UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
_________________
For the quarterly period ended June 30, 2024
OR
For the transition period from to
Commission file number 001-38872
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of Principal Executive Offices, including zip code) | (Zip Code) | ||||
(415 ) 762-7100
Registrant’s Telephone Number, Including Area Code
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 24, 2024, there were 603,566,773 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 82,628,809 shares of the Registrant’s Class B common stock outstanding.
PINTEREST, INC.
TABLE OF CONTENTS
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| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
2
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve substantial risk and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “can,” “intends,” “plans,” “targets,” “forecasts,” “anticipates,” or similar expressions, or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, statements about:
•general economic uncertainty in global markets and a worsening of global economic conditions or low levels of economic growth, including inflation, stress in the banking industry, foreign exchange fluctuations and supply-chain issues;
•the effect of general economic and political conditions;
•our financial performance, including revenue, cost and expenses and cash flows;
•our ability to attract, retain and recover users and maintain and grow their level of engagement;
•our ability to provide content that is useful and relevant to users’ personal taste and interests;
•our ability to develop successful new products or improve existing ones;
•our ability to maintain and enhance our brand and reputation;
•potential harm caused by compromises in security, including our cybersecurity protections and resources and costs required to prevent, detect and remediate potential security breaches;
•potential harm caused by changes in online application stores or internet search engines’ methodologies, particularly search engine optimization methodologies and policies;
•discontinuation, disruptions or outages in third-party single sign-on access;
•our ability to compete effectively in our industry;
•our ability to scale our business, including our monetization efforts;
•our ability to attract and retain advertisers and scale our revenue model;
•our ability to attract and retain creators and publishers that create relevant and engaging content;
•our ability to develop effective products and tools for advertisers, including measurement tools;
•our ability to expand and monetize our platform internationally;
•our ability to effectively manage the growth of our business;
•our ability to continue to use and develop artificial intelligence (“AI”) as well as managing the challenges and risks posed by AI;
•our ability to successfully manage our flexible work model with a more distributed workforce;
•our lack of operating history and ability to sustain profitability;
•decisions that reduce short-term revenue or profitability or do not produce the long-term benefits we expect;
•fluctuations in our operating results;
•our ability to raise additional capital on favorable terms or at all;
•our ability to realize anticipated benefits from mergers and acquisitions, joint ventures, strategic partnerships and other investments;
•our ability to protect our intellectual property;
•our ability to receive, process, store, use and share data, and compliance with laws and regulations related to data privacy and content;
•current or potential litigation and regulatory actions involving us;
3
•our ability to comply with modified or new laws and regulations applying to our business, and potential harm to our business as a result of those laws and regulations;
•real or perceived inaccuracies in metrics related to our business;
•disruption of, degradation in or interference with our use of Amazon Web Services and our infrastructure; and
•our ability to attract and retain personnel.
These statements are based on our historical performance and on our current plans, estimates and projections in light of information currently available to us, and therefore you should not place undue reliance on them. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.
You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q. The factors identified above should not be construed as an exhaustive list of factors that could affect our future results and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. If any of these trends, risks or uncertainties actually occurs or continues, our business, revenue and financial results could be harmed, the trading price of our Class A common stock could decline and you could lose all or part of your investment.
Unless expressly indicated or the context requires otherwise, the terms "Pinterest," "company," "we," "us," and "our" in this document refer to Pinterest, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries. The term "Pinterest" may also refer to our products, regardless of the manner in which they are accessed. For references to accessing Pinterest on the "web" or via a "website," such terms refer to accessing Pinterest on personal computers. For references to accessing Pinterest on "mobile," such term refers to accessing Pinterest via a mobile application or via a mobile-optimized version of our website such as m.pinterest.com, whether on a mobile phone or tablet.
Summary of Risk Factors
The following summarizes the principal factors that make an investment in our company speculative or risky, all of which are more fully described in the Risk Factors section below. This summary should be read in conjunction with the Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our business. The following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts:
Business Strategy and Growth. Our strategic decisions and efforts to expand the business, including:
•our ability to scale our business for future growth;
•our ability to attract, grow, retain, recover and engage our user base;
•our dependence on advertising for substantially all of our revenue;
•providing content that is useful and relevant to users’ personal taste and interests;
•decisions consistent with our mission and values that may reduce our short- or medium-term operating results;
•removing objectionable content or blocking objectionable practices by advertisers or third parties;
•our ability to compete effectively for users, creators, publishers or advertisers;
•our ability to develop effective products and tools for advertisers;
•our further expansion and monetization of our platform internationally;
•effective management of our business growth;
•our acquisition of other businesses;
•our development of or investment in successful new products or improvements to existing one;
•our dependence on and ability to maintain and enhance a strong brand and reputation; and
•the attraction, retention, and loss of our key personnel and other highly qualified personnel.
