Q1FALSE2020--12-310001506293100015062932020-01-012020-03-31xbrli:shares0001506293us-gaap:CommonClassAMember2020-04-300001506293us-gaap:CommonClassBMember2020-04-30iso4217:USD00015062932020-03-3100015062932019-12-31iso4217:USDxbrli:shares0001506293us-gaap:CommonClassAMember2020-03-310001506293us-gaap:CommonClassAMember2019-12-310001506293us-gaap:CommonClassBMember2019-12-310001506293us-gaap:CommonClassBMember2020-03-3100015062932019-01-012019-03-310001506293us-gaap:CommonStockMember2019-12-310001506293us-gaap:AdditionalPaidInCapitalMember2019-12-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001506293us-gaap:RetainedEarningsMember2019-12-310001506293us-gaap:CommonStockMember2020-01-012020-03-310001506293us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001506293us-gaap:RetainedEarningsMember2020-01-012020-03-310001506293us-gaap:CommonStockMember2020-03-310001506293us-gaap:AdditionalPaidInCapitalMember2020-03-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001506293us-gaap:RetainedEarningsMember2020-03-3100015062932018-12-310001506293us-gaap:CommonStockMember2018-12-310001506293us-gaap:AdditionalPaidInCapitalMember2018-12-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001506293us-gaap:RetainedEarningsMember2018-12-310001506293us-gaap:CommonStockMember2019-01-012019-03-310001506293us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001506293us-gaap:RetainedEarningsMember2019-01-012019-03-3100015062932019-03-310001506293us-gaap:CommonStockMember2019-03-310001506293us-gaap:AdditionalPaidInCapitalMember2019-03-310001506293us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310001506293us-gaap:RetainedEarningsMember2019-03-310001506293pins:A2009StockPlanMemberus-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-310001506293pins:A2019OmnibusIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-31pins:segment0001506293us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-03-310001506293us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-03-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-03-310001506293us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2020-03-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001506293us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2019-12-310001506293us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateBondSecuritiesMember2019-12-310001506293us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2019-12-310001506293us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001506293us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-31utr:sqft0001506293pins:A2009StockPlanMemberus-gaap:EmployeeStockOptionMember2020-01-012020-03-310001506293pins:A2009StockPlanMember2020-03-310001506293pins:A2019OmnibusIncentivePlanMemberus-gaap:EmployeeStockOptionMember2020-01-012020-03-310001506293us-gaap:CommonClassAMemberpins:A2019OmnibusIncentivePlanMember2020-03-31xbrli:pure0001506293pins:A2019OmnibusIncentivePlanMember2020-01-012020-03-310001506293us-gaap:RestrictedStockUnitsRSUMember2019-12-310001506293us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-310001506293us-gaap:RestrictedStockUnitsRSUMember2020-03-310001506293us-gaap:CostOfSalesMember2020-01-012020-03-310001506293us-gaap:CostOfSalesMember2019-01-012019-03-310001506293us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-03-310001506293us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-03-310001506293us-gaap:SellingAndMarketingExpenseMember2020-01-012020-03-310001506293us-gaap:SellingAndMarketingExpenseMember2019-01-012019-03-310001506293us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-03-310001506293us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-03-310001506293us-gaap:CommonClassAMember2020-01-012020-03-310001506293us-gaap:CommonClassBMember2020-01-012020-03-310001506293us-gaap:RedeemableConvertiblePreferredStockMember2020-01-012020-03-310001506293us-gaap:RedeemableConvertiblePreferredStockMember2019-01-012019-03-310001506293us-gaap:EmployeeStockOptionMember2020-01-012020-03-310001506293us-gaap:EmployeeStockOptionMember2019-01-012019-03-310001506293us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-310001506293us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-03-310001506293pins:RedeemableConvertiblePreferredStockWarrantsMember2020-01-012020-03-310001506293pins:RedeemableConvertiblePreferredStockWarrantsMember2019-01-012019-03-310001506293country:US2020-01-012020-03-310001506293country:US2019-01-012019-03-310001506293us-gaap:NonUsMember2020-01-012020-03-310001506293us-gaap:NonUsMember2019-01-012019-03-310001506293country:US2020-03-310001506293country:US2019-12-310001506293us-gaap:NonUsMember2020-03-310001506293us-gaap:NonUsMember2019-12-310001506293us-gaap:SubsequentEventMemberpins:RestrictedStockUnitsRSUsAndRestrictedStockAwardsRSAsMember2020-04-072020-04-070001506293us-gaap:SubsequentEventMemberpins:RestrictedStockUnitsRSUsAndRestrictedStockAwardsRSAsMember2020-04-07

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
_________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                     to                     
Commission file number 001-38872
PINS-20200331_G1.JPG
Pinterest, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 26-3607129
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
505 Brannan Street
San Francisco, California
94107
(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
Class A Common Stock, $0.00001 par value  PINS New York Stock Exchange

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.
Large accelerated filer 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 April 30, 2020, there were 403,489,955 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 182,966,393 shares of the Registrant’s Class B common stock outstanding.




PINTEREST, INC.
TABLE OF CONTENTS
Page
3
5
Item 1.
6
6
7
8
9
10
11
Item 2.
19
Item 3.
32
Item 4.
33
Item 1.
34
Item 1A.
35
Item 2.
63
Item 6.
64
65

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, and Section 21E of the Securities Exchange Act of 1934, as amended, 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,” “intends,” “plans”, “targets”, “forecasts” or “anticipates,” 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:
uncertainty regarding the duration and scope of the coronavirus referred to as the COVID-19 pandemic;
actions governments and businesses take in response to the pandemic, including actions that could affect levels of advertising activity;
the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity;
the pace of recovery when the COVID-19 pandemic subsides;
general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth;
the scope and impact of the COVID-19 pandemic on our planned investments, operations, expenses, revenue, cash flow, liquidity and users;
the effect of general economic and political conditions;
our financial performance, including revenue, cost of revenue and operating expenses and cash flows;
our ability to attract and retain Pinners and their level of engagement;
our ability to provide content that is useful and relevant to Pinners’ 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 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 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 lack of operating history and ability to attain and 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;
our ability to realize anticipated benefits from mergers and acquisitions, joint ventures, strategic partnerships and other investments;
our ability to protect our intellectual property;
3


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;
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, including under “Risk Factors” and 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.
4


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 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. We present MAUs based on the number of MAUs measured on the last day of the current period. 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 between 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. 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.

5

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PINTEREST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)


March 31, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 740,833    $ 649,666   
Marketable securities 995,875    1,063,679   
Accounts receivable, net of allowances of $5,889 and $2,851 as of March 31, 2020 and December 31, 2019, respectively
212,215    316,367   
Prepaid expenses and other current assets 32,565    37,522   
Total current assets 1,981,488    2,067,234   
Property and equipment, net 90,357    91,992   
Operating lease right-of-use assets 172,927    188,251   
Goodwill and intangible assets, net 14,319    14,576   
Restricted cash 23,791    25,339   
Other assets 5,730    5,925   
Total assets $ 2,288,612    $ 2,393,317   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 37,749    $ 34,334   
Accrued expenses and other current liabilities 133,050    141,823   
Total current liabilities 170,799    176,157   
Operating lease liabilities 158,298    173,392   
Other liabilities 21,035    20,063   
Total liabilities 350,132    369,612   
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.00001 par value, 6,666,667 shares authorized, 398,929 and 360,850 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively; Class B common stock, $0.00001 par value, 1,333,333 shares authorized, 182,911 and 209,054 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
   
Additional paid-in capital 4,288,603    4,229,778   
Accumulated other comprehensive income (loss) (2,207)   647   
Accumulated deficit (2,347,922)   (2,206,726)  
Total stockholders’ equity 1,938,480    2,023,705   
Total liabilities and stockholders’ equity $ 2,288,612    $ 2,393,317   



The accompanying notes are an integral part of these condensed consolidated financial statements.

6


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended March 31,
2020 2019
Revenue $ 271,940    $ 201,911   
Costs and expenses:
Cost of revenue 99,232    73,694   
Research and development 145,704    72,444   
Sales and marketing 117,027    76,394   
General and administrative 56,067    24,205   
Total costs and expenses 418,030    246,737   
Loss from operations (146,090)   (44,826)  
Interest income 7,151    4,059   
Interest expense and other income (expense), net (2,077)   (500)  
Loss before provision for income taxes (141,016)   (41,267)  
Provision for income taxes 180    153   
Net loss $ (141,196)   $ (41,420)  
Net loss per share attributable to common stockholders, basic and diluted
$ (0.25)   $ (0.33)  
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
576,302    127,346   








The accompanying notes are an integral part of these condensed consolidated financial statements.

