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Pinterest's (PINS) Q3 Earnings, Revenues Surpass Estimates

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Pinterest (PINS - Free Report) reported third-quarter 2019 non-GAAP earnings of 1 cent per share against the Zacks Consensus Estimate of a loss of 5 cents per share.

The company had reported a loss of 12 cents in the year-ago quarter.

Revenues surged 47.1% year over year to $279.7 million. Revenues from the United States jumped 38.7% to $251 million. International revenues soared 211.1% year over year to $28 million.

The Zacks Consensus Estimate for revenues was pegged at $271 million for third-quarter 2019.

User Base & Advertising Business Expands in Q3

Monthly average users (MAUs) Global increased 28% to 322 million driven by double-digit growth in nearly all international countries except Canada, Iceland, and New Zealand.

While United States MAUs increased 8% to 87 million, International MAUs increased 38% to 235 million.

Average revenue per user (ARPU) Global increased 14% to 90 cents. ARPU United States and International jumped 26% and 127% on a year-over-year basis to $2.93 and 13 cents, respectively.

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

At the end of third-quarter 2019, Pinterest offered ads to users in 28 countries, up from 19 at the end of second-quarter 2019. New markets added include Cyprus, Czech Republic, Greece, Hungary, Luxembourg, Malta, Poland, Romania and Slovakia.

Pinterest, Inc. Price, Consensus and EPS Surprise

Pinterest, Inc. Price, Consensus and EPS Surprise

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

Key Q3 Developments

Pinterest continued to focus on making the platform more shopping-friendly for users (called Pinners) by uploading 75% more merchant catalogs than in the second quarter.

The company also expanded Shopping Ads internationally and worked with commerce platforms, including Shopify, to introduce merchants and advertisers on the Pinterest platform during the quarter.

Additionally, Pinterest launched Dark Mode during the third quarter as well as a Pinterest Lite version for Android in Peru, Argentina, Colombia, Chile and Mexico. Pinterest Lite is an option for people who want faster download on slower Internet.

Moreover, the company also focused on healthcare initiatives like bringing authoritative vaccine results to Pinterest search, and introducing a collection of emotional well-being activities for distressed users, which are likely to aid user growth and engagement levels.

The company also made improvements to its machine-learning models, which identify self-harm content, resulting in 70% decrease in reports of this type of content during the quarter.

Further, in the third quarter, the company continued to integrate the Pinterest Tag with Google Tag Manager and other tag management and e-commerce platforms, making Pinterest Tag more accessible to medium & small businesses. The number of tags has increased 10 times since the first quarter.

Notably, the company added new features on Pinterest mobile platform during the quarter such as Shop the Look ads and Pinterest Ads-On-The-Go to improve services to businesses and retailers.

New business profile features with video and shop tabs were launched in the quarter. The company expanded Catalogues and Shopping Ads features to France, Germany, Spain and Italy, which accelerated growth of advertisers on the platform.

Operating Details

Pinterest’s third-quarter 2019 total expenses grew 94.4% to $413.4 million, which includes $131 million of share-based compensation following its April 2019 IPO.

In the reported quarter, research and development expenses grew 163.9% to $167.7 million attributed to higher personnel and facilities-related costs.

Sales and marketing expenses surged 66% year over year to $110.7 million due to higher marketing expenses.

General and administrative expenses increased 174.9% year over year to $51.5 million.

Adjusted EBITDA was $3.87 million in third-quarter 2019, reflecting year-over-year top-line growth. The company had reported adjusted EBITDA loss of $13.4 million in the year-ago quarter.

Non-GAAP costs and expenses grew 35.5% year over year to $282.7 million, driven by headcount growth and increased sales coverage in the United States and International markets.

Loss from operations was $133.7 million compared with loss of $22.4 million in the year-ago quarter.

Balance Sheet

As of Sep 30, 2019 cash, cash equivalents, and marketable securities were $1.73 billion compared with $1.85 billion in the previous quarter.

Guidance

For 2019, Pinterest expects revenues between $1.100 billion and $1.115 billion compared with its prior forecast of $1.095 billion and $1.115 billion.

The Zacks Consensus Estimate is currently pegged at $1.10 billion.

Adjusted EBITDA is expected between negative $10 million and $30 million compared with the prior forecast between negative $25 million and $50 million.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the broader technology sector include Itron (ITRI - Free Report) , Digital Turbine (APPS - Free Report) and Dropbox (DBX - Free Report) .  While Itron sports a Zacks Rank #1 (Strong Buy). Digital Turbine and Dropbox carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Itron and Digital Turbine are set to report their quarterly earnings on Nov 4. Drobox will report its quarterly earnings on Nov 7.

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