Discounted Cash Flow Analysis - Snap Inc.

(Unlevered DCF)
($ in Millions Except Per Share Data)

Snap Inc. - DCF Assumptions & Output:

Company Name: Snap Inc. Terminal Value - Multiples Method:

Ticker: SNAP
Current Share Price: $ 21.09 Forward EV / EBITDA of FB:
Basic Shares Outstanding: 1,157.213 Forward EV / EBITDA of TWTR:
Diluted Shares @ Current Price: 1,352.529 Forward EV / EBITDA of GOOGL:

Last Fiscal Year End: 2016-12-31 Baseline Terminal EBITDA Multiple:

Effective Tax Rate: 40.0% Facebook-Like
Initial Discount Rate (WACC): 12.00% Twitter-Like
Terminal Discount Rate: 7.46% Crash and Burn
Selected Terminal EBITDA Multiple:
Scenario: Facebook-Like
Baseline Terminal Value:
Current Equity Value: $ 28,524.8 Implied Terminal FCF Growth Rate:
(-) Cash & Cash-Equivalents: (3,390.7)
(-) Other Non-Core-Business Assets: - (+) PV of Terminal Value:
(+) Total Debt: 15.1 (+) PV of Year 20 NOL Balance:
(+) Other Funding Sources: - (+) Sum of PV of Free Cash Flows:
Current Enterprise Value: $ 25,149.2 Implied Enterprise Value:

% of Implied EV from Terminal Value:

(+) Cash & Cash-Equivalents:

(+) Other Non-Core-Business Asset
(-) Total Debt:
(-) Other Funding Sources:
Implied Equity Value:

Diluted Shares Outstanding:

Implied Share Price from DCF:

Premium / (Discount) to Current:
 Type:
Options:
RSUs:
Total:
 Historical:
Snap Inc. - FCF Projections: Units: FY 15 FY 16

Average Daily Active Users (DAUs): M Users 91.8 144.0

DAU Growth Rate: %

Facebook-Like %
Twitter-Like %
Crash and Burn %
Selected DAU Growth Rate: % 56.9%

Average Revenue per User (ARPU): $ as Stated $ 0.64 $ 2.81

ARPU Growth Rate: %

Facebook-Like %
Twitter-Like %
Crash and Burn %
Selected ARPU Growth Rate: % 339.3%

Revenue: $M $ 58.7 $ 404.5

Revenue Growth Rate: % 589.5%

Operating Income (EBIT): $M (365.3) (520.4)

Operating Margin: %
Facebook-Like %
Twitter-Like %
Crash and Burn %
Selected Operating Margin: % (622.8%) (128.7%)

Beginning NOL Balance: $M

(+) NOLs Created: $M
(-) NOLs Used: $M
Ending NOL Balance: $M

NOL-Adjusted Operating Income: $M

(-) Cash Taxes: $M

Net Operating Profit After Tax (NOPAT): $M

(+) Depreciation & Amortization: $M 15.3 29.1
% Revenue: % 26.1% 7.2%

(+/-) Change in Working Capital: $M (15.5) (150.4)

% Change in Revenue: % (43.5%)

(-) Capital Expenditures: $M (19.2) (66.4)

% Revenue: % 32.7% 16.4%

Unlevered Free Cash Flow: $M

Growth Rate: %

Discount Period: #
Discount Rate (WACC): %
Cumulative Discount Factor: #

PV of Unlevered FCF: $M

EBITDA: $M
Growth Rate: %
Sensitivity Analyses:

Terminal Weighted Averag

3868.3% 6.50% 6.70% 6.90% 7.10%
10.00 x
Terminal EV / 9.50 x
EBITDA 9.00 x
Multiple
(Terminal 8.50 x
Value 8.00 x
Calculated 7.50 x
Using the
Multiples 7.00 x
Method): 6.50 x
6.00 x

Terminal Weighted Averag

$ 38.65 6.50% 6.70% 6.90% 7.10%
2.20%
Terminal FCF 2.03%
Growth Rate 1.85%
(Terminal
Value 1.68%
Calculated 1.50%
Using the 1.33%
Gordon
Growth 1.15%
Method): 0.98%
0.80%
rminal Value - Multiples Method:

rward EV / EBITDA of FB: 15.8 x Expected Long-Term GDP Growth:

rward EV / EBITDA of TWTR: 15.0 x
rward EV / EBITDA of GOOGL: 11.8 x

seline Terminal EBITDA Multiple: Baseline Terminal FCF Growth Rate:

Facebook-Like 10.0 x Facebook-Like
Twitter-Like 8.0 x Twitter-Like
Crash and Burn 5.0 x Crash and Burn
ected Terminal EBITDA Multiple: 10.0 x Selected Terminal FCF Growth Rate:

seline Terminal Value: $ 149,521.17 Baseline Terminal Value:

plied Terminal FCF Growth Rate: 2.2% Implied Terminal EBITDA Multiple:

(+) PV of Terminal Value: 28,327.1 (+) PV of Terminal Value:

(+) PV of Year 20 NOL Balance: - (+) PV of Year 20 NOL Balance:
(+) Sum of PV of Free Cash Flows: 20,640.8 (+) Sum of PV of Free Cash Flows:
plied Enterprise Value: $ 48,967.9 Implied Enterprise Value:

of Implied EV from Terminal Value: 57.8% % of Implied EV from Terminal Value:

(+) Cash & Cash-Equivalents: $ 3,390.7 (+) Cash & Cash-Equivalents:

(+) Other Non-Core-Business Assets: - (+) Other Non-Core-Business Assets:
(-) Total Debt: (15.1) (-) Total Debt:
(-) Other Funding Sources: - (-) Other Funding Sources:
plied Equity Value: 52,343.5 Implied Equity Value:

uted Shares Outstanding: 1,353.131 Diluted Shares Outstanding:

plied Share Price from DCF: $ 38.68 Implied Share Price from DCF:
emium / (Discount) to Current: 83.4% Premium / (Discount) to Current:
 Exercise Exercise
Number: Price: Dilution: Type: Number: Price:
15.944 $ 1.75 15.223 Options: 15.944 $ 1.75
180.695 N/A 180.695 RSUs: 180.695 N/A
195.918 Total:
 Projected - Phase I (Growth):
FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23

187.2 234.0 280.8 337.0 387.5 445.6 490.2

30.0% 25.0% 20.0% 20.0% 15.0% 15.0% 10.0%

20.0% 15.0% 15.0% 10.0% 10.0% 9.0% 8.0%
10.0% 10.0% 5.0% 5.0% 5.0% 4.0% 3.0%
30.0% 25.0% 20.0% 20.0% 15.0% 15.0% 10.0%

$ 4.21 $ 6.11 $ 8.55 $ 11.55 $ 15.01 $ 18.76 $ 22.52

50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0%

25.0% 20.0% 15.0% 12.5% 10.0% 9.0% 8.0%
10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0%
50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0%

$ 788.7 $ 1,429.6 $ 2,401.7 $ 3,890.8 $ 5,816.7 $ 8,361.5 $ 11,037.2

95.0% 81.3% 68.0% 62.0% 49.5% 43.8% 32.0%

(354.9) (428.9) (360.3) (194.5) - 836.2 2,207.4

(45.0%) (30.0%) (15.0%) (5.0%) 0.0% 10.0% 20.0%

(50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0%
(50.0%) (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0%
(45.0%) (30.0%) (15.0%) (5.0%) 0.0% 10.0% 20.0%

220.0 574.9 1,003.8 1,364.1 1,558.6 1,558.6 722.5

354.9 428.9 360.3 194.5 - - -
- - - - - (836.2) (722.5)
574.9 1,003.8 1,364.1 1,558.6 1,558.6 722.5 -

(354.9) (428.9) (360.3) (194.5) - - 1,485.0

- - - - - - (594.0)

(354.9) (428.9) (360.3) (194.5) - 836.2 1,613.4

 102.5 157.3 216.2 272.4 290.8 250.8 331.1
13.0% 11.0% 9.0% 7.0% 5.0% 3.0% 3.0%

(76.9) (64.1) (48.6) - 19.3 76.3 80.3

(20.0%) (10.0%) (5.0%) 0.0% 1.0% 3.0% 3.0%

(118.3) (185.8) (264.2) (350.2) (407.2) (418.1) (551.9)