7


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)



Three Months Ended March 31,
2020 2019
Net loss $ (141,196)   $ (41,420)  
Other comprehensive income (loss), net of taxes:
Change in unrealized gain (loss) on available-for-sale marketable securities (2,535)   1,189   
Change in foreign currency translation adjustment (319)    
Comprehensive loss $ (144,050)   $ (40,230)  








The accompanying notes are an integral part of these condensed consolidated financial statements.

8


Pinterest, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands)
(Unaudited)




Three Months Ended March 31, 2020
Redeemable Convertible Preferred Stock  
Class A and Class B Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of December 31, 2019 —    $ —    569,904    $   $ 4,229,778    $ 647    $ (2,206,726)   $ 2,023,705   
Release of restricted stock units
—    —    2,913    —    —    —    —    —   
Shares repurchased for tax withholdings on release of restricted stock units —    —    —    —    (44,090)   —    —    (44,090)  
Issuance of common stock for cash upon exercise of stock options, net
—    —    8,923    —    20,347    —    —    20,347   
Issuance of common stock related to charitable contributions
—    —    100    —    1,544    —    —    1,544   
Share-based compensation —    —    —    —    81,024    —    —    81,024   
Other comprehensive loss —    —    —    —    —    (2,854)   —    (2,854)  
Net loss —    —    —    —    —    —    (141,196)   (141,196)  
Balance as of March 31, 2020 —    $ —    581,840    $   $ 4,288,603    $ (2,207)   $ (2,347,922)   $ 1,938,480   

Three Months Ended March 31, 2019
Redeemable Convertible Preferred Stock  
Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of December 31, 2018 308,373    $ 1,465,399    127,298    $   $ 252,212    $ (1,421)   $ (845,355)   $ (594,563)  
Issuance of common stock for cash upon exercise of stock options, net
—    —    73    —    110    —    —    110   
Share-based compensation —    —    —    —    694    —    —    694   
Other comprehensive income —    —    —    —    —    1,190    —    1,190   
Net loss —    —    —    —    —    —    (41,420)   (41,420)  
Balance as of March 31, 2019 308,373    $ 1,465,399    127,371    $   $ 253,016    $ (231)   $ (886,775)   $ (633,989)  









The accompanying notes are an integral part of these condensed consolidated financial statements.

9


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)






Three Months Ended March 31,
2020 2019
Operating activities
Net loss $ (141,196)   $ (41,420)  
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 11,746    5,696   
Share-based compensation 81,024    694   
Other 2,719    (993)  
Changes in assets and liabilities:
Accounts receivable 100,991    61,329   
Prepaid expenses and other assets 6,624    510   
Operating lease right-of-use assets 10,879    6,427   
Accounts payable 2,613    7,481   
Accrued expenses and other liabilities (4,905)   (2,024)  
Operating lease liabilities (13,205)   (4,578)  
Net cash provided by operating activities 57,290    33,122   
Investing activities
Purchases of property and equipment and intangible assets (7,005)   (3,706)  
Purchases of marketable securities (257,593)   (113,952)  
Sales of marketable securities 72,043    28,953   
Maturities of marketable securities 250,074    84,883   
Other investing activities 316    —   
Net cash provided by (used in) investing activities 57,835    (3,822)  
Financing activities
Proceeds from exercise of stock options, net
20,347    110   
Shares repurchased for tax withholdings on release of restricted stock units (44,090)   —   
Other financing activities
—    (3,279)  
Net cash used in financing activities (23,743)   (3,169)  
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (214)    
Net increase in cash, cash equivalents, and restricted cash 91,168    26,139   
Cash, cash equivalents, and restricted cash, beginning of period 677,743    135,290   
Cash, cash equivalents, and restricted cash, end of period $ 768,911    $ 161,429   
Supplemental cash flow information
Accrued property and equipment $ 7,831    $ 4,484   
Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 1,242    $ 22,862   


Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents $ 740,833    $ 134,648   
Restricted cash included in prepaid expenses and other current assets 4,287    1,057   
Restricted cash 23,791    25,724   
Total cash, cash equivalents, and restricted cash $ 768,911    $ 161,429   








The accompanying notes are an integral part of these condensed consolidated financial statements.

10


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 discovery engine that people around the globe use to find the inspiration to create a life they love. We generate revenue by delivering ads on our website and mobile application.
Basis of Presentation and Consolidation
We prepared the accompanying condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of Pinterest, Inc. and its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.
The condensed consolidated balance sheet as of December 31, 2019 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, 2019, 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, 2020.
Reclassifications
We have reclassified certain amounts in prior periods to conform with current presentation.
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, assets acquired and liabilities assumed through business combinations, common stock prior to our IPO, 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.
Many of our estimates require increased judgment due to the significant volatility, uncertainty and economic disruption of the recent global COVID-19 pandemic. We will continue to monitor the effects of the COVID-19 pandemic, and our estimates and judgments may change materially as new events occur or additional information becomes available to us.
Segments
We operate as a single operating segment. Our chief operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis, accompanied by disaggregated information about our revenue, for purposes of making operating decisions, assessing financial performance and allocating resources.
Revenue Recognition
We generate revenue by delivering ads on our website and mobile application. 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 views




11



PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
a video ad contracted on a cost per view ("CPV") basis. We typically bill customers on a CPC, CPM or CPV basis, and our payment terms vary by customer type and location. The term between billing and payment due dates is not significant.
We occasionally offer customers free ad inventory and revenue is recognized only after satisfying our contractual performance obligations. When contracts with our customers contain multiple performance obligations, we allocate the overall transaction price, which is the amount of consideration to which we expect to be entitled in exchange for promised goods or services, to each of the distinct performance obligations based on their relative standalone selling prices. We generally determine standalone selling prices based on the effective price charged per contracted click, impression or view and we do not disclose the value of unsatisfied performance obligations because the original expected duration of our contracts is generally less than one year.
We record sales commissions in sales and marketing expense as incurred because we would amortize these over a period of less than one year.
Deferred revenue was not material as of March 31, 2020 and 2019.
Share-Based Compensation
Restricted stock units ("RSUs") granted under our 2009 Stock Plan (the "2009 Plan") are subject to both a service condition, which is typically satisfied over four years, and a performance condition, which was deemed satisfied upon the pricing of our IPO. We did not record any share-based compensation expense for our RSUs prior to our IPO because the performance condition had not yet been satisfied. Upon pricing our IPO, we recorded cumulative share-based compensation expense using the accelerated attribution method for those RSUs granted under our 2009 Plan for which the service condition had been satisfied at that date. We will record the remaining unrecognized share-based compensation expense over the remainder of the requisite service period.
RSUs granted under our 2019 Omnibus Incentive Plan (the "2019 Plan") are subject only to a service condition, which is typically satisfied over four years. We record share-based compensation expense for these RSUs on a straight-line basis over the requisite service period.
We measure RSUs based on the fair market value of our common stock on the grant date, and we account for forfeitures as they occur.
Leases and Operating Lease Incremental Borrowing Rate
We lease office space under operating leases with expiration dates through 2033. We determine whether an arrangement constitutes a lease and record lease liabilities and right-of-use assets on our condensed consolidated balance sheets at lease commencement. We measure lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or our incremental borrowing rate, which is the estimated rate we would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. We estimate our incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to our own. We measure right-of-use assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs we incur and (iii) tenant incentives under the lease. We begin recognizing rent expense when the lessor makes the underlying asset available to us, we do not assume renewals or early terminations unless we are reasonably certain to exercise these options at commencement, and we do not allocate consideration between lease and non-lease components.
For short-term leases, we record rent expense in our condensed consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets not held at fair value. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier
12


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
recognition of credit losses. We adopted ASU 2016-13 as of January 1, 2020, using the modified retrospective method, and while the effects of adoption on our condensed consolidated financial statements were not material, we will continue to monitor the effects of the COVID-19 pandemic on expected credit losses.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. We elected to early adopt ASU 2019-12 effective as of January 1, 2020, and the effects of adoption on our condensed consolidated financial statements were not material.
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):
March 31, 2020
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 310,815    $ —    $ —    $ 310,815   
Commercial paper —    88,923    —    88,923   
Marketable securities:
Corporate bonds —    418,412    —    418,412   
U.S. treasury securities 222,515    —    —    222,515   
Commercial paper —    159,177    —    159,177   
Asset-backed securities —    105,868    —    105,868   
Certificates of deposit —    89,903    —    89,903   
Prepaid expenses and other current assets:
Certificates of deposit —    4,287    —    4,287   
Restricted cash:
Certificates of deposit $ —    $ 23,791    $ —    $ 23,791   

