Pinterest(PINS) - 2024 Q2 - Quarterly Report

FORM 10-Q General Information This section provides general information about the Form 10-Q filing, including the company's identification and stock details - The document is a Quarterly Report on Form 10-Q for the period ended June 30, 2024, filed by Pinterest, Inc[2] - Pinterest, Inc. is a Delaware corporation with its principal executive offices in San Francisco, California[2] Trading and Stock Information | Metric | Value | | :---------------------------------- | :------------------- | | Trading Symbol | PINS | | Exchange | New York Stock Exchange | | Class A Common Stock Outstanding (July 24, 2024) | 603,566,773 shares | | Class B Common Stock Outstanding (July 24, 2024) | 82,628,809 shares | TABLE OF CONTENTS This section outlines the report's structure, detailing the financial and other information presented in Part I and Part II - The report is structured into two main parts: Part I - Financial Information and Part II - Other Information[3] - Part I includes Financial Statements, Management's Discussion and Analysis, Quantitative and Qualitative Disclosure About Market Risk, and Controls and Procedures[3] - Part II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities and Use of Proceeds, Other Information, and Exhibits[3] NOTE ABOUT FORWARD-LOOKING STATEMENTS AND SUMMARY RISK FACTORS This section provides important disclaimers regarding forward-looking statements and a high-level overview of the company's principal risk factors Note About Forward-Looking Statements This section cautions readers that the report contains forward-looking statements subject to substantial risks and uncertainties - Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause actual results to differ materially from historical or future results[4] - Key risks include general economic uncertainty, financial performance, ability to attract/retain users, product development, brand reputation, security compromises, competition, and challenges posed by AI[4] - Readers should not place undue reliance on these statements, which speak only as of the date they are made, and the company undertakes no obligation to update them[90] Summary of Risk Factors This section provides a high-level overview of the principal factors that make an investment in the company speculative or risky - Business Strategy and Growth risks include scaling the business, attracting/retaining users, dependence on advertising, content relevance, mission-driven decisions, competition, international expansion, and key personnel[8] - Data, Security and Privacy risks involve actual or perceived security compromises, complex and evolving data privacy regulations, and the ability to measure advertisement effectiveness[10][11] - Operation of Our Business and Third-Party Reliance risks highlight dependence on online application stores, internet search engines, third-party login providers, Amazon Web Services, and interoperability with mobile operating systems and web browsers[12] - Legal and Regulatory Matters risks cover liability for content, government restrictions, legal disputes, intellectual property protection, and changes in tax legislation[13] - Financial Statements and Performance risks include limited operating history, potential future operating losses, fluctuations in operating results, ability to obtain additional financing, and adverse global economic conditions[14] - Risks related to Our Common Stock involve the dual-class structure, trading price volatility, future offerings of debt or equity securities, and the intention not to pay dividends for the foreseeable future[16] LIMITATIONS OF KEY METRICS AND OTHER DATA This section defines key operational metrics like MAUs and ARPU, highlighting the inherent challenges and potential inaccuracies in their measurement - Monthly Active Users (MAUs) are defined as authenticated Pinterest users who visit the website, open the mobile application, or interact with Pinterest through browser/site extensions at least once during a 30-day period[18] - Average Revenue Per User (ARPU) is defined as total revenue in a given geography during a period divided by the average number of MAUs in that geography during the period[18] - The company uses MAUs and ARPU to assess business growth and health, but acknowledges inherent challenges in measuring usage across large global online and mobile populations, and estimates may change due to improvements in technology or methodology[18] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements (Unaudited) This item presents the unaudited condensed consolidated financial statements for Pinterest, Inc., including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with their accompanying notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $1,376,681 | $1,361,936 | | Marketable securities | $1,358,502 | $1,149,148 | | Accounts receivable, net | $664,293 | $763,159 | | Total current assets | $3,492,746 | $3,338,559 | | Total assets | $3,747,516 | $3,594,405 | | Total current liabilities | $367,703 | $317,090 | | Total liabilities | $549,463 | $503,725 | | Total stockholders' equity | $3,198,053 | $3,090,680 | Condensed Consolidated Statements of Operations This section presents the company's financial performance, detailing revenues, expenses, and net income or loss over specific