.4%
Gross Profit 119.7% -35.0% -101.1% -138.5% 80.0% -133.8% 20121.7% 979.7% -293.3% 1971.3% 187.3% 149.0%
Product Development 69.4% 108.9% 187.3% 121.0% 4606.3% 162.8% 102.6% 83.1% -91.1% 25.9% 24.6% 26.8%
Marketing and Sales 326.8% 318.7% 322.3% 420.3% 2194.2% 244.2% 170.8% 100.0% -69.4% 34.7% 34.5% 50.2%
General and Administrative -61.3% 9.8% 39.6% 146.9% 2382.3% 161.3% 113.6% 52.9% -80.8% 36.1% 30.9% 21.4%
Reported Income from Operations -5.0% -31.9% -35.2% -72.9% -2137.5% -120.9% -59.4% -11.1% 91.1% 26.8% 35.1% 49.9%
Net Income -6.0% -45.2% -28.5% -73.8% -2120.5% -117.4% -65.1% -9.0% 91.2% 26.8% 35.2% 50.3%
Adjusted EBITDA -112.0% -34.9% -29.3% -75.2% -169.5% -125.0% -69.5% -5.2% 28.7% 33.4% 45.3% 65.8%
Pro Forma Net Income to Common -110.9% -50.6% -24.4% -80.0% -164.7% -119.8% -76.3% -4.1% 27.7% 30.9% 41.5% 60.3%
Margins
Gross Margin -95.3% -32.0% 0.3% 7.4% -44.4% 4.0% 28.1% 34.7% 34.5% 38.2% 45.9% 50.6%
GAAP Operating Margin -267.6% -161.4% -102.2% -102.4% -1549.9% -133.5% -68.4% -49.2% -55.4% -44.5% -25.2% -14.4%
Pro Forma Operating Margin -253.3% -154.8% -90.6% -98.4% -175.5% -129.5% -64.4% -45.2% -51.6% -40.8% -21.5% -10.7%
Adjusted EBITDA Margin -240.3% -146.4% -84.8% -91.9% -167.6% -123.4% -60.4% -41.8% -48.1% -37.5% -18.8% -8.4%
Net Income Margin -269.5% -161.4% -96.9% -102.6% -1549.3% -131.5% -67.2% -48.3% -54.6% -43.9% -24.8% -14.1%
Adjusted Net Income Margin -255.3% -154.8% -85.4% -98.5% -174.9% -127.5% -63.2% -44.3% -50.8% -40.1% -21.0% -10.3%
Snap Inc. (SNAP) 23