4
Data, Security and Privacy.
•actual or perceived compromises in our security;
•the data, including personal information, we receive, process, store, use, and share, which subjects us to complex and evolving governmental regulation and other legal obligations related to data privacy, data protection and other matters; and
•the development of tools to accurately measure the effectiveness of advertisements on our platform and thereby attract and maintain advertisers.
Operation of Our Business. The manner in which we operate our business, including:
•the inherent challenges of measurements related to user metrics and other estimates; and
•our ability to maintain and scale our technology infrastructure, including the speed and availability of our service.
Third-Party Reliance. Our use and dependence on third-party businesses and products, or the impacts of third-party business and products, including:
•our dependence on online application stores and internet search engines, including their methodologies, policies, and results, to direct traffic and refer new users to our service;
•users’ ability to authenticate with our service through third-party login providers;
•our dependence on Amazon Web Services for the vast majority of our compute, storage, data transfer, and other services;
•effectively operating with mobile operating systems, web browsers, networks, regulations, and standards, which we do not control, and changes in our products or to those mobile operating systems, web browsers, networks, regulations or standards;
•our reliance on software, technologies, and related services from other parties; and
•technologies that can block the display of our ads.
Legal and Regulatory Matters. The legal and regulatory frameworks, actions, and requirements to which our business, products, services, and operations are subject, including:
•any liability as a result of content or information that is published or made available on our service;
•government action to restrict access to our service or certain of our products in their countries;
•our involvement in any legal disputes or other disputes that are expensive to support and may be resolved adversely;
•an ability to protect our intellectual property and our use of “open source” software; and
•the interpretation and application of U.S. and non-U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations.
Financial Statements and Performance. The preparation of our financial statements and our financial and operating performance, including:
•our limited operating history and previously incurred operating losses, anticipated increases to operating costs, and expenses and our ability to obtain or maintain profitability;
•fluctuations in our operating results from quarter to quarter;
•our ability to obtain additional financing, if needed and any default on our credit obligations;
•greater than anticipated tax liabilities;
•limitations in our ability to use or benefit from our net operating loss carryforwards and certain other tax attributes;
•the requirements of being a public company;
•adverse global economic and financial conditions; and
•changes in accounting principles generally accepted in the United States.
5
Our Common Stock. The rights, restrictions, and structure of, and actions that we may take that impact our common stock, including:
•the dual class structure of our common stock;
•trading price volatility of our Class A common stock;
•future offerings of debt or equity securities by us or existing stockholders that could adversely impact the market price of our Class A common stock;
•additional stock issuances, including in connection with settlement of equity awards, and any resulting dilution;
•provisions under Delaware law and our governing documents that could make a merger, tender offer, or proxy contest difficult;
•our certificate of incorporation’s designation of a state or federal court located within Delaware as the exclusive forum for substantially all disputes between us and our stockholders; and
•our intention not to pay dividends for the foreseeable future.
6
LIMITATIONS OF KEY METRICS AND OTHER DATA
The numbers for our key metrics, which include our monthly active users ("MAUs") and average revenue per user ("ARPU"), are calculated using internal company data based on the activity of user accounts. We define a MAU as an authenticated Pinterest user who visits our website, opens our mobile application or interacts with Pinterest through one of our browser or site extensions, such as the Save button, at least once during the 30-day period ending on the date of measurement. The number of MAUs do not include Shuffles users unless they would otherwise qualify as MAUs. Unless otherwise indicated, we present MAUs based on the number of MAUs measured on the last day of the current period. We measure monetization of our platform through our ARPU metric. We define ARPU as our total revenue in a given geography during a period divided by the average of the number of MAUs in that geography during the period. We calculate average MAUs based on the average of the number of MAUs measured on the last day of the current period and the last day prior to the beginning of the current period. We calculate ARPU by geography based on our estimate of the geography in which revenue-generating activities occur. We use these metrics to assess the growth and health of the overall business and believe that MAUs and ARPU best reflect our ability to attract, retain, engage and monetize our users, and thereby drive revenue. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world. In addition, we are continually seeking to improve our estimates of our user base, and such estimates may change due to improvements or changes in technology or our methodology.