periods | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :--------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $853,680 | $708,025 | $1,593,663 | $1,310,606 | | 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) | | Net income (loss) | $8,887 | $(34,942) | $(15,925) | $(243,521) | | Basic net income (loss) per share | $0.01 | $(0.05) | $(0.02) | $(0.36) | | Diluted net income (loss) per share | $0.01 | $(0.05) | $(0.02) | $(0.36) | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's comprehensive income or loss, including net income and other comprehensive income items | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income (loss) | $8,887 | $(34,942) | $(15,925) | $(243,521) | | Change in unrealized gain (loss) on available-for-sale marketable securities | $(110) | $(1,198) | $(1,531) | $2,758 | | Change in foreign currency translation adjustment | $680 | $(376) | $499 | $(45) | | Comprehensive income (loss) | $9,457 | $(36,516) | $(16,957) | $(240,808) | Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit - Total stockholders' equity as of June 30, 2024, was $3,198.1 million, up from $3,090.7 million as of December 31, 2023[176][178] - Share-based compensation for the six months ended June 30, 2024, was $358.9 million[178] - Repurchases of Class A common stock for the six months ended June 30, 2024, amounted to $(34.4) million[178] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Net Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $462,572 | $246,176 | | Net cash used in investing activities | $(214,275) | $(18,476) | | Net cash used in financing activities | $(233,542) | $(659,987) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $13,271 | $(431,212) | | Cash, cash equivalents and restricted cash, end of period | $1,381,803 | $1,186,448 | Notes to Condensed Consolidated Financial Statements These notes provide additional information and details regarding the accounting policies, financial instruments, commitments, equity, income taxes, and geographical data presented in the condensed consolidated financial statements Description of Business and Summary of Significant Accounting Policies This section describes the company's business operations and outlines the significant accounting policies used in preparing the financial statements - Pinterest operates as a visual search and discovery platform, generating revenue primarily through ads on its website and mobile application[212] - The condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP)[213] - There have been no material changes to the company's significant accounting policies from its Annual Report on Form 10-K for the year ended December 31, 2023[165] Fair Value of Financial Instruments This section details the fair value measurements of the company's financial instruments, categorized by valuation input levels - The fair values of marketable securities are classified within Level 1 or Level 2, determined using quoted market prices or alternative pricing sources with market observable inputs[217] Fair Value of Cash Equivalents and Marketable Securities (June 30, 2024) | Category | Level 1 (in thousands) | Level 2 (in thousands) | Total (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :------------------- | | Cash equivalents: | | | | | Money market funds | $1,141,896 | — | $1,141,896 | | Commercial paper | — | $130,088 | $130,088 | | U.S. treasury securities | $7,519 | — | $7,519 | | Marketable securities: | | | | | Corporate bonds | — | $545,856 | $545,856 | | U.S. treasury securities | $350,520 | — | $350,520 | | Commercial paper | — | $272,668 | $272,668 | | Certificates of deposit | — | $167,027 | $167,027 | | U.S. agency bonds | — | $13,381 | $13,381 | | Non-U.S. government and supranational bonds | — | $9,050 | $9,050 | Commitments and Contingencies This section discloses the company's contractual obligations, legal proceedings, and other potential liabilities - The company is involved in various lawsuits, claims, and proceedings in the ordinary course of business, but does not believe their ultimate resolution will have a material adverse effect on its financial position[190] - Pinterest has a purchase commitment with Amazon Web Services (AWS) to purchase at least $3,250.0 million of cloud services through April 2029[166] - As of June 30, 2024, the remaining contractual commitment with AWS is $1,440.2 million, which the company expects to meet[166] Stockholders' Equity This section provides further details on the company's equity structure, share-based compensation plans, and stock repurchase programs - The 2019 Omnibus Incentive Plan provides for the issuance of stock options, RSAs, RSUs, and other awards, with 170,323,989 shares of Class A common stock reserved for future issuance as of June 30, 2024[191] - As of June 30, 2024, unrecognized share-based compensation expense totaled $1,288.8 million, expected to be recognized over a weighted-average period of 2.2 years[155] - A stock repurchase program authorized up to $1.0 billion of Class A common stock repurchases, with $965.6 million remaining available as of June 30, 2024[226] Net Income (Loss) Per Share This section explains the calculation of basic and diluted net income or loss per share, including the treatment of potential dilutive securities - Basic and diluted net income (loss) per share