UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-K
_________________
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 2019
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
Pinterest, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
505 Brannan Street
San Francisco, California
(Address of Principal Executive Offices, including zip code)
26-3607129
(I.R.S. Employer Identification No.)
94107
(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
Class A Common Stock, $0.00001 par value
Trading Symbol
PINS
Name of each exchange on which registered
New York Stock Exchange
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act:
None
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
Non-accelerated filer
☐
☒
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 ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s common stock on June
28, 2019 as reported by the New York Stock Exchange on such date was approximately $14.8 billion.
As of January 31, 2020, there were 363,567,902 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 209,050,139 shares of the Registrant’s Class
B common stock outstanding.
Portions of the registrant’s definitive Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where
indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2019.
Documents Incorporated by Reference
Note About Forward-Looking Statements
Limitations of Key Metrics and Other Data
Item 1.
Item 1A.
Business
Risk Factors
Item 1B.
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
PINTEREST, INC.
TABLE OF CONTENTS
Part I
Part II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Item 8.
Quantitative and Qualitative Disclosure About Market Risk
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Part III
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
Part IV
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NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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:
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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;
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.
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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 Annual Report on Form 10-K 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 Annual Report on Form 10-K, including under
“Risk Factors” and elsewhere in this Annual Report on Form 10-K. 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 Annual
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.
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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 our methodology.
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PART I
Item 1. Business
Overview
Our mission is to bring everyone the inspiration to create a life they love.
Pinterest is where 335 million people around the world go to get inspiration for their lives. They come to discover ideas for just about anything you
can imagine: daily activities like cooking dinner or deciding what to wear, major commitments like remodeling a house or training for a marathon,
ongoing passions like fly fishing or fashion and milestone events like planning a wedding or a dream vacation.
We call these people Pinners. We show them visual recommendations, which we call Pins, based on their personal taste and interests. They then
save and organize these recommendations into collections, called boards. Browsing and saving visual ideas on our service helps Pinners imagine
what their future could look like, which helps them go from inspiration to reality.
Pinterest is the productivity tool for planning your dreams. Dreaming and productivity may seem like polar opposites, but on Pinterest, inspiration
enables action and dreams become reality. Visualizing the future helps bring it to life. In this way, Pinterest is unique. Most consumer internet
companies are either tools (search, ecommerce) or media (newsfeeds, video, social networks). Pinterest is not a pure media channel; it is a media-
rich utility.
Value Proposition for Pinners
Visual Experience. People often don’t have the words to describe what they want, but they know it when they see it. This is why we made Pinterest
a visual experience. Images and video can communicate concepts that are impossible to describe with words. We believe that Pinterest is the best
place on the web for people to get visual inspiration at scale. Visual searches are becoming more and more common on Pinterest, with hundreds of
millions of visual searches per month. We have invested heavily in computer vision to help people discover possibilities that traditional text-based
search queries cannot offer. The computer vision models we’ve developed “see” the content of each Pin and optimize billions of related
recommendations daily to help people take action on the Pins they’ve found.
Personalization. Pinterest is a personalized, curated environment. Most Pins have been handpicked, saved and organized over the years by
hundreds of millions of Pinners creating billions of boards. As of December 31, 2019, our Pinners saved 240 billion pins across five billion boards.
We call this body of data the Pinterest taste graph. Machine learning and computer vision help us find patterns in the data. We then understand
each individual Pin’s relationship not just to the Pinner who saved it, but also to the ideas and aesthetics reflected by the names and content of the
boards where it’s been pinned. We believe we can better predict what content will be helpful and relevant because Pinners tell us how they organize
ideas. The Pinterest taste graph is the first-party data asset we use to power our visual recommendations.
When people organize ideas into collections on Pinterest, they are sharing how they contextualize that idea. When we scale human curation across
hundreds of millions of Pinners saving over 240 billion Pins, we believe our taste graph and recommendations get exponentially better. The more
people use Pinterest, the richer the taste graph gets, and the more an individual uses Pinterest, the more personalized their home feed becomes.
Designed for Action. People use Pinterest to visualize their future and to make their dreams a reality. Our goal is for each Pin to link back to a
useful source—everything from a product to buy, ingredients for a recipe or instructions to complete a project. We have built features that encourage
Pinners to take action on ideas they see on Pinterest, with a special focus on making it easy for people to purchase products they discover on our
service.
Empowering Environment. Pinners describe Pinterest as an inspiring place where they can focus on themselves, their interests and their future.
This is an important part of our value proposition because people are less likely to dream about their future when they feel self-conscious,
preoccupied with the problems of the day or gripped by a “fear of missing out.” On Pinterest, people can explore new things, free of much of the
judgment that occurs elsewhere online.