December 31, 2019
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 214,413    $ —    $ —    $ 214,413   
Commercial paper —    105,354    —    105,354   
Corporate bonds —    3,791    —    3,791   
Certificates of deposit —    2,914    —    2,914   
Marketable securities:
Corporate bonds —    450,433    —    450,433   
U.S. treasury securities 201,640    —    —    201,640   
Commercial paper —    196,328    —    196,328   
Asset-backed securities —    114,599    —    114,599   
Certificates of deposit —    100,679    —    100,679   
Prepaid expenses and other current assets:
Certificates of deposit —    2,738    —    2,738   
Restricted cash:
Certificates of deposit $ —    $ 25,339    $ —    $ 25,339   

13


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 immaterial in the aggregate as of March 31, 2020 and December 31, 2019. We evaluated all available evidence and did not recognize any allowance for credit losses for our marketable securities as of March 31, 2020 and December 31, 2019. We will continue to monitor the effects of the COVID-19 pandemic on expected credit losses.
The fair value of our marketable securities by contractual maturity is as follows (in thousands):
March 31, 2020
Due in one year or less $ 721,044   
Due after one to five years 274,831   
Total $ 995,875   
Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.
3. Commitments and Contingencies
Commitments
In March 2019, we entered into a lease for approximately 490,000 square feet of office space to be constructed near our current headquarters campus in San Francisco, California. Expected delivery of the premises has been delayed, and we currently estimate that commencement and expiration will occur in 2025 and 2035, respectively. We may terminate the lease prior to commencement if certain contingencies are not satisfied. We will be subject to total non-cancelable minimum lease payments of approximately $440.0 million if these contingencies are met, and if the lease commences we will record a right-of-use asset and related lease liability of no more than that amount at lease commencement using our incremental borrowing rate at that date.
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 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.
Letters of Credit
We had $25.5 million of secured letters of credit outstanding as of March 31, 2020 and December 31, 2019. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in prepaid expenses and other current assets or restricted cash in our condensed consolidated balance sheets based on the term of the remaining restriction.
4. Share-Based Compensation
Equity Incentive Plan
In June 2009, our board of directors adopted and approved our 2009 Plan, which provides for the issuance of stock options, restricted stock and RSUs to qualified employees, directors and consultants. Stock options granted under our 2009 Stock 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 March 31, 2020.
Our 2019 Plan became effective upon closing of our IPO and succeeds our 2009 Plan. Our 2019 Plan provides for the issuance of stock options, restricted stock awards, 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.
14


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
117,448,816 shares of our Class A common stock were reserved for future issuance under our 2019 Plan as of March 31, 2020.
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 as of the closing of our IPO 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, commencing on January 1, 2020 and ending on (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.
Stock Option Activity
Stock option activity during the three months ended March 31, 2020, 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, 2019 56,966 $ 2.25    3.5 $ 933,299   
Granted 1,130 22.35   
Exercised (8,923) 2.28   
Outstanding as of March 31, 2020 49,173 $ 2.71    3.4 $ 625,770   
Exercisable as of March 31, 2020 48,105 $ 2.28    3.3 $ 632,999   
(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 three months ended March 31, 2020 and 2019, was $0.8 million and $0.6 million, respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019, was $179.1 million and $1.2 million, respectively.

The total grant-date fair value of stock options granted during the three months ended March 31, 2020 was not material. No stock options were granted during the three months ended March 31, 2019.
15


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Restricted Stock Unit Activity
RSU activity during the three months ended March 31, 2020, was as follows (in thousands, except per share amounts):
Restricted Stock Units Outstanding
Shares Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019 56,791 $ 20.19   
Granted 4,853 22.02   
Released (5,296) 19.04   
Forfeited (2,643) 19.20   
Outstanding as of March 31, 2020 53,705 $ 20.51   

Share-Based Compensation
Share-based compensation expense during the three months ended March 31, 2020 and 2019, was as follows (in thousands):
Three Months Ended March 31,
2020 2019
Cost of revenue $ 1,426    $ 15   
Research and development 48,906    626   
Sales and marketing 13,919    29   
General and administrative 16,773    24   
Total share-based compensation $ 81,024    $ 694   
As of March 31, 2020, we had $623.0 million of unrecognized share-based compensation expense, which we expect to recognize over a weighted-average period of 3.1 years.
5. Net Loss Per Share Attributable to Common Stockholders
We present net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities, and we consider all series of our redeemable convertible preferred stock participating securities. We have not allocated net loss attributable to common stockholders to our redeemable convertible preferred stock because the holders of our redeemable convertible preferred stock are not contractually obligated to share in our losses.
We calculate basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders gives effect to all potential shares of common stock, including common stock issuable upon conversion of our redeemable convertible preferred stock and redeemable convertible preferred stock warrants, stock options, RSUs and common stock warrants to the extent these are dilutive.
We calculated basic and diluted net loss per share attributable to common stockholders as follows (in thousands, except per share amounts):
16


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three Months Ended March 31,
2020 2019
Class A Class B Common
Numerator:
Net loss attributable to common stockholders $ (93,363)   $ (47,833)   $ (41,420)  
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 381,068    195,234    127,346   
Net loss per share attributable to common stockholders, basic and diluted $ (0.25)   $ (0.25)   $ (0.33)  
Basic net loss per share is the same as diluted net loss per share because we reported net losses for all periods presented. We excluded the following weighted-average potential shares of common stock from our calculation of diluted net loss per share attributable to common stockholders because these would be anti-dilutive (in thousands):
Three Months Ended March 31,
2020 2019
Redeemable convertible preferred stock —    308,373   
Outstanding stock options 52,581    76,584   
Unvested restricted stock units 56,412    81,498   
Redeemable convertible preferred stock warrants —    249   
Total 108,993    466,704   

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 taxes from international operations are not material for the three months ended March 31, 2020 and 2019.
On June 7, 2019, a three-judge panel from the U.S. Court of Appeals for the Ninth Circuit overturned the U.S. Tax Court's decision in Altera Corp. v. Commissioner and upheld the portion of the Treasury regulations under Section 482 of the Internal Revenue Code that requires related parties in a cost-sharing arrangement to share expenses related to share-based compensation. As a result of this decision, our gross unrecognized tax benefits increased to reflect the impact of including share-based compensation in cost-sharing arrangements. Recognizing our gross unrecognized tax benefits would not affect our effective tax rate as their recognition would be offset by the reversal of the related deferred tax assets, which are subject to a full valuation allowance. On July 22, 2019, the taxpayer filed a petition for a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019. On February 10, 2020, the taxpayer filed a petition to appeal the decision to the Supreme Court. We will continue to monitor future developments and their potential effects on our condensed consolidated financial statements.
17


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Geographical Information
Revenue disaggregated by geography based on our customers’ billing addresses is as follows (in thousands):
Three Months Ended March 31,
2020 2019
United States $ 234,950    $ 181,762   
International(1)
36,990    20,149   
Total revenue $ 271,940    $ 201,911   
(1)No individual country other than the United States exceeded 10% of our total revenue for any period presented.
Property and equipment, net and operating lease right-of-use assets by geography is as follows (in thousands):
March 31, December 31,
2020 2019
United States $ 249,261    $ 266,763   
International(1)
14,023    13,480   
Total property and equipment, net and operating lease right-of-use assets $ 263,284    $ 280,243   
(1)No individual country other than the United States exceeded 10% of our total property and equipment, net and operating lease right-of-use assets for any period presented.
8. Subsequent Events
On April 7, 2020, we granted 19,431,808 RSU and Restricted Stock Awards with an aggregate grant-date fair value of $292.6 million, which we expect to recognize as share-based compensation expense over a weighted-average period of 3.9 years.
18



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, including uncertainty regarding the duration and scope of the impact of the COVID-19 pandemic. 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 First Quarter Results
Our key financial and operating results as of and for the three months ended March 31, 2020 are as follows:
Revenue was $271.9 million, an increase of 35% compared to the three months ended March 31, 2019.
Monthly active users ("MAUs") were 367 million, an increase of 26% compared to March 31, 2019.
Share-based compensation expense was $81.0 million, an increase of $80.3 million compared to the three months ended March 31, 2019.
Total costs and expenses were $418.0 million.
Loss from operations was $146.1 million.
Net loss was $141.2 million.
Adjusted EBITDA was $(53.3) million.
Cash, cash equivalents and marketable securities were $1,736.7 million.
Headcount was 2,321.
Update on the COVID-19 Pandemic
The COVID-19 pandemic has resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines and shelter-in-place orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which has impacted our business and results of operations. We began to experience a sharp deceleration in revenue growth in the middle of March, which has continued into April, as advertisers responded to changes in demand related to the COVID-19 pandemic. In addition, as people began spending more time at home due to the pandemic, over the same time period, we have seen an increase in user engagement, driving higher levels of board creation and visitation, saves, searches and conversions. We are unable to predict the extent and duration of the impact of the COVID-19 pandemic on our business, operations and financial results. See "Risk Factors" and "Note About Forward-Looking Statements” for additional details. While we plan to continue to invest in our strategic priorities in the coming year as we pursue and prioritize long-term growth, we are also looking at making adjustments to our expenses where appropriate to be prudent in the current environment.
The full impact of the recent COVID-19 pandemic on our results of operations and overall financial performance remains uncertain and highly unpredictable. Our past results may not be indicative of our future performance. To the extent the pandemic continues to disrupt economic activity globally we, like other businesses, would not be immune as it could adversely affect our business, operations and financial results through prolonged decreases in advertising spend, depressed economic activity or declines in capital markets. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, advertisers, Pinners, partners and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our advertisers, Pinners, suppliers or vendors, or on our financial results.