are calculated using the two-class method for Class A and Class B common stock[197][255] - For periods with net losses, basic and diluted net income (loss) per share are the same[257] Weighted-Average Potential Shares Excluded from Diluted EPS (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Outstanding stock options | — | 14,723 | 11,884 | 14,973 | | Unvested restricted stock units and awards | 1,623 | 50,521 | 46,963 | 52,085 | | Total | 1,623 | 65,244 | 58,847 | 67,058 | Income Taxes This section details the company's income tax provisions, effective tax rates, and the impact of valuation allowances on deferred tax assets - Income tax benefits for the three and six months ended June 30, 2024, were not material, compared to $11.2 million and $21.1 million for the same periods in 2023, respectively[198] - The primary difference between the effective tax rate and the federal statutory rate is the full valuation allowance on federal, state, and foreign net operating losses and credits[198] - Given recent net income in the U.S., there is a reasonable possibility that a significant portion of the valuation allowance against U.S. deferred tax assets may be released within the next twelve months, resulting in a significant income tax benefit[260] Geographical Information This section provides a breakdown of the company's revenue and long-lived assets by geographical region Revenue Disaggregated by Geography (in thousands) | Region | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | U.S. and Canada | $633,607 | $549,653 | $1,180,191 | $1,021,474 | | Europe | $143,729 | $118,810 | $267,771 | $216,198 | | Rest of World | $76,344 | $39,562 | $145,701 | $72,934 | | Total revenue | $853,680 | $708,025 | $1,593,663 | $1,310,606 | Property and Equipment, Net and Operating Lease Right-of-Use Assets by Geography (in thousands) | Region | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :---------------- | | United States | $67,703 | $66,335 | | Ireland | $25,895 | $18,658 | | Mexico | $10,079 | $12,835 | | International | $20,300 | $26,516 | | Total | $123,977 | $124,344 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, analyzing key financial and operating metrics, trends, and liquidity Overview of Second Quarter Results This section provides a high-level summary of the company's financial and operational performance for the second quarter - Revenue for the three months ended June 30, 2024, was $853.7 million, an increase of 21% compared to the prior year[236] - Monthly active users (MAUs) reached 522 million, representing a 12% increase compared to June 30, 2023[265] Key Financial and Operating Results (Q2 2024) | Metric | Value (in millions) | | :------------------------------------------ | :------------------ | | Revenue | $853.7 | | Share-based compensation expense | $196.4 | | Total costs and expenses | $875.1 | | Loss from operations | $(21.4) | | Net income | $8.9 | | Adjusted EBITDA | $179.9 | | Cash, cash equivalents and marketable securities | $2,735.2 | | Headcount | 4,249 | Trends in User Metrics This section analyzes the company's user growth and engagement trends across different geographical regions - Global MAUs increased to 522 million as of June 30, 2024, primarily driven by investments in relevance and personalization since the second quarter of 2022[265][268] Quarterly Monthly Active Users (in millions) | Quarter | Global MAUs | U.S. and Canada MAUs | Europe MAUs | Rest of World MAUs | | :------ | :---------- | :------------------- | :---------- | :----------------- | | Q2'22 | 433 | 92 | 124 | 217 | | Q3'22 | 445 | 92 | 128 | 225 | | Q4'22 | 450 | 90 | 128 | 232 | | Q1'23 | 463 | 90 | 135 | 238 | | Q2'23 | 465 | 90 | 136 | 239 | | Q3'23 | 482 | 91 | 140 | 251 | | Q4'23 | 498 | 92 | 143 | 263 | | Q1'24 | 518 | 92 | 143 | 283 | | Q2'24 | 522 | 92 | 136 | 288 | Trends in Monetization Metrics This section analyzes the company's average revenue per user (ARPU) trends across different geographical regions - Global Average Revenue per User (ARPU) increased by 8% to $1.64 for the three months ended June 30, 2024, compared to the same period in 2023[270] Quarterly Average Revenue per User by Region | Quarter | Global ARPU | U.S. and Canada ARPU | Europe ARPU | Rest of World ARPU | | :------ | :---------- | :------------------- | :---------- | :----------------- | | Q2'22 | $1.32 | $5.11 | $0.86 | $0.10 | | Q3'22 | $1.53 | $5.82 | $0.91 | $0.11 | | Q4'22 | $2.00 | $8.07 | $1.23 | $0.14 | | Q1'23 | $1.46 | $5.92 | $0.91 | $0.10 | | Q2'23 | $1.54 | $6.05 | $0.91 | $0.12 | | Q3'23 | $1.61 | $6.13 | $1.01 | $0.12 | | Q4'23 | $1.96 | $7.60 | $1.23 | $0.15 | | Q1'24 | $1.56 | $6.46 | $0.86 | $0.11 | | Q2'24 | $1.64 | $6.85 | $1.03 | $0.13 | - U.S. and Canada ARPU increased by 16% to $6.85, Europe ARPU by 14% to $1.03, and Rest of World ARPU by 13% to $0.13 for Q2 2024, compared to Q2 2023[241] Non-GAAP Financial Measure (Adjusted EBITDA) This section defines and reconciles Adjusted EBITDA, a non-GAAP measure used to assess the company's operating performance - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operating results and for financial/operational decision-making, excluding certain non-cash and non-recurring items[271] - Adjusted EBITDA excludes depreciation and amortization, share-based compensation, interest income (expense), other