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Value Proposition for Advertisers
Valuable Audience. Pinterest reaches 335 million monthly active users, two-thirds of whom are female. As of December 2019, our total audience
includes 47% of internet users in the United States, according to data from Comscore based on total unique visitors to our service. This includes
eight out of 10 moms, who are often the primary decision-makers when it comes to buying products and services for their household, as well as
more than half of all U.S. millennials ages 18-34.
The value of Pinterest’s audience to advertisers is driven not merely by the number of Pinners on our platform or their demographics, but also by the
reason they come to Pinterest in the first place. Getting inspiration for your home, your style or your travel often means that you are actively looking
for products and services to buy. Billions of searches happen on Pinterest every month. Commercial content from brands, retailers and advertisers
is central to Pinterest. This means that relevant ads don’t compete with native content on Pinterest; instead, they are content. The mutually
beneficial alignment between advertisers and Pinners differentiates us from other platforms where ads (even relevant ads) can be distracting or
annoying. We are still in the early stages of building an advertising product suite that fully taps the value of this alignment between Pinners and
advertisers, but we believe it will be a competitive advantage over the long term.
Inspiration to Action. Pinners use our service to get inspiration for things they want to do and buy in their real lives. This journey from ideation to
action takes them down the entire purchasing process, which we call a “funnel”, so our advertisers have the opportunity to put relevant promoted
content in front of Pinners at every stage of the purchasing journey—when they are browsing through many possibilities without a clear idea of what
they want, when they have identified and are comparing a handful of options and when they are ready to make a purchase. As a result, advertisers
can achieve a range of awareness and performance objectives on Pinterest.
Empowering Environment. Advertisers are in the business of inspiration. On Pinterest, businesses have the opportunity to showcase their
products and services in an inspiring, creative environment. This is rare on the internet, where consumers’ digital experiences can be stressful or
negative, and brands can get caught in the crossfire. We believe that the inspirational and constructive feelings that many people experience on
Pinterest make our site an especially effective environment for brands to build an emotional connection with consumers.
Our Pinner Products
Pins
People come to Pinterest because it is filled with billions of great ideas. Each idea is represented by a Pin. Pins can be created by individual users or
by businesses.
When an individual user finds an image or video anywhere on the web and wants to save it, she can use our browser extension or Save button to
create a Pin with that image or video in it. Pinners can also create Pins featuring their own original work, like a recipe they made or a landscape they
photographed. When people click on a Pin, they can learn more and act on it.
Businesses also create Pins on our platform in the form of both organic content and paid advertisements. We believe the addition of organic content
from merchants adds significant value to the experience of both Pinners and advertisers. We expect that these Pins will become a larger part of our
content in the future.
We have several types of Pins on our platform to inspire people and help them take action, including standard Pins, product Pins, collections and
video Pins. More types of Pins and features will come in the future.
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Standard Pins: Images used to highlight products, recipes, photos and more.
Product Pins: Product Pins make items shoppable with up-to-date pricing, information about availability and links that go directly to the
checkout page of a retailer’s website.
• Collections: Collections allow Pinners to shop for the individual products they see in the inspiring scenes on fashion and home decor Pins.
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Video Pins: Video Pins are short videos on topics like how-to content about cooking, beauty and DIY that help Pinners more deeply engage
by watching an idea come alive.
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Planning
Boards are where Pinners save and organize Pins into collections around a topic. Every new Pin saved by a user must be saved onto a particular
board and is associated with a particular context (such as “bedroom rug ideas,” “electric bikes” or “healthy kids’ snacks”). Once the Pin has been
saved, it exists on the board of the Pinner who saved it, but it also joins the billions of Pins available for other Pinners to discover and save to their
own boards. Pinners access their boards in their profile and organize them however they prefer.
Pinners can create sections in a board to better organize Pins. For example, a “Quick Weekday Meals” board could have sections like “breakfast,”
“lunch,” “dinner” and “desserts.” A board can be made visible to anyone on Pinterest or kept private so only the Pinner can see it. As Pinners plan
projects, like a home renovation or a wedding, they can invite others on Pinterest to a shared group board. When a Pinner follows another person on
Pinterest, they can choose to follow a select board or their entire account.
Discovery
People go to Pinterest to discover the best ideas to bring into their lives. They do this by exploring the home feed and search tools on our service.
• Home Feed: When people open Pinterest, they see their home feed, which is where they will find Pins that are relevant to their interests
based in part on their recent activity. They will also see Pins from the people, topics and boards they choose to follow. Every home feed is
personalized to reflect the taste and interests of the Pinner.
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Search:
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Text queries: Pinners can search for Pins, boards, people or hashtags by typing in the search bar. Pinners who use search typically
want to see many relevant possibilities that are personalized for their individual taste and interests rather than one perfect answer.
Often, Pinners start by typing in something general like “dinner ideas,” then use Pinterest’s built-in search guides (like “weekday” or
“family”) to narrow down the results.