27 March 2017
Figure 34: Snap Inc.—Annual Income Statement

CAGR
2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E '17-'22
Total Revenue 58.7 404.5 1030.0 1985.4 3175.1 4634.3 6326.1 8064.4 50.9%
Cost of Revenue 182.3 451.7 869.9 1118.2 1421.8 1763.6 2116.8 2458.3 23.1%
Gross Profit (123.7) (47.2) 160.1 867.2 1753.3 2870.8 4209.2 5606.1 103.6%
Product Development 82.2 183.7 1646.6 525.0 707.4 911.3 1115.9 1308.3
Marketing and Sales 27.2 124.4 617.3 495.1 698.1 880.4 1062.6 1222.3 14.6%
General and Administrative 148.6 165.2 872.4 470.6 570.2 657.5 731.4 793.3
Total Operating Expenses 258.1 473.2 3136.3 1490.7 1975.6 2449.3 2910.0 3323.9 1.2%
Operating Income (381.7) (520.4) (2976.2) (623.5) (222.3) 421.5 1299.3 2282.2
Interest Income 1.4 4.7 13.0 11.8 9.0 8.6 12.0 20.3
Interest Expense 0.0 (1.4) (1.2) (1.2) (1.2) (1.2) (0.6) 0.0
Other Income (0.2) (4.6) 0.0 0.0 0.0 0.0 0.0 0.0
Pretax Income (380.5) (521.7) (2964.4) (612.9) (214.6) 428.9 1310.7 2302.5
Income Tax 7.6 7.1 0.0 0.0 0.0 0.0 0.0 0.0
Net income (372.9) (514.6) (2964.4) (612.9) (214.6) 428.9 1310.7 2302.5
Basic EPS to Common ($0.51) ($0.64) ($2.77) ($0.52) ($0.18) $0.35 $1.07 $1.87
Basic Shares Outstanding 0.0 0.0 1070.7 1185.9 1197.8 1209.8 1221.9 1234.2 2.9%
Diluted EPS ($0.51) ($0.64) ($2.25) ($0.43) ($0.15) $0.29 $0.89 $1.55
Diluted Shares Outstanding 0.0 0.0 1315.8 1435.5 1447.4 1459.5 1471.6 1483.9 2.4%
EBITDA Reconciliation
GAAP Operating Income (381.7) (520.4) (2976.2) (623.5) (222.3) 421.5 1299.3 2282.2
Stock-Based Compensation 73.5 31.8 2095.2 74.5 111.1 150.6 189.8 221.8
Pro Forma Operating Income (308.2) (488.5) (881.0) (549.0) (111.2) 572.1 1489.1 2504.0
Depreciation and Amortization 15.3 29.1 48.7 56.8 68.2 61.8 77.0 93.6 14.0%
Adjusted EBITDA (292.9) (459.4) (832.3) (492.2) (43.0) 633.9 1566.1 2597.5
Pro Forma Net Income (299.4) (482.8) (869.2) (538.5) (103.5) 579.6 1500.5 2524.3
Adjusted EPS - Diluted ($0.53) ($0.81) ($0.45) ($0.09) $0.40 $1.02 $1.70
Y/Y % Change
Total Revenue 1366.6% 589.5% 154.6% 92.8% 59.9% 46.0% 36.5% 27.5%
Cost of Revenue 237.7% 147.7% 92.6% 28.5% 27.2% 24.0% 20.0% 16.1%
Gross Profit 147.4% -61.9% -439.3% 441.7% 102.2% 63.7% 46.6% 33.2%
Product Development 123.4% 796.5% -68.1% 34.7% 28.8% 22.4% 17.2%
Marketing and Sales 357.0% 396.4% -19.8% 41.0% 26.1% 20.7% 15.0%
General and Administrative 11.1% 428.2% -46.1% 21.2% 15.3% 11.2% 8.5%
Reported Income from Operations -319.5% -36.3% -471.9% 79.1% 64.3% 289.6% 208.2% 75.7%
Net Income -38.0% -476.0% 79.3% 65.0% 299.9% 205.6% 75.7%
Adjusted EBITDA -221.9% -56.9% -81.2% 40.9% 91.3% 1572.8% 147.1% 65.9%
Pro Forma Net Income to Common -61.3% -80.0% 38.0% 80.8% 660.2% 158.9% 68.2%
Margins
Gross Margin -210.8% -11.7% 15.5% 43.7% 55.2% 61.9% 66.5% 69.5%
GAAP Operating Margin -650.7% -128.7% -289.0% -31.4% -7.0% 9.1% 20.5% 28.3%
Pro Forma Operating Margin -525.4% -120.8% -85.5% -27.7% -3.5% 12.3% 23.5% 31.0%
Adjusted EBITDA Margin -499.3% -113.6% -80.8% -24.8% -1.4% 13.7% 24.8% 32.2%
Net Income Margin -635.7% -127.2% -287.8% -30.9% -6.8% 9.3% 20.7% 28.6%
Adjusted Net Income Margin -510.3% -119.4% -84.4% -27.1% -3.3% 12.5% 23.7% 31.3%
Snap Inc. (SNAP) 24

