Pinterest Reported Lower Profit in Q2 on Rising Costs

Pinterest Inc. NYSE:PINS

Pinterest Inc. (NYSE:PINS) released mixed results for the second quarter of 2022 but revenues increased year-over-year thanks to robust demand from partner ventures. The top line outperformed the Zacks Consensus Estimate, while the bottom line fell short.

Pinterest Swung to a Loss in Q2

Pinterest recorded a GAAP net loss of $43.1 million, or a loss of $0.07 per share in the second quarter, compared to a net income of $69.4 million or $0.10 per share in the same quarter last year.

In the reported quarter, non-GAAP net income was $77.4 million, or $0.11 per share, versus $169.9 million, or $0.25 per share, in the comparable quarter. The amount fell $0.06 short of the Zacks Consensus Estimate.

Revenues in the second quarter of 2022 increased 8.6% year over year to $665.9 million, exceeding the $660 million consensus projection. The top line increased by 25% due to increased spending commitments from partner businesses. While sales in the United States and Canada rose by 7% annually to $542 million, those in Europe and the rest of the world jumped by 10% and 71 %, to $102 million and $22 million, respectively.

Pinterest User Base Declined

Monthly active users (MAUs) fell by 5% from the same quarter last year to 433 million worldwide as consumers spent more time outside once the pandemic restrictions were lifted. In addition, lower customer engagements were caused by lower search traffic brought on by a Google algorithm change in November and increased competition from other video-centric consumer apps. MAUs in the United States and Canada fell by 8% to 92 million, while those in Europe and the rest of the world fell by 4% and 3%, respectively, from the prior quarter to 117 million and 223 million.

Because of solid ad demand, the global average revenue per user (ARPU) rose 17% to $1.54 from the previous year. While ARPU in the US and Canada climbed 20% to $5.82, it increased 20% and 80%, respectively, in Europe and the rest of the world to $0.86 and $0.10.

Due to more intensive brand marketing activities and an expanded workforce, Pinterest’s operating costs for the second quarter of 2022 climbed by 29.2% year-over-year to $700.4 million. Research and development costs rose by 28.5% to $233.5 million in the reported quarter. Spending on sales and marketing increased by 29% to $212 million.

In the second quarter of 2022, adjusted EBITDA (14% of total revenues) decreased to $92 million from $178.2 million (29% of total revenues). The business has made strategic hires to strengthen the team that it hopes will fuel long-term success. Plus, it achieved its initial goals for creator-led marketing.

Pinterest had $1,641.5 million in cash and cash equivalents as of June 30, 2022, and had $192.5 million in operational lease obligations. In the first half of 2022, the company generated $333.5 million in cash from operations, down from $375.4 million in the same period last year.

Outlook for 2022

On an annual basis, Pinterest anticipates third-quarter revenues to increase by the mid-single digits. Sequential growth in non-GAAP operating expenses is anticipated to be in the low double digits. Because of inflation and supply chain challenges that many advertising partners are experiencing, non-GAAP operating expenses for 2022 will probably rise by 35 to 40% over the previous year.

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About the author: Stephanie Bedard-Chateauneuf has over four years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on consumer stocks, cannabis stocks, tech stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.