Pinterest, Inc. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Pinterest operates a visual discovery platform and generates substantially all revenue from advertising on its website and mobile app. This unaudited filing covers the three months ended March 31, 2022, compared with Q1 2021.
Financial and operating metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $574.9 million | $485.2 million | +18% |
| Gross profit / margin | $428.8 million / 74.6% | $351.8 million / 72.5% | Margin +2.1 percentage points |
| Operating loss / margin | $3.7 million / (0.6%) | $22.9 million / (4.7%) | Loss narrowed |
| Net loss | $5.3 million | $21.7 million | Loss narrowed |
| Adjusted EBITDA | $76.8 million | $83.8 million | (8%) |
| Operating cash flow | $213.4 million | $270.6 million | (21%) |
| Monthly active users | 433 million | Q1 2021 comparable not clearly stated in the filing text | (9%) year over year |
| Global ARPU | $1.33 | $1.04 | +28% |
Cash, cash equivalents and marketable securities totaled $2.678 billion at March 31, 2022. Total liabilities were $458.5 million, including $202.6 million of operating lease liabilities. No borrowings were outstanding under the $500 million revolving credit facility; Pinterest reported compliance with its covenants. The company said available liquidity should cover working capital and capital expenditure needs for at least 12 months.
Revenue growth reflected higher monetization despite fewer users: management cited a 28% increase in ARPU, a 2% increase in ad pricing and a 16% increase in ads served. User-geography revenue was $470.0 million in U.S. and Canada, $87.4 million in Europe and $17.5 million in the Rest of World; these figures use management’s estimated user location, unlike the financial-statement geographic disclosure based on customer billing addresses.
Material changes versus Q1 2021
- Revenue rose 18%, while global MAUs fell 9%, continuing declines that began as pandemic restrictions eased.
- Cost of revenue increased 9% to $146.1 million, slower than revenue growth; management attributed the increase primarily to higher hosting costs. Sales and marketing increased 33% and research and development increased 14%, reflecting higher headcount and marketing and consulting costs.
- General and administrative expense fell 13%, primarily because Q1 2021 included $20.5 million of non-cash charitable contributions.
- Adjusted EBITDA declined 8% despite the narrower GAAP net loss. Share-based compensation was $73.2 million, down from $79.5 million.
- Operating cash flow decreased by $57.2 million, primarily due to timing of vendor payments. Investing cash flow was positive $49.4 million, versus negative $35.1 million, mainly reflecting changes in marketable-security purchases, sales and maturities.
Outlook, commentary, risks and unusual items
- The filing provides no specific financial guidance for future periods. Management expects pandemic-related changes in user behavior and historically lower second-quarter engagement to affect metrics; it cautioned that results may not follow normal seasonal patterns.
- Management attributed user declines to the COVID-19 unwind and lower search traffic following search-engine algorithm changes. It cited uncertainty around the pandemic, advertiser demand, macroeconomic conditions and Russia’s invasion of Ukraine.
- Substantially all revenue depends on advertising. Key risks include user engagement and retention, competition, ad measurement and targeting limitations, privacy regulation and third-party platform or search changes.
- Pinterest has a remaining AWS purchase commitment of $2.819 billion through April 2029 under a $3.25 billion minimum commitment; management expects to meet it.
- Shareholder derivative litigation concerning workplace discrimination allegations had a settlement preliminarily approved; final approval was scheduled for May 26, 2022. The company did not believe the litigation would materially affect its financial position or results.
- On April 13, 2022, after quarter-end, Pinterest granted approximately 24.7 million RSUs and RSAs with aggregate grant-date fair value of $566.9 million, expected to be recognized over a weighted-average 3.8 years.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether MAU trends stabilize and whether ARPU growth can continue to offset user declines.
- Whether revenue growth translates into sustained GAAP profitability and improved Adjusted EBITDA; assess the substantial share-based compensation excluded from that non-GAAP measure.
- How advertising demand, ad pricing and measurement performance evolve amid privacy changes and macroeconomic uncertainty.
- The company’s ability to satisfy the AWS commitment and maintain adequate liquidity while funding operating and product investments.
- The status and potential costs of the shareholder litigation settlement and the scale and expense recognition of the post-quarter equity awards.