27 March 2017
Figure 35: Snap Inc.—Annual Cash Flow Statement

2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E

Cash Flows from Operating Activities:
Net Income (372.9) (514.6) (2964.4) (612.9) (214.6) 428.9 1310.7 2302.5
Depreciation & Amortization 15.3 29.1 48.7 56.8 68.2 61.8 77.0 93.6
Stock-Based Compensation 73.5 31.8 2095.2 74.5 111.1 150.6 189.8 221.8
Deferred Income Taxes (7.7) (8.0) 0.0 0.0 0.0 0.0 0.0 0.0
Other 0.6 0.9 0.0 0.0 0.0 0.0 0.0 0.0
Accounts Receivable (41.9) (118.4) (195.3) (217.9) (267.7) (309.9) (307.3) (253.9)
Prepaid Expenses and Other Assets (6.6) (20.5) (23.1) (23.6) (24.7) (24.3) (23.5) (19.6)
Other Assets (4.5) (5.1) 0.0 0.0 0.0 0.0 0.0 0.0
Accounts Payable (6.7) 6.5 42.1 15.7 49.7 62.5 53.4 53.5
Accrued Expenses and Other Current Liabilities 40.0 (19.7) 54.3 49.4 58.9 69.2 69.8 62.9
Other Liabilities 4.2 6.8 17.8 12.8 24.6 24.7 22.9 19.0
Net Cash from Operating Activities (306.6) (611.2) (924.9) (645.2) (194.4) 463.6 1392.9 2479.8
Cash Flows from Investing Activities:

Purchase of Property and Equipment (19.2) (66.4) (76.0) (80.7) (93.5) (105.2) (112.0) (120.7)
Purchases of Intangible Assets (9.1) (0.6) 0.0 0.0 0.0 0.0 0.0 0.0
Non-marketable Investments (9.6) (6.5) 0.0 0.0 0.0 0.0 0.0 0.0
Cash Paid for Acquisitions, net of cash acquired (48.7) (104.0) 0.0 0.0 0.0 0.0 0.0 0.0
Issuance of Notes Receivable from Officers/Stockholders (7.5) (15.0) 0.0 0.0 0.0 0.0 0.0 0.0
Repayment of Notes Receivable from Officers/Stockholders 0.0 15.0 0.0 0.0 0.0 0.0 0.0 0.0
Purchases of Marketable Securities 0.0 (1565.3) 0.0 0.0 0.0 0.0 0.0 0.0
Sales of Marketable Securities 0.0 195.9 0.0 0.0 0.0 0.0 0.0 0.0
Maturities of Marketable Securities 0.0 532.7 0.0 0.0 0.0 0.0 0.0 0.0
Change in Restricted Cash (1.9) (7.0) 0.0 0.0 0.0 0.0 0.0 0.0
Other Investing Activities (5.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Cash from Investing Activities (100.9) (1021.3) (76.0) (80.7) (93.5) (105.2) (112.0) (120.7)
Cash Flows from Financing Activities:

Proceeds from the Exercise of Stock Options 0.1 0.7 0.0 0.0 0.0 0.0 0.0 0.0
Repurchase of Class B Voting Common Stock and Series FP Preferred Stock (1.0) (10.6) 0.0 0.0 0.0 0.0 0.0 0.0
Proceeds from Issuance of Preferred Stock, net of issuance cost 651.3 1157.1 2645.3 0.0 0.0 0.0 0.0 0.0
Borrowings from Revolving Credit Facility 0.0 5.0 0.0 0.0 0.0 0.0 0.0 0.0
Principal Payments on Revolving Credit Facility 0.0 (5.0) 0.0 0.0 0.0 0.0 0.0 0.0
Payments of Deferred Offering Costs 0.0 (5.4) 0.0 0.0 0.0 0.0 0.0 0.0
Net Cash from Financing Activities 650.4 1141.9 2645.3 0.0 0.0 0.0 0.0 0.0
Net Increase (Decrease) in Cash 242.8 (490.7) 1644.4 (725.9) (287.9) 358.4 1280.9 2359.2
Cash - Beginning of Period 398.0 640.8 150.1 1794.5 1068.6 780.6 1139.0 2419.9
Cash - End of Period 640.8 150.1 1794.5 1068.6 780.6 1139.0 2419.9 4779.1
Snap Inc. (SNAP) 25

