Pinterest, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated financial statements prepared under U.S. GAAP. Pinterest earns substantially all revenue from advertising on its website and mobile app.
Key financial and operating metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $665.9m (+9%) | $613.2m | $1,240.8m (+13%) | $1,098.4m |
| Operating income (loss) | ($34.5m) | $71.2m | ($38.2m) | $48.3m |
| Net income (loss) | ($43.1m) | $69.4m | ($48.4m) | $47.7m |
| Adjusted EBITDA | $92.0m | $178.2m | $168.8m | $262.0m |
| Operating cash flow | — | $333.5m | $375.4m |
Q2 gross margin was approximately 75.2%, versus 79.2% a year earlier; operating margin was approximately negative 5.2%, versus positive 11.6%. For the first half, gross margin was approximately 74.9% versus 76.2%, and operating margin approximately negative 3.1% versus positive 4.4%.
- Q2 monthly active users (MAUs) were 433 million, down 5% year over year and flat sequentially. Management cited competition, lower search traffic following algorithm changes, and the unwind of pandemic-related engagement gains.
- Q2 global average revenue per user (ARPU) rose 17% to $1.54. U.S. and Canada ARPU was $5.82 (+20%), Europe $0.86 (+20%), and Rest of World $0.10 (+80%). Higher ARPU and ad volume supported revenue growth despite fewer users; ad pricing declined.
- Costs and expenses rose to $700.4m in Q2 (+29%). Q2 research and development rose 28%, sales and marketing 29%, and general and administrative 32%, with staffing, consulting, facilities and hosting costs among the cited drivers. Share-based compensation was $117.4m in Q2 and $190.7m for the half.
- Cash, cash equivalents and marketable securities totaled $2.659bn at June 30. Current assets were $3.246bn and current liabilities $350.9m. The company reported no borrowings under its $500m revolving credit facility and said it was in compliance with its covenants. Operating lease liabilities totaled $192.5m; the filing reports no outstanding facility debt.
- First-half investing cash outflow was $75.8m, including $86.1m paid for an acquisition, partly offset by net marketable-security maturities and sales. Financing cash outflow was $33.9m, mainly reflecting tax withholding on released equity awards.
Changes, outlook and notable items
- Revenue growth slowed to 9% in Q2 while the company moved from year-earlier GAAP profit to a loss. Adjusted EBITDA declined 48% in Q2 and 36% for the first half. Higher operating expenses and foreign-currency losses contributed to the weaker results.
- On June 10, Pinterest acquired The Yes Platform, an AI-powered fashion shopping platform, for $87.6m in cash. The acquisition added $60.0m of goodwill and $28.6m of identified intangible assets; its reported financial impact was not material.
- Bill Ready became CEO, while co-founder Ben Silbermann transitioned to Executive Chairman. The filing identifies leadership transition and talent retention as risks.
- Management said existing cash, investments and available credit should meet working-capital and capital-expenditure needs for at least the next 12 months, while noting additional capital could be needed later. The filing provides no specific revenue, earnings or margin guidance.
- Management highlighted inflation, supply-chain constraints, foreign-exchange movements, the war in Ukraine and uncertainty in advertising demand. Substantially all revenue depends on advertising; other key risks include user engagement, competition, privacy and ad-measurement restrictions, search-engine traffic, and reliance on AWS.
- Pinterest has a remaining AWS cloud-services purchase commitment of $2.672bn through April 2029 and expects to meet it. The company reported $1.221bn of unrecognized share-based compensation expense expected to be recognized over a weighted-average 3.1 years.
- Q2 included $9.3m of interest expense and other expense, net, primarily attributed to foreign-currency losses. A shareholder derivative settlement received final approval on May 26; a related Delaware case was dismissed July 21, after quarter-end. Management did not believe the disclosed legal matters were reasonably likely to have a material adverse effect.
Important facts for investors to verify
- Whether MAUs stabilize and whether user trends, engagement and search referrals recover, given the reported 5% year-over-year MAU decline.
- Whether ARPU growth and ad-volume gains can offset user weakness and lower ad pricing, particularly amid macroeconomic uncertainty.
- Whether expense growth, hosting costs and share-based compensation moderate, and whether GAAP profitability returns; Adjusted EBITDA excludes significant recurring share-based compensation.
- Cash generation and liquidity relative to the long-term AWS commitment, and any changes in borrowing, covenant compliance or capital needs.
- Progress integrating The Yes and executing the CEO transition, alongside developments in privacy regulation, ad measurement, competition and legal or regulatory matters.