01—Abstract
Summary
Summary of the 10-Q filed August 7, 2024. Cited figures are marked; the original filing is the authoritative source.
Reddit, Inc. reported second-quarter 2024 revenue of $281.2 milliona, up 54% year over year from $183.0 million, with advertising revenue of $253.1 million and other revenue of $28.1 million.
Net loss narrowed to $10.1 millionb from $41.1 million a year earlier. Adjusted EBITDA was $39.5 million, compared with $(35.4) million in the prior-year quarter, and Free Cash Flow was $27.2 million versus $(54.9) million. For the six months, net loss was $585.2 million, driven largely by stock-based compensation expense of $641.8 million, including a cumulative catch-up recognized upon the IPO for RSUs with a liquidity event vesting condition.
User engagement grew strongly: global DAUq was 91.2 million, up 51% year over year, with United States DAUq up 59% and rest-of-world DAUq up 44%. ARPU was $3.08c, up 2% year over year, although United States ARPU declined to $4.94 from $5.21. The filing attributes the global ARPU increase mainly to higher impressions, partially offset by lower pricing, and notes that data licensing agreements executed in 2024 contributed to revenue and ARPU.
The balance sheet strengthened following the March 2024 IPO, which provided net proceeds of $600.0 milliond. Cash, cash equivalents, and marketable securities totaled $1.7 billion as of June 30, 2024, and the company stated these resources, together with its $745.1 million of available revolving credit capacity, are sufficient for at least the next 12 months. The filing also highlights risks including user-growth concentration in logged-out traffic, reliance on third-party search engines, dual-class control held by Advance Magazine Publishers Inc. and CEO Steve Huffman, and an FTC inquiry related to AI training data licensing.
02—Key points
Key Highlights
- Revenue of $281.2 million for Q2 2024, up 54% year over year; six-month revenue of $524.1 million, up 51%.
- Net loss narrowed to $10.1 million in Q2 2024 from $41.1 million in Q2 2023; six-month net loss was $585.2 million, including $641.8 million of stock-based compensation expense.
- Adjusted EBITDA of $39.5 million in Q2 2024 versus $(35.4) million a year earlier; Free Cash Flow of $27.2 million versus $(54.9) million.
- Global DAUq reached 91.2 million, up 51% year over year, with United States DAUq up 59% and rest-of-world DAUq up 44%.
- ARPU was $3.08, up 2% year over year, while United States ARPU fell to $4.94 from $5.21.
- Cash, cash equivalents, and marketable securities totaled $1.7 billion at June 30, 2024, following $600.0 million in net IPO proceeds.
- Remaining performance obligations on contracts longer than one year totaled $320.3 million, primarily from long-term data licensing contracts.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2024, Reddit lost $0.04.
- Revenue$281.2M100.0%
- Cost of revenue−$29.5M10.5%
- Gross profit$251.7M89.5%
- Operating costs−$282.7M100.5%
- Operating income−$31.0M11.0%
- Interest, other & tax$20.9M7.4%
- Net income−$10.1M3.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 7, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $281.18M$183.03M | +53.6% |
| Cost of Revenue | $29.50M$28.84M | +2.3% |
| Gross Profit | $251.68M$154.19M | +63.2% |
| R&D Expenses | $142.78M$109.73M | +30.1% |
| Operating Expenses | $312.22M$236.02M | +32.3% |
| Operating Income | -$31.04M-$52.99M | +41.4% |
| Net Income | -$10.10M-$41.11M | +75.4% |
| EPS (Basic) | $-0.06$-0.70 | +91.4% |
| EPS (Diluted) | $-0.06$-0.70 | +91.4% |
| Shares Outstanding (Basic) | 164.38M58.51M | +181.0% |
| Shares Outstanding (Diluted) | 164.38M58.51M | +181.0% |
05—Questions
Frequently Asked Questions
What drove the growth in Reddit's revenue in the second quarter of 2024?
The filing attributes the growth primarily to an increase in advertising revenue driven by more impressions delivered, partially offset by lower pricing. Other revenue also increased to $28.1 million from $3.5 million, as a result of data licensing agreements executed in 2024.
Why was the six-month net loss so much larger than the quarterly loss?
The six-month net loss of $585.2 million was driven mainly by stock-based compensation expense of $641.8 million, which included a cumulative catch-up recognized upon the IPO for RSUs with a liquidity event vesting condition. Research and development, sales and marketing, and general and administrative expenses all rose sharply as a result.
How much liquidity does Reddit have, and is it sufficient?
As of June 30, 2024, Reddit had $1.7 billion in cash, cash equivalents, and marketable securities, and $745.1 million available under its Revolving Credit Facility. The company believes these resources will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months, though it may require additional capital in the future.
What risks does the filing highlight regarding user growth and control of the company?
The filing notes that logged-out users, who typically come from search engines and monetize at lower rates, made up 75% of incremental users added since July 2023 as of December 2023, and that DAUq growth may slow. It also states that Class B shareholders, including Advance Magazine Publishers Inc., and CEO Steven Huffman, who holds voting agreements covering about 50% of voting power, control significant voting power.
06—Continue