15.0% 13.0% 11.0% 9.0% 7.0% 5.0% 5.0%

$ (447.6) $ (521.6) $ (456.9) $ (272.4) $ (97.1) $ 745.3 $ 1,473.0

N/A 16.5% (12.4%) (40.4%) (64.4%) (867.7%) 97.6%

1 2 3 4 5 6 7
12.00% 11.55% 11.09% 10.64% 10.18% 9.73% 9.28%
0.893 0.800 0.721 0.651 0.591 0.539 0.493

(399.6) (417.5) (329.2) (177.4) (57.4) 401.4 726.1

$ (252.4) $ (271.6) $ (144.1) $ 77.8 $ 290.8 $ 1,087.0 $ 2,538.6

N/A 7.6% (46.9%) (154.0%) 273.8% 273.8% 133.5%
Terminal Weighted Average Cost of Capital (WACC):
7.30% 7.50% 7.70% 7.90% 8.10% 8.30% 8.50%

Terminal Weighted Average Cost of Capital (WACC):

7.30% 7.50% 7.70% 7.90% 8.10% 8.30% 8.50%
 2.5%

2.2%
1.5%
1.1%
2.2%

$ 149,258.3
10.0 x

28,277.3
-
20,640.8
$ 48,918.1

57.8%

$ 3,390.7
-
(15.1)
-
52,293.7

1,353.130

$ 38.65
83.2%
Dilution:
15.222
180.695
195.917
 FY 24 FY 25 FY 26

539.2 566.2 594.5

10.0% 5.0% 5.0%

7.0% 6.0% 5.0%
2.0% 1.0% 1.0%
10.0% 5.0% 5.0%

$ 25.89 $ 28.48 $ 31.33

15.0% 10.0% 10.0%

7.0% 6.0% 5.0%
5.0% 5.0% 5.0%
15.0% 10.0% 10.0%

$ 13,962.1 $ 16,126.2 $ 18,625.7

26.5% 15.5% 15.5%

4,188.6 6,450.5 7,450.3

30.0% 40.0% 40.0%

15.0% 20.0% 25.0%
10.0% 10.0% 10.0%
30.0% 40.0% 40.0%

- - -
- - -
- - -
- - -

4,188.6 6,450.5 7,450.3

(1,675.4) (2,580.2) (2,980.1)

2,513.2 3,870.3 4,470.2

 418.9 483.8 558.8
3.0% 3.0% 3.0%

87.7 64.9 75.0

3.0% 3.0% 3.0%

(698.1) (806.3) (931.3)

5.0% 5.0% 5.0%

$ 2,321.7 $ 3,612.7 $ 4,172.7

57.6% 55.6% 15.5%

8 9 10
8.82% 8.37% 7.46%
0.453 0.418 0.389

1,051.6 1,510.1 1,623.1

$ 4,607.5 $ 6,934.3 $ 8,009.1

81.5% 50.5% 15.5%
<-- Terminal Multiple in FB case.

<-- Terminal Multiple in TWTR case.

<-- Terminal Growth Rate in FB case.

<-- Terminal Growth Rate in TWTR case.

 Projected - Phase II (Maturity)
FY 27 FY 28 FY 29 FY 30 FY 31 FY 32 FY 33

618.3 636.8 649.5 656.0 662.6 669.2 675.9

4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0%

4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0%
1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0%

$ 34.15 $ 36.88 $ 39.46 $ 41.83 $ 43.92 $ 45.68 $ 47.05

9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0%

4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0%
4.0% 3.0% 2.0% 1.0% 1.0% 1.0% 1.0%
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0%

$ 21,114.1 $ 23,487.4 $ 25,634.1 $ 27,443.9 $ 29,104.2 $ 30,571.1 $ 31,803.1

13.4% 11.2% 9.1% 7.1% 6.1% 5.0% 4.0%

8,445.7 9,394.9 10,253.6 10,977.6 11,641.7 12,228.4 12,721.2

40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -

8,445.7 9,394.9 10,253.6 10,977.6 11,641.7 12,228.4 12,721.2

(3,378.3) (3,758.0) (4,101.5) (4,391.0) (4,656.7) (4,891.4) (5,088.5)

5,067.4 5,637.0 6,152.2 6,586.5 6,985.0 7,337.1 7,632.7

 633.4 704.6 769.0 823.3 873.1 917.1 954.1
3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

