Pinterest, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts are in U.S. dollars; financial statement figures are unaudited. Pinterest generates substantially all revenue from advertising on its website and mobile app.
Financial and operating performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $763.2M | $684.6M | $2,073.8M | $1,925.4M |
| Operating income (loss) | ($5.0M) | ($69.4M) | ($321.9M) | ($107.5M) |
| Net income (loss) | $6.7M | ($65.2M) | ($236.8M) | ($113.5M) |
| Adjusted EBITDA | $184.7M | $77.3M | $318.7M | $246.2M |
| Net cash from operating activities | Not provided by quarter | Not provided by quarter | $354.7M | $410.9M |
Q3 revenue grew 11% year over year; nine-month revenue grew 8%. Q3 gross margin was approximately 77.6% (revenue less cost of revenue), compared with approximately 73.3% a year earlier. Q3 operating margin was approximately -0.7%, versus approximately -10.1%. Nine-month operating margin was approximately -15.5%, versus approximately -5.6%.
Q3 monthly active users (MAUs) were 482 million, up 8%. Global average revenue per user (ARPU) was $1.61, up 3%; U.S. and Canada ARPU was $6.46 (+5%), Europe $0.91 (+26%), and Rest of World $0.12 (+16%). Ad impressions served increased 26% in Q3 while ad prices declined 12%.
At September 30, cash and cash equivalents were $1,168.4M and marketable securities were $1,162.3M, for $2,330.7M combined. Total current assets were $3,039.3M and current liabilities $304.3M. Total liabilities were $497.9M; no borrowings were outstanding under the revolving credit facility as of filing. Nine-month operating cash flow was $354.7M, investing cash outflow $58.7M, and financing cash outflow $739.3M.
Material changes and notable items
- Q3 returned to GAAP net income from a year-earlier loss, while nine-month net loss widened. Higher interest income helped Q3 results; nine-month results included substantial restructuring charges.
- Q3 costs and expenses totaled $768.2M, slightly exceeding revenue. Nine-month general and administrative expense rose 73% to $414.3M, including $119.4M of restructuring charges and $12.9M in non-cash charitable contributions.
- Total share-based compensation increased to $171.9M in Q3 from $136.2M and to $484.6M for nine months from $326.8M. The company reported $1,284.2M of unrecognized share-based compensation expense expected to be recognized over a weighted-average 2.4 years.
- The March 2023 restructuring included an approximately 4% workforce reduction and office-space exits. The plan was completed; Q3 charges were immaterial. Nine-month charges were $126.9M, including $117.3M of non-cash office impairment and abandonment charges.
- The company repurchased $500.0M of Class A shares under a program completed in Q2. A new $1.0B authorization was approved in September, with the full amount still available at September 30.
Outlook, liquidity, risks, and contingencies
The filing provides no specific revenue, earnings, or other numerical guidance. Management said existing cash, cash equivalents, marketable securities, and available credit should cover working capital and capital expenditure needs for at least the next 12 months, while noting that additional capital could be needed later. In October 2023, the revolving credit commitment was increased from $400M to $500M; the company reported covenant compliance and no outstanding borrowings.
AWS provides the vast majority of the company’s cloud infrastructure. Pinterest is committed to purchasing at least $3.25B of AWS services through April 2029; the remaining commitment was $1,908.7M, which management expects to meet. The restructuring does not eliminate future lease-payment obligations for affected office space.
Key risks include dependence on advertising demand, competition for users and advertisers, ad pricing and measurement effectiveness, macroeconomic uncertainty, privacy and regulatory requirements, content-related liability, cybersecurity, reliance on AWS and other third parties, and the ability to sustain profitability. Management highlighted that higher ad volume was partly offset by lower ad prices. A hypothetical 100-basis-point increase in interest rates would have reduced the fair value of cash equivalents and marketable securities by $7.3M at September 30, 2023. The company reported that it does not hedge foreign exchange exposure and that a 10% currency move was not expected to have a material financial-statement effect.
The company is involved in ordinary-course legal matters but does not believe their resolution is reasonably likely to have a material adverse effect. It cautions that litigation may still bring costs, management distraction, or reputational harm. The company also notes that MAU and ARPU are internally calculated estimates with measurement limitations.
Important facts for investors to verify
- Whether user growth and monetization can sustain revenue growth as ad prices remain under pressure.
- How recurring share-based compensation and restructuring-related costs affect GAAP profitability and dilution.
- Whether operating cash generation remains adequate after buybacks and ongoing commitments, including the AWS minimum-purchase obligation and lease payments.
- Execution and eventual use of the $1.0B repurchase authorization, including its effect on cash reserves and share dilution.
- Developments in advertising measurement, privacy rules, content regulation, cybersecurity, and AWS service or pricing risks.
- Management’s non-GAAP Adjusted EBITDA excludes share-based compensation and other items; assess it alongside GAAP results rather than as a substitute.