Good afternoon, everyone, and welcome to Snap Inc.'s Second Quarter 2019 Earnings Conference Call. At this time, participants are in a listen-only mode. After the prepared remarks, there will be a question-and-answer session. [Operator Instructions] This call will be recorded. Thank you very much. Mr. David Ometer of Investor Relations, you may begin.

Thank you, and good afternoon, everyone. Welcome to Snap's Second Quarter 2019 Earnings Conference Call. With us today are Evan Spiegel, Chief Executive Officer and Cofounder; Jeremi Gorman, Chief Business Officer; and Derek Andersen, Chief Financial Officer. Earlier today, we made a slide presentation available that provides an overview of our user and financial metrics for the second quarter 2019, which can be found on our Investor Relations website at investor.snap.com. Now I will cover the safe harbor. Today's call is to provide you with information regarding our second quarter 2019 performance in addition to our financial outlook. This conference call includes forward-looking statements. Any statement that refers to expectations, projections, guidance or other characterizations of future events, including financial projections or future market conditions, is a forward-looking statement based on assumptions today. Actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as risks described in our quarterly report on Form 10-Q for the quarter ended March 31, 2019, particularly in the section titled Risk Factors. Additional information can be found in our other filings with the SEC when available. Our commentary today will also include non-GAAP financial measures, and we believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our press release issued today, a copy of which can be found on our Investor Relations website. Please note that when we discuss all of our expense figures, they will exclude stock-based compensation and related payroll taxes as well as depreciation and amortization and nonrecurring charges. At times in our prepared remarks or in response to questions, we may offer additional metrics to provide greater insight into our business or our quarterly and annual results. This additional detail may be onetime in nature, and we may or may not provide an update in the future on these metrics. Please refer to our filings with the SEC to understand how we calculate our metrics. With that, I'd like to turn the call over to Evan.

Hi, everyone, and welcome to our call. We're proud of the results that our team delivered this quarter. We added 13 million daily active users, our highest net add since the second quarter of 2016, bringing our daily active users to 203 million. The average number of Snaps created every day grew to more than 3.5 billion this quarter, and average time spent per user was over 30 minutes per day. Our revenue growth rate accelerated both quarter-over-quarter and year-over-year to 48%, yielding $388 million in total revenue for the quarter. This growth in our community, engagement and revenue is the result of several transitions we completed over the past 18 months. Early last year, we redesigned our application to emphasize the importance of communicating with real friends and create a space for premium content. We rebuilt our Android application to reach broader audience, built a self-serve advertising platform to reach more advertisers and transitioned our leadership to support our growing team. In addition to delivering improved business results, we have built a company culture that reflects our long-held values of being kind, smart and creative. Completing these transitions has established a strong foundation for growing our community, increasing engagement and growing advertiser demand. Our team is hard at work making significant progress against each of these areas. We have driven the growth of our community by making Snapchat a fast and fun way to communicate with real friends. Following last year's substantial product evolution, we believe that we are now better positioned for long-term success. Today, more than 75% of the 13 to 34-year-old population in the United States is active on Snapchat, making us larger than services like Facebook and Instagram among this audience and demonstrating the broad-based appeal of our service. We have also observed that communicating…

Thanks, Evan. We're pleased with our results for this quarter and continue to see significant upside and opportunity for our advertising business. In Q2, we generated total revenue of $388 million and delivered a second straight quarter of revenue growth acceleration. Average revenue per user was $1.91 in Q2, an increase of 37% year-over-year and 14% sequentially. We believe the single biggest driver for our revenue in the short to medium term will be increasing the number of active advertisers using Snapchat. We have significant headroom in our business given high levels of user engagement and ample supply of available impressions. We are making consistent improvements and investments across our products, tools and sales teams to grow advertiser demand and help advertisers on Snapchat achieve business outcomes at scale. We have a strong, straightforward value proposition to offer new and existing advertisers. As Evan noted, Snapchat plays a central role in the lives of the 13- to 34-year old demographic. In fact, in the U.S., advertisers can reach more of this audience on Snapchat than on other platforms like Instagram, Facebook and Twitter, creating an obvious and exciting opportunity for incremental reach. In addition to millennials, Gen Z has become a growing focus for brands as this generation begins to develop lifelong habits and brand affinity. Gen Z already commands $44 billion in buying power and influences up to $600 billion in household spending, particularly in categories in which Gen Z family members are more native to the product such as in tech and gaming. As we look to the future, we have many opportunities to highlight the ways that millennials and Gen Z use Snapchat with their friends and to enable brands to reach them in creative and impactful ways. To engage the Snapchat audience, advertisers need effective ads,…

