Pinterest, Inc.

Hello and welcome to the Pinterest first quarter 2023 earnings conference call. My name is Elliot. I'll be coordinating your call today. If you would like to register a question during the presentation, please press star followed by one on your telephone keypad. And I'd like to hand over to Neil Doshi, head of investor relations. The floor is yours. Please go ahead.

Neil Doshi, Thank you. Good afternoon, and thank you for joining us. Welcome to Pinterest earnings call for the first quarter ended March 31, 2023. I'm Neil Doshi, Head of Investor Relations for Pinterest. Joining me today on the call are Bill Reddy, Pinterest CEO, and Todd Morgenfeld, our Chief Financial Officer and Head of Business Operations. Now we'll cover the safe harbor. Some of the statements we make today regarding our performance operations and outlook may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In addition, our results, trends, and outlook for Q2 2023 and beyond are preliminary and are not indicative of future performance. We are making these forward-looking statements based on information available to us as of today, and we disclaim any duty to update them later unless required by law. For more information, please refer to the risk factors discussed in our most recent form, 10Q or 10K, filed at the SEC and available on the Investor Relations section of our website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our investor relations website located at investor.pinterestinc.com. Lastly, all growth rates discussed in today's prepared remarks should be considered year over year unless otherwise specified. And now we'll turn the call over to Bill.