19


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. 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)
PINS-20200331_G2.JPG
PINS-20200331_G3.JPG PINS-20200331_G4.JPG
Note: United States and International may not sum to Global due to rounding.

We have experienced significant growth in our global MAUs over the last several years. In particular, our international MAUs have grown significantly as a result of our focus on localizing content in international markets. We expect our international user growth to continue to outpace U.S. user growth in the near term.
20


Trends in Monetization Metrics
Revenue. We calculate revenue by user geography based on our estimate of the geography in which ad impressions are delivered. 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 the United States is higher primarily due to our decision to focus our earliest monetization efforts there and also due to the relative size and maturity of the U.S. digital advertising market.
Quarterly Revenue
(in millions)
PINS-20200331_G5.JPG
PINS-20200331_G6.JPG PINS-20200331_G7.JPG
Note: Revenue by geography in the charts above is geographically apportioned based on our estimate of the geographic location of our users 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. United States and International may not sum to Global and quarterly amounts may not sum to annual due to rounding.
21


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 international basis because we currently monetize users in different geographies at different average rates. U.S. ARPU is higher primarily due to our decision to focus our earliest monetization efforts there and also due to the relative size and maturity of the U.S. digital advertising market.
Quarterly Average Revenue per User
PINS-20200331_G8.JPG
PINS-20200331_G9.JPG PINS-20200331_G10.JPG
For the three months ended March 31, 2020, global ARPU was $0.77, which represents an increase of 7% compared to the three months ended March 31, 2019. For the three months ended March 31, 2020, U.S. ARPU was $2.66 and international ARPU was $0.13, which represent increases of 18% and 76%, respectively, compared to the three months ended March 31, 2019.
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.
22


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 loss adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest income, interest expense and other income (expense), net and provision for income taxes.
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 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 loss and our other financial results presented in accordance with GAAP. The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA (in thousands):
Three Months Ended March 31,
2020 2019
Net Loss $ (141,196)   $ (41,420)  
Depreciation and amortization 11,746    5,696   
Share-based compensation 81,024    694   
Interest income (7,151)   (4,059)  
Interest expense and other (income) expense, net 2,077    500   
Provision for income taxes 180    153   
Adjusted EBITDA $ (53,320)   $ (38,436)  


23


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 CPC basis, views an ad contracted on a CPM basis or views a video ad contracted on a CPV basis.
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, 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, business development and customer service functions, advertising and promotional expenditures, professional services 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, and allocated facilities and other supporting overhead costs.
Other Income (Expense), Net. Other income (expense), net consists primarily of interest earned on our cash equivalents and marketable securities.
Provision for Income Taxes. Provision for income taxes consists primarily of income taxes in foreign jurisdictions, U.S. federal and state income taxes adjusted for discrete items.
Adjusted EBITDA. We define Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest and other income (expense), net and provision for income taxes. See “Non-GAAP Financial Measure” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
24


Results of Operations
The following tables set forth our condensed consolidated statements of operations data (in thousands):
Three Months Ended March 31,
2020 2019
Revenue $ 271,940    $ 201,911   
Costs and expenses (1):
Cost of revenue 99,232    73,694   
Research and development 145,704    72,444   
Sales and marketing 117,027    76,394   
General and administrative 56,067    24,205   
Total costs and expenses 418,030    246,737   
Loss from operations (146,090)   (44,826)  
Interest income 7,151    4,059   
Interest expense and other income (expense), net (2,077)   (500)  
Loss before provision for income taxes (141,016)   (41,267)  
Provision for income taxes 180    153   
Net loss $ (141,196)   $ (41,420)  
Adjusted EBITDA (2)
$ (53,320)   $ (38,436)  
(1)Includes share-based compensation expense as follows (in thousands): 
Three Months Ended March 31,
2020 2019
Cost of revenue $ 1,426    $ 15   
Research and development 48,906    626   
Sales and marketing 13,919    29   
General and administrative 16,773    24   
Total share-based compensation $ 81,024    $ 694   
(2)See “Non-GAAP Financial Measure” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
25


The following table sets forth our condensed consolidated statements of operations data (as a percentage of revenue):
Three Months Ended March 31,
2020 2019
Revenue 100  % 100  %
Costs and expenses:
Cost of revenue 36    36   
Research and development 54    36   
Sales and marketing 43    38   
General and administrative 21    12   
Total costs and expenses 154    122   
Loss from operations (54)   (22)  
Interest income    
Interest expense and other income (expense), net (1)   —   
Loss before provision for income taxes (52)   (20)  
Provision for income taxes —    —   
Net loss (52) % (21) %

Three Months Ended March 31, 2020 and 2019
Revenue
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Revenue $ 271,940    $ 201,911    35  %
Revenue for the three months ended March 31, 2020 increased by $70.0 million compared to the three months ended March 31, 2019. Revenue growth was driven by a 7% increase in APRU supported by a 26% increase in MAUs. ARPU growth was driven by higher monetization of our user base largely due to an increase in advertising demand from new and existing advertisers on our platform. This resulted in an increase in the number of advertisements served as well as an increase in the price of advertisements, but the impact of the latter was not significant.
Revenue based on our estimate of the geographic location of our users increased by 27% in the United States to $236.8 million and by 136% internationally to $35.1 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. For the three months ended March 31, 2020, U.S. revenue growth was driven by an 18% increase in U.S. ARPU supported by a 6% increase in U.S. MAUs, and international revenue growth was driven by a 76% increase in international ARPU and a 34% increase in international MAUs.
Cost of Revenue
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Cost of revenue $ 99,232    $ 73,694    35  %
Percentage of revenue 36  % 36  %
Cost of revenue for the three months ended March 31, 2020 increased by $25.5 million compared to the three months ended March 31, 2019. The increase was primarily due to higher absolute hosting costs due to user growth.
26


Research and Development
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Research and development $ 145,704    $ 72,444    101  %
Percentage of revenue 54  % 36  %
Research and development for the three months ended March 31, 2020 increased by $73.3 million compared to the three months ended March 31, 2019. The increase was primarily due to a $48.3 million increase in share-based compensation expense and a 21% increase in average headcount, which drove higher personnel and facilities-related expenses.
Sales and Marketing
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Sales and marketing $ 117,027    $ 76,394    53  %
Percentage of revenue 43  % 38  %
Sales and marketing for the three months ended March 31, 2020 increased by $40.6 million compared to the three months ended March 31, 2019. The increase was primarily due to a $13.9 million increase in share-based compensation expense and a 36% increase in average headcount, which drove higher personnel and facilities-related expenses.
General and Administrative
Three Months Ended March 31,
2020 2019 % change
(in thousands)
General and administrative $ 56,067    $ 24,205    132  %
Percentage of revenue 21  % 12  %
General and administrative for the three months ended March 31, 2020 increased by $31.9 million compared to the three months ended March 31, 2019. The increase was primarily due to a $16.7 million increase in share-based compensation expense and a 21% increase in average headcount, which drove higher personnel and facilities-related expenses.
Other Income (Expense), Net
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Interest income $ 7,151    $ 4,059    76  %
Interest expense and other income (expense) (2,077)   (500)   315  %
Other income (expense), net $ 5,074    $ 3,559    43  %
Other income (expense), net for the three months ended March 31, 2020 increased by $1.5 million compared to the three months ended March 31, 2019. The increase was primarily due to higher returns on our marketable securities as a result of higher invested balances following our investment of the proceeds of our IPO.
27


Provision for Income Taxes
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Provision for income taxes $ 180    $ 153    18  %
Provision for income taxes was primarily due to profits generated by our foreign subsidiaries.
Net Loss and Adjusted EBITDA
Three Months Ended March 31,
2020 2019 % change
(in thousands)
Net loss $ (141,196)   $ (41,420)   (241) %
Adjusted EBITDA $ (53,320)   $ (38,436)   (39) %
Net loss for the three months ended March 31, 2020 was $141.2 million, as compared to $41.4 million for the three months ended March 31, 2019. Adjusted EBITDA was $(53.3) million for the three months ended March 31, 2020, as compared to $(38.4) million for the three months ended March 31, 2019, due to the factors described above. See “Non-GAAP Financial Measure” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
28