Thanks, Jeremi. Our Q2 financial results reflect our priorities of making focused investments in the future of our business and scaling our business efficiently in order to drive towards profitability and positive free cash flow. As Evan mentioned earlier, daily active users increased to 203 million in Q2 2019, which represents an increase of 13 million or 7% growth sequentially and 15 million or 8% growth year-over-year. We were particularly pleased to see that the growth of our community was broad-based with year-over-year and sequential growth on both iOS and Android platforms. In addition, we observed both year-over-year and sequential growth across each of North America, Europe and Rest of World. We estimate that approximately 7 million to 9 million of the 13 million in sequential DAU growth is attributable to an improvement in user engagement that we observed after launching our new augmented reality Lenses, which brought in new users and reengaged lapsed users. We estimate that the remaining 4 million to 6 million of sequential growth in DAU was driven by underlying growth trends in our community, which are the result of the improvements we've made to our application over the past year. Importantly, the impact of our augmented reality innovation was higher because of these improvements, including the rebuild of Android, as these improvements have better positioned us to capture the upside of our innovation. Average revenue per user was $1.91 in Q2, an increase of 37% year-over-year and 14% sequentially. We saw improvement in ARPU across all regions, both year-over-year and sequentially. Impressions per DAU were up 122% year-over-year driven by growth in user engagement, in particular growing engagement with premium content and improvements in sell-through rate. For the quarter, we generated total revenue of $388 million, an increase of 48% year-over-year. Our year-over-year revenue growth…

That concludes the prepared remarks for today’s earning call. And we will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Ross Sandler of Barclays. Please go ahead.

Hi, guys. One question related to the DAU trajectory and then a quick one on Discover. So Evan, I guess how's the retention on the 7 million to 9 million DAUs that you added in 2Q from the new filters and trending of late. Is the guidance for 3Q reflecting some drop-off in that user cohort? Or is that just some conservatism baked in? Any color there will be helpful. And then you guys gave a couple new stats on engagement from new Discover users and existing Discover users. So I guess - and it looks like it's going up a lot. So what are the primary drivers of the accelerating growth in engagement you're seeing in Discover? And do you think this can continue for the foreseeable future? Thank you.

Thanks, Ross. Yes, we're really excited about the momentum we're seeing on our content business. A lot of demand for our content. I think that's a function of the improving content quality and also the personalization that we've really been investing in over the past couple of quarters. We're also currently testing a bunch of new ways of merchandising content. And specifically, our Shows and premium content, we're excited about that, too. And I'll let Derek speak to the guidance question.

Hey, Ross. Thanks for the question. We are pleased with growth that we saw in Q2, in particular that it was broad-based. We saw growth across platforms and regions, which is really nice. Looking forward into Q3, we're coming from a higher base in Q2 and really pleased that we're able to share -- that we expect to have sequential growth again into the next quarter. This time around, we wanted to share with you guys a little bit of guidance on that front in terms of what we've assumed for DAU growth in our -- on our own financial forecasting. Hopefully, that gives you a little bit of color about where we can expect going forward. And really pleased to see that we've got strength on the underlying momentum of the business, and that that's going to carry forward and now allow us to grow off of our now higher base number.

The next question will come from Heath Terry of Goldman Sachs. Please go ahead.

