Pinterest, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide a clear set of standalone Q4 financial results.
Business context
Pinterest operates a visual discovery and shopping platform and generates substantially all revenue from advertising. It reported 450 million monthly active users (MAUs) at year-end, up 4% year over year. The weekly-active-to-monthly-active-user ratio was 61%.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $2.803 billion | $2.578 billion | +9% |
| Operating income (loss) | $(101.7) million | $326.2 million | Turned to loss |
| Net income (loss) | $(96.0) million | $316.4 million | Turned to loss |
| Adjusted EBITDA | $441.9 million | $814.4 million | -46% |
| Cash from operations | $469.2 million | $752.9 million | -38% |
Cost of revenue rose 28% to $678.6 million, faster than revenue; gross margin was approximately 75.8%, down from 79.5% (calculated from reported revenue and cost of revenue). Operating margin was approximately -3.6% and net margin approximately -3.4%. Adjusted EBITDA margin was approximately 15.8%, versus 31.6% in 2021; this non-GAAP measure excludes, among other items, recurring share-based compensation.
Share-based compensation increased to $497.1 million from $415.4 million. Total costs and expenses rose 29% to $2.904 billion. Year-end cash, cash equivalents and marketable securities totaled $2.698 billion; current assets were $3.455 billion against current liabilities of $380.5 million. Investing cash outflow was $128.2 million and financing cash outflow was $148.9 million.
No borrowings were outstanding on the $400 million revolving credit facility at year-end. Operating lease liabilities totaled approximately $229.0 million. The company disclosed a remaining AWS purchase commitment of $2.357 billion through April 2029 and said it expected to meet it. Management stated existing liquidity and available credit should cover working capital and capital expenditure needs for at least 12 months.
Material changes and unusual items
- Revenue growth reflected a 10% increase in annual ARPU, partly offset by a 1% decrease in average MAUs. Ad impressions served increased 17%, while ad prices fell 7%.
- Annual ARPU was $6.36 globally (+10%); U.S. and Canada was $24.38 (+16%), Europe $3.23 (+7%), and Rest of World $0.43 (+49%).
- Sales and marketing expense increased 46%, including higher marketing costs, headcount and share-based compensation. Research and development expense rose 22%; cost of revenue increased partly because of higher hosting costs.
- The company acquired fashion-shopping platform The Yes for $87.6 million in cash in June 2022. Following key employee departures, Pinterest recorded $9.4 million of acquired-intangible impairment charges in Q4 and related severance and compensation costs.
- Operating cash flow declined primarily with the deterioration in earnings, partly offset by increased collections of accounts receivable. Financing cash outflow included $161.8 million of share withholding tax payments after the company transitioned to net settling RSU and RSA tax obligations.
- On February 2, 2023, the board authorized a discretionary share repurchase program of up to $500 million over 12 months. No repurchases under the program had occurred by February 6, 2023.
Outlook, commentary and risks
The filing provides no quantified revenue, earnings or margin guidance. Management cited inflation, supply-chain issues, foreign-exchange movements, macroeconomic uncertainty and platform competition as factors affecting advertiser demand, user growth and engagement. It said user growth benefited as pandemic-related effects and the impact of late-2021 search algorithm changes subsided; 2022 trends began returning to typical seasonality.
Key risks include dependence on advertising, advertiser concentration in certain verticals, competition for users and ad budgets, and the ability to demonstrate ad effectiveness. Privacy rules and changes to third-party tracking may constrain ad targeting and measurement. Pinterest also relies heavily on AWS and on search engines and app stores for infrastructure, distribution and traffic. The filing describes evolving content, privacy and platform regulation, international access restrictions, litigation exposure and the possibility of volatile results. It notes that substantially all revenue is advertising-derived.
The company reported an unqualified audit opinion and effective internal control over financial reporting. Management did not believe the disclosed legal matters were reasonably likely to have a material adverse effect, while acknowledging litigation can entail costs and management distraction. The 20-to-1 voting rights of Class B shares concentrate voting control; the company does not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Whether ad pricing, advertiser demand and revenue growth improve, particularly as impressions rise but prices decline.
- Whether operating costs and share-based compensation remain high enough to pressure GAAP profitability and adjusted EBITDA.
- Progress in international monetization and user engagement, including the sustainability of ARPU growth alongside average MAU trends.
- The AWS commitment’s expected utilization and cost, and the company’s liquidity and cash-flow needs alongside leases and the new repurchase authorization.
- Developments in privacy regulation, ad measurement, content obligations, litigation and the acquired The Yes business.