27 March 2017
Figure 36: Snap Inc.—Annual Balance Sheet

2015A 2016A 2017E 2018E 2019E 2020E 2021E 2022E

Current Assets:
Cash and Cash Equivalents 640.8 150.1 1794.5 1068.6 780.6 1139.0 2419.9 4779.1
Short-term Marketable Securities 0.0 837.2 837.2 837.2 837.2 837.2 837.2 837.2
Accounts Receivable, net of allowance 44.3 162.7 358.0 575.9 843.5 1153.4 1460.7 1714.6
Prepaid Expenses and Other Current Assets 7.4 30.0 53.1 76.7 101.3 125.6 149.1 168.6
Total Current Assets 692.6 1180.0 3042.8 2558.3 2562.7 3255.3 4867.0 7499.6
Property and Equipment, Net 44.1 100.6 153.8 200.7 247.9 292.6 328.7 356.8
Intangible Assets, Net 43.2 76.0 50.1 27.0 5.2 3.9 2.9 1.8
Goodwill 133.9 319.1 319.1 319.1 319.1 319.1 319.1 319.1
Other Assets 25.1 47.1 47.1 47.1 47.1 47.1 47.1 47.1
Total Assets 938.9 1722.8 3613.0 3152.3 3182.1 3918.1 5564.7 8224.4
Current Liabilities:
Accounts Payable 0.7 8.4 50.5 66.2 115.8 178.3 231.8 285.3
Accrued Expenses and Other Current Liabilities 155.6 335.5 389.8 439.2 498.1 567.3 637.2 700.1
Total Current Liabilities 156.3 343.9 440.3 505.4 614.0 745.7 868.9 985.4
Other Liabilities 18.5 47.1 64.9 77.7 102.3 127.0 150.0 168.9
Total Liabilities 174.8 391.1 505.2 583.0 716.3 872.7 1018.9 1154.3
Convertible Preferred and Common Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Additional Paid-in Capital 1467.4 3639.6 8380.1 8454.5 8565.7 8716.3 8906.1 9127.8
Retained Earnings (693.2) (2305.9) (5270.3) (5883.2) (6097.8) (5668.9) (4358.2) (2055.7)
Accumulated Other Comprehensive Income 0.0 (2.1) (2.1) (2.1) (2.1) (2.1) (2.1) (2.1)
Total Stockholder's Equity 764.1 1331.7 3107.8 2569.3 2465.8 3045.4 4545.8 7070.1
Total Liabilities and Stockholder's Equity 938.9 1722.8 3613.0 3152.3 3182.1 3918.1 5564.7 8224.4
PEERS
Figure 37 shows Snap's positioning vis-à-vis the Credit Suisse PEERS construct, which
lists its competitors, suppliers, and customers.
Figure 37: Snap Inc.—PEERS Relationship Map
Snap Inc. (SNAP) 26

27 March 2017
Companies Mentioned (Price as of 24-Mar-2017)

21st Century Fox Inc. (FOXA.OQ, $31.52)
Amazon com Inc. (AMZN.OQ, $845.61)
Apple Inc (AAPL.OQ, $140.64)
Facebook Inc. (FB.OQ, $140.34)
Kakao Corp (035720.KQ, W84,100)
Line (LN.N, $36.87)
Microsoft (MSFT.OQ, $64.98)
Naver Corp (035420.KS, W872,000)
Netflix, Inc. (NFLX.OQ, $142.02)
Snap Inc. (SNAP.N, $22.74, OUTPERFORM[V], TP $30.0)
Tencent Holdings (0700.HK, HK$225.2)
The Walt Disney Company (DIS.N, $112.14)
Twitter (TWTR.N, $15.14)
Weibo Corporation (WB.OQ, $49.78)
Yahoo Inc. (YHOO.OQ, $46.4)
Disclosure Appendix
Analyst Certification
I, Stephen Ju, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
3-Year Price and Rating History for Kakao Corp (035720.KQ)
035720.KQ Closing Price Target Price