Thank you, Neil, and thank you all for joining our first quarter 2023 earnings call. Q1 was a strong quarter as we continue to deliver growth driven by foundational improvements in the core Pinterest experience and by continued focus on our strategic priorities and unique differentiators. We ended the quarter with 463 million monthly active users, up 7%. Furthermore, we accelerated growth among our global and UCAN, or US and Canada mobile app users, similar to last quarter, and our measures of engagement, including impressions, sessions, and time spent, continued to grow significantly faster than overall users, a testament to our work to deepen engagement per user. We generated revenue of $603 million, up approximately 6% on a constant currency basis. This strength came from the top and bottom of the funnel, including demand from our brand and performance objectives. As you saw in our press release, we announced a multi-year strategic third-party ad demand partnership with Amazon, which we believe can, over time, improve monetization with relevant ad content on the platform and increase shopability for users. I'll discuss this later in my remarks. While the overall demand environment remains challenging, we're demonstrating we can continue to grow our business while also operating with more efficiency. We delivered $27 million of adjusted EBITDA for the quarter, with an adjusted EBITDA margin of 4%, as our operating expenses came in lower than expected. This is due to a variety of cost reductions we achieved in the quarter, as well as timing shifts that moved some expenses to Q2 and later in the year. Even with those timing shifts, we have confidence that the operational rigor we are driving in the business gives us a clear path to margin expansion in line with our prior commitments. This quarter, we continue to execute on our key strategic priorities, including one, growing monetization and engagement per user, two, integrating shopping into the core of the product experience, three, improving operational rigor and therefore margin expansion, and four, strengthening our leadership as a positive and brand-safe platform, including taking further steps to enhance the well-being of our users, especially teens. In Q1, we made solid progress in deepening engagement on the platform with our existing users. Users provide strong first-party signals to their actions on Pinterest, such as searching and browsing related items, as well as by saving pins onto curated boards that create product associations unique to our platform. This signal, combined with our increasingly sophisticated AI models, is driving improved relevancy and personalization for users. To that end, our mobile app users, who are our most engaged and monetizable users and account for more than 80% of our total impressions and revenue, grew 16% globally. U.S. and Canada mobile app user growth also accelerated to 7%. And our measures of engagement continue to grow faster than overall users, which is proof that users are coming back more frequently to Pinterest as they find more of what they're looking for on the platform. We continue to make good headway in adding new users, especially Gen Z users, who grew double digits and continue to be our fastest growing demographic on the platform. Gen Z users are finding value in our positive and inspirational platform and are engaging with the full breadth of content, including video. During the quarter, our video content on the platform grew nearly 40% quarter over quarter, on top of the 30% sequential growth we drove in Q4. Furthermore, in March, we announced a new publisher deal with Dot Dash Meredith, one of the largest publishers in America, to bring video content to the platform across lifestyle, fashion, and food categories, with brands including Better Homes and Gardens, Brides, Food & Wine, and Allrecipes. We're also finding that our blend of videos and images is resonating with users, as images remain a vital part of the Pinterest value proposition. Images, in addition to video, help users find inspiration relevant to them, refine what they're looking for, and take action. Our corpus of images continues to grow, even off a very large base. And we saw that the number of boards grew double digits in Q1. The unique curation and depth of signal we drive speaks to the high intent of our audience and the lean forward experience we have on Pinterest. We're also improving monetization by making Pinterest more valuable for advertisers as a full funnel platform. At the top of the funnel, we're seeing strength in awareness objectives as we bring greater performance for advertisers. Also, our engagement wins are contributing to this growth by delivering more supply and favorable pricing. We've been hard at work building new ad formats that our brand advertisers have been asking for. In Q1, we began testing Premier Spotlight, our first premium awareness offering to showcase brands in an exclusive placement on our search page with advertisers like the Coca-Cola Company. Based on early testing results, premier spotlight ads drive significantly higher click-through rates on average compared to standard video awareness ads on Pinterest. We also remain focused on lower funnel objectives, where we believe we have a much larger opportunity to deliver conversions to advertisers looking for sales. We're doing this by growing supply, better matching that supply with relevant demand, and innovating on formats, actionability, and measurement capabilities. In Q1, whole page optimization, which we introduced in the prior quarter, continued to drive more relevant ad impressions, with impressions growing faster than sessions, even as engagement improves. As a result, our ads marketplace is getting more efficient, contributing to an 8% reduction in CPAs for performance advertisers. We've also expanded our conversion ad products with mobile deep linking, or MDL. We began beta testing MDL in Q3 of last year for shopping ads. And in Q1, MDL was the primary contributor to our shopping revenue growth, which was up 40% year over year. Building new ad tools and formats is only part of the equation for monetization success. The other part is helping advertisers measure those results through conversion visibility and attribution solutions. In Q1, we integrated our API for conversion with Telium to drive further advertiser adoption, and we're in the process of onboarding advertisers like Wayfair onto our live ramp cleanroom solution in Q2. As I've discussed previously, I also believe there's a meaningful opportunity for us to augment our auction with third-party ad demand. This is an important lever for us to increase the comprehensiveness of our ads, thereby leading to greater relevance and shopability for users, and ultimately improve monetization on the platform. We believe Amazon is the right first partner as we bring third-party demand onto Pinterest because they offer a breadth of relevant, shoppable ad content paired with a seamless consumer buying experience. Their broad coverage of brands and products will help accelerate our efforts to take users from inspiration to action, satisfying more of the commercial intent that users have on our platform. We're excited about this partnership and the value it can bring to users and advertisers. A partnership of this scale will be a multi-quarter implementation, and therefore, it may not be until next year that we see more meaningful revenue impact. Moving to shopping, in Q1, we continue to execute on our vision to build the home of taste-based shopping. Our survey work consistently shows that over 50% of users view Pinterest as a place to shop, and our long-term goal is to make every pen shoppable. In Q1, we started integrating shoppable pins, or products you can take action on, to the home feed and improving the overall distribution of this content through investments in our core relevancy algorithm. These changes are showing promising results. Click-through rates and saves of shoppable pins grew over 35% year-on-year. We're also exploring new formats to make shopping more fun and engaging. Earlier in the quarter, we announced that we were testing shoppable shuffles on Pinterest. with the goal of allowing users to more seamlessly access shoppable pins from their collages. As we started integrating more shuffled content into the main Pinterest app, we're seeing that shuffles with the highest number of saves have shoppable content, like outfit, wedding, and home ideas. As we make products more easily discoverable and shoppable, we're also enhancing merchant value on the platform. In the last six months, we've seen nearly a 30% increase in attributed checkouts for merchants who upload their catalogs to the platform. As I've mentioned in past quarters, I believe our ability to execute on our key strategic priorities is enhanced by instilling a culture of operational rigor, including discipline management of expenses. We're not a growth at all cost company, and our actions have proven that since I joined. Shortly after I arrived last summer, we took steps to significantly slow our pace of hiring. In Q3, we kept headcount flat and began driving meaningful improvement in infrastructure spend in Q4 while returning to user growth. In Q1, we took further actions to drive longer-term efficiency in our business through our restructuring plan, which we announced at the end of March. As part of this restructuring, we reduced our real estate footprint by downsizing or completely closing several of our offices around the globe, as our flexible work policies do not require our historical levels of capacity. In addition, we made a 4% reduction in our workforce in early February to better align our talent against our top strategic priorities. We remain committed to delivering meaningful margin expansion this year, even if the demand environment takes longer to improve. Todd will address this further in his remarks. As we grow users and engagement, we're also investing in making Pinterest a more positive place on the internet, which is important for our users and advertisers. For many of our users, Pinterest is a personal space online where they can discover, grow, and manifest their dreams. Several third party studies have shown that users feel safer on Pinterest than other platforms, and they feel more positive when on Pinterest. We think that's worth investing in. To do that, we've taken steps to further enhance the safety and well-being of our users, especially minors. In late March, we made it mandatory for users to provide their birth dates so that we can provide age appropriate features and functionality. Pinterest is now private by default for existing and new users under the age of 16, and their content and profiles won't be discoverable by others, setting a new bar for user well-being in this industry. Our investments in being a positive platform also make good business sense, as advertisers often cite our positivity and brand-safe environment as a reason for spending on the platform. Lastly, we're excited that Sabrina Ellis will be joining Pinterest as our Chief Product Officer. Sabrina is passionate about our mission to create a world where inspiration and well-being go hand in hand. I also want to thank Naveen Govini for his 11 years of service and dedication to Pinterest. I'll now turn the call over to Todd to go into more detail on our quarter and guidance.