I wonder if we could dig a bit into the monetization side of things. Can you -- as we look at the improvement here, can you give us a sense of what the profile of that growth is? How much of it is brands versus direct response? You mentioned growing advertisers. Is that to say that the majority of this is coming from existing advertisers increasing their spend? And then as we think about sort of the channels within that spend, is there a way to sort of disaggregate between professional content, creative tools, UTC messaging? Just -- and then of course, the impact of self-serve. So just trying to get a little bit deeper into that number please.

Thanks for the question, Heath. We don't break out specific brand versus DR, but I can give you some examples. As you heard in the call just a bit ago, we have great examples from Subway, HBO and Quip, which are really reflective of our overall ecosystem growing from all different types of advertisers. We are also really focused on how those two objectives are starting to converge, so we don't really consider there to be a specific brand advertiser and a specific DR advertiser anymore. What we really are focused on is making sure that the outcomes are best for the advertiser, and those are starting to converge. In order to do this, we are creating the powerful easy-to-use format. We moved to the auction, as everybody has heard us talked about, and that really helped our DR advertisers grow. But we also have just absolutely incredible augmented reality formats, creative tools. And as we talked about before, with the increased engagement in Discover, we also have the opportunity to run our unskippable, 6-second Commercials format and now even further refined into Snap Select, which is running those in a brand safe environment. So we continue to see acceleration across both brand and DR types of advertisers, and we saw that this past quarter.

The next question will come from Mark Mahaney of RBC. Please go ahead.

Okay. Let me try two questions. I just want to follow up on Ross' question, and I just want to try to get at the issue of this extra color you gave on the DAU growth in the quarter. Is there -- should we be reading that the ones that -- that some of the DAUs came in because some -- maybe some of the Lens filters may be less sustainable, that they may not stick with the company as long as the other -- as consistently -- whoever -- as long as the other DAUs? Just address that, what you're seeing in that. I know it's early, but is there a particular reason why you would call that group of DAUs out? And then when you talk about talent, investing in talent in the back half of the year, any more color on what sort of talents you're looking for? Is that on the sales side, R&D side? Any color there would be appreciated. Thank you.

Hey, Mark. Thanks for the question. I think on the first one there around the drivers around the DAU growth, really pleased to see the overall growth in Q2, and we thought it's a big number there. It made sense to share a little bit of color about some of the drivers. And obviously, pleased to see we've had innovation on the augmented reality Lens side. That's been a driver for us. And that's not only brought in some new users to the platform, but it's increased engagement with existing users as well, which contributed to the overall growth. But in addition to that, we're pleased that we've got an underlying momentum of growth with our user base, which is really coming from all of the improvements that we've made to the app over the last year, which are paying off in terms of us being able to capture the benefit of our own innovation driving into the platform. And so the benefit that we saw off of the augmented reality Lens innovation was higher because of those improvements we made. So hopefully, that gives you a little bit more color in terms of what drove the growth in Q2. And again, as I said earlier, we're super pleased that we can now build on top of that higher base going into the next quarter. I believe your second question was around the growing of the talent base in the latter half of the year, and yes, definitely making targeted investments in the business. We see a lot of opportunity in the business, and we want to make sure that we're investing in the long-term future of the business. We think we've been pretty disciplined about those investments so far and expect to be going forward. So we're balancing operating leverage and pushing towards our goals of profitability and positive free cash flow while still making big investments in the future of the business. We've made a lot of investments recently and expect to make more going forward, and we see that as part of us building towards a sustainably profitable business. So these things go hand-in-hand. Hopefully, that helps give a little more context.

The next question will come from Stephen Ju of Credit Suisse. Please go ahead.

Okay. Thank you. So Evan, it seems like in the past, the potential ARPU over CoRPU had to make sense for you guys to think about entering a region. But how does the current Android app or even the iOS app for that matter change that ratio? You launched in 8 new languages for your prepared remarks. So should we be thinking about a more expansive addressable market for Snapchat? And, Jeremi, you understandably called out brand safety as an important consideration for premium video ads. So it sounds like right now that inventory is corralled around Shows, where you can know -- the context than the content. So can you talk about what you will look to do to scale this stream of revenue in the future? Thanks.