Date (W) (W) Rating
20-Jun-14 101,300 125,000 O
30-Jul-14 130,800 150,000
06-Oct-14 154,800 220,000
10-Nov-14 139,300 200,000
13-Feb-15 141,200 175,000
20-Mar-15 121,000 110,000 N
14-May-15 105,900 105,000
17-Aug-15 137,100 120,000 *
13-Jan-16 119,800 R
21-Mar-16 112,200 120,000 N O U T PERFO RM
N EU T RA L
12-May-16 106,300 * REST RIC T ED
07-Jun-16 98,200 69,000 U U N D ERPERFO RM
21-Jul-16 92,700 73,000

11-Oct-16 81,500 63,000
* Asterisk signifies initiation or assumption of coverage.
3-Year Price and Rating History for Naver Corp (035420.KS)
035420.KS Closing Price Target Price

Date (W) (W) Rating
08-May-14 705,000 750,000 N
20-Jun-14 787,000 850,000
31-Oct-14 754,000 1,000,000 O
04-May-15 603,000 900,000
30-Jul-15 518,000 840,000
29-Oct-15 592,000 800,000 *
28-Jan-16 631,000 910,000 *
29-Jan-16 628,000 890,000
29-Apr-16 677,000 870,000
10-Jun-16 720,000 R N EU T RA L
O U T PERFO RM
23-Aug-16 806,000 NR REST RIC T ED
05-Sep-16 850,000 1,060,000 O N O T RA T ED
16-Jan-17 794,000 1,020,000

30-Jan-17 753,000 930,000
16-Mar-17 819,000 950,000
* Asterisk signifies initiation or assumption of coverage.
Snap Inc. (SNAP) 27

27 March 2017
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of
all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least
attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage
universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average
total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its
current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the
expected total return (ETR) calculation includes 12-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform
where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating
that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between
15% and 7.5%, which was in operation from 7 July 2011.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the
company at this time.
Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment
view on the equity security of the company or related products.
Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst m ay cover multiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 45% (64% banking clients)
Neutral/Hold* 39% (61% banking clients)
Underperform/Sell* 14% (53% banking clients)
Restricted 2%
*For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, a nd Underperform most closely
correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. ( Please refer to
definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, curr ent holdings, and other individual factors.
Important Global Disclosures
Credit Suisse’s research reports are made available to clients through our proprietary research portal on CS PLUS. Credit Suisse research products
may also be made available through third-party vendors or alternate electronic means as a convenience. Certain research products are only made
available through CS PLUS. The services provided by Credit Suisse’s analysts to clients may depend on a specific client’s preferences regarding the
frequency and manner of receiving communications, the client’s risk profile and investment, the size and scope of the overall client relationship with
the Firm, as well as legal and regulatory constraints. To access all of Credit Suisse’s research that you are entitled to receive in the most timely
manner, please contact your sales representative or go to https://plus.credit-suisse.com .
Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
market that may have a material impact on the research views or opinions stated herein.
Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer
to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: https://www.credit-
suisse.com/sites/disclaimers-ib/en/managing-conflicts.html .
Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
be used, by any taxpayer for the purposes of avoiding any penalties.
Snap Inc. (SNAP) 28

