Pinterest, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This annual filing also reports unaudited results for the quarter ended December 31, 2020; it is not a standalone quarterly filing.
Business context
Pinterest operates a visual discovery and planning platform and generates substantially all revenue from advertising. At year-end, the company reported 459 million monthly active users (MAUs), up 37% year over year. Advertising revenue includes both brand and performance advertising; performance accounted for approximately two-thirds of FY2020 revenue.
Financial and operating highlights
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $1.693 billion | $1.143 billion |
| Gross profit / gross margin | $1.243 billion / approximately 73% | $783.9 million / approximately 69% |
| Operating loss / margin | $(142.5) million / approximately (8)% | $(1.389) billion / approximately (122)% |
| Net loss | $(128.3) million | $(1.361) billion |
| Adjusted EBITDA | $305.0 million | $16.7 million |
| Operating cash flow | $28.8 million | $0.7 million |
| Cash, cash equivalents and marketable securities | $1.760 billion | $1.713 billion |
FY2020 revenue rose 48%, driven by 37% MAU growth and 12% global average revenue per user (ARPU) growth. Management attributed revenue growth to 27% more ad impressions served and a 17% increase in ad prices. Annual ARPU was $4.26 globally, $15.34 in the U.S. and $0.88 internationally.
Q4 2020 revenue was $705.6 million, versus $399.9 million in Q4 2019. Q4 operating income was $205.1 million and net income was $207.8 million, compared with operating and net losses of $43.2 million and $35.7 million, respectively, in Q4 2019. Q4 Adjusted EBITDA was $299.2 million, versus $77.3 million.
Liquidity remained substantial: current assets were $2.358 billion and current liabilities $204.8 million at year-end, with reported working capital of $2.153 billion. The company had a $500 million revolving credit facility, with no borrowings outstanding and reported covenant compliance. Total liabilities were $367.1 million, including operating lease liabilities; operating lease commitments totaled $231.0 million.
Changes versus prior year and unusual items
- Revenue grew 48%; international revenue, allocated by estimated user location, grew 129% to $268.2 million, while U.S. revenue grew 39% to $1.425 billion. The filing’s financial-statement geographic breakdown uses customer billing addresses and reports different amounts; the two measures are not directly comparable.
- Net loss narrowed substantially, and Adjusted EBITDA increased. A key comparison factor was share-based compensation: $321.0 million in FY2020 versus $1.378 billion in FY2019, when IPO-related vesting produced a large one-time catch-up charge.
- FY2020 included an $89.5 million one-time payment to terminate a planned office lease; the termination eliminated approximately $440 million of potential future minimum lease payments. Adjusted EBITDA excludes this payment.
- Operating cash flow improved to $28.8 million, but remained modest relative to revenue; higher accounts receivable was a cash-flow offset.
Outlook, commentary and risks
No specific numerical revenue, earnings or cash-flow guidance is provided. Management said international user growth was expected to outpace U.S. growth in the near term and that long-term revenue growth would depend increasingly on engagement quality and monetization. It also expects seasonality to become more pronounced: advertising spend historically peaks in Q4, while engagement has typically been lower in Q2.
Management described the pandemic’s continuing effects as difficult to predict. Revenue growth recovered after a sharp mid-March slowdown, accelerated from July and remained strong through year-end; management cautioned that pandemic-era user engagement and results may not indicate future performance. Key risks include dependence on advertising, advertiser demand and ad measurement, privacy rules and third-party tracking changes, competition, international monetization, reliance on Amazon Web Services, and potential shifts in user engagement after the pandemic. The company reported workplace-culture allegations, an independent board review and implementation of recommendations; related derivative lawsuits were pending. A securities class action alleging misleading statements about 2019 revenue and user growth was also pending. The company said it did not believe the disclosed litigation would materially affect its financial position or results.
Important facts for investors to verify
- Whether MAU growth, engagement and retention persist after pandemic-related behavior changes; the filing notes that user metrics are internally estimated and subject to measurement limitations.
- Whether revenue and ARPU growth can continue, especially outside the U.S., and whether the company can sustain advertiser demand and demonstrate ad effectiveness amid privacy and tracking changes.
- How recurring share-based compensation, hiring and technology investment affect GAAP profitability and cash generation; FY2020 included $742.7 million of unrecognized share-based compensation expense.
- Whether the $1.760 billion cash-and-securities balance, operating cash flow and $500 million undrawn credit facility provide adequate flexibility alongside lease obligations and business investment needs.
- Developments in the pending securities and workplace-related litigation, the workplace-culture review recommendations, and applicable privacy, content and tax regulation.