income (expense), benefit from income taxes, and restructuring charges[298] Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 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 | Components of Results of Operations This section explains the primary components of the company's revenue and operating expenses - Revenue is generated by delivering ads on the website and mobile application, recognized when a user clicks on a CPC ad, views a CPM/CPD ad, or views a CPV ad[300] - Cost of revenue primarily includes expenses for hosting, personnel for operations, partner arrangements, transaction fees, and amortization of acquired intangible assets[273] - Research and development, sales and marketing, and general and administrative expenses primarily consist of personnel-related costs, including salaries, benefits, and share-based compensation[172][245][301] Three and Six Months Ended June 30, 2024 and 2023 This section provides a detailed comparative analysis of the company's financial results for the three and six months ended June 30, 2024 and 2023 - Revenue increased by 21% to $853.7 million for Q2 2024 and 22% to $1,593.7 million for H1 2024, driven by a 12% increase in MAUs and an 8% increase in ARPU[279][305] - Cost of revenue increased by 10% for Q2 2024 and 8% for H1 2024, primarily due to increased users and engagement, partially offset by infrastructure efficiency initiatives[307] - Research and development expenses increased by 16% for Q2 2024 and 11% for H1 2024, mainly due to higher share-based compensation and personnel expenses[282][308] - Sales and marketing expenses increased by 9% for Q2 2024 and 11% for H1 2024, primarily due to increased marketing expenses and personnel costs[282][308] - General and administrative expenses increased by 12% for Q2 2024 due to non-income-based taxes, but decreased by 29% for H1 2024 primarily due to $119.4 million in restructuring charges in 2023[309][161] - Net income for Q2 2024 was $8.9 million (compared to a net loss of $34.9 million in Q2 2023), and net loss for H1 2024 was $15.9 million (compared to $243.5 million in H1 2023)[313] Liquidity and Capital Resources This section discusses the company's cash position, sources of liquidity, capital commitments, and cash flow activities - As of June 30, 2024, the company had $2,735.2 million in cash, cash equivalents, and marketable securities[315] - The company has a $500.0 million revolving credit facility, amended in October 2023, and was in compliance with all covenants as of June 30, 2024[340][341] - A stock repurchase program authorized up to $1.0 billion of Class A common stock, with $965.6 million remaining available as of June 30, 2024[342] Net Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :----------------- | :-------- | :-------- | | Operating activities | $462,572 | $246,176 | | Investing activities | $(214,275) | $(18,476) | | Financing activities | $(233,542) | $(659,987) | - Net cash provided by operating activities increased by $216.4 million for H1 2024, primarily due to decreased net loss and increased accrued expenses[319] - Net cash used in investing activities increased by $195.8 million for H1 2024, mainly due to increased net purchases of marketable securities[344] - Net cash used in financing activities decreased by $426.4 million for H1 2024, primarily due to a decrease in Class A common stock repurchases[292] Critical Accounting Policies and Estimates This section highlights the accounting policies that require significant management judgment and estimates, such as revenue recognition - The preparation of condensed consolidated financial statements requires significant estimates and judgments, which can affect reported amounts and may differ materially from actual results[321] - Revenue recognition is a critical accounting policy, with revenue recognized after transferring control of promised goods or services, typically upon user interaction with an ad (click, view)[346][322] - For contracts with multiple performance obligations, the transaction price is allocated based on the relative standalone selling prices of each distinct obligation[347] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company is exposed to market risks from foreign currency exchange rates and interest rates, which could impact the fair value of its cash equivalents and marketable securities Foreign Currency Exchange Risk This section discusses the company's exposure to fluctuations in foreign currency exchange rates and their potential impact on financial results - The company's reporting currency is the U.S. dollar, but it faces foreign currency risks from revenue and operating expenses denominated in other currencies[326] - Fluctuations in foreign currency exchange rates have not materially affected the condensed consolidated financial statements for the periods presented[326] - The company has not engaged in hedging activities for foreign currency exchange risk, but may do so in the future[326] Interest Rate Risk This section discusses the company's exposure to interest rate fluctuations and their potential impact on the fair value of its investments - As of June 30, 2024, the company held $2,735.2 million in cash, cash equivalents, and marketable securities, primarily invested in short-duration fixed income securities[327] - Changes in interest rates