WEBVTT
X-TIMESTAMP-MAP=MPEGTS:900000,LOCAL:00:00:00.000

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NOW.
EVERYONE IS LOOKING AT THOSE

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DAILY ACTIVE USERS NUMBERS.
WE ARE SEEING GROWTH, JUST NOT

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AS ROBUST.

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>> THAT'S RIGHT.
YEAR OVER YEAR FOR THE QUARTER,

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FOURTH QUARTER 48% INCREASE.
THIS IS ONLY 36% YEAR OVER YEAR

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FROM THE FIRST QUARTER LAST
YEAR.

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WHEN THIS COMPANY LISTED TWO
MONTHS AGO, USER GROWTH WAS A

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CONCERN.
IT IS NOT WHAT MANAGEMENT

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WANTS THE STREET TO FOCUS ON.
JOE: ONE OF THE BIG STORIES,

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FACEBOOK KEEPS TOPPING EVERY
SNAPCHAT PRODUCT AND DOING WELL

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WITH THOSE COPIES.
IS THAT POTENTIALLY ONE OF THE

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HEADWINDS?

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>> IT IS.
IT IS INSTAGRAM IN PARTICULAR,

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WHERE THEY HAVE COPIED STORIES
AND BROUGHT ADVERTISER DOLLARS

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IN, WHICH THEY HOPE DRIVES
REVENUE.

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WHEN YOU LOOK AT LATE 2016, THAT
IS WHEN INSTAGRAM INTRODUCED

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STORIES AND WE SAW A FALLOFF IN
GROWTH FOR SNAP.

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IT DID HAVE SOME ISSUES WITH ITS
ANDROID SNAPCHAT APP, BUT WE

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WILL SEE IF THOSE ARE ALLEVIATED
THIS QUARTER.

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SCARLET: I'M LOOKING AT THE
OTHER HEADLINES, $2 MILLION OF

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STOCK-BASED COMPENSATION
EXPENSE.

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THIS QUARTER MARKS THE QUARTER
WHERE THEY DECIDE TO GO WITH

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GAP EARNINGS RATHER THAN
ADJUSTED EARNINGS.

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WHY DOES THIS MATTER FOR A SMALL
COMPANY TO LOOK AT STOCK

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COMPENSATION.

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>> A LOT OF SMALL STARTUP TECH
COMPANIES ARE CASH LIGHT ON

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COMPENSATION AND EQUITY RICH.
THAT IS HELD THE WEALTH IS

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CREATED.
THIS FIRST QUARTER OUT OF THE

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BOX IS A TREMENDOUS
DISAPPOINTMENT FOR SNAP

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INVESTORS.
YOU TAKE THE RISK OF BUYING AN

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IPO, YOU EXPECT ONE OR TWO OR
THREE QUARTERS OF THEM BEATING

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EXPECTATION.
THEY MISSED ON EVERYTHING.

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THERE IS NOT MUCH TO LIKE.

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>> INSTAGRAM STORIES ARE MORE
POPULAR ON GOOGLE TRENDS, BUT

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WHAT CAN THEY DO?
THEY ARE LOOKING LESS POPULAR

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THAN THEIR COMPETITORS WHO ARE
REPLICATING EVERYTHING THEY DO.

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ARE THEY FIGHTING BACK AND WORK
AND THEY SAY TO CONVINCE THEY

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ARE?

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>> THEY HAVE ADDED A SEARCH TOOL
WITHIN SNAP WHERE IT LOOKS MORE

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LIKE INSTAGRAM.
WHAT I THINK THEY WILL TRY TO

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CONVINCE WALL STREET IS THESE
USER GROWTH NUMBERS ARE

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IMPORTANT, BUT YOU SHOULD BE
LOOKING AT REVENUE PER USER.

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SCARLET: AVERAGE REVENUE PER
USER, $.90, AN INCREASE OF 180%,

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BUT A DROP OF 14% FROM THE
FOURTH QUARTER WHEN IT WAS

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$1.05.

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>> I THINK THE SEQUENTIAL MOVE
IS IMPORTANT.

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THIS COMPANY HAS ONLY BEEN
MAKING MEANINGFUL REVENUE OR A

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YEAR AND A HALF, SO THAT
SEQUENTIAL MOVE WILL BE

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IMPORTANT IN TERMS OF JUDGING
THE COMPANY'S CONTINUED GROWTH.

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JOE: YOU MENTIONED THIS IS THE
COMPANY'S FIRST-QUARTER OFF THIS

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IPO.
EVEN DURING THE ROADSHOW, THERE

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WAS FRUSTRATION ABOUT THE LACK
OF DETAIL, PRETTY OK, AND NOW

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INVESTORS GET HIT WITH THE NEWS
OF SLOWING GROWTH, SO HOW MUCH

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DOES THIS DAMAGE THE CREDIBILITY
OF THE COMPANY AFTER THAT

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DISAPPOINTING ROADSHOW?

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>> MANAGEMENT WILL TAKE A
CREDIBILITY HIT.

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HERE IS A COMPANY WHERE THE
INSIDERS CONTROL ALL THE VOTES,

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SO A SUPER CONTROL ASPECT WHERE
PUBLIC SHAREHOLDERS ARE GETTING

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LESS REPRESENTATION THAN THEY
WOULD IN AN AVERAGE U.S.

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COMPANY.
INVESTORS ARE WILLING TO TAKE

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THAT RISK FOR THE EXPECTATION OF
GREAT EXECUTION AND GREAT STOCK

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PRICE PERFORMANCE.
THEY ARE NOT GETTING IT HERE.

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THEY MISSED ON EVERY SINGLE
METRICS THE STREET HAS OUT

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THERE.
THE QUESTION IS, FACEBOOK,

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INSTAGRAM WITH THE DEEPER
POCKETS AND GREATER RESOURCES,

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SO DO THEY HAVE NEW PRODUCTS IN
THE PIPELINE TO FIGHT BACK.

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>> THEY RAISED MORE THAN $3