Pinterest, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report. Pinterest operates a visual discovery and planning platform and generates substantially all revenue from advertising.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $2.578 billion | $1.693 billion |
| Income (loss) from operations | $326.2 million | $(142.5) million |
| Net income (loss) | $316.4 million | $(128.3) million |
| Adjusted EBITDA (non-GAAP) | $814.4 million | $305.0 million |
| Operating cash flow | $752.9 million | $28.8 million |
| Cash, cash equivalents and marketable securities at year-end | $2.480 billion | $1.760 billion |
| Monthly active users at year-end | 431 million | Down 6% year over year |
Revenue increased 52%. Approximate operating margin was 13%, up from negative 8%; net margin was approximately 12%, versus negative 8%. Cost of revenue was 21% of revenue, implying an approximate gross margin of 79%, compared with 73% in 2020. These percentages are calculated from the reported figures.
Global full-year ARPU rose 36% to $5.79; U.S. ARPU was $21.98 (+43%) and international ARPU $1.59 (+80%). Revenue growth reflected a 36% increase in ARPU and 12% growth in average MAUs; the company also reported 13% more ads served and a 35% increase in ad prices. U.S. revenue by user geography grew 42% to $2.016 billion; international revenue grew 110% to $562.1 million.
Cash flow from investing activities was a use of $25.9 million and financing activities provided $22.2 million. The company had no borrowings outstanding on its $500 million revolving credit facility and reported compliance with its covenants. Current assets were $3.182 billion and current liabilities $259.8 million at year-end. Total liabilities were $498.5 million, including operating lease liabilities; no conventional funded debt balance was reported as outstanding.
Material changes and notable items
- Revenue rose substantially and Pinterest moved from a 2020 operating and net loss to 2021 operating and net income.
- Despite full-year average MAU growth, year-end global MAUs declined 6% year over year. Management attributed the reversal to easing pandemic restrictions and lower search traffic following search-engine algorithm changes, including changes by Google.
- Research and development expense rose 29% and sales and marketing rose 45%, reflecting increased personnel, marketing and other investment. General and administrative expense fell 11%, primarily because 2020 included an $89.5 million lease-termination payment.
- Share-based compensation increased to $415.4 million from $321.0 million. It included a one-time $48.6 million charge related to co-founder Evan Sharp’s transition to a consulting role. The company also recorded $45.3 million of non-cash charitable contributions.
- Pinterest acquired video creation app Vochi for $45.9 million in cash consideration, including an $8.6 million indemnification holdback; $33.3 million was recorded as goodwill.
Outlook, risks and contingencies
Management did not provide specific revenue or earnings guidance in the supplied filing text. It said existing cash, cash equivalents, marketable securities and available revolving-credit capacity should be sufficient for working capital and capital expenditures for at least the next 12 months, while noting that additional capital could be needed later. The company reported $2.949 billion of remaining AWS purchase commitments through April 2029 and $323.6 million of operating lease commitments, including $57.9 million due within 12 months; management expects to meet the AWS commitment.
Management cautioned that post-pandemic changes in user behavior and engagement remain uncertain. Other principal risks include dependence on advertising, competition for users, creators and advertisers, privacy and data-protection rules and platform changes that affect ad targeting or measurement, reliance on Google and other traffic sources, and heavy reliance on AWS. The company also highlighted content regulation, cybersecurity, international expansion, talent and workplace-culture matters, and volatility in advertising demand and macroeconomic conditions.
The filing describes ordinary-course litigation and related claims. Pinterest stated it did not believe their ultimate resolution would have a material adverse effect on its business or financial results, while noting litigation can still entail costs and management distraction. A securities class action was dismissed and judgment entered in October 2021. Shareholder derivative matters relating to workplace discrimination allegations remained subject to settlement proceedings or a stay; the company said it did not expect a material financial impact.
Important facts for investors to verify
- Whether MAUs, engagement and search-driven acquisition stabilize after the 2021 declines, and whether ARPU gains can continue.
- How advertising growth, pricing and measurement perform as privacy rules and third-party platform policies change.
- The recurring impact of higher operating investment and substantial share-based compensation on GAAP profitability and dilution.
- The company’s ability to satisfy the large AWS minimum-spend commitment and manage cloud-service concentration.
- Developments in workplace-related litigation and initiatives, and any effect on costs, reputation or employee retention.
- Tax-attribute utilization: the filing reports substantial federal and state net operating loss carryforwards subject to possible limitations and a full valuation allowance on U.S. and Irish deferred tax assets.