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Pinterest (PINS) Q2 Loss Narrows Y/Y, Revenues Increase

Zacks Equity Research

Pinterest PINS reported second-quarter 2019 non-GAAP loss of 6 cents per share that was narrower than the year-ago quarter loss of 27 cents.

Revenues surged 62.1% year over year to $261.2 million. Revenues from the United States jumped 55.6% to $238 million primarily due to higher advertisements revenues from emerging verticals and consumer packaged goods.

International revenues soared 200% year over year to $24 million.

The Zacks Consensus Estimate for the top and the bottom lines was pegged at $235 million and loss of $2.65, respectively.

Pinterest, Inc. Price, Consensus and EPS Surprise

Pinterest, Inc. Price, Consensus and EPS Surprise

Pinterest, Inc. price-consensus-eps-surprise-chart | Pinterest, Inc. Quote

User Base & Advertising Business Expands in Q2

MAUs (Monthly Average Users) Global increased 30% to 300 million. While United States MAUs increased 13% to 85 million, International MAUs soared 38% to 215 million.

Pinterest continued to focus on making the platform more relevant for users (called Pinners) by improving search recommendations and by adding more video content and products.

ARPU (Average Revenue Per User) Global surged 29% to 88 cents. ARPU United States and International jumped 41% and 123% on a year-over-year basis to $2.8 and 11 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 key priorities in the second quarter.

At the end of second-quarter 2019, Pinterest offered ads to users in 19 countries, up from 13 at the end of first-quarter 2019. New markets added were Denmark, Finland, Norway, Portugal, Sweden and Switzerland.

Revenues from large Canadian advertisers more than quadrupled year over year. The company wishes to replicate the same approach with investments made in France and Germany for 2019.

Additionally, Pinterest launched Mobile Ads Tools, a mobile version of advertising manager that boosted mobile signup activation rates.

Moreover, in the second quarter, the company integrated the Pinterest Tag with Google Tag Manager and other tag management and e-commerce platforms, making Pinterest Tag more accessible to medium & small businesses. These integrations provide a low-friction way for advertisers to install code and measure campaign performance. The number of tags added so far in 2019 is twice as many as the company added in full year 2018.

Also, the company enabled businesses to create visual ads with revamped Pin creation tools, including the ability to choose from pre-set aspect ratios of an image, crop and add text and logos.

Operating Details

Pinterest’s second-quarter 2019 total expenses grew 605% to $1.43 billion, which includes $1.13 billion of share-based compensation following its April 2019 IPO.

In the reported quarter, research and development expenses grew significantly to $801.9 million attributed to higher personnel and facilities-related costs.

Sales and marketing expenses surged 355.8% year over year to $296.9 million due to higher marketing expenses.

General and administrative expenses increased year over year to $224.2 million.

Adjusted EBITDA was negative $26 million compared with negative $31.9 million in the year-ago quarter, reflecting top-line growth.

Non-GAAP costs and expenses grew 48% year over year to $293 million, driven by headcount growth and increased sales coverage in the U.S. and International markets.

Loss from operations was $1.17 billion compared with loss of $41.4 million in the year-ago quarter.

Balance Sheet

As of Jun 30, 2019 cash, cash equivalents, and marketable securities were $1.85 billion compared with $642 million in the previous quarter.

Outlook

For 2019, Pinterest expects revenues between $1.055 billion and $1.080 billion, indicating growth in the range of 40-43% over 2018.

The Zacks Consensus Estimate is currently pegged at $1.07 billion.

Adjusted EBITDA is expected between negative $45 million and $70 million.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the broader technology sector are CACI International CACI, Ciena Corporation CIEN and Cisco Systems CSCO. Each of the stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CACI International and Cisco Systems are set to report their quarterly earnings on Aug 14. Ciena will report its quarterly earnings on Aug 29.

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