affect both the interest income earned and the fair value of these investments[327] - A hypothetical 100 basis point increase in interest rates would have decreased the market value of these investments by $8.0 million as of June 30, 2024[327] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024, concluding they are effective Evaluation of Disclosure Controls and Procedures This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - The CEO and CFO evaluated the effectiveness of disclosure controls and procedures as of June 30, 2024[351] - They concluded that the disclosure controls and procedures are effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[351] Changes in Internal Control over Financial Reporting This section discloses any material changes in the company's internal control over financial reporting during the reporting period - There was no change in internal control over financial reporting during the period covered by this report that materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting[352] Limitations on Effectiveness of Controls and Procedures This section acknowledges the inherent limitations of any control system, emphasizing that controls provide only reasonable assurance - Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired control objectives[353] - The design of controls and procedures must reflect resource constraints, and management applies judgment in evaluating benefits relative to costs[353] PART II - OTHER INFORMATION This part covers legal proceedings, risk factors, equity security sales, other information, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in various legal proceedings, claims, and investigations in the ordinary course of business, but no material adverse effect on business or financial results is currently anticipated - Pinterest is involved in actual and threatened legal proceedings, claims, investigations, and government inquiries arising in the ordinary course of business[332] - These proceedings include matters related to intellectual property, data privacy, content regulation, consumer protection, securities, and employment[332] - While the results are inherently uncertain, the company does not believe there is a reasonable possibility that the final outcome of these matters will have a material adverse effect on its business or financial results[334] - Regardless of the outcome, litigation can adversely impact the company due to defense and settlement costs, diversion of management resources, and harm to reputation[334] Item 1A. Risk Factors This comprehensive section details various risks that could harm the company's business, reputation, revenue, financial results, and prospects Risks Related to our Business Strategy and Growth This section outlines risks associated with the company's business model, user acquisition, content management, competition, product development, and international operations - Substantially all revenue is derived from advertising; failure to attract/retain advertisers or reduced spending could harm business and financial results[357] - The company's ability to attract, retain, and engage its user base is critical; active user growth rate may decline, increasing dependence on user engagement and monetization efforts[384][388] - Failure to provide useful and relevant content, or to effectively remove objectionable content, could lead to a decline in user growth, retention, engagement, and loss of advertisers[364][391] - Significant competition exists for users and advertising revenue from large, established companies and emerging startups[369][375] - Inability to develop successful new products or improve existing ones, or investing in products that fail to attract users or generate revenue, could harm the business[378][431] - International expansion efforts face risks including political/economic instability, currency fluctuations, varying regulations, and difficulties in managing global operations[379][402] - Maintaining and enhancing a strong brand and reputation is critical; adverse publicity, user actions, or regulatory scrutiny could damage the brand and reduce user/advertiser base[407][408][409] - Continued development and use of AI technologies may result in reputational harm, liability, ethical concerns, and adverse consequences due to complexity, rapid evolution, and evolving regulatory landscape[442][443] Risks Related to Data, Security and Privacy This section details risks concerning data breaches, evolving privacy regulations, and limitations on data collection impacting advertising effectiveness - Compromises in security, whether actual or perceived, due to third-party actions, software bugs, cyberattacks, or employee error, could lead to loss of user/advertiser trust, legal/regulatory action, and significant costs[412][414] - The ability to attract and retain advertisers depends on collecting and using data to effectively deliver and accurately measure advertisements; limitations from browser/device changes (e.g., Apple's ITP, AppTrackingTransparency) hinder data collection and ad effectiveness measurement[415][418][419] - The company is subject to complex and evolving governmental regulations related to data privacy and protection (e.g., GDPR, CCPA/CPRA), which are subject to uncertain interpretation and can impose significant penalties for