Visual queries: When a Pinner taps on a Pin to learn more about an idea or image, a feed of visually similar Pins is served beneath
the tapped image. These related Pins help Pinners springboard off a point of inspiration to explore deeper into an interest or narrow
in on the perfect idea. Pinners also search within images by using our Lens tool to select specific objects inside an inspiring scene
e.g., a lamp in a living room scene or a pair of shoes in a street fashion scene. This action automatically triggers a new search that
yields related Pins that are visually similar to the specific object.
Our Advertising Products
Pinners’ desire to discover something they love and make it part of their life is aligned with the motivations of our advertisers. Products and services
often help bring dreams to life. Pinterest can help businesses reach a Pinner from the moment he starts thinking about what he wants his living room
to look like to the moment when he is about to purchase a couch at his price point. We’ve understood this alignment since our founding, and we’re
building an ad product suite that drives value for our users and advertisers simultaneously.
We offer both brand and performance ads, with performance representing approximately two thirds of our revenue for the year ended December 31,
2019. Brand revenue is billed when an advertiser optimizes an ad campaign around “brand” objectives like impressions or video views. Performance
revenue is billed when an advertiser optimizes an ad campaign around “performance” objectives like clicks or conversion events.
Because Pinners travel down the entire purchasing funnel on Pinterest, our ad product suite is used by different advertisers to meet different
objectives, including awareness, consideration and sales.
Awareness Objective.
Pinterest ads appear in the home feed and on search results pages. They echo the visual style of organic Pins and are fully integrated into the
design. A Pinner sees ads as he scrolls through his home feed and search results, looking for inspiration and ideas.
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Consideration and Sales Objectives.
When a Pinner clicks on an ad, he sees an intermediate screen that gives him a closer view of the ad creative as well as the option to save the ad to
a board. He will also be able to swipe up or click to see the advertiser’s online presence, where he can pursue deeper consideration (by exploring
available products and services or signing-up for memberships) and potentially transact.
Ad Formats
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Standard ad: A static image used to showcase content in a simple vertical image format.
Video ad: Used by advertisers to capture attention and tell a story with a visually engaging format. We currently offer three video ad formats:
standard video, performance video and max width video.
Shopping ad: Similar to a standard ad, used to reach people when they are deciding what to buy. Shopping ads are exclusive to advertisers
who upload their product catalog to Pinterest.
Carousel ad: Multiple static or video in one carousel, used by advertisers to showcase more than one image or video at a time.
Our Advertising System
Ad Auction
All advertisers on Pinterest buy ads through an auction-based system. Our ad auction allows us to serve ads to Pinners at relevant moments while
optimizing business outcomes for advertisers. Our auction system selects the best ad for each available ad impression, based on the likelihood of a
desired action occurring and how much that action is worth to advertisers. The likelihood of the action occurring depends on a variety of factors,
such as targeting relevance and creative. Today, our advertisers can optimize their campaigns around four different types of user activity depending
on their objectives: impressions ("CPM"), video views ("CPV"), clicks ("CPC"), and conversion events ("oCPM") such as checkout or add to cart.
Targeting
Ad targeting helps businesses reach the millions of people who come to Pinterest to find or shop for products and services.
Advertisers can target their messages to specific demographics (locations, languages, gender, age), device types, audiences (such as existing
customers or Pinners who recently engaged with their content) and interests or keywords. Advertisers can also choose whether they want ads to
show in Pinners’ search surfaces, home feed or both.
Because ads are content on Pinterest, ad relevance is powered by the same principles that drive organic recommendations. We are building ad
products that will allow advertisers to target ads based on a particular consumer’s known aesthetic preferences and style. Eventually we expect to
be able to leverage the Pinterest taste graph to match ad creative to a Pinner’s individual taste and interests.
Measurement
Measuring the effectiveness of digital spend is a high priority for our advertisers. Our measurement solutions are aligned to help advertisers
recognize the value of an investment on our platform across a variety of objectives. We enable our advertisers to meet their awareness,
consideration and conversion objectives with a number of first-party tools to measure campaign effectiveness. We also have leading third-party
measurement partners to validate Pinterest’s performance and measure advertiser results.
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Sales and Marketing
Our Go-to-Market Approach
The Pinterest platform enables a diverse group of advertisers to achieve a wide range of objectives. We serve these advertisers in customized ways
across their size, product needs and measurement objectives. We initially built our business with large consumer packaged goods ("CPG") and retail
advertisers in the United States who typically have large marketing budgets and had the greatest affinity for our core use cases at that time. We then
scaled our sales force to support these advertisers and grew their spend with us over time while broadening the mix of advertisers across verticals.
