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Pinterest (PINS) Q1 Loss Wider Than Expected, Revenues Beat

Zacks Equity Research

Pinterest PINS reported first-quarter 2020 non-GAAP loss of 10 cent per share, wider than the Zacks Consensus Estimate of a loss of 8 cents per share.

The company had reported loss of 32 cents in the year-ago quarter.

Revenues increased 34.7% year over year to $272 million and beat the Zacks Consensus Estimate by 1.9%.

Revenues from the United States jumped 26.7% to $237 million. International revenues soared 133.3% year over year to $35 million.

User Base & Advertising Business Expands in Q1

Monthly active users (MAUs) Global increased 26% to 367 million. Since mid-March, the company witnessed record levels of engagement globally (in impressions, searches, saves, board creation and visitation), with Pinners staying home as well as recent product innovations.

While United States MAUs increased 6% to 90 million, International MAUs increased 34% to 277 million.

Pinterest, Inc. Price, Consensus and EPS Surprise

The company’s expansion in nine additional countries, including the UK, Ireland, Canada, Australia, Singapore, India, the Philippines, Hong Kong and New Zealand contributed to international user base growth in the first quarter.

In the early days of physical isolation (starting in mid-March), use of Pinterest dipped as many U.S. and European users  adjusted to shelter in place but following that phase the company witnessed significant increases across multiple engagement metrics.

Average revenue per user (ARPU) Global increased 7% to 77 cents. ARPU United States and International jumped 18% and 76% on a year-over-year basis to $2.66 and 13 cents, respectively.

Growth in ARPU was primarily driven by an increase in the number of advertisements. Further, the price of advertisements increased on a year-over-year basis. Internalizing ads business, simplifying ad systems for smaller businesses and improving advertisers’ ability to measure the effectiveness of their ad spend were the key priorities in the first quarter.

Key Q1 Developments

Pinterest introduced a Today tab with curated topics and trending Pins to inspire Pinners to explore popular and timely ideas including expert information from the World Health Organization and Centers for Disease Control on topics like hand washing and other precautionary measures amid the coronavirus epidemic.

Pinterest also collaborated with American Academy of Pediatrics to bring the latter’s resources for parents to its platform.

Additionally, Pinterest launched Pinterest Lite in countries such as Peru, Argentina, Colombia, Chile and Mexico among others. Pinterest Lite is an option for users who want faster download on slower Internet.

New Verified Merchant Program launched with retailers like Quay Australia, Ruggable, Filson, Coyuchi and Lotuff Leather among others displays a special blue checkmark on their profiles, and provides eligibility for increased distribution within high-intent shopping experiences and metrics like conversion reporting.

Catalog feed uploads increased 144% sequentially in the first quarter, boosted in part by the migration of existing merchants participating in Shopify beta test and Verified Merchant Program.

In February, Pinners who engaged with organic shopping content on Pinterest, increased 44% year over year, and total organic traffic to retailers increased 2.3X, showing engagement gains even before users began sheltering in place.

Pinterest platform saw significant increase in search and saving on the platform as Pinners looked for practical solutions on how to educate and entertain their kids and how to clean during quarantine among others.

Moreover, the company’s partnership with Shopify SHOP is helping smaller merchants to get on Pinterest. Currently, the integration is live to all Shopify merchants in the United States and Canada.

With just a few clicks on the Shopify merchant dashboard, merchants can seamlessly set up their Pinterest Tag, upload their Product Catalogs to Pinterest and create Pinterest ad campaigns. However, the company does not expect this integration to significantly impact near-term revenues.

Operating Details

Pinterest’s first-quarter 2020 total expenses grew 69.4% year over year to $418 million, which includes $81 million of share-based compensation following its April 2019 IPO.

In the reported quarter, research and development expenses grew 101% to $145.7 million attributed to higher personnel and facilities-related costs.

Sales and marketing expenses surged 53% year over year to $117 million due to higher marketing expenses.

General and administrative expenses increased 132% year over year to $56 million.

Adjusted EBITDA loss was $53 million in first-quarter 2020. The company had reported adjusted EBITDA loss of $38 million in the year-ago quarter.

Non-GAAP costs and expenses grew 37% year over year to $336.7 million, attributable to headcount growth.

Loss from operations was $146 million compared with loss of $44.8 million in the year-ago quarter.

Balance Sheet

The company ended Mar 31, 2020 with cash, cash equivalents, and marketable securities were $1.74 billion compared with $1.71 billion in the previous quarter; no financial debt, and an undrawn $500 million revolving credit facility.

Guidance

Given the uncertainties related to the ongoing COVID-19 pandemic and the rapidly shifting macroeconomic conditions, the company has not provided guidance for 2020 revenues and adjusted EBITDA.

Pinterest expects an increase in operating expenses year over year in second-quarter 2020 but at a slower pace compared to the first quarter.

Zacks Rank & Stocks to Consider

Pinterest currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector include Cogent Communications Holdings, Inc. CCOI and Inphi Corporation IPHI. While Cogent Communications sports a Zacks Rank #1 (Strong Buy), Inphi carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cogent Communications and Inphi are set to report on May 7.

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Click to get this free report Cogent Communications Holdings, Inc. (CCOI) : Free Stock Analysis Report Inphi Corporation (IPHI) : Free Stock Analysis Report Shopify Inc. (SHOP) : Free Stock Analysis Report Pinterest, Inc. (PINS) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research