27 March 2017
Target Price and Rating

Valuation Methodology and Risks: (12 months) for Snap Inc. (SNAP.N)
Method: In-line with the valuation methodology we have used with the rest of our coverage universe, we have based our target price for SNAP
shares on DCF, which suggests $30. We have used a weighted average cost of capital of 11% and a terminal growth rate of 3%. Our
Outperform investment rating is based on 1) we believe SNAP shares at current levels are exhibiting attractive risk/reward to the upside,
with downside risk of ~21% in our Grey Sky scenario and upside potential of ~32% to our target, 2) it is a scarce asset which offers
advertisers access to a coveted younger demographic, and 3) Snap is a margin expansion story with revenue CAGR exceeding cost of
sales CAGR.
Risk: With this in mind, we also point out that investing SNAP shares in our view is high-risk/high-reward. The following are risks to our $30
target price and Outperform investment rating: the presence of a long list of well-heeled global competitors, the potential for the migration
and/or the failure to hang on to its existing user base, or scale advertising revenue through ongoing product development.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations
typically used in the target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (SNAP.N, FB.OQ, AAPL.OQ, 0700.HK, 035720.KQ, 035420.KS, MSFT.OQ, NFLX.OQ, AMZN.OQ, FOXA.OQ, DIS.N,
WB.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (SNAP.N, FB.OQ, AAPL.OQ, 035420.KS, MSFT.OQ, FOXA.OQ, DIS.N,
WB.OQ) within the past 12 months.
Credit Suisse has managed or co-managed a public offering of securities for the subject company (SNAP.N, 035420.KS, MSFT.OQ) within the past
12 months.
Credit Suisse has received investment banking related compensation from the subject company (SNAP.N, FB.OQ, AAPL.OQ, 035420.KS,
MSFT.OQ, FOXA.OQ, DIS.N, WB.OQ) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (SNAP.N, FB.OQ,
AAPL.OQ, 0700.HK, 035720.KQ, 035420.KS, MSFT.OQ, YHOO.OQ, NFLX.OQ, AMZN.OQ, FOXA.OQ, DIS.N, WB.OQ) within the next 3 months.
As of the date of this report, Credit Suisse makes a market in the following subject companies (AAPL.OQ, MSFT.OQ).
Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (035420.KS).
Credit Suisse has a material conflict of interest with the subject company (FB.OQ) . Credit Suisse has been named as a defendant in various
putative shareholder class-action lawsuits relating to Facebook, Inc.’s May 2012 initial public offering. Credit Suisse’s practice is not to comment in
research reports on pending litigations to which it is a party. Nothing in this report should be construed as an opinion on the merits or potential
outcome of the lawsuits.
Credit Suisse has a material conflict of interest with the subject company (FOXA.OQ) . “Tidjane Thiam, the CEO of Credit Suisse is a non-executive
Director of 21st Century Fox Inc. (FOXA)”
For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-
suisse.com/disclosures or call +1 (877) 291-2683.
For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated
within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=290431&v=3jvw2yay70wvkkmfkf7iqhaol .
Important Regional Disclosures
Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse
does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.
Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
SVS--Subordinate Voting Shares.
Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-
suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.
Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SNAP.N, AAPL.OQ,
0700.HK, 035420.KS, MSFT.OQ, DIS.N, WB.OQ) within the past 3 years.
Principal is not guaranteed in the case of equities because equity prices are variable.
Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
This research report is authored by:
Credit Suisse Securities (USA) LLC ............................................................................................................................ Stephen Ju ; Christopher Ford
Important disclosures regarding companies or other issuers that are the subject of this report are available on Credit Suisse’s disclosure website at
https://rave.credit-suisse.com/disclosures or by calling +1 (877) 291-2683.
Snap Inc. (SNAP) 29

