Reddit Inc. - Ordinary Shares (RDDT) 6 Aug 24 2024 Q2 Earnings call transcript

Reddit, the popular social media platform, recently held its second quarter earnings call for 2024. The call, led by Head of Investor Relations Jesse Rose, provided insights into the company's performance, growth strategies, and future prospects.

Financial Performance

Reddit reported strong financial performance in the second quarter, with both users and revenue growing over 50% year-over-year. The company achieved positive cash flow and was profitable on an adjusted EBITDA basis. Notably, the number of active users reached over 342 million, with more than 91 million daily active users. This growth signals a robust user base and a strong engagement rate, boding well for the company's future.

Product and User Experience

Product improvements have been a key focus for Reddit, with near-instant comment loading and more intuitive navigation across different post types, including text, video, and images. These enhancements aim to bring users into conversations faster and more often, driving increased engagement on the platform. The number of comments viewed reached a new high, up 10% from Q1 to Q2.

International Expansion

International expansion remains a priority for Reddit, with over 50% of the current user base outside of the U.S. The company saw significant growth in international daily active users, which exceeded 45 million, growing 44% year-over-year and 11% from Q1. This expansion is driven by a focus on machine translation, which is now widely available in French and will soon be extended to German, Spanish, and Portuguese. This move aims to make Reddit accessible to a broader audience, regardless of their native language.

Emerging Initiatives

Reddit is making progress on several emerging initiatives, including the user economy, search, and data licensing. The user economy, driven by the developer platform, is seeing growing engagement, with about 3x more custom post use than in Q1. The platform is working towards enabling monetization within the developer platform to empower users to create and earn money on the platform this year.

In terms of search, Reddit's content is becoming increasingly valuable and important in the context of Internet search. The company is testing new search result pages powered by AI to summarize and recommend content, helping users dive deeper into topics and discover new communities on Reddit. The strategy is to improve the search experience and success rate on the platform, making it a valuable resource for users and advertisers alike.

Advertising and Partnerships

Advertising remains a significant revenue driver for Reddit, with ad revenue growing 41% year-over-year to $253.1 million. The company is diversifying its business across channels, verticals, and geographies, with a focus on scaling and improving the ad experience. Partnerships with Google and OpenAI align with Reddit's public content policies and uphold the belief in an open and connected Internet, helping users find and engage with communities on Reddit.

Challenges and Opportunities

Despite the strong financial performance, Reddit faces challenges, particularly in relation to third-party search and access to its content. The company is balancing the need for openness with the protection of user privacy and content, a challenge shared by many social media platforms. However, the company's focus on international expansion, product development, and emerging initiatives presents significant opportunities for growth and innovation.

Conclusion

In conclusion, Reddit's second quarter earnings call underscored the company's strong financial performance, robust user growth, and strategic focus on product development, international expansion, and emerging initiatives. While challenges remain, particularly in the area of third-party search and content access, the company's overall outlook is positive, with a clear focus on growth and innovation. As Reddit continues to navigate the dynamic landscape of social media and Internet search, it remains well-positioned to capitalize on the opportunities ahead.