Thanks, Stephen. Yes, there's a sort of confluence of factors that are making us excited about our international growth opportunity. One of them is the success we're seeing on the self-serve advertising platform, and you can see that in the Rest of World ARPU numbers. So we're getting more and more confident about our ability to really scale the business and generate revenue there over the longer term. And additionally, the improvements we've made on Android have now made our product available to a much larger subset of the smartphone population globally. So really excited about the progress there. What we're going to do now is invest a lot more in content, augmented reality, experiences, of course localizing the service in terms of the languages that we discussed. And so we're investing heavily there, and we're excited about that long-term opportunity. And given that we've been able to manage costs on the infrastructure side, we think that can be a really valuable revenue generator for the business over the long term.

And thanks, I'll take the second part there regarding safety. It is not centered specifically on Discover or on Commercials. We -- from the outset, Snapchat has been designed to create the feeling of a natural conversation. It's a private conversation and communication that deletes by default, and it's not preserved for eternity, which makes it brand safe across the board. And all in, we're really comfortable with our position because of the regulatory notions and privacy concerns like discussed in GDPR. They've -- those have been embedded in our principles since the beginning as a company. And our content isn't random. It's hand-curated with a select -- with select community members as well as publishers participating in Discover. So what I was speaking to is that, that's further curated in Snap Select so as is from our hand-curated publisher content as well as our own Shows to ensure brand safety. But it's something that we -- that is truly embedded in our values and everything we do across all of our platforms, including our augmented reality, our Snap Ads as well as our Story Ads.

The next question will come from John Egbert of Stifel. Please go ahead.

Great. Thanks. Over the last couple of weeks, we've seen growing concerns around the usage of third-party apps like FaceApp in terms of how they obtain store and claim ownership of users' personal photos. I was wondering if you could talk about some of the way that Snap protects users' photos and videos when they use Snap's own AR Lenses as well as those built by creators in the Lens Studio.

That's a great question. Obviously, we've invested a lot in privacy, and we care a lot about the safety of our community. And from the beginning, we've always embraced this idea of deletion by default, meaning that the content that you create and send your friends is deleted after they viewed it. And so I think the way that we've constructed our service really helps preserve user privacy. And as we look forward and empower more creativity on our platform, that's always something that we're going to keep in mind.

The next question will come from Lloyd Walmsley of Deutsche Bank. Please go ahead.

Thanks. So you talked about seeing an immediate impact from product catalogs and what sounds like healthy adoption for the businesses there. So wondering if you can just give us a sense on what kind of conversion rates or conversion rate uplifts the advertisers are seeing from integrating that format with the new ad unit kind of relative to a traditional ad that would require click out. And then I guess, related to that, what do you see in terms of ad pricing in this -- as people integrate product catalogs of this data premium pricing to these sort of ad units? Anything you can share there would be great.

Thanks for the question, Lloyd. Regarding the ROI that advertisers are seeing, we really believe that our advertising partners are voting with their wallets. They're retaining well. They're continuing to grow their spend, and we are keeping them within the ecosystem. We do believe that driving that ROI is the best retention tool for us, and we continue to make investments in the ad product and self-service platform. You mentioned catalogs specifically, which is built, of course, for our e-com advertisers. And we are committed to helping these e-commerce businesses achieve their objectives by creating these rich experiences. We just -- we had launched, as you know probably, the Amazon Visual Search product. We have digital recognition tech, and we recently launched our Shopify integration as well, which will allow our advertising partners who have Shopify stores to link quickly to build ads just right from the Shopify experience. And then we've also dipped our toes into launching stories for influencers. So it's very clear that we're committed to the e-commerce space. And again, with the retention that we see from these advertisers in particular and that continued spend growth, we know that we're continuing to perform on an ROI basis for them.

