01—Abstract
Summary
Summary of the 10-Q filed May 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Reddit, Inc. (RDDT) reported its first quarter 2024 results in this Form 10-Q, covering the three months ended March 31, 2024, shortly after its March 2024 initial public offering.
Revenue was $242.96 milliona, up 48% from $163.74 million a year earlier, driven primarily by higher advertising revenue from more impressions delivered, partially offset by lower pricing, and by data licensing agreements executed in 2024. Advertising revenue was $222.68 million and other revenue was $20.28 million. Daily Active Uniques (DAUq) reached 82.7 million, up 37% year over year, and ARPU was $2.94, up 8%.
The company posted a net loss of $575.07 millionb, compared with a net loss of $60.87 million in the prior-year quarter. The loss was driven primarily by stock-based compensation of $577.5 million, largely tied to RSUs with a liquidity event vesting condition that was satisfied upon the IPO's effectiveness. Research and development, sales and marketing, and general and administrative expenses rose sharply as a result.
Adjusted EBITDA, a non-GAAP measure, was $10.03 millionc, compared with a negative $50.18 million a year earlier. Net cash provided by operating activities was $32.06 million, and Free Cash Flow was $29.21 million. The IPO closed on March 25, 2024, at $34.00 per share, with 18,576,527 Class A shares sold by the company and net proceeds of $600.0 million after $31.6 million of underwriting discounts and commissions.
As of March 31, 2024, cash, cash equivalents, and marketable securities totaled $1.7 billiond, and the company had $745.1 million available under its $750.0 million revolving credit facility. Management stated that existing cash and credit facility availability are sufficient for working capital and capital expenditure needs for at least the next 12 months. The filing also discloses a multi-class share structure in which Advance Magazine Publishers Inc. held approximately 25% of Class A and Class B shares and approximately 34% of voting power, and a Governance Agreement granting Advance significant approval rights.
02—Key points
Key Highlights
- Revenue of $242.96 million for Q1 2024, up 48% year over year from $163.74 million; advertising revenue was $222.68 million and other revenue was $20.28 million.
- Net loss widened to $575.07 million from $60.87 million, primarily due to $577.5 million of stock-based compensation, including amounts tied to the IPO liquidity event vesting condition.
- Adjusted EBITDA (non-GAAP) was $10.03 million, versus $(50.18) million in Q1 2023; Free Cash Flow (non-GAAP) was $29.21 million.
- DAUq grew 37% year over year to 82.7 million, and ARPU rose 8% to $2.94; U.S. ARPU was $4.77 and rest-of-world ARPU was $1.10.
- The IPO closed March 25, 2024, at $34.00 per share, generating net proceeds of $600.0 million for the company.
- Cash, cash equivalents, and marketable securities totaled $1.7 billion as of March 31, 2024, with $745.1 million available under the revolving credit facility.
- Advance Magazine Publishers Inc. holds approximately 25% of outstanding Class A and Class B shares and approximately 34% of voting power, with governance rights that include board designation and approval rights.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 8, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $242.96M$163.74M | +48.4% |
| Cost of Revenue | $27.62M$26.86M | +2.8% |
| Gross Profit | $215.35M$136.88M | +57.3% |
| R&D Expenses | $437.03M$108.77M | +301.8% |
| Operating Expenses | $832.22M$234.34M | +255.1% |
| Operating Income | -$589.25M-$70.60M | −734.6% |
| Net Income | -$575.07M-$60.87M | −844.8% |
| EPS (Basic) | $-8.19$-1.05 | −680.0% |
| EPS (Diluted) | $-8.19$-1.05 | −680.0% |
| Shares Outstanding (Basic) | 70.24M58.11M | +20.9% |
| Shares Outstanding (Diluted) | 70.24M58.11M | +20.9% |
05—Questions
Frequently Asked Questions
How did Reddit's revenue and user growth perform in the first quarter of 2024?
Revenue was $242.96 million, up 48% from $163.74 million a year earlier. DAUq reached 82.7 million, up 37% year over year, and ARPU was $2.94, up 8%. The filing attributes revenue growth mainly to higher advertising impressions delivered, partly offset by lower pricing, plus other revenue from data licensing agreements executed in 2024.
Why was the net loss so large this quarter?
The net loss of $575.07 million was driven primarily by stock-based compensation of $577.5 million. The filing states that research and development expenses rose $328.3 million, sales and marketing rose $66.2 million, and general and administrative rose $202.7 million, mainly due to stock-based compensation tied to RSUs with a liquidity event vesting condition satisfied upon the IPO's effectiveness.
What did the company do with the IPO proceeds, and is it well funded?
Reddit received net proceeds of $600.0 million from the IPO after $31.6 million of underwriting discounts and commissions. Cash, cash equivalents, and marketable securities were $1.7 billion as of March 31, 2024. Management believes existing cash, marketable securities, and revolving credit facility availability will be sufficient for working capital and capital expenditure needs for at least the next 12 months. The filing notes that a portion of IPO proceeds was used for tax withholding obligations on RSUs that vested in connection with the IPO.
Who controls voting power at Reddit after the IPO?
Class B common stock carries ten votes per share, and Class A carries one vote per share. As of March 31, 2024, Advance Magazine Publishers Inc. held approximately 34% of voting power and approximately 25% of outstanding Class A and Class B shares. Tencent Cloud Europe B.V. and Jojoba Investment Limited collectively held approximately 9% of voting power. Steven Huffman, CEO, is entitled to vote shares held by Advance and these holders under voting agreements, and Advance has board designation and approval rights under a Governance Agreement.
What risks did the filing highlight regarding future lock-up expirations and data licensing?
The filing states that substantially all outstanding Class A common stock and convertible securities are subject to lock-up or market standoff provisions until the earlier of the third trading day after the public release of Q2 2024 earnings or 180 days after the Prospectus date, after which substantially all of these securities become eligible for sale. It also notes that substantially all of the contract value associated with licensing revenue derives from one partner, and that the company is in the early stages of data licensing, which is a novel business model. The company also disclosed receipt of an FTC letter dated March 14, 2024, regarding a non-public inquiry into the sale or licensing of user-generated content to train AI models.
06—Continue