By coinnews 
00:00 Speaker A
Reddit shares are soaring following its latest results. Let’s welcome back in Rohid Kakarni, Roth MKM Managing Director, Senior Research Analyst, for more on those results. The shares up by 16%, just to run through the numbers real quickly here as well. Uh, revenue coming in at $392.4 million, that’s better than estimated. EBITDA at about $115 million. That was much better than estimated. So Rohid, as we look at this stock, which is I mean, it’s been public for about a year. It came public at $34. Closed today at almost $119 and now it’s rising by this much in the after hours. It’s been a pretty good performance overall.
01:09 Rohid Kakarni
Yeah. It was a very emphatic result, uh, in my opinion, um, as in, uh, given the current context we are in, given the macro uncertainty that we feel that most of the ad names are going to face over the next 60-90 days, um, coming in and providing guidance that is much above any bullish expectation. Uh, they are going to be rewarded for that. So, uh, I’m very impressed with what, uh, we are seeing from Reddit right now.
02:04 Speaker A
Rohit, you just mentioned sort of the headwinds that these, uh, companies that get a lot of revenue from ads could be facing. Can you just kind of break down what you’re talking about there as far as how the potential uncertainty and slowdown could weigh on ad companies? And I guess the second part of that question would be, the stock’s now up 17%, given that potential headwind, is that maybe a little bit too much?
02:56 Rohid Kakarni
Uh, again, uh, parsing the numbers objectively, the numbers tell a fantastic story. Uh, what they may provide with regards to their outlook for uh, 2Q from a qualitative standpoint may drive extra uncertainty in results. But overall, um, advertising names like Reddit, like what we heard from Snapchat, they, they tend to be at a somewhat of a mercy of very large brand advertisers. And if there’s a large brand company, say for example, Apple, it decides to pull back advertising because they don’t know how their cost structure is going to evolve over the next six months, advertising is the first thing that companies can just pause for a little bit and then figure out the rest of the cost structure. So that’s where the uncertainty first hits. That’s the first line of defense or the first line that gets hit. And uh, that’s why we are worried about smaller mid-sized companies. But Reddit clearly seems like an outlier here where they are performing above and beyond other smaller mid-sized companies.
04:51 Speaker A
Why is that, Rohit? Is it, do we have a way of knowing? And by the way, the forecast you’re referring to, uh, the company is, is forecasting, uh, second quarter revenue, uh, pretty far above what analysts had been estimating here, at least $410 million. Analysts have been looking for below $400 million. Um, is it advertising? Is it also the sort of AI licensing that the company is doing? I mean, how significant a portion of its revenue is that at this point?
05:44 Rohid Kakarni
So at this point, uh, uh, the licensing revenues, licensing deals that they have signed, two significant ones last year, uh, one with OpenAI, one with Google, uh, they, they pay about 15 to $20 million per quarter. So they are not a significant, uh, drivers of growth this year. Uh, having said that, they, they are pretty big drivers of profitability. So that, um, people cheer Reddit for that with regards to, um, as compared to Pinterest or Snapchat that do not have similar deals that with very high margins. Um, also, Reddit is very early when it comes to, uh, monetizing their user base. I think they, they are probably two, three, four years behind some of the larger platforms. And, and hence they are, uh, at a, at a point that, uh, is letting them monetize at a much higher rate. And they’re growing faster than the market. So perhaps there is stickiness in the ad spend on Reddit. And I think Q2 outlook is a very clear indication of that.
07:30 Speaker A
Interesting. Rohit, thank you so much. And thanks also to our Josh Shafer for hanging with me during these earnings. Thanks guys.