Liquidity and Capital Resources
We have historically financed our operations primarily through sales of our stock and payments received from our customers. Our primary uses of cash are personnel-related costs and the cost of hosting our website and mobile application. As of March 31, 2020, we had $1,736.7 million in cash, cash equivalents and marketable securities. Our cash equivalents and marketable securities are primarily invested in short-duration fixed income securities, including government and investment-grade corporate debt securities and money market funds. As of March 31, 2020, $33.5 million of our cash and cash equivalents was held by our foreign subsidiaries.
In November 2018, we entered into a five-year $500.0 million revolving credit facility with an accordion option which, if exercised, would allow us to increase the aggregate commitments by the greater of $100.0 million and 10% of our consolidated total assets, provided we are able to secure additional lender commitments and satisfy certain other conditions. Interest on any borrowings under the revolving credit facility accrues at either LIBOR plus 1.50% or at an alternative base rate plus 0.50%, at our election, and we are required to pay an annual commitment fee that accrues at 0.15% per annum on the unused portion of the aggregate commitments under the revolving credit facility.
The revolving credit facility also allows us to issue letters of credit, which reduce the amount we can borrow. We are required to pay a fee that accrues at 1.50% per annum on the average aggregate daily maximum amount available to be drawn under any outstanding letters of credit.
The revolving credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to incur indebtedness, grant liens, make distributions to holders of our stock or the stock of our subsidiaries, make investments or engage in transactions with our affiliates. The revolving credit facility also contains two financial maintenance covenants: a consolidated total assets covenant and a minimum liquidity balance of $350.0 million, which includes any available borrowing capacity. The obligations under the revolving credit facility are secured by liens on substantially all of our domestic assets, including certain domestic intellectual property assets. We are in compliance with all covenants and there were no amounts outstanding under this facility as of March 31, 2020.
We believe our existing cash, cash equivalents and marketable securities and amounts available under our revolving credit facility will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we will continue to monitor the effects of COVID-19 on our working capital needs and may require additional capital resources in the future. In addition, the recent COVID-19 pandemic has caused disruption in the capital markets. It could make financing more difficult and/or expensive and we may not be able to obtain such financing on terms acceptable to us or at all.
For the three months ended March 31, 2020 and 2019, our net cash flows were as follows (in thousands):
Three Months Ended March 31,
2020 2019
Net cash provided by (used in):
Operating activities $ 57,290    $ 33,122   
Investing activities $ 57,835    $ (3,822)  
Financing activities $ (23,743)   $ (3,169)  
29


Operating Activities
Cash flows from operating activities consist of our net loss adjusted for certain non-cash reconciling items, such as share-based compensation expense, depreciation and amortization, and changes in our operating assets and liabilities. Net cash provided by operating activities increased by $24.2 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to an increase in collections of accounts receivable offset by an increase in our net loss after adjusting for non-cash reconciling items.
Investing Activities
Cash flows from investing activities consist of capital expenditures for improvements to new and existing office spaces. We also actively manage our operating cash and cash equivalent balances and invest excess cash in short-duration marketable securities, the sales and maturities of which we use to fund our ongoing working capital requirements. Net cash provided by investing activities increased by $61.7 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to increased proceeds from sales and maturities of marketable securities offset by increased purchases of marketable securities.
Financing Activities
Cash flows from financing activities consist of tax remittances on release of RSUs and proceeds from the exercise of stock options. Net cash used in financing activities increased by $20.6 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to tax remittances on release of RSUs offset by proceeds from the exercise of stock options.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2020.
Contractual Obligations
In March 2019, we entered into a lease for approximately 490,000 square feet of office space to be constructed near our current headquarters campus in San Francisco, California. Expected delivery of the premises has been delayed, and we currently estimate that commencement and expiration dates will occur in 2025 and 2035, respectively. We may terminate the lease prior to commencement if certain contingencies are not satisfied. We will be subject to total non-cancelable minimum lease payments of approximately $440.0 million if these contingencies are met, and we will record a right-of-use asset and related lease liability of no more than that amount at lease commencement using our incremental borrowing rate at that date.
There have been no other material changes to our non-cancelable contractual commitments since December 31, 2019.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. Preparing our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as related disclosures. Because these estimates and judgments may change from period to period, actual results could differ materially, which may negatively affect our financial condition or results of operations. We base our estimates and judgments on historical experience and various other assumptions that we consider reasonable, and we evaluate these estimates and judgments on an ongoing basis. We refer to such estimates and judgments, discussed further below, as critical accounting policies and estimates.
Many of our estimates require increased judgment due to the significant volatility, uncertainty and economic disruption of the recent global COVID-19 pandemic . We will continue to monitor the effects of the COVID-19 pandemic, and our estimates and judgments may change materially as new events occur or additional information becomes available to us.
Refer to Note 1 to our condensed consolidated financial statements for further information on our other significant accounting policies.
30


Revenue Recognition
We generate revenue by delivering ads on our website and mobile application. 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 CPC basis, views an ad contracted on a CPM basis or views a video ad contracted on a CPV basis. We typically bill customers on a CPC, CPM or CPV basis, and our payment terms vary by customer type and location. The term between billing and payment due dates is not significant.
We occasionally offer customers free ad inventory and revenue is recognized only after satisfying our contractual performance obligations. When contracts with our customers contain multiple performance obligations, we allocate the overall transaction price, which is the amount of consideration to which we expect to be entitled in exchange for promised goods or services, to each of the distinct performance obligations based on their relative standalone selling prices. We generally determine standalone selling prices based on the effective price charged per contracted click, impression or view, and we do not disclose the value of unsatisfied performance obligations because the original expected duration of our contracts is generally less than one year.
Share-Based Compensation
RSUs granted under our 2009 Plan are subject to both a service condition, which is typically satisfied over four years, and a performance condition, which was deemed satisfied upon the pricing of our IPO. We did not record any share-based compensation expense for our RSUs prior to our IPO because the performance condition had not yet been satisfied. Following the closing of our IPO, we recorded cumulative share-based compensation expense using the accelerated attribution method for those RSUs granted under our 2009 Plan for which the service condition had been satisfied at that date. We will record the remaining unrecognized share-based compensation expense over the remainder of the requisite service period.
RSUs granted under our 2019 Plan are subject to a service condition only, which is typically satisfied over four years. We recognize share-based compensation expense on these RSUs on a straight-line basis over the requisite service period.
We measure RSUs based on the fair market value of our common stock on the grant date, and we account for forfeitures as they occur.
Leases and Operating Lease Incremental Borrowing Rate
We lease office space under operating leases with expiration dates through 2035. We determine whether an arrangement constitutes a lease and record lease liabilities and right-of-use assets on our condensed consolidated balance sheets at lease commencement. We measure lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or our incremental borrowing rate, which is the estimated rate we would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. We estimate our incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to our own. We measure right-of-use assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs we incur and (iii) tenant incentives under the lease. We begin recognizing rent expense when the lessor makes the underlying asset available to us, we do not assume renewals or early terminations unless we are reasonably certain to exercise these options at commencement, and we do not allocate consideration between lease and non-lease components.
Recent Accounting Pronouncements
Refer to Note 1 to our condensed consolidated financial statements for recent accounting pronouncements.
31


Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks, including changes in foreign currency exchange and interest rates, in the ordinary course of our business.
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar, and the functional currency of our subsidiaries is either their local currency or the U.S. dollar, depending on the circumstances. While the majority of our revenue and operating expenses are denominated in U.S. dollars, we have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We have experienced and will continue to experience fluctuations in our net loss as a result of transaction gains or losses related to revaluing certain current asset and current liability balances denominated in currencies other than the functional currency of the subsidiaries in which they are recorded. To date, these fluctuations have not been material. We have not engaged in hedging activities relating to our foreign currency exchange risk, although we may do so in the future. We do not believe a 10% increase or decrease in the relative value of the U.S. dollar would have materially affected our condensed consolidated financial statements as of and for the three months ended March 31, 2020.
Interest Rate Risk
As of March 31, 2020, we held cash, cash equivalents and marketable securities of $1,736.7 million. Our cash equivalents and marketable securities primarily consist of short-duration fixed income securities, including government and investment-grade corporate debt securities and money market funds, and our investment policy is meant to preserve capital and maintain liquidity. Changes in interest rates affect the interest income we earn on our cash, cash equivalents and marketable securities and the fair value of our cash equivalents and marketable securities. A hypothetical 100 basis point increase in interest rates would have decreased the market value of our cash equivalents and marketable securities by $4.0 million and $5.8 million as of March 31, 2020 and December 31, 2019, respectively.
32


Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer (CEO) and chief financial officer (CFO), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of March 31, 2020, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Further, while the majority of our employees are working remotely, we have not experienced any material impact in our internal control over financial reporting as a result of the COVID-19 pandemic. We will continue to monitor for and assess any effects COVID-19 may have on the design or operating effectiveness of our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
33



PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are currently involved in, and may in the future be involved in, actual and threatened legal proceedings, claims, investigations and government inquiries arising in the ordinary course of our business, including legal proceedings, claims, investigations and government inquiries involving intellectual property, data privacy and data protection, privacy and other torts, illegal or objectionable content, consumer protection, securities, employment, contractual rights, civil rights infringement, false or misleading advertising, or other legal claims relating to content or information that is provided to us or published or made available on our service. This risk is enhanced in certain jurisdictions outside of the United States where our protection from liability for content published on our platform by third parties may be unclear and where we may be less protected under local laws than we are in the United States.
Although the results of the actual and threatened legal proceedings, claims, investigations and government inquiries in which we currently are involved cannot be predicted with certainty, we do not believe that there is a reasonable possibility that the final outcome of these matters will have a material adverse effect on our business or financial results. Regardless of the final outcome, however, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, harm to our reputation and brand, and other factors.
34


Item 1A. Risk Factors
Investing in our Class A common stock involves a high degree of risk. In addition to the other information set forth in this Quarterly Report, you should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, before deciding to invest in our Class A common stock. The occurrence of any of the following risks could harm our business, reputation, revenue, financial results and prospects. In addition, risks and uncertainties that are not presently known to us or that we currently believe are immaterial could also harm our business, revenue, financial results and prospects. If any of these risks occur, the value of our Class A common stock could decline and you may lose all or part of your investment.
Risks Related to the Company and our Industry
The recent global COVID-19 pandemic outbreak could harm our business and results of operations.
The recent global COVID-19 pandemic outbreak and the various attempts to contain it have created significant volatility, uncertainty and economic disruption. It has adversely affected the broader economies, financial markets and overall demand for advertising.
As a result of the COVID-19 pandemic, we have temporarily closed all our offices (including our corporate headquarters) globally and implemented certain travel restrictions, both of which have disrupted and could continue to disrupt how we operate our business, including limiting certain of our sales and marketing plans and requiring us to manage an entire workforce remotely. Our workforce has had to spend a significant amount of time working from home, which could impact their productivity. Moreover, the conditions caused by the COVID-19 pandemic have had and could continue to have an adverse effect on the ability or willingness of existing and potential advertisers to use our services for advertising. Further, we may not be able to recognize revenue, collect payment or generate future revenue from advertisers, including from those that have been or may be forced to close their businesses or are otherwise impacted by the economic downturn. The pandemic has, and could continue to, adversely affect our business, growth rate, financial performance and stock price. Additionally, volatility in capital markets could affect the values of our cash equivalents and marketable securities or our ability to dispose of them to fund future working capital needs. Further, the COVID-19 pandemic and the related shelter in place order has led to an increase in Pinner engagement. As a result, engagement as well as metrics such as revenues, operating margins and other financial and operating data, may not be indicative of results for future periods.
We are currently unable to accurately predict the full impact that the COVID-19 pandemic will have on our results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the severity and transmission rate of the virus, the extent and effectiveness of containment actions and other public health measures and the impact of these and other factors on our employees, customers, partners and vendors.
Our ecosystem of Pinners and advertisers depends on our ability to attract, retain and engage our user base. If we fail to add new Pinners or retain current Pinners, or if Pinners engage less with us, our business, revenue and financial results could be harmed.
We must continue to attract, retain and engage our users on our platform, who we call Pinners. Our active Pinners may not continue to grow, and may decline.
If current and potential Pinners do not perceive their experience with our service to be useful, or the content that we serve to them to be relevant to their personal taste and interests, we may not be able to attract new Pinners, retain existing Pinners or maintain or increase the frequency and duration of their engagement. In addition, if our existing Pinners do not continue to utilize our service or our user base does not continue to grow, we may be required to incur significantly higher marketing expenses than we currently anticipate to add new Pinners or retain current Pinners. Pinner engagement may also fluctuate depending on factors beyond our control, such as the recent shelter-in-place order due to the COVID-19 pandemic. Although we have seen higher engagement from Pinners during this time, we cannot predict Pinner engagement levels once the shelter-in-place order is lifted.
We anticipate that our active user growth rate will decline over time if the size of our active user base increases or we achieve higher market penetration rates. If our active user growth rate slows, our financial performance will increasingly depend on our ability to increase Pinner engagement and our monetization efforts. We also may not be able to penetrate certain demographics in a meaningful manner to grow the number of Pinners. For example, in the
35


United States, a substantial majority of our Pinners are women of ages 18-64 according to data from Comscore. We may not be able to further increase the number of Pinners in this demographic and would need to increase the number of Pinners in other demographics, such as men and international users, in order to maintain our user growth rate.
In addition, our products typically require high bandwidth data capabilities, and many Pinners live in countries with high-end mobile device penetration and high bandwidth capacity cellular networks with large coverage areas. Therefore, we do not expect to experience rapid user growth or engagement in countries with low smartphone penetration even if such countries have well-established and high bandwidth capacity cellular networks. We may also not experience rapid user growth or engagement in countries where, even though smartphone penetration is high, consumers rely heavily on Wi-Fi due to the lack of sufficient cellular based data network. We have entered into, and plan to continue to enter into, contracts with data service providers that allow Pinners to access our mobile application without it counting toward their monthly data allowance, a practice known as “zero rating.” Changes in regulations could adversely impact our existing and future contracts regarding our access to, and use of, zero-rating offers or other discounts or data usage for our service.
Our ability to serve advertisements on our platform, and therefore the value proposition for our advertisers, depends on the size and engagement of our user base. Our growth efforts are not currently focused on increasing the number of daily active users, and we do not anticipate that most of our users will become daily active users. Therefore, even if we are able to increase demand for our advertising products, we may not be able to deliver those advertisements if we cannot also increase the size and engagement of our user base, which could harm our business, revenue and financial results.
There are many other factors that could negatively affect user growth, retention and engagement, including if:
our competitors mimic our products or product features, causing Pinners to utilize their products instead of, or more frequently than, our products;
we do not provide a compelling Pinner experience because of the decisions we make regarding our products or the type and frequency of advertisements that we display;
our content is not relevant to Pinners’ personal taste and interests;
third parties do not permit or continue to permit their content to be displayed on our platform;
Pinners have difficulty installing, updating or otherwise accessing our service on mobile devices or web browsers;
there are changes in the amount of time Pinners spend across all applications and platforms, including ours;
technical or other problems frustrate the Pinner experience, particularly if those problems prevent us from delivering our service in a fast and reliable manner;
we are unable to address Pinner and advertiser concerns regarding the content, privacy and security of our service;
we are unable to combat spam, harassment, cyberbullying or other hostile, inappropriate, abusive or offensive content or usage on our products or services;
Pinners adopt new technologies where our products or services may be displaced in favor of other products or services, or may not be featured or otherwise available;
third-party initiatives that may enable greater use of our service, including low-cost or discounted data plans, are discontinued; or
the other risks and uncertainties described in this Quarterly Report on Form 10-Q.
Any decrease in user growth, retention or engagement could render our service less attractive to Pinners or advertisers, and could harm our business, revenue and financial results.
If we are not able to continue to provide content that is useful and relevant to Pinners’ personal taste and interests or fail to remove objectionable content or block objectionable practices by advertisers or third
36