non-compliance[420][421][422] - Failure to comply with privacy policies or legal obligations, or security compromises, can result in governmental enforcement actions, litigation, financial penalties, negative publicity, and damage to brand and reputation[455] Risks Related to our Business Operations This section covers operational risks including infrastructure maintenance, reliance on third-party services, talent acquisition, and managing business growth - The business depends on maintaining and scaling its technology infrastructure, including speed and availability of service; failure to do so could harm business, revenue, and financial results[456][425] - A substantial portion of the technology infrastructure is provided by third parties (e.g., Amazon Web Services); any disruption or failure in these services could harm the ability to handle traffic or cause platform unavailability[26] - The failure to attract and retain highly qualified personnel, particularly engineers with expertise in computer vision, AI, and machine learning, or the loss of key personnel, could disrupt operations and harm the business[459][461] - Managing the growth of the business, including a flexible work model with a distributed workforce, presents challenges to management, operational/financial resources, and preserving workplace culture[404] Risks arising from our reliance on third parties This section details risks stemming from the company's dependence on external platforms, services, and technologies for user acquisition, app distribution, and infrastructure - The company depends on internet search engines (e.g., Google) to direct significant traffic and refer new users; changes in search algorithms or policies can lead to declines in traffic and user growth[29][463] - Reliance on major online application stores for app distribution means policy changes or new terms could require product modifications or harm the business[30] - Users access accounts via third-party login providers (e.g., Facebook, Apple, Google); discontinuations, breaches, or outages could lead to user access issues and decline in retention/engagement[32][465] - Heavy dependence on Amazon Web Services (AWS) for cloud computing infrastructure; any disruption, degradation, or interference with AWS services could negatively affect operations[33][466] - The platform must remain interoperable with popular mobile operating systems (Android, iOS) and web browsers (Chrome, Safari); changes to these systems could harm usage[35][468] - Technologies that block the display of ads could harm the business, revenue, and financial results, as advertising generates substantially all of the company's revenue[39][472] Risks relating to legal and regulatory matters This section addresses legal and regulatory challenges, including content liability, new legislative regimes, government restrictions, intellectual property disputes, and tax law changes - The company may be liable for content published on its platform, especially with new features like video, and this risk is enhanced in non-U.S. jurisdictions where liability protections may be unclear[473] - New regulatory regimes (e.g., EU Copyright Directive, EU Digital Services Act) and legislative proposals in the U.S. and internationally are increasing potential liability and compliance costs for online services[475][42] - Governmental actions to restrict or block access to the platform in certain countries could harm business, revenue, and financial results[44][73] - Involvement in legal disputes, including intellectual property claims, can be expensive, divert management attention, and if resolved adversely, could harm business and financial results[45][74][75] - Inability to protect intellectual property rights could diminish brand value and allow competitors to mimic technologies, harming business and financial results[479][48] - Use of 'open source' software could subject the company to litigation or require it to offer products for no cost or release proprietary source code[77][49] - Changes in U.S. or non-U.S. tax legislation (e.g., Tax Act, digital services tax, global minimum tax) could increase the worldwide effective tax rate and tax liabilities[78][482][50] Risks relating to our financial statements and performance This section highlights financial risks such as limited operating history, potential future losses, fluctuating results, measurement inaccuracies, financing needs, tax liabilities, and macroeconomic impacts - The company has a limited operating history with its current scale, making it difficult to forecast future results, and past performance may not be indicative of future operating performance[52][80] - The company has incurred operating losses in the past, anticipates increasing costs and operating expenses, and may incur future operating losses, potentially failing to maintain profitability[53][81] - Quarterly operating results are likely to fluctuate due to numerous factors, including revenue generation, ad relevancy, advertiser spending, seasonal fluctuations, and macroeconomic conditions[55][82] - User metrics and other estimates are subject to inherent measurement challenges and potential inaccuracies, which could harm the business, revenue, and financial results[56][84] - Inability to obtain additional financing if needed, or default on credit