7
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PINTEREST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
| June 30, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill and intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Class A common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total costs and expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Interest income (expense), net | |||||||||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||||||||
| Income (loss) before benefit from income taxes | ( | ( | ( | ||||||||||||||||||||
| Benefit from income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted-average shares used in computing net income (loss) per share: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||||||||||
| Change in unrealized gain (loss) on available-for-sale marketable securities | ( | ( | ( | ||||||||||||||||||||
| Change in foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
Pinterest, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Class A and Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Release of restricted stock units and issuance of restricted stock awards, net | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on release of restricted stock units and restricted stock awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Issuance of common stock for cash upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Repurchases of Class A common stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Class A and Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Release of restricted stock units and issuance of restricted stock awards, net | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on release of restricted stock units and restricted stock awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Issuance of common stock for cash upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
Repurchases of Class A common stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
Pinterest, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Class A and Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Release of restricted stock units and issuance of restricted stock awards, net | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on release of restricted stock units and restricted stock awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Issuance of common stock for cash upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Repurchases of Class A common stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Class A and Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
Release of restricted stock units and issuance of restricted stock awards, net | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares repurchased for tax withholdings on release of restricted stock units and restricted stock awards | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
Issuance of common stock for cash upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||
| Repurchases of Class A common stock | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
12
PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
| Impairment and abandonment charges for leases and leasehold improvements | |||||||||||
| Net amortization of investment premium and discount | ( | ( | |||||||||
| Other | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Operating lease right-of-use assets | |||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued expenses and other liabilities | ( | ||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Purchases of marketable securities | ( | ( | |||||||||
| Sales of marketable securities | |||||||||||
| Maturities of marketable securities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Repurchases of Class A common stock | ( | ( | |||||||||
| Shares repurchased for tax withholdings on release of restricted stock units and restricted stock awards | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental cash flow information | |||||||||||
| Cash paid for income taxes, net | $ | $ | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| Repurchases of Class A common stock in accrued expenses and other current liabilities | $ | $ | |||||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
| Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in prepaid expenses and other current assets | |||||||||||
| Restricted cash included in other assets | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
13
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Description of Business and Summary of Significant Accounting Policies
Description of Business
Pinterest was incorporated in Delaware in 2008 and is headquartered in San Francisco, California. Pinterest is a visual search and discovery platform positioned at the intersection of search, social and commerce. We generate revenue by delivering ads on our website and mobile application.
Basis of Presentation and Consolidation
The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited financial statements as of that date. We have condensed or omitted certain information and notes normally included in complete financial statements prepared in accordance with GAAP. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2023, which are included in our Annual Report on Form 10-K.
In our opinion, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the results for the interim periods presented, but they are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2024.
Reclassifications
Use of Estimates
Preparing our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect amounts reported in the condensed consolidated financial statements and accompanying notes. We base these estimates and judgments on historical experience and various other assumptions that we consider reasonable. GAAP requires us to make estimates and assumptions in several areas, including the fair values of financial instruments, leases, assets acquired and liabilities assumed through business combinations, share-based awards, and contingencies as well as the collectability of our accounts receivable, the useful lives of our intangible assets and property and equipment, the incremental borrowing rate we use to determine our operating lease liabilities, and revenue recognition, among others. Actual results could differ materially from these estimates and judgments.
Significant Accounting Policies
There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2023.
14
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Fair Value of Financial Instruments
The fair values of the financial instruments we measure at fair value on a recurring basis are as follows (in thousands):
| June 30, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| U.S. treasury securities | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| U.S. treasury securities | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| U.S. agency bonds | |||||||||||||||||||||||
| Non-U.S. government and supranational bonds | |||||||||||||||||||||||
| Prepaid expenses and other current assets: | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Restricted cash: | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| U.S. treasury securities | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| U.S. agency bonds | |||||||||||||||||||||||
| Non-U.S. government and supranational bonds | |||||||||||||||||||||||
| Prepaid expenses and other current assets: | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
| Restricted cash: | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
We classify our marketable securities within Level 1 or Level 2 because we determine their fair values using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
Gross unrealized gains and losses on our marketable securities were not material in the aggregate as of June 30, 2024 and December 31, 2023. We evaluated all available evidence and did not recognize any allowance for credit losses for our marketable securities as of June 30, 2024 and December 31, 2023.
15
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair value of our marketable securities by contractual maturity is as follows (in thousands):
| June 30, 2024 | |||||
| Due in one year or less | $ | ||||
| Due after one to five years | |||||
| Total | $ | ||||
Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.
