01—Abstract
Summary
Summary of the 10-Q filed October 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Reddit, Inc. reported third-quarter 2024 revenue of $348.4 milliona, up 68% year over year from $207.5 million, with advertising revenue of $315.1 million and other revenue of $33.2 million.
The company swung to net income of $29.9 millionb for the quarter, compared with a net loss of $7.4 million a year earlier. Results were helped by a sharp rise in revenue and a 90.1% gross margin, though nine-month results remained a net loss of $555.3 million, largely reflecting stock-based compensation of $716.5 million tied to the March 2024 IPO, including a cumulative catch-up for RSUs with liquidity-event vesting conditions. Adjusted EBITDA was $94.1 million for the quarter versus a $6.9 million loss a year earlier.
User growth and monetization both moved higher. Global DAUq was 97.2 million, up 47% year over year, and ARPU was $3.58c, up 14%. Management attributed the revenue increase mainly to higher impressions delivered, with pricing flat versus the prior-year period, and noted that data licensing agreements executed in 2024 contributed to other revenue.
The filing also notes that DAUq growth quarter over quarter was 7%, and that logged-out users made up 75% of incremental users added since July 2023 as of December 2023. Liquidity is strong: cash, cash equivalents, and marketable securities totaled $1.7 billiond at September 30, 2024, and free cash flow was $70.3 million for the quarter ($126.7 million for nine months).
The company received $600.0 million in net IPO proceeds in March 2024 and has a $750.0 million revolving credit facility with $745.0 million available. Risk disclosures highlight dependence on a small number of data licensing partners, a concentrated voting structure controlled largely by Steven Huffman and Advance Magazine Publishers, an FTC inquiry into AI training data licensing, and reliance on search engine traffic.
02—Key points
Key Highlights
- Revenue of $348.4 million for Q3 2024, up 68% year over year; nine-month revenue of $872.5 million, up 57%.
- Net income of $29.9 million in Q3 2024 versus a net loss of $7.4 million in Q3 2023; nine-month net loss of $555.3 million.
- Adjusted EBITDA of $94.1 million in Q3 2024 versus $(6.9) million a year earlier; gross margin of 90.1%.
- DAUq of 97.2 million, up 47% year over year and 7% quarter over quarter; ARPU of $3.58, up 14% year over year.
- Free cash flow of $70.3 million in Q3 2024 and $126.7 million for the nine months; cash, equivalents, and marketable securities of $1.7 billion.
- Stock-based compensation expense of $716.5 million for the nine months, including a cumulative catch-up upon IPO for liquidity-event RSUs.
- Top ten customers accounted for approximately 26% of 2023 revenue, and the company has a $745.0 million undrawn revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Reddit kept $0.09.
- Revenue$348.4M100.0%
- Cost of revenue−$34.6M9.9%
- Gross profit$313.7M90.1%
- Operating costs−$306.9M88.1%
- Operating income$6.9M2.0%
- Interest, other & tax$23.0M6.6%
- Net income$29.9M8.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 30, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $348.35M$207.51M | +67.9% |
| Cost of Revenue | $34.63M$26.39M | +31.2% |
| Gross Profit | $313.72M$181.11M | +73.2% |
| R&D Expenses | $166.70M$108.28M | +53.9% |
| Operating Expenses | $341.50M$227.09M | +50.4% |
| Operating Income | $6.85M-$19.59M | +135.0% |
| Net Income | $29.85M-$7.38M | +504.3% |
| EPS (Basic) | $0.18$-0.13 | +238.5% |
| EPS (Diluted) | $0.16$-0.13 | +223.1% |
| Shares Outstanding (Basic) | 169.17M58.86M | +187.4% |
| Shares Outstanding (Diluted) | 192.32M58.86M | +226.8% |
05—Questions
Frequently Asked Questions
What drove the increase in Reddit's third-quarter 2024 revenue?
Revenue rose $140.8 million, or 68%, to $348.4 million. The filing attributes the growth primarily to higher advertising revenue driven by increased impressions delivered, with pricing consistent with the prior-year period. Other revenue also increased to $33.2 million from $5.1 million, as a result of data licensing agreements executed in 2024.
Why did Reddit report a net loss for the nine months despite profit in the quarter?
The nine-month net loss of $555.3 million was driven mainly by higher stock-based compensation expense and related taxes following the March 2024 IPO, including the cumulative catch-up for RSUs with a liquidity event vesting condition. Research and development expense rose to $746.5 million for the nine months from $326.8 million, and general and administrative expense rose to $377.6 million from $116.3 million.
How much cash did Reddit have available and what is its borrowing capacity?
As of September 30, 2024, the company had $1.7 billion in cash, cash equivalents, and marketable securities. It also had $745.0 million available under its $750.0 million revolving credit facility, which the company said is sufficient to meet working capital and capital expenditure needs for at least the next 12 months.
What are the main risks flagged in the filing for investors?
The filing highlights dependence on a small number of data licensing partners, with substantially all licensing contract value derived from two partners. It also notes concentrated voting control, with Steven Huffman entitled to vote approximately 69% of the voting power of Class A and Class B common stock, and an FTC staff inquiry into the company's sale or licensing of user-generated content for AI training. Additional risks include reliance on search engine traffic and the volatility of DAUq metrics, particularly for logged-out users.
06—Continue