Pinterest, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Pinterest operates a visual discovery platform and generates revenue primarily from advertising. Figures are unaudited and in U.S. dollars.
Key financial and operating metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $485.2 million | $271.9 million | +78% |
| Gross profit and gross margin | $351.8 million; 72.5% | $172.7 million; 63.5% | Margin +9.0 percentage points |
| Operating loss and margin | $(22.9) million; (4.7)% | $(146.1) million; (53.7)% | Loss narrowed |
| Net loss | $(21.7) million | $(141.2) million | Loss narrowed |
| Adjusted EBITDA | $83.8 million | $(53.3) million | Turned positive |
| Operating cash flow | $270.6 million | $57.3 million | Increased $213.3 million |
| Cash, cash equivalents and marketable securities | $2.034 billion | — | At March 31, 2021 |
| Debt | No revolver borrowings | — | $500 million facility available, subject to terms |
Basic and diluted loss per share was $0.03, compared with $0.25 in Q1 2020. Current assets were $2.457 billion and current liabilities were $209.0 million at quarter-end. The filing reports no material off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Revenue growth reflected a 30% increase in monthly active users (MAUs) to 478 million and 34% growth in global average revenue per user (ARPU) to $1.04. Management attributed revenue growth to 22% more ads served and a 46% increase in ad prices.
- U.S. ARPU rose 50% to $3.99; international ARPU rose 91% to $0.26. Management-reported revenue by user location increased 65% in the U.S. and 170% internationally. These geographic measures use estimated user location and differ from the financial-statement revenue breakdown by customer billing address.
- Total costs and expenses increased 22% to $508.1 million, but fell to 105% of revenue from 154%. Cost of revenue rose 35%, primarily from higher hosting costs; R&D rose 18% and sales and marketing rose 11%, largely reflecting higher headcount.
- Operating cash flow improved, partly due to a smaller adjusted net loss and increased receivables collections. Investing cash flow was $(35.1) million, versus $57.8 million provided in Q1 2020; financing cash flow was $9.3 million, versus $(23.7) million.
Outlook, risks and unusual items
- The filing gives no numerical revenue, earnings or cash-flow guidance. Management says international users are expected to continue driving user growth in the near term, but notes that post-pandemic changes make future engagement and growth difficult to predict.
- Management reported that easing pandemic restrictions beginning in mid-March slowed U.S. MAU growth and reduced engagement compared with the same period in 2020. It cautioned that Q1 results may not indicate future performance and that the pandemic’s effects on users, advertisers and financial results remain uncertain.
- Q1 included $20.5 million of non-cash charitable contributions, mainly contributing to the increase in general and administrative expense. Adjusted EBITDA excludes this item, as well as share-based compensation and other specified items; it is a non-GAAP measure and should be considered alongside GAAP results.
- Share-based compensation expense was $79.5 million; $704.3 million remained unrecognized at March 31, 2021. On April 16, the company granted RSUs with $386.0 million aggregate grant-date fair value, expected to be recognized over a weighted-average 3.9 years.
- Key risks include dependence on advertising, competition for users and ad budgets, privacy and measurement changes that could affect targeting and attribution, reliance on Amazon Web Services, and uncertainty around pandemic-related engagement. The company also disclosed securities and derivative litigation, including claims concerning 2019 statements and allegations related to workplace discrimination; management did not believe the matters would materially affect its financial position or results.
Most important facts for investors to verify
- Whether user growth and engagement remain resilient as pandemic restrictions ease, particularly in the U.S.
- Whether ARPU and ad pricing gains can continue, and whether international monetization can scale from a lower base.
- How much of the positive Adjusted EBITDA and operating cash flow translates into sustained GAAP profitability, considering recurring share-based compensation and non-cash adjustments.
- The effect of privacy-policy and regulatory changes on ad targeting, measurement, and advertiser demand.
- Potential developments in the disclosed securities and workplace-related litigation, and the dilution implications of equity awards and future share issuance.