3. Commitments and Contingencies
Purchase Commitments
In April 2021, we entered into a private pricing addendum with Amazon Web Services (“AWS”), which governs our use of cloud computing infrastructure provided by AWS. Under the pricing addendum, we are required to purchase at least $3,250.0 million of cloud services from AWS through April 2029. If we fail to do so, we are required to pay the difference between the amount we spend and the required commitment amount. As of June 30, 2024, our remaining contractual commitment is $1,440.2 million. We expect to meet our remaining commitment.
Legal Matters
We are involved in various lawsuits, claims and proceedings that arise in the ordinary course of business. While the results of legal matters are inherently uncertain, we do not believe there is a reasonable possibility that the ultimate resolution of these matters, either individually or in aggregate, will have a material adverse effect on our business, financial position, results of operations or cash flows.
4. Stockholders' Equity
Equity Incentive Plan
In June 2009, our board of directors adopted and approved our 2009 Stock Plan (the "2009 Plan"), which provides for the issuance of stock options, Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs") to qualified employees, directors and consultants. Stock options granted under our 2009 Plan have a maximum life of 10 years and an exercise price not less than 100 % of the fair market value of our common stock on the date of grant. RSUs granted under our 2009 Plan have a maximum life of seven years . No shares of our common stock were reserved for future issuance under our 2009 Plan as of June 30, 2024.
Our 2019 Omnibus Incentive Plan ("2019 Plan") became effective upon closing of our initial public offering and succeeds our 2009 Plan. Our 2019 Plan provides for the issuance of stock options, RSAs, RSUs and other equity- or cash-based awards to qualified employees, directors and consultants. Stock options granted under our 2019 Plan have a maximum life of 10 years and an exercise price not less than 100 % of the fair market value of our common stock on the date of grant. 170,323,989 shares of our Class A common stock were reserved for future issuance under our 2019 Plan as of June 30, 2024.
The number of shares of our Class A common stock available for issuance under the 2019 Plan will be increased by the number of shares of our Class B common stock subject to awards outstanding under our 2009 Plan that would, but for the terms of the 2019 Plan, have returned to the share reserves of the 2009 Plan pursuant to the terms of such awards, including as the result of forfeiture, repurchase, expiration or retention by us in order to satisfy an award’s exercise price or tax withholding obligations. In addition, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan will automatically increase on the first day of each fiscal year through and including January 1, 2029, in an amount equal to 5 % of the total number of shares of our Class A common stock and our Class B common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by our board of directors.
16
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Option Activity
Stock option activity during the six months ended June 30, 2024, was as follows (in thousands, except per share amounts):
| Stock Options Outstanding | ||||||||||||||||||||||||||
| Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value (1) | |||||||||||||||||||||||
| (in years) | ||||||||||||||||||||||||||
| Outstanding as of December 31, 2023 | $ | $ | ||||||||||||||||||||||||
Exercised | ( | |||||||||||||||||||||||||
| Forfeited | ( | |||||||||||||||||||||||||
| Outstanding as of June 30, 2024 | $ | $ | ||||||||||||||||||||||||
| Exercisable as of June 30, 2024 | $ | $ | ||||||||||||||||||||||||
(1)We calculate intrinsic value based on the difference between the exercise price of in-the-money-stock options and the fair value of our common stock as of the respective balance sheet date.
The total grant-date fair value of stock options vested during the six months ended June 30, 2024 and 2023, was $12.6 million and $14.2 million, respectively. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2024 and 2023 was $56.5 million and $29.4 million, respectively.
Restricted Stock Unit and Restricted Stock Award Activity
RSU and RSA activity during the six months ended June 30, 2024, was as follows (in thousands, except per share amounts):
| Restricted Stock Units and Restricted Stock Awards Outstanding | ||||||||||||||
| Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Outstanding as of December 31, 2023 | $ | |||||||||||||
Granted | ||||||||||||||
| Released | ( | |||||||||||||
Forfeited | ( | |||||||||||||
| Outstanding as of June 30, 2024 | $ | |||||||||||||
Share-Based Compensation
Share-based compensation expense during the three and six months ended June 30, 2024 and 2023, was as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||
General and administrative | ||||||||||||||||||||||||||
Total share-based compensation | $ | $ | $ | $ | ||||||||||||||||||||||
17
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of June 30, 2024, we had $1,288.8 million of unrecognized share-based compensation expense, which we expect to recognize over a weighted-average period of 2.2 years.
