Pinterest, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023. Filed August 1, 2023. Pinterest generates substantially all revenue from advertising on its website and mobile application.
Financial and operating results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $708.0 million | $665.9 million | $1,310.6 million | $1,240.8 million |
| Operating loss | $73.2 million | $34.5 million | $316.9 million | $38.2 million |
| Net loss | $34.9 million | $43.1 million | $243.5 million | $48.4 million |
| Adjusted EBITDA | $107.0 million | $92.0 million | $134.0 million | $168.8 million |
| Operating cash flow | Not separately provided | Not separately provided | $246.2 million | $333.5 million |
Q2 revenue grew 6% year over year. Calculated from reported figures, operating margin was approximately -10.3% versus -5.2%, net margin -4.9% versus -6.5%, and Adjusted EBITDA margin 15.1% versus 13.8%. For the first half, operating margin was approximately -24.2% versus -3.1%, net margin -18.6% versus -3.9%, and Adjusted EBITDA margin 10.2% versus 13.6%. Adjusted EBITDA is a non-GAAP measure and excludes, among other items, share-based compensation and restructuring charges.
Global monthly active users were 465 million, up 8% year over year. Q2 global ARPU was $1.53, down 1%; U.S. and Canada ARPU was $5.92, up 2%; Europe was $0.91, up 6%; and Rest of World was $0.12, up 20%. Management said ad impressions served increased 33% while ad prices declined 20% year over year.
At June 30, cash and cash equivalents were $1.180 billion and marketable securities were $1.116 billion, totaling $2.295 billion. Current assets were $2.941 billion and current liabilities $319.9 million. Total liabilities were $508.7 million, including $163.0 million of operating lease liabilities. No amounts were outstanding under the $400 million revolving credit facility; Pinterest reported compliance with its covenants. The filing does not identify outstanding conventional borrowings.
Material changes and drivers
- Revenue growth reflected higher demand for awareness advertising and 8% MAU growth, partly offset by a 1% decline in ARPU. U.S. and Canada revenue grew 4%, Europe 12%, and Rest of World 32%, based on estimated user geography.
- Costs and expenses rose faster than quarterly revenue: total Q2 expenses were $781.3 million, up from $700.4 million. Research and development and sales and marketing increased 15% each, with higher compensation and headcount among the drivers.
- Share-based compensation was $169.6 million in Q2, up from $117.4 million; first-half expense was $312.8 million versus $190.7 million. Unrecognized compensation expense was $1.381 billion, expected to be recognized over a weighted-average 2.6 years.
- First-half general and administrative expense included $119.4 million of restructuring charges, primarily non-cash office-space impairment and abandonment costs. Total first-half restructuring charges were $126.9 million; Q2 charges were $5.6 million.
- Higher interest income on cash and securities supported results: Q2 net interest income was $24.9 million versus $3.4 million. First-half net loss widened substantially, while Adjusted EBITDA declined 21% year over year.
- First-half operating cash flow fell by $87.3 million year over year. Financing cash outflow was $660.0 million, primarily reflecting the $500 million share repurchase and $163.2 million of tax-withholding share repurchases. Cash, cash equivalents and restricted cash declined $431.2 million during the half.
Outlook, commentary and risks
The filing gives no specific revenue, earnings or margin guidance. Management said existing cash, cash equivalents, marketable securities and available revolver capacity should be sufficient for working capital and capital expenditure needs for at least the next 12 months, while noting that additional capital may be needed beyond that period. Management also cautioned that interim results are not necessarily indicative of full-year results.
In March 2023 Pinterest began a restructuring intended to improve efficiency and align operations with strategy and macroeconomic conditions. It announced a workforce reduction of approximately 4% and plans to sublease or abandon certain office space. Management said remaining plan liabilities and charges were immaterial at June 30, but the restructuring does not eliminate future lease payment obligations.
Key risks include dependence on advertising and advertiser demand; lower ad pricing; competition for users and ad spending; ability to demonstrate ad effectiveness amid privacy and platform-policy changes; user engagement and international monetization; macroeconomic and foreign-exchange conditions; and reliance on AWS and other third parties. Pinterest has a remaining AWS purchase commitment of $2.057 billion through April 2029 and expects to meet it. The EU Digital Services Act was scheduled to apply to Pinterest beginning August 25, 2023. The company reported ordinary-course legal matters and did not believe their resolution was reasonably likely to have a material adverse effect, while noting litigation may still impose costs and management burdens.
Management stated that disclosure controls and procedures were effective as of June 30, 2023, and that there was no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether user growth and improvements in international monetization can offset lower ad prices and weak or changing advertiser demand.
- How the sharp first-half operating loss and expense growth compare with future cost trends, particularly share-based compensation and restructuring-related lease costs.
- Whether cash generation remains adequate after the completed $500 million buyback and required AWS spending commitments.
- The sustainability and comparability of MAU, ARPU, ad-impression and ad-pricing metrics, which Pinterest calculates from internal data and estimates.
- Developments in privacy, advertising measurement, AI-related regulation, the EU Digital Services Act, litigation and other contingencies.