The next question will come from Brian Nowak of Morgan Stanley. Please go ahead.

Thank you for taking my questions. I have two. The first one, your innovation around AR continues to really stand out, what you had with baby face and then gender swap this quarter. Could you just talk us a little bit about how you think about sort of pipeline -- the visibility on forward pipeline for other big AR innovation to come -- to continue to drive the user growth as we go into the back half and then to 2020? Then the second one, in the letter, you talked about the importance of advertiser count growth. Can you just give us an update on how many advertisers you have now on the platform and how quickly that's growing? Thanks.

On the AR front, we really believe we're barely scratching the surface. We're investing heavily in that area, and I think most importantly, building tools for creators. So what we're seeing in Lens Studio is that people are creating more and more Lenses for our community and really creating an ecosystem around augmented reality. So beyond even the fundamental investments and fundamental innovation in augmented reality at Snap, I think the way that our community is embracing the tools that we're creating is really exciting. So a lot of work to do there. This is a 3, 5, 10-year journey for us, and we're just at the beginning. So we're really excited about that. And unfortunately, we don't break out the number of advertisers, but we're making good progress there. And I think what's exciting is spend per advertiser and advertisers are both growing together, and I think that bodes well for the long term.

The next question will come from Justin Post of Merrill Lynch. Please go ahead.

Thanks for taking the question. Obviously, you have a very strong reach among younger demographics. And just wondering if you could talk about the challenges and opportunities for advertisers in reaching that demographic. Are there additional concerns you think about? And then longer term, how do you think, with all your engagement, your ARPU will look when you compare it to other sites such as Twitter and Instagram given how much engagement you have? Thank you.

Thanks. Yes, I think the biggest hurdle for advertisers historically has been the creative formats. But I think fortunately, what we're seeing is that formats like our 6-second nonskippable video ads have a really high impact with our community, and so advertisers are increasingly willing to make vertical creative or cut their creative. So I think we've overcome that barrier. And we're seeing advertisers get really excited about augmented reality, this idea of experiential advertising that our community opts into. So I think really, those creative formats, 2, 3 years ago, maybe were a hindrance for our business but now have become a real asset for us. And so that's really an exciting shift to see there. And then in terms of the ARPU question, I think if we take the U.S., for example, I think we're monetizing it like roughly 1/5 of Twitter ARPU or something like that in the U.S. And not that we want to use that as a comp, but I think there's a huge amount of upside relative to the time spent in engagement we're seeing on our platform. So I think as Jeremi pointed out, that's why we're so focused on advertiser growth. We've got a lot of supply, and we really have to onboard advertisers. And fortunately, with our new self-serve platform, people are seeing great ROI, great results, and they're able to scale.

The next question will come from Jason Helfstein of Oppenheimer. Please go ahead.

Thanks. I guess two questions. One, the metric that you started out with, the 3.8 billion Snaps per day -- 3.8 billion Snaps per day, 30 minutes per day in time spent, is that a regular metric you plan to give? And can you tell us perhaps how that trended either sequentially or year-over-year? And then just second, maybe just to dig deeper, I know you don't want to give out the number of advertisers, but can you comment in the growth perhaps in advertisers quarterly or year-over-year? Thanks.

Yes. We shared the Snaps per day metric in the past as well as time spent both as a spot metric. The 3.5 billion Snaps a day is up from 3 billion. And I'm afraid we can't break out advertiser growth for you, but we'll try to share more in the future.

The next question will come from John Blackledge of Cowen. Please go ahead.

Great. Thank you. Evan, on the gaming opportunity, could you just discuss it a little bit further in how you would expect it to kind of impact the user base or the engagement or retention, et cetera? And then on user growth, as it relates to the 3Q guide and going into 4Q in 2020, you expect to add more users. Would you expect the majority of the user additions to be driven by Rest of World? Or would it perhaps be a little bit more broad-based? Thanks.