Stock Repurchase
On September 16, 2023, our board of directors authorized a stock repurchase program of up to $1.0 billion of our Class A common stock. Under the stock repurchase program, we are authorized to repurchase, from time-to-time, shares of our Class A common stock through open market purchases, in privately negotiated transactions or in such other manner as permitted by securities law and as determined by management at such time and in such amounts as management may decide. The program does not obligate us to repurchase any specific number of shares and may be modified, suspended or discontinued at any time. The timing, manner, price and amount of any repurchases are determined by management in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. During the six months ended June 30, 2024, we repurchased and retired 804,297 shares of our Class A common stock for an aggregate purchase price of $34.4 million. As of June 30, 2024, $965.6 million remains available for repurchases under the stock repurchase program.
5. Net Income (Loss) Per Share
We present net income (loss) per share using the two-class method required for multiple classes of common stock. Holders of our Class A and Class B common stock have identical rights except with respect to voting, conversion and transfer rights and therefore share equally in our net income or losses.
We calculate basic net income (loss) per share by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.
Diluted net income (loss) per share gives effect to all potential shares of common stock, including stock options, RSAs and RSUs, to the extent these are dilutive. The calculation of diluted net income (loss) of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income (loss) of Class B common stock does not assume the conversion of those shares to Class A common stock.
18
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We calculated basic and diluted net income (loss) per share as follows (in thousands, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Class A | Class B | Class A | Class B | Class A | Class B | Class A | Class B | ||||||||||||||||||||||||||||||||||||||||
Basic net income (loss) per share: | |||||||||||||||||||||||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average shares used in computing net income (loss) per share, basic | |||||||||||||||||||||||||||||||||||||||||||||||
Basic net income (loss) per share | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
Diluted net income (loss) per share: | |||||||||||||||||||||||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Reallocation of net income as a result of conversion of Class B to Class A common stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Reallocation of net income to Class B common stock | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Diluted net income (loss) | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| Denominator | |||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average shares used in computing net income (loss) per share, basic | |||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Class B to Class A common stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average effect of dilutive potential common stock | |||||||||||||||||||||||||||||||||||||||||||||||
Weighted-average shares used in computing net income (loss) per share, diluted | |||||||||||||||||||||||||||||||||||||||||||||||
Diluted net income (loss) per share | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
Basic net income (loss) per share is the same as diluted net income (loss) per share for the periods we reported net losses. We excluded the following weighted-average potential shares of common stock from our calculation of diluted net income (loss) per share because these would be anti-dilutive (in thousands):
19
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Outstanding stock options | |||||||||||||||||||||||
| Unvested restricted stock units and restricted stock awards | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
6. Income Taxes
We determine our income tax provision for interim periods using an estimate of our annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between our effective tax rate and the federal statutory rate is the full valuation allowance we have established on our federal, state and foreign net operating losses and credits. Income tax benefits are no 11.2 million and $21.1 million for the three and six months ended June 30, 2023, respectively.
The income tax benefits recorded for all periods presented were primarily driven by the pre-tax losses generated during the periods, partially offset by changes in our valuation allowance. All periods include the effects of the capitalization and amortization of research and development expenses as required by the 2017 Tax Cuts and Jobs Act.
Given our recent history of generating net income in the U.S., we believe that there is a reasonable possibility that within the next twelve months sufficient positive evidence may become available to allow us to determine that a significant portion of the valuation allowance recorded against our U.S. deferred tax assets should be released. The reversal would result in a significant income tax benefit for the period when we release the valuation allowance in the U.S. However, the exact timing and amount of the valuation allowance release are subject to change based on our actual operating results.
7. Geographical Information
Revenue disaggregated by geography based on our customers’ billing addresses was as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
U.S. and Canada(1) | $ | $ | $ | $ | ||||||||||||||||||||||
Europe(2) | ||||||||||||||||||||||||||
Rest of World | ||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
(1)United States revenue was $603.8 million and $518.5 million for the three months ended June 30, 2024 and 2023, respectively, and $1,126.4 million and $967.5 million for the six months ended June 30, 2024 and 2023, respectively. No individual country other than the United States exceeded 10% of our total revenue for any period presented.
(2)Europe includes Russia and Turkey.
20
PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our total deferred revenue was $21.5 million and $15.3 million as of June 30, 2024 and December 31, 2023, respectively.