obligations, could interrupt operations and harm business, revenue, and financial results[58][86][88] - The company may have greater than anticipated tax liabilities due to changes in tax laws, jurisdiction mix, or challenges to tax positions, which could harm financial results[63][64][91] - The ability to use or benefit from net operating loss carryforwards and other tax attributes may be limited by annual limitations or ownership change rules, potentially causing them to expire before utilization[66][92] - Adverse global economic and financial events (e.g., inflation, recession fears) could cause disruptions and volatility, negatively impacting advertising spend and the company's financial condition[67][94] - Changes in generally accepted accounting principles in the United States or their interpretations could adversely affect revenue and financial results[95][119] Risks Related to Ownership of Our Class A Common Stock This section addresses risks pertinent to the company's stock, including its dual-class structure, price volatility, potential dilution, and lack of dividends - The dual-class structure of common stock concentrates voting control with Class B stockholders (approximately 73.2% as of June 30, 2024), limiting the ability of Class A stockholders to influence corporate matters[69][121] - The trading price of Class A common stock has been and may continue to be volatile, and stockholders could lose all or part of their investment due to various market and company-specific factors[100][126] - Future offerings of debt or equity securities, including stock issuances for equity awards or acquisitions, could dilute the economic and voting rights of existing stockholders and depress the market price of Class A common stock[104][105][106] - Delaware law and provisions in the company's governing documents could make a merger, tender offer, or proxy contest difficult, potentially depressing the market price of Class A common stock[131][132][133] - The amended and restated certificate of incorporation designates a state or federal court within Delaware as the exclusive forum for substantially all disputes between the company and its stockholders, which could limit stockholders' choice of judicial forum[109][134] - The company does not intend to pay dividends for the foreseeable future, requiring stockholders to rely on sales of Class A common stock after price appreciation for any future gains[111][136] - The stock repurchase program does not obligate the company to repurchase any specific amount and may not enhance long-term stockholder value, potentially affecting stock price volatility[68][120] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's purchases of equity securities, specifically Class A common stock, during the three months ended June 30, 2024 Issuer Purchases of Equity Securities (Three Months Ended June 30, 2024) | Period | Total number of shares purchased (1) | Average price paid (2) per share | Total number of shares purchased as part of publicly announced plans or programs | | :----------------------- | :----------------------------------- | :------------------------------- | :------------------------------------------------------------------------------- | | April 1 - April 30, 2024 | 51,584 | $33.09 | — | | May 1 - May 31, 2024 | 331,900 | $41.90 | 331,900 | | June 1 - June 30, 2024 | 472,397 | $43.33 | 472,397 | | Total | 855,881 | | 804,297 | - Shares were withheld from employees to satisfy tax withholding obligations on the release of restricted stock awards[137] - The publicly announced stock repurchase program was authorized by the board of directors on September 16, 2023, for up to $1.0 billion of Class A common stock[138] Item 5. Other Information This item discloses Rule 10b5-1 trading arrangements adopted by a director and an LLC associated with a co-founder, outlining their plans to sell Class A common stock - Gokul Rajaram, a member of the board of directors, adopted a Rule 10b5-1 trading plan on June 12, 2024, to sell up to 18,400 shares of Class A common stock between September 18, 2024, and August 20, 2025[139] - SFTC LLC adopted a Rule 10b5-1 trading plan on June 14, 2024, to sell up to 450,000 shares of Class A common stock[115] - SFTC LLC is owned by The Silbermann 2012 Irrevocable Trust, whose beneficiaries include certain immediate family members of Ben Silbermann[115] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and various Inline XBRL taxonomy extension documents - Exhibit 31.1 and 31.2 are Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)[116][145] - Exhibit 32.1 contains Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350[145] - The exhibits include various Inline XBRL Taxonomy Extension Documents (Instance, Schema, Definition Linkbase, Calculation Linkbase, Presentation Linkbase, Label Linkbase)[116][140][145] SIGNATURES This section contains the official signatures of the company's principal financial and accounting officers, certifying the accuracy of the Form 10-Q report - The Quarterly Report on Form 10-Q was signed on behalf of Pinterest, Inc. on July 30, 2024[146][147][118] - The report was signed by Julia Brau Donnelly, Chief Financial Officer (Principal Financial Officer)[147] - The report was also signed by Andrea Acosta, Chief Accounting Officer (Principal Accounting Officer)[118]