On the gaming front, I think the best way to think about it is really when we first started out building our content business, we really took time to get the user experience right before we scaled it out. And so today, we're working with this very small number of publishers, really focusing on user engagement and retention. And I think the exciting thing that we're seeing is that people who are playing games with more friends are playing longer, which means that the Snap platform can really provide unique value to gaming publishers because we're able to bring this group of real friends that likes hanging out together. So I think we've been correct so far on our thesis around socializing and social gaming, so we're excited to continue building on that. And I think I'll let Derek take the question on the guide for DAU.

Hey, John. Thanks for the question. Really pleased with the growth we saw in Q2 and pleased that we can share that we do expect to grow again into the next quarter sequentially. And in terms of sources of growth, we really are pleased with the underlying growth trends and momentum we're seeing in the business. Those have come from the improvements we've made to the app over the last year, including the rebuild of Android but also improvements across all platforms. And so you saw that we had fairly broad-based growth in Q2, all regions, all platforms, which we're pleased with. We do expect to grow into the next quarter. We're not going to break out our thoughts going forward by platform or by region, but we are pleased to see that we've got fairly broad-based momentum in the most recent quarters. And we expect that, that will continue forward into the next quarter and be able to grow again sequentially on our new higher base. Thanks for the question.

The next question will come from Mark May of Citi. Please go ahead.

Thank you. Two, if I could. First, I know advertisers on Snap can execute against many different objectives like app installs, website visits, video views, et cetera. I'm sure they're all growing nicely. Just wonder -- I just was hoping if you could comment on the ones where you're seeing particularly strong growth right now. And then on Snap Maps, other companies in the space have been able to create a lot of value off their map assets. Snapchat uses the map in a very different way than all these other companies. Just curious what sort of opportunities, if any, there are -- that there may be to like further leverage Snap Map going forward from an engagement and monetization standpoint.

Thanks for the question, Mark. I'll answer the first part and then turn it over. Regarding what advertisers -- where advertisers are seeing success, I think it's on goal-based bidding across the board. So whether that goal is number of app installs, number of views, number of impressions, whether it means that they want to sell product on e-com, whatever it may be, they have the opportunity to choose that goal-based bidding in our Ad Manager platform that was well designed to have an algorithm that optimizes to those outcomes, and we're seeing success across the board given the strength of the algorithm, and it's learning over time.

On the Snap Maps front, we really set out to explore this opportunity of creating a personal map. We noticed that so many people when they open their phone, they have the exact same map even though their personal experiences of the world are so different, they live in different places, they hang out with different friends, they have different favorite places to go. And so I think as we've been on this journey, the first place we really started was bringing your friends into the map and allowing you to interact with them, and that's really gone well so far. So we're super excited with the engagement that we're seeing there. But this is a long product journey for us before we think about monetization. And so for now, we're just focused on the product experience. We've got a big, long road map here to keep developing that product. But so far, great engagement and exciting to build on that thesis.

The next question will come from Doug Anmuth of JPMorgan. Please go ahead.

Thanks for taking the question. One for Evan and one for Jeremi. First, Evan, you talked about 75% of the 13- to 34-year-old population in the U.S. active on Snapchat. Can you just talk about whether you think it's important to go beyond 34-year-olds? Is that a material part of the strategy still? And then, Jeremi, record advertisers in 2Q and still demand constrained. What's the gating factor in your view to getting more advertisers on board? Thanks.

Thanks, Doug. Yes, I definitely think it's important for us to grow with our user base over time, especially as we look towards the long term of the business. That's why we shared the retentions that we're really excited about, that I think shows that this communication with real friends and this idea of visual communication is really powerful and something that people grow with over time as it becomes a part of their lives. So definitely, I think that that's an important opportunity. And one of the areas where we're investing there is around content and augmented reality experiences to meet the needs of different demographics. So that no matter what age you are when you come in to Snapchat, you feel like there's something for you to play with or to watch. We think that's really important.