Property and equipment, net and operating lease right-of-use assets by geography is as follows (in thousands):
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | |||||||||||||
United States | $ | $ | ||||||||||||
Ireland | ||||||||||||||
| Mexico | ||||||||||||||
International(1) | ||||||||||||||
| Total property and equipment, net and operating lease right-of-use assets | $ | $ | ||||||||||||
(1)Other than the United States, Ireland and Mexico, no other country exceeded 10% of our total property and equipment, net and operating lease right-of-use assets for any period presented.
21
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and “Note About Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.
Overview of Second Quarter Results
Our key financial and operating results as of and for the three months ended June 30, 2024 are as follows:
•Revenue was $853.7 million, an increase of 21% compared to the three months ended June 30, 2023.
•Monthly active users ("MAUs") were 522 million, an increase of 12% compared to June 30, 2023.
•Share-based compensation expense was $196.4 million, an increase of $26.8 million compared to the three months ended June 30, 2023.
•Total costs and expenses were $875.1 million.
•Loss from operations was $21.4 million.
•Net income was $8.9 million.
•Adjusted EBITDA was $179.9 million.
•Cash, cash equivalents and marketable securities was $2,735.2 million.
•Headcount was 4,249.
22
Trends in User Metrics
Monthly Active Users. We define a monthly active user as an authenticated Pinterest user who visits our website, opens our mobile application or interacts with Pinterest through one of our browser or site extensions, such as the Save button, at least once during the 30-day period ending on the date of measurement. The number of MAUs do not include Shuffles users unless they would otherwise qualify as MAUs. We present MAUs based on the number of MAUs measured on the last day of the current period. We calculate average MAUs based on the average of the number of MAUs measured on the last day of the current period and the last day prior to the beginning of the current period. MAUs are the primary metric by which we measure the scale of our active user base.
Quarterly Monthly Active Users
(in millions)
Note: U.S. and Canada, Europe and Rest of World may not sum to Global due to rounding. Europe includes Russia and Turkey for our reporting of Revenue, MAUs and ARPU by geographic region.
23
As of June 30, 2024, global MAUs increased compared to June 30, 2023 primarily due to our investments in relevance and personalization beginning in the second quarter of 2022.
Trends in Monetization Metrics
Revenue. We calculate revenue by user geography based on our estimate of the geographic location of our users when they perform a revenue-generating activity. The geography of our users affects our revenue and financial results because we currently only monetize certain countries and currencies and because we monetize different geographies at different average rates. Our revenue in U.S. and Canada and, to a lesser extent, Europe is higher primarily due to the relative size and maturity of the digital advertising markets in these geographies.
Quarterly Revenue
(in millions)
Note: Revenue by geography in the charts above is geographically apportioned based on our estimate of users' geographic location when they perform a revenue-generating activity. This allocation differs from our disclosure of revenue disaggregated by geography in the notes to our condensed consolidated financial statements where revenue is geographically apportioned based on our customers’ billing addresses. U.S. and Canada, Europe and Rest of World may not sum to Global and quarterly amounts may not sum to annual due to rounding.
24
Average Revenue per User (“ARPU”). We measure monetization of our platform through our average revenue per user metric. We define ARPU as our total revenue in a given geography during a period divided by average MAUs in that geography during the period. We calculate ARPU by geography based on our estimate of the geography in which revenue-generating activities occur. We present ARPU on a U.S. and Canada, Europe and Rest of World basis because we currently monetize users in different geographies at different average rates. Our ARPU in U.S. and Canada and, to a lesser extent, Europe is higher primarily due to the relative size and maturity of the digital advertising markets in these geographies.
Quarterly Average Revenue per User
For the three months ended June 30, 2024, global ARPU was $1.64, which represents an increase of 8% compared to the three months ended June 30, 2023. For the three months ended June 30, 2024, U.S. and Canada ARPU was $6.85, an increase of 16%, Europe ARPU was $1.03, an increase of 14%, and Rest of World ARPU was $0.13, an increase of 13% compared to the three months ended June 30, 2023.
We use MAUs and ARPU to assess the growth and health of the overall business and believe that these metrics best reflect our ability to attract, retain, engage and monetize our users, and thereby drive revenue.
25
Non-GAAP Financial Measure
To supplement our condensed consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, a financial measure which is not based on any standardized methodology prescribed by GAAP.
We define Adjusted EBITDA as net income (loss) adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest income (expense), net, other income (expense), net, benefit from income taxes and restructuring charges.