74.7 71.2 64.4 54.3 49.8 44.0 37.0

3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

(1,055.7) (1,174.4) (1,281.7) (1,372.2) (1,455.2) (1,528.6) (1,590.2)

5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

$ 4,719.8 $ 5,238.4 $ 5,703.9 $ 6,091.9 $ 6,452.7 $ 6,769.6 $ 7,033.6

13.1% 11.0% 8.9% 6.8% 5.9% 4.9% 3.9%

11 12 13 14 15 16 17
7.46% 7.46% 7.46% 7.46% 7.46% 7.46% 7.46%
0.362 0.337 0.313 0.292 0.271 0.253 0.235

1,708.5 1,764.6 1,788.0 1,777.1 1,751.7 1,710.2 1,653.5

$ 9,079.1 $ 10,099.6 $ 11,022.7 $ 11,800.9 $ 12,514.8 $ 13,145.6 $ 13,675.3

13.4% 11.2% 9.1% 7.1% 6.1% 5.0% 4.0%
 FY 34 FY 35 FY 36

682.7 689.5 696.4

1.0% 1.0% 1.0%

1.0% 1.0% 1.0%
1.0% 1.0% 1.0%
1.0% 1.0% 1.0%

$ 47.99 $ 48.95 $ 49.93

2.0% 2.0% 2.0%

1.0% 1.0% 1.0%
1.0% 1.0% 1.0%
2.0% 2.0% 2.0%

$ 32,763.6 $ 33,753.0 $ 34,772.4

3.0% 3.0% 3.0%

13,105.4 13,501.2 13,908.9

40.0% 40.0% 40.0%

25.0% 25.0% 25.0%
10.0% 10.0% 10.0%
40.0% 40.0% 40.0%

- - -
- - -
- - -
- - -

13,105.4 13,501.2 13,908.9

(5,242.2) (5,400.5) (5,563.6)

7,863.3 8,100.7 8,345.4

 982.9 1,012.6 1,043.2
3.0% 3.0% 3.0%

28.8 29.7 30.6

3.0% 3.0% 3.0%

(1,638.2) (1,687.7) (1,738.6)

5.0% 5.0% 5.0%

$ 7,236.8 $ 7,455.3 $ 7,680.5

2.9% 3.0% 3.0%

18 19 20
7.46% 7.46% 7.46%
0.219 0.204 0.189

1,583.2 1,517.8 1,455.1

$ 14,088.3 $ 14,513.8 $ 14,952.1

3.0% 3.0% 3.0%
WACC Analysis - Snap Inc.
($ in Millions Except Per Share Data)

Discount Rate Calculations - Assumptions:

Risk-Free Rate: 2.60%
Equity Risk Premium: 6.00%
Pre-Tax Cost of Debt: 5.93%
Cost of Preferred Stock: 10.00%

Comparable Companies - Unlevered Beta Calculation:

Levered
Name Ticker Beta Debt % Debt
Facebook FB 0.67 $ -
Twitter TWTR 1.05 1,686.7 13.4%

Median: 0.86 $ 843.4 6.7%

Snap Inc. - Levered Beta & WACC Calculation

Unlevered
Ticker Beta Debt % Debt
Current Capital Structure: SNAP 0.82 $ 15.1 0.1%
"Optimal" Capital Structure: SNAP 0.82 1,910.2 6.7%

Cost of Equity Based on Comparables, Current Capital Structure:

Cost of Equity Based on Comparables, "Optimal" Capital Structure:

WACC = Cost of Equity * % Equity + Cost of Debt * (1 - Tax Rate) * % Debt + Cost of Preferred Stock * % Preferred S

WACC, Current Capital Structure:

WACC, "Optimal" Capital Structure:

Average WACC Produced by All Methods:

 Preferred Equity Unlevered
Stock % Preferred Value % Equity Tax Rate Beta
$ - $ 403,441.4 100.0% 40.0% 0.67
- 10,913.5 86.6% 40.0% 0.96

$ - $ 207,177.5 93.3% 40.0% 0.82

Preferred Equity Levered

Stock % Preferred Value % Equity Tax Rate Beta
$ - $ 28,524.8 99.9% 40.0% 0.82
- 26,629.8 93.3% 40.0% 0.85

7.49%
7.70%

ost of Preferred Stock * % Preferred Stock

7.49%
7.43%

7.46%