And thanks. Regarding how we increase the number of advertisers, we're very fortunate to be in a position where engagement continues to be brought across the entirety of the app from Discover to the camera to chat, and we have an opportunity from the supply side to really just add more advertisers as we've talked about. So can't overemphasize enough how our biggest opportunity is getting more advertisers into the system. And in order to that, we're focused on 3 fundamental priorities. One is to develop ad formats that are both innovative and easy to create, so take down any barriers that advertisers may have regardless of their level of sophistication. The second is to show consistent and predictable results for our advertisers, driving ROI and enabling them to optimize for whatever outcome it is that they wanted. And then also as we've been continuing to do over the last 3 quarters, aligning our sales teams around the advertiser needs and objectives, and both segmentation and verticalization have led to really positive momentum across all cohorts and verticals, and we're really thrilled about that. So we will continue to focus on those to get even more than the record number of advertisers that we had this quarter, and we know that the opportunity in front of us is tremendous.

Our next question will come from Victor Anthony of Aegis Capital. Please go ahead.

Hey, guys. Thanks for putting me on. Maybe just talk about your path to free cash flow generation, if you could give kind of somewhat of a time frame on that. And second, you touched upon, I guess, the e-commerce efforts, whether they be product catalog formats, Instant Create. Maybe if you could just discuss how big of an opportunity do you think e-commerce will be for you guys. Thanks.

Hey, Victor. Thanks for the question. I'll take the first one and the second one for Jeremi. On the path to free cash flow, one, I think you've seen pretty consistent progress quarter-to-quarter-to-quarter, pretty pleased. This was our fifth consecutive quarter of year-over-year adjusted EBITDA improvement. We're guiding for next quarter that we expect that we would make it a sixth. So we're just trying to be super disciplined here in terms of making progress down that road, getting to free cash flow. I'm not going to give you a time line here, but certainly, you can see that we've been making significant progress. It's been fairly consistent quarter-to-quarter for a couple of years now and looking forward to being able to get to that milestone at some point. Not a specific date, but pleased with our progress, and it is a priority for us for sure.

And thanks. As it comes to e-commerce advertisers, it's definitely an area of focus for us. We are doubling down on our sales efforts, on our product efforts, continuing to innovate not only on the bid side of the platform but also on the outcome side of the platform to ensure that the people who are looking to sell product from Snap are staying within the confines of Snap and able to execute that transaction really easily. If you think about the opportunity ahead, I'll just speak to the partnership that we have with Shopify specifically. If you just look at that one opportunity, there are hundreds of thousands of Shopify vendors that have storefronts that they can create in just a few clicks directly into Snap, create a store, and our customers can shop directly from that store. And that is just Shopify. So if you extrapolate that out into the litany of other e-commerce players that there are in the ecosystem, the opportunity is tremendous. And we will continue to double down both in product and sales to ensure that we capture that.

Our last question comes from Michael Levine of Pivotal. Please go ahead.

Congratulations on great quarter, guys. In your comment, Jeremi, about the verticalization of the sales force, what inning would you say you view the business at in terms of generating returns from that restructuring?

Thanks for the question, Michael. It's early days. We have completed the reorganization in the U.S., and that has been behind us for 1 quarter now. We are cautiously optimistic that we'll see a lot of the same positive momentum in the international reorg, which we're undergoing right now. I can tell you that advertiser sentiment has been extremely positive as our teams start to grow and learn -- and have depth of experience by category, particularly when you consider that each different category has different levels of pressure, different types of investor pressures, different types of tariff pressures. The better that we can understand that they're particular industries, the better we can help solve their problem. And so we are seeing a huge -- a groundswell of support from our advertiser and agency community on the verticalization, but it's still early days. But I'm thrilled to see that most of the verticals at the company right now are growing.

This concludes our question-and-answer session as well as Snap Inc.'s Second Quarter 2019 Earnings Conference Call. Thank you for attending today's session. You may now disconnect.