We use Adjusted EBITDA to evaluate our operating results and for financial and operational decision-making purposes. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that it excludes. We also believe Adjusted EBITDA provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key metrics we use for financial and operational decision-making. We are presenting Adjusted EBITDA to assist investors in seeing our operating results through the eyes of management and because we believe that this measure provides an additional tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry. However, our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income (loss), the nearest GAAP equivalent. For example, Adjusted EBITDA excludes:
•certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets, although these assets may have to be replaced in the future; and
•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with GAAP. The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net income (loss) | $ | 8,887 | $ | (34,942) | $ | (15,925) | $ | (243,521) | ||||||||||||||||||
| Depreciation and amortization | 4,920 | 5,071 | 9,781 | 11,283 | ||||||||||||||||||||||
| Share-based compensation | 196,433 | 169,630 | 358,906 | 312,752 | ||||||||||||||||||||||
| Interest (income) expense, net | (34,680) | (24,888) | (65,946) | (49,789) | ||||||||||||||||||||||
| Other (income) expense, net | 4,596 | (2,180) | 9,122 | (2,502) | ||||||||||||||||||||||
| Benefit from income taxes | (244) | (11,233) | (3,108) | (21,117) | ||||||||||||||||||||||
| Restructuring charges | — | 5,561 | — | 126,882 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 179,912 | $ | 107,019 | $ | 292,830 | $ | 133,988 | ||||||||||||||||||
26
Components of Results of Operations
Revenue. We generate revenue by delivering ads on our website and mobile application. Advertisers purchase ads directly with us or through their relationships with advertising agencies. We recognize revenue only after transferring control of promised goods or services to customers, which occurs when a user clicks on an ad contracted on a cost per click ("CPC") basis, views an ad contracted on a cost per thousand impressions ("CPM") basis or cost per day ("CPD") basis or views a video ad contracted on a cost per view ("CPV") basis. We recognize revenue over the service period for ads contracted on a CPD basis, which do not contain minimum impression guarantees.
Cost of Revenue. Cost of revenue consists primarily of expenses associated with the delivery of our service, including the cost of hosting our website and mobile application. Cost of revenue also includes personnel-related expense, including salaries, benefits and share-based compensation for employees on our operations teams, payments associated with partner arrangements, credit card and other transaction processing fees, amortization of acquired intangible assets and allocated facilities and other supporting overhead costs.
Research and Development. Research and development consists primarily of personnel-related expense, including salaries, benefits and share-based compensation for our engineers and other employees engaged in the research and development of our products, and allocated facilities and other supporting overhead costs.
Sales and Marketing. Sales and marketing consists primarily of personnel-related expense, including salaries, commissions, benefits and share-based compensation for our employees engaged in sales, sales support, marketing and customer service functions, advertising and promotional expenditures, professional services, amortization of acquired intangible assets and allocated facilities and other supporting overhead costs. Our marketing efforts also include user- and advertiser-focused marketing expenditures.
General and Administrative. General and administrative consists primarily of personnel-related expense, including salaries, benefits and share-based compensation for our employees engaged in finance, legal, human resources and other administrative functions, professional services, including outside legal and accounting services, charitable contributions and allocated facilities and other supporting overhead costs.
Interest and Other Income (Expense), Net. Interest and other income (expense), net consists primarily of interest earned on our cash equivalents and marketable securities and foreign currency exchange gains and losses.
Benefit From Income Taxes. Benefit from income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes adjusted for discrete items.