parties, user growth, retention or engagement could decline, which could result in the loss of advertisers and revenue.
Our success depends on our ability to provide Pinners with content, including advertisements, that is useful and relevant to their personal taste and interests. This depends on the content contributed by our users and advertisers and the manner in which we present that content to Pinners. Pinners engage with content that is relevant to their country, language and gender preferences as well as their personal intent. We may not correctly identify and serve content that is useful and relevant to Pinners. Content that is not visually pleasing, is not intuitive or easy to use or is not in the desired language may not be engaging for Pinners, especially in non-U.S. markets. If Pinners do not believe that we offer content that is useful and relevant to their personal taste and interests, user growth, retention or engagement may decline, which could result in the loss of advertisers and revenue.
Some of the actions that we may take to make our content more useful and relevant may reduce traffic that we drive from our platform to the websites of third parties, which may reduce their willingness to contribute or continue availability of their content on our service. We endeavor to keep divisive, disturbing or unsafe content off our service. We do this by deleting or hiding certain types of content, even if this content would be permitted on other platforms, which could result in decrease in user growth, retention or engagement. We apply significant judgment in making these determinations and may be unsuccessful in our efforts to remove this content on a timely basis, which could also result in a decrease in user growth, retention or engagement. Further, if we fail to identify and keep off our service advertisers who offer poor quality goods, we may lose Pinner confidence.
We regularly monitor how our advertising affects Pinners’ experiences to ensure we do not deliver too many advertisements or irrelevant advertisements to Pinners. Therefore we may decide to change the number of advertisements or eliminate certain types of advertisements to ensure Pinners’ satisfaction in the service. We may make changes to our platform based on feedback provided by Pinners or advertisers. These decisions may not produce the long-term benefits that we expect, in which case user growth, retention and engagement, our relationships with advertisers, and our business, revenue and financial results could be harmed.
Current and future data privacy laws and regulations, including the General Data Protection Regulation (“GDPR”) and California Consumer Privacy Act of 2018 (the “CCPA”) which became effective January 2020, or new interpretations of existing laws and regulations, may limit our ability to collect and use data, which may impact our ability to effectively deliver relevant content. These laws and regulations may also impact our ability to expand advertising on our platform, as they may impede our ability to deliver targeted advertising and accurately measure our ad performance. Additionally, even if not prohibited by data privacy laws and regulations, we may elect not to collect certain types of data if we believe doing so would be inconsistent with our Pinners’ expectations, if the source is unreliable or for any other reason. Similarly, the increase in media attention about online privacy and data protection may motivate Pinners to take certain actions to protect their privacy. Pinners may elect not to allow data sharing for a number of reasons, such as data privacy concerns. This could impact our ability to deliver relevant content aligned with Pinners’ personal taste and interests. Additionally, the impact of these developments may disproportionately affect our business in comparison to certain peers in the technology sector that, by virtue of the scope and breadth of their operations or user base, have greater access to user data.
Substantially all our revenue is generated from advertising, and a decline in user growth, retention or engagement as a result of our inability to provide relevant and useful content to Pinners, and therefore our inability to serve the volume of advertisements desired by our advertisers, may deter new advertisers from using our platform or cause current advertisers to reduce their spending with us or cease doing business with us altogether, which could harm our business, revenue and financial results.
If we do not develop successful new products or improve existing ones, our business may suffer. We may also invest in new products that fail to attract or retain Pinners or generate revenue.
Our ability to grow, retain and engage our user base and therefore increase our revenue depends on our ability to successfully enhance our existing products and create new products, both independently and in conjunction with platform developers or other third parties, and to do so quickly. We may introduce significant changes to our existing products or develop and introduce new and unproven products with which we have little or no prior development or operating experience. Our focus on innovation and experimentation could result in unintended outcomes or decisions that are poorly received by Pinners. If new or enhanced products fail to engage our Pinners, we may fail to generate sufficient revenue, operating margin or other value to justify our investments, any of which could harm our business,
37


revenue and financial results. We also may develop new products that increase Pinner engagement and costs that are not intended to increase revenue.
Further, our products often require Pinners to learn new behaviors that may not always be intuitive to them. To the extent that new Pinners are less willing to invest the time to learn to use our products, or if we are unable to make our products easier to learn to use, our user growth, retention or engagement could be affected, and our business, revenue and financial results could be harmed.
Our business depends on a strong brand and reputation, and if we are unable to maintain and enhance our brand and reputation, our ability to expand our user and advertiser base will be impaired and our business, revenue and financial results could be harmed.
We believe that our brand identity and reputation has significantly contributed to the success of our business. We also believe that maintaining and enhancing the “Pinterest” brand and reputation is critical to retaining and growing our user and advertiser base. Maintaining and enhancing our brand and reputation depends largely on our continued ability to provide high-quality, relevant, reliable, trustworthy and innovative products, which may require substantial investment and may not be successful. We may need to introduce new products or updates to existing products that require Pinners to agree to new terms of service that Pinners do not like, which may negatively affect our brand and reputation. Additionally, advertisements or actions of our advertisers may affect our brand and reputation if Pinners do not think the advertisements help them accomplish their objectives, view the advertisements as intrusive, annoying or misleading or have poor experiences with our advertisers.
Our brand and reputation may also be negatively affected by the content or actions of Pinners that are deemed to be hostile or inappropriate to other Pinners, by the actions of Pinners acting under false or inauthentic identities, by the use of our products or services to disseminate information that is deemed to be misleading, or by the use of our service for illicit, illegal or objectionable ends. We also may fail to respond expeditiously to the sharing of illegal, illicit or objectionable content on our service or objectionable practices by advertisers, or to otherwise address Pinner concerns, which could erode confidence in our brand and damage our reputation. We expect that our ability to identify and respond to this content in a timely manner may decrease as the number of Pinners grows, as the amount of content on the platform increases or as we expand our product and service offerings, such as video. Any governmental or regulatory inquiry, investigation or action, including based on the appearance of illegal, illicit or objectionable content on our platform, our business practices, or failure to comply with laws and regulations, could damage our brand and reputation, regardless of the outcome.
We have experienced, and expect to continue to experience, media, legislative, governmental, regulatory, investor and other third-party scrutiny of our decisions. Any scrutiny, inquiry, investigation or action, including regarding our data privacy, copyright, content or other practices, product changes, product quality, litigation or regulatory action or regarding the actions of our employees, Pinners or advertisers or other issues, may harm our brand and reputation. In addition, scrutiny of other companies in our industry, including of their impact on user “screen time” or their content policies or data privacy practices, could also have a negative impact on our brand and reputation. These concerns, whether actual or unfounded, may also deter Pinners or advertisers from using our service.
If we fail to promote and maintain the “Pinterest” brand or preserve our reputation, or if we incur excessive expenses in this effort, our business, revenue and financial results could be harmed.
If our security is compromised, or Pinners or advertisers believe our security has been compromised, we could lose the trust of Pinners and advertisers who may use our service less or may stop using our service altogether, which could harm our business, revenue and financial results.
Our efforts to protect the information that Pinners and advertisers have shared with us may be unsuccessful due to the actions of third parties, software bugs or other technical malfunctions, cyberattacks, employee error or malfeasance, hacking, viruses or other factors. In addition, third parties may attempt to induce our employees or Pinners to disclose information to gain access to our data, advertisers' data or Pinners’ data. Further, because the login credentials or passwords employed by Pinners to access our service may be similar to or the same as the ones that they use in connection with other platforms or websites, a breach in the security of those platforms or websites can allow third parties to gain unauthorized access to Pinners’ accounts on our service. If any of the events described above occur, our information or Pinners’ or advertisers' information could be accessed or disclosed improperly. If a third party gains unauthorized access to our service, they may amongst other things that could negatively affect our products and our business, post malicious spam and other content on our platform using a Pinner’s or advertiser’s account.
38


Some third parties, including advertisers, may store information that we share with them on their networks. If these third parties fail to implement adequate data-security practices or fail to comply with our terms and policies, Pinners’ data may be improperly accessed, used or disclosed. Even if these third parties take all the necessary precautions, their networks may still suffer a breach, which could compromise Pinners' data.
Any incidents where Pinners’, advertisers or our information is accessed without authorization or is improperly used, or incidents that violate our privacy policy, terms of service or other policies, or the perception that an incident has occurred, could damage our brand and reputation, adversely impact our competitive position and result in significant costs. We may need to notify government authorities or affected Pinners regarding security incidents, and government authorities or affected Pinners or advertisers could initiate legal or regulatory action against us over those incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. Maintaining the trust of Pinners and advertisers is important to sustain user growth, retention and engagement, and we may incur significant costs in an effort to detect and prevent any security incidents. Concerns over our data privacy practices, whether actual or unfounded, could subject us to negative publicity and damage our brand and reputation and deter Pinners and advertisers from using our service. Any of these occurrences could harm our business, revenue and financial results.
We depend in part on internet search engines to direct traffic and refer new Pinners to our service. If search engines’ methodologies and policies are modified or enforced in ways we do not anticipate, or if our search results page rankings decline for other reasons, traffic to our service or user growth, retention or engagement could decline, any of which could harm our business, revenue and financial results.
We depend in part on internet search engines, such as Bing, Google, Yahoo! and Yandex, to direct a significant amount of traffic to our service. For example, when a Pinner types a query into a search engine, we may receive traffic and acquire new Pinners when those search results include Pins, boards, Pinners and other features of our service that cause the Pinner to click on the Pinterest result or create a Pinterest account. These actions increase user growth due to signups of new Pinners and increase retention and engagement of existing Pinners.
Our ability to maintain and increase the number of visitors directed to our service from search engines is not within our control. Search engines, such as Google, may modify their search algorithms (including what content they index) and policies or enforce those policies in ways that are detrimental to us, that we are not able to predict or without prior notice. When that occurs, we expect to experience declines or de-indexing in the organic search ranking of certain Pinterest search results, leading to a decrease in traffic to our service, new user signups and existing user retention and engagement. We have experienced declines in traffic and user growth as a result of these changes in the past, and anticipate fluctuations as a result of such actions in the future. For example, in the first quarter of 2018, Google de-indexed our keyword landing pages, which negatively impacted traffic and user growth in the quarters that followed. Our ability to appeal these actions is limited, and we may not be able to revise our search engine optimization (“SEO”) strategies to recover the loss in traffic or user growth resulting from such actions. Changes in policies or their enforcement may not apply in the same manner to our competitors, or our competitors’ SEO strategies may be more successful than ours. In addition, some of these search engines are owned by companies that compete with various aspects of our business. When email platforms, such as Google, change their policies related to the placement of our emails in Pinners' inboxes, it can affect the open and click rate of our emails. Such changes have led to and may lead to a decrease in traffic to our service, new user signups and existing user retention and engagement. To offset the impact on our user growth, we would need to increase our investment in other growth strategies, such as paid marketing or other initiatives that drive user acquisition, which may cost more and be less effective. Any significant reduction in the number of Pinners directed to our website or mobile application from search engines or email could harm our business, revenue and financial results.
We allow users to authenticate with our service through third-party login providers. If these third parties discontinue these tools or experience a breach or outage in their platform or web browser developers make changes that restrict the use of these tools, user growth or engagement could decline, and our business, revenue and financial results could be harmed.
A significant number of Pinners access their accounts on our service using a third party login provider such as Facebook or Google. If security on those platforms is compromised, if Pinners are locked out from their accounts on those platforms or if those platforms experience an outage or otherwise institute policies that prevent Pinners from accessing their accounts on our service through those logins, Pinners may be unable to access our service. In addition, third-party log-in providers may institute policies that restrict us from communicating with Pinners. As a result, user growth, retention and engagement on our service could be adversely affected, even if for a temporary
39


