Business context and reporting period
Pinterest, Inc. filed its annual report for the fiscal year ended December 31, 2019. This summary focuses on fourth-quarter results and compares full-year 2019 with 2018. Pinterest operates a visual discovery and planning platform and generates substantially all revenue from advertising. The company completed its IPO in April 2019.
Key financial and operating metrics
| Metric | Q4 2019 | FY 2019 | FY 2018 |
|---|---|---|---|
| Revenue | $399.9 million | $1,142.8 million | $755.9 million |
| Operating income (loss) | $(43.2) million | $(1,388.9) million | $(74.7) million |
| Net income (loss) | $(35.7) million | $(1,361.4) million | $(63.0) million |
| Adjusted EBITDA | $77.3 million | $16.7 million | $(39.0) million |
| Operating cash flow | Not separately stated here | $0.7 million | $(60.4) million |
- Q4 revenue grew 46% year over year. Q4 operating loss was $43.2 million, versus operating income of $44.1 million in Q4 2018; Q4 2018 net income was $47.0 million.
- FY 2019 revenue increased 51%. Revenue based on user location grew 43% in the U.S. to $1,025.5 million and 187% internationally to $117.2 million.
- FY gross margin was approximately 69% (revenue less cost of revenue), compared with approximately 68% in 2018. Q4 gross margin was approximately 76%.
- The FY net loss included $1,377.8 million of share-based compensation, largely reflecting accelerated recognition after the IPO satisfied performance conditions on earlier RSU awards. Q2 recorded $1,134.6 million of this expense. Adjusted EBITDA excludes share-based compensation and other items and is a non-GAAP measure.
- Global MAUs reached 335 million at year-end, up 26% year over year; weekly active users were 57% of MAUs. FY global ARPU was $3.81, up 21%; U.S. ARPU was $12.07 and international ARPU $0.54.
- Cash, cash equivalents and marketable securities totaled $1,713.3 million at year-end; working capital was $1,891.1 million. Total liabilities were $369.6 million, including operating lease liabilities. No borrowings were outstanding under the $500 million revolving credit facility.
Material changes versus the prior comparable period
- FY revenue increased $386.8 million, supported by higher advertising demand, more ads served and higher monetization. U.S. ad pricing increased; international pricing decreased as Pinterest entered additional countries.
- FY costs and expenses rose to $2,531.6 million from $830.7 million. The increase chiefly reflected IPO-related share-based compensation and higher staffing, alongside increased marketing and infrastructure costs.
- Adjusted EBITDA improved to positive $16.7 million from a loss of $39.0 million, while GAAP net loss widened substantially because of the IPO-related compensation expense.
- Operating cash flow improved by $61.0 million to $0.7 million. Financing cash flow was $1,128.2 million, mainly reflecting IPO proceeds; investing cash flow was $(586.5) million, largely due to purchases of marketable securities.
Outlook, risks and unusual items
- The filing provides no quantified revenue, earnings or cash-flow guidance. Management expected international user growth to outpace U.S. growth in the near term and said future revenue growth would depend increasingly on engagement quality and monetization, rather than user growth alone.
- Management described monetization as early-stage and planned to expand international advertising, mid-market and unmanaged advertiser coverage, self-serve tools, and ad measurement capabilities. The company served ads in 28 countries at year-end, versus seven a year earlier.
- Key risks include reliance on advertising revenue; competition for users and advertiser budgets; the ability to improve ad targeting and measurement; privacy regulation and restrictions on tracking; dependence on search engines and Amazon Web Services; content and intellectual-property disputes; and execution risks in international markets.
- Seasonality affects engagement and advertising: historically, engagement has been lower in Q2 and advertising spend stronger in Q4. The company cautioned that seasonality may become more pronounced.
- Contractual commitments included $276.8 million of operating lease payments and $171.3 million remaining under the AWS cloud-services commitment. A planned San Francisco office lease could add approximately $420 million of undiscounted minimum payments if specified contingencies are met and the lease commences.
- The company reported ongoing legal matters but did not believe their resolution would have a material adverse effect. Its independent auditor issued an unqualified opinion on the financial statements; the auditor was not engaged to audit internal control effectiveness.
Important facts for investors to verify
- Review the scale, timing and expected run-off of IPO-triggered share-based compensation, including the $635.1 million of unrecognized compensation at year-end.
- Assess whether revenue and ARPU growth can continue as Pinterest expands monetization internationally, and track advertiser concentration and performance-measurement progress.
- Evaluate underlying cash generation alongside GAAP losses and non-GAAP Adjusted EBITDA, which excludes significant recurring share-based compensation.
- Check the terms and contingencies for the planned office lease, AWS minimum-spend commitment, and revolving-credit covenants.
- Consider the reliability and comparability of MAU and ARPU measures, which are internally calculated estimates, and the effect of privacy, content, and platform-policy changes.