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest income (expense), net, other income (expense), net, benefit from income taxes and restructuring charges. See “Non-GAAP Financial Measure” for more information and for a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
27
Results of Operations
The following tables set forth our condensed consolidated statements of operations data (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenue | $ | 853,680 | $ | 708,025 | $ | 1,593,663 | $ | 1,310,606 | ||||||||||||||||||
Costs and expenses(1): | ||||||||||||||||||||||||||
| Cost of revenue | 184,856 | 168,740 | 365,947 | 339,666 | ||||||||||||||||||||||
| Research and development | 312,837 | 269,391 | 593,112 | 535,737 | ||||||||||||||||||||||
| Sales and marketing | 265,354 | 243,239 | 491,643 | 444,370 | ||||||||||||||||||||||
| General and administrative | 112,074 | 99,898 | 218,818 | 307,762 | ||||||||||||||||||||||
| Total costs and expenses | 875,121 | 781,268 | 1,669,520 | 1,627,535 | ||||||||||||||||||||||
| Loss from operations | (21,441) | (73,243) | (75,857) | (316,929) | ||||||||||||||||||||||
| Interest income (expense), net | 34,680 | 24,888 | 65,946 | 49,789 | ||||||||||||||||||||||
| Other income (expense), net | (4,596) | 2,180 | (9,122) | 2,502 | ||||||||||||||||||||||
| Income (loss) before benefit from income taxes | 8,643 | (46,175) | (19,033) | (264,638) | ||||||||||||||||||||||
| Benefit from income taxes | (244) | (11,233) | (3,108) | (21,117) | ||||||||||||||||||||||
| Net income (loss) | $ | 8,887 | $ | (34,942) | $ | (15,925) | $ | (243,521) | ||||||||||||||||||
Adjusted EBITDA(2) | $ | 179,912 | $ | 107,019 | $ | 292,830 | $ | 133,988 | ||||||||||||||||||
(1)Includes share-based compensation expense as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Cost of revenue | $ | 3,777 | $ | 2,740 | $ | 6,725 | $ | 5,049 | |||||||||||||||
| Research and development | 128,481 | 108,580 | 230,836 | 202,845 | |||||||||||||||||||
| Sales and marketing | 30,906 | 26,398 | 55,895 | 45,587 | |||||||||||||||||||
| General and administrative | 33,269 | 31,912 | 65,450 | 59,271 | |||||||||||||||||||
| Total share-based compensation | $ | 196,433 | $ | 169,630 | $ | 358,906 | $ | 312,752 | |||||||||||||||
(2)See “Non-GAAP Financial Measure” for more information and for a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
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The following table sets forth our condensed consolidated statements of operations data (as a percentage of revenue):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 22 | 24 | 23 | 26 | |||||||||||||||||||
| Research and development | 37 | 38 | 37 | 41 | |||||||||||||||||||
| Sales and marketing | 31 | 34 | 31 | 34 | |||||||||||||||||||
| General and administrative | 13 | 14 | 14 | 23 | |||||||||||||||||||
| Total costs and expenses | 103 | 110 | 105 | 124 | |||||||||||||||||||
| Loss from operations | (3) | (10) | (5) | (24) | |||||||||||||||||||
| Interest income (expense), net | 4 | 4 | 4 | 4 | |||||||||||||||||||
| Other income (expense), net | (1) | — | (1) | — | |||||||||||||||||||
| Income (loss) before benefit from income taxes | 1 | (7) | (1) | (20) | |||||||||||||||||||
| Benefit from income taxes | — | (2) | — | (2) | |||||||||||||||||||
| Net income (loss) | 1 | % | (5) | % | (1) | % | (19) | % | |||||||||||||||
Three and Six Months Ended June 30, 2024 and 2023
Revenue
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | % change | 2024 | 2023 | % change | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Revenue | $ | 853,680 | $ | 708,025 | 21 | % | $ | 1,593,663 | $ | 1,310,606 | 22 | % | |||||||||||||||||||||||
Revenue for the three and six months ended June 30, 2024 increased by $145.7 million and $283.1 million, respectively, compared to the three and six months ended June 30, 2023 primarily due to growth in demand from our conversion and consideration objectives. Revenue growth was primarily driven by a 12% increase in MAUs as well as 8% and 9% respective increases in ARPU for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023. The number of advertisements served increased by 35% and 36% for the three and six months ended June 30, 2024 while the price of advertisements decreased by 11% for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively.
Revenue based on our estimate of the geographic location of our users increased by 19% and 20% in U.S. and Canada to $672.9 million and $1,264.7 million, Europe revenue increased by 25% and 26% to $142.7 million and $260.7 million, and Rest of World revenue increased by 32% and 29% to $38.1 million and $68.3 million for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively.
Cost of Revenue
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | % change | 2024 | 2023 | % change | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 184,856 | $ | 168,740 | 10 | % | $ | 365,947 | $ | 339,666 | 8 | % | |||||||||||||||||||||||
| Percentage of revenue | 22 | % | 24 | % | 23 | % | 26 | % | |||||||||||||||||||||||||||
Cost of revenue for the three and six months ended June 30, 2024 increased by $16.1 million and $26.3 million, respectively compared to the three and six months ended June 30, 2023 primarily due to increased users and engagement offset by infrastructure efficiency initiatives.
29
Research and Development
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | % change | 2024 | 2023 | % change | ||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Research and development | $ | 312,837 | $ | 269,391 | 16 | % | $ | 593,112 | $ | 535,737 | 11 | % | |||||||||||||||||||||||
| Percentage of revenue | 37 | ||||||||||||||||||||||||||||||||||