27 March 2017
This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may
contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use
would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is
under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks
and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are
not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for
any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that
you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy
is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser.
Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their
accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations
applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions
from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications
are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market
maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and
estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can
fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such
as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who
are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and
exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the
product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and
large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such
circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some
investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report
may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such
address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such
website or following such link through this report or CS's website shall be at your own risk.
This report is issued and distributed in European Union (except Switzerland): by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Germany: Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht
("BaFin"). United States and Canada: Credit Suisse Securities (USA) LLC; Switzerland: Credit Suisse AG; Brazil: Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; Mexico: Banco Credit Suisse (México), S.A. (transactions
related to the securities mentioned in this report will only be effected in compliance with applicable regulation); Japan: by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau
( Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; Hong Kong: Credit Suisse (Hong
Kong) Limited; Australia: Credit Suisse Equities (Australia) Limited; Thailand: Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990
Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok10500, Thailand, Tel. +66 2614 6000; Malaysia: Credit Suisse Securities (Malaysia) Sdn Bhd; Singapore: Credit Suisse AG, Singapore Branch; India: Credit
Suisse Securities (India) Private Limited (CIN no.U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India as Research Analyst (registration no. INH 000001030) and as Stock Broker (registration no.
INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777; South Korea: Credit Suisse Securities (Europe) Limited,
Seoul Branch; Taiwan: Credit Suisse AG Taipei Securities Branch; Indonesia: PT Credit Suisse Securities Indonesia; Philippines:Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of
the above.
Additional Regional Disclaimers
Hong Kong: Credit Suisse (Hong Kong) Limited ("CSHK") is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from Australian laws. CSHKL does not hold an Australian
financial services licence (AFSL) and is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (the Act) under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian
wholesale clients (within the meaning of section 761G of the Act). Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person.
Australia (to the extent services are offered in Australia): Credit Suisse Securities (Europe) Limited (“CSSEL”) and Credit Suisse International (“CSI”) are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority (“FCA”) and the Prudential Regulation Authority under UK laws, which differ from Australian Laws. CSSEL and CSI do not hold an Australian Financial Services Licence (“AFSL”) and are exempt from the requirement to hold an AFSL
under the Corporations Act (Cth) 2001 (“Corporations Act”) under Class Order 03/1099 published by the Australian Securities and Investments Commission (“ASIC”), in respect of the financial services provided to Australian wholesale clients
(within the meaning of section 761G of the Corporations Act). This material is not for distribution to retail clients and is directed exclusively at Credit Suisse's professional clients and eligible counterparties as defined by the FCA, and wholesale
clients as defined under section 761G of the Corporations Act. Credit Suisse (Hong Kong) Limited (“CSHK”) is licensed and regulated by the Securities and Futures Commission of Hong Kong under the laws of Hong Kong, which differ from
Australian laws. CSHKL does not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class Order 03/1103 published by the ASIC in respect of financial services provided to Australian
wholesale clients (within the meaning of section 761G of the Corporations Act). Credit Suisse Securities (USA) LLC (CSSU) and Credit Suisse Asset Management LLC (CSAM LLC) are licensed and regulated by the Securities Exchange
Commission of the United States under the laws of the United States, which differ from Australian laws. CSSU and CSAM LLC do not hold an AFSL and is exempt from the requirement to hold an AFSL under the Corporations Act under Class
Order 03/1100 published by the ASIC in respect of financial services provided to Australian wholesale clients (within the meaning of section 761G of the Corporations Act).
Malaysia: Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020.
Singapore: This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by
Credit Suisse AG, Singapore Branch to overseas investors (as defined under the Financial Advisers Regulations). Credit Suisse AG, Singapore Branch may distribute reports produced by its foreign entities or affiliates pursuant to an
arrangement under Regulation 32C of the Financial Advisers Regulations. Singapore recipients should contact Credit Suisse AG, Singapore Branch at +65-6212-2000 for matters arising from, or in connection with, this report. By virtue of your
status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore Branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110
of Singapore (the “FAA”), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore Branch may provide to you.
UAE: This information is being distributed by Credit Suisse AG (DIFC Branch), duly licensed and regulated by the Dubai Financial Services Authority (“DFSA”). Related financial services or products are only made available to Professional
Clients or Market Counterparties, as defined by the DFSA, and are not intended for any other persons. Credit Suisse AG (DIFC Branch) is located on Level 9 East, The Gate Building, DIFC, Dubai, United Arab Emirates.
EU: This report has been produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division
In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade
be made in accordance with applicable exemptions from registration or licensing requirements. Non-US customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. US
customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the US.
Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should
seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK
or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation
Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report.
CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not
viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or
fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials,management, employees or agents thereof) and CS for CS to
provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the
municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial
Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its
affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not
constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or
consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
Copyright © 2017 CREDIT SUISSE AG and/or its affiliates. All rights reserved.
Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can
be eroded due to changes in redemption amounts. Care is required when investing in such instruments.
When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to
pay the purchase price only.
Snap Inc. (SNAP) 30