period. For example, in the second quarter of 2018, Facebook changed its login authentication systems, which negatively impacted our user growth and engagement in that period. Additionally, if Facebook or Google discontinue their identity services or experience an outage, then we may lose and be unable to recover users previously using this function, and our user growth or engagement could decline. Any of these events could harm our business, revenue and financial results.
In addition, third-party login providers, such as Apple, Microsoft or Google, have implemented and/or may implement changes and restrictions in browser or device functionality including by limiting the use of cookies, or that limit our ability to communicate with or understand the identity of our Pinners. Any of these events could harm our business, revenue and financial results.
If we are unable to compete effectively for users, our business, revenue and financial results could be harmed.
We face significant competition to attract, retain and engage users and for their time and attention. We primarily compete with consumer internet companies that are either tools (search, ecommerce) or media (newsfeeds, video, social networks).
We compete with larger, more established companies such as Amazon, Facebook (including Instagram), Google, Snap and Twitter, which provide their users with a variety of online products, services, content (including video) and advertising offerings, including web search engines, social networks and other means of discovering, using or acquiring goods and services. Many of these competitors have longer operating histories, significantly greater financial, technical, research, marketing and other resources and larger user bases than we do. These competitors also have access to larger volumes of data and platforms that are used on a more frequent basis than ours, which may enable them to better understand their user base and develop and deliver more relevant content.
Our competitors have previously and may continue to develop technology, products, services or interfaces that are similar to our existing and future products quickly and at scale, or that achieve greater market acceptance than our products. Some of our competitors also operate existing products that have significant market power in certain market sectors and could use that market power to advance their own products or services that compete with ours. For example, Amazon, Google and Snap have introduced shopping platforms, each with camera search functionality, Google has developed a series of features on Google Image Search that are similar to those of our service, including shoppable ads and a version of boards, called “Collections,” and Instagram and other platforms allow users to bookmark and save images and other content and create collections. These competitors may engage in more extensive research and development efforts and undertake more extensive marketing campaigns, which may allow them to build larger, more engaged user bases than we have. In addition, the recent COVID-19 pandemic may have a greater impact on us than our larger competitors. We may not be able to devote significant resources to new features, enhancements and product development as we shift, and further consider shifting, resources in light of COVID-19 which may adversely affect our competitive position. Also, some of our existing or potential competitors operate products or services from which we currently derive substantial value, such as search engines and email, and those competitors could reduce or eliminate the value we receive.
We also face competition from smaller companies in one or more high-value verticals, including Allrecipes, Houzz and Tastemade, that offer users engaging content and commerce opportunities through similar technology, products, features or services to ours. In addition, emerging startups may be able to innovate and provide technology, products, services or features similar to ours or before us.
Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in user preferences. Barriers to entry in our industry are low, and our intellectual property rights may not be sufficient to prevent competitors from launching comparable products or services.
In emerging international markets, where mobile devices often lack large storage capabilities, we may also compete with other applications for the limited space available on a user’s mobile device.
40


We believe that our ability to compete for users depends upon many factors both within and beyond our control, including:
the usefulness, novelty, performance and reliability of our service compared to those of our competitors;
the timing and market acceptance of our products, including the developments and enhancements to those products, offered by us or our competitors;
our brand strength relative to our competitors; and
the other risks and uncertainties described in this Quarterly Report on Form 10-Q.
If we are unable to compete effectively for users, our business, revenue and financial results could be harmed.
If we are unable to compete effectively for advertisers, our business, revenue and financial results could be harmed.
We face significant competition for advertising revenue across a variety of formats. To compete effectively, we must enable our advertisers to easily create content and buy, forecast, optimize and measure the performance of advertising on our platform. In order to grow our revenue and improve our operating results, we must increase our share of advertising spend relative to our competitors, many of which are larger companies that offer more traditional and widely accepted advertising products, as well as more robust tools to measure the effectiveness of advertising campaigns.
Some of our larger competitors have substantially broader product or service offerings and leverage their relationships based on other products or services to gain additional share of advertising spend. They have large distributed sales forces and an increasing amount of control over mobile distribution channels. These competitors’ economies of scale allow them to have access to larger volumes of data and platforms that are used on a more frequent basis than ours, which may enable them to better understand their user base and develop and deliver more targeted advertising. They may not need to rely on third-party data, including data provided by advertisers, in order to effectively target the campaigns of advertisers, which could make their advertising products more attractive to advertisers than ours if third-party data ceases to be available to us, whether because of regulatory changes, privacy concerns or other reasons. If we are unable to provide our advertisers with the ability to effectively target their advertising campaigns, or if our advertisers do not believe that our value proposition is as compelling as those of our competitors, we may not be able to attract new advertisers or retain existing ones, and our business, revenue and financial results could be harmed.
We believe that our ability to compete for advertisers, depends upon many factors both within and beyond our control, including:
sales, marketing, customer service and support efforts;
first- and third-party data available to us relative to our competitors;
ease of use, performance, price and reliability of solutions developed either by us or our competitors;
the attractiveness and volume of our product and service offerings (including measurement tools) compared to those of our competitors;
the strength of our advertiser relationships and offerings compared to those of our competitors;
the ease with which our advertising products fit into existing advertiser budgets compared to those of our competitors; and
the other risks and uncertainties described in this Quarterly Report on Form 10-Q.
If we are unable to compete effectively for advertisers, our business, revenue and financial results could be harmed.
We are in the early stages of our monetization efforts and there is no assurance we will be able to scale our business for future growth.
We are in the early stages of our monetization efforts and are still growing and scaling our revenue model. Our growth strategy depends on, among other things, attracting more advertisers (including serving more mid-market and unmanaged advertisers and expanding our sales efforts to reach advertisers in additional international markets), scaling our business with existing advertisers and expanding our advertising product offerings, such as self-serve tools. There is no assurance that this revenue model will continue to be successful or that we will generate increasing
41


revenue. We do not know if we can sustain the current growth rate of our revenue. To sustain or increase our revenue, we must obtain new advertisers, encourage existing advertisers to maintain or increase their advertising spend on our platform, expand the number of markets where we offer advertising and increase the breadth and functionality of our advertising offerings, including new advertising formats and measurement tools.
In order to obtain new advertisers and further our relationship with current advertisers, we must increase the size of our user base or the engagement of our users. There is no assurance that our user growth or engagement strategy will continue to be successful or that we will increase the number of users on our service.
In addition, to scale the growth of our ad platform, we will have to successfully develop and target ad products based on Pinners’ personal taste and interests, which will require broad and diverse Pinner data. If we are unable to do this with the data, technology and resources available to us, we may need to consider alternatives, such as partnerships, to grow our business. If we choose not to pursue these partnerships, or if these partnerships are unsuccessful, our business may prove less scalable, and our business, revenue and financial results could be harmed.
We generate substantially all of our revenue from advertising. The failure to attract new advertisers, the loss of advertisers or a reduction in how much they spend could harm our business, revenue and financial results.
Substantially all of our revenue is generated from third-party advertising, a trend that we expect to continue. Most advertisers do not have long-term advertising commitments with us. Many of our advertisers only recently started working with us and spend a relatively small portion of their overall advertising budget with us. In order to increase the number of advertisers