Snap Coverage Initiation March 2017 Credit Suisse

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Snap Coverage Initiation March 2017 Credit Suisse

Uploaded by

Copyright:

Available Formats

27 March 2017

Snap Inc. (SNAP)

Snap Inc. (SNAP)

On 24-Mar-2017 the S&P 500 INDEX closed at 2343.98

Source: Company data, Thomson Reuters, Credit Suisse estimates

Snap Inc. (SNAP) 2

Investment Summary: Weaving a Path Out of the

Snap Inc. (SNAP) 3

Figure 1: Snap Inc.—Navigating the Snapchat App

Swipe Swipe Swipe

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 4

Figure 2: Snap Inc.—Common Smartphone Application Use Cases

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 5

Figure 3: Snap Inc.—Consumer Product Release Timeline and Daily Active

Video + Voice Calling

Publisher Stories Spectacles

Chat Best Friend Emojis Story Playlist

Live Stories Snapcodes Group Chat

Stories Geofilters Trophies Scissors

Android Smart Filters Snapcash Lenses Paintbrush

Snapchat Launched Video Replay Community Geofilters Story Explorer Shazam

2011 2012 2013 2014 2015 2016

39 million 74 million 107 million 158 million

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 6

Figure 4: Snap Inc.—Geofilter Examples Figure 5: Snap Inc.—Lenses Examples

User Applied Sponsored User Applied Sponsored

Figure 6: Snap Inc.—Different Types of Sponsored Geofilter Campaigns

Event Shared Spaces Chain National

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 7

Figure 7: Snap Inc.—Snap Ads with Attachments

Web View Article App Install Long-Form Video

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 8

Optionality to Emerge as an Additional Advertising

Figure 8: Snap Inc.—Prior Method of Delivery Figure 9: Snap Inc.—Goal-Based Delivery

Likely to Swipe Unlikely to Swipe Likely to Swipe Unlikely to Swipe

Snap Inc. (SNAP) 9

2015 Mobile Ad Facebook Google Other 2016 Mobile Ad

Source: Company data, Credit Suisse estimates, Magna Global estimates.

Figure 11: 2016 Total Global Advertising Spend (ex-China)

163.1 85.2 63.7 46.1 20.2 26.0 27.5

TV Digital - Digital - Newspapers Magazines Radio Out-Of-Home

Source: Company data, Credit Suisse estimates.

Snap Inc. (SNAP) 10

Source: Company data, Credit Suisse estimates.

Ongoing Expansion of User Base in Key Ad Markets

Snap Inc. (SNAP) 11

Facebook Snap Twitter Facebook Snap

Figure 15: Long-Term Daily Active User Penetration Rate by Region

2015A 2020E 2025E

Snap Inc. (SNAP) 12

Gross Margin Expansion as Revenue CAGR Exceeds

Snap Inc. (SNAP) 13

Figure 16: Snap Inc.—Spectacles and Charging Case

Source: Company data, Credit Suisse estimates.

Figure 17: Snap Inc.—Estimated Margin Expansion Trajectory

2015A 2016A 2017E 2018E 2019E 2020E 2021E

Snap Inc. (SNAP) 14

Architecture of the Earnings Model

Figure 18: Snap Inc.—Year End Daily Active User Assumptions