As these advertisers scaled their investment on our platform, we have increased our focus on building the product and measurement tools required
to serve mid-market and unmanaged advertisers. Recently, we have also begun to focus on expanding our international advertiser base.
Marketing
To date, we have been able to grow our global user base with relatively low marketing costs. User acquisition has been driven by the strength of our
global brand and the utility of our service as well as by unpaid search engine traffic. We continue to test additional marketing efforts including paid
marketing campaigns focused on user and advertiser acquisition efforts.
Our Technology Innovation
With billions of human-curated ideas, we believe we have one of the largest image-rich data sets ever assembled. This lets us analyze trends,
understand intent and predict consumer behavior. And, we are just scratching the surface of what is possible. Looking ahead, we are excited about
new technical challenges, including fine-grained image recognition, object-to-object visual search and large-scale visual search infrastructure.
Our Competition
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. Many of these
companies have significantly greater financial and human resources. 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 or
products to ours. We remain focused on emerging competition as well. We face competition across almost every aspect of our business, particularly
users and engagement, advertising and talent.
Users and Engagement
We compete to attract, engage and retain users and their time and attention. Because our products and those of our competitors are typically free,
we compete based on our brand, product experience, quality, utility and ease of use of our products.
Advertising
We compete for advertising revenue across a variety of formats. We believe our ability to compete effectively depends on the effectiveness of our
service in reaching users early in the decision-making process, amplifying advertisers’ messages and delivering compelling returns on investment.
This is driven by a number of factors, including our reach, relevance and engagement, as well as our brand and advertising products, delivery and
measurement capabilities and other offerings.
Talent
We compete to attract and retain highly talented individuals, particularly people with expertise in computer vision, artificial intelligence and machine
learning. We believe we compete for these potential employees by providing a work environment that offers the opportunity to work on challenging,
cutting-edge and inspirational products. We also compete by providing competitive compensation packages that we believe will enable us to attract
and retain talent.
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Intellectual Property
Our success is tied in part to our ability to protect our intellectual property and key technological innovations. We rely on a combination of federal,
state and common-law rights in the United States and rights under the laws of other countries, as well as contractual restrictions, to protect our
intellectual property and other proprietary rights. We rely on a combination of patents, copyrights, trademarks, trade secrets, domain names and
other intellectual property rights to help protect our brand and proprietary technologies. In addition, we generally enter into confidentiality and
invention assignment agreements with our employees and contractors, and confidentiality agreements with other third parties, in order to limit
access to, and disclosure and use of, our confidential information and proprietary technology and to preserve our rights thereto.
As of December 31, 2019, we had over 300 issued patents and pending patent applications in the United States and foreign countries relating to
aspects of our actual or contemplated operations and technologies. We also had over 500 registered trademarks and patent trademark applications
in the United States and foreign countries as of December 31, 2019, including our “Pinterest” name and related logos.
We are also dependent on third-party content, technology and intellectual property in connection with our business.
We are presently involved in a number of intellectual property lawsuits, and expect to continue to face allegations from third parties, including our
competitors and “non-practicing entities,” that we have infringed or otherwise violated their intellectual property rights.
For additional information on risks relating to intellectual property, please see the sections titled “Risk Factors” and “—Legal Proceedings.”
Government Regulation
We are subject to many U.S. federal and state and foreign laws and regulations that involve matters central to our business, including laws and
regulations that involve data privacy and data protection, intellectual property (including copyright and patent laws), content regulation, rights of
publicity, advertising, marketing, health and safety, competition, protection of minors, consumer protection, taxation, anti-bribery, anti-money
laundering and corruption, economic or other trade prohibitions or sanctions or securities law compliance. Our business may also be affected by the
adoption of any new or existing laws or regulations or changes in laws or regulations that adversely affect the growth, popularity or use of the
internet, or that significantly restrict or impose conditions on our ability to collect, store, augment, analyze, use and share data or increase consumer
notice or consent requirements before a company can utilize cookies or other tracking technologies. Many relevant laws and regulations are still
evolving and may be interpreted, applied, created or amended in a manner that could harm our business, and new laws and regulations may be
enacted, including in connection with the restriction or prohibition of certain content or business activities. For example, EU member states are in the
process of implementing the EU Copyright Directive, which may impose significant new burdens on content platforms like us.
We rely on a variety of statutory and common-law frameworks and defenses relevant to the content available on our service, including the Digital
Millennium Copyright Act (“DMCA”), the Communications Decency Act (“CDA”) and the fair-use doctrine in the United States, and the Electronic
Commerce Directive in the European Union. In addition, there are newly adopted and pending legislations in the European Union that may impose
additional obligations or liability on us associated with content uploaded by users to our platform.
We receive, process, store, use and share data, some of which contains personal information. We are therefore subject to U.S. federal, state, local
and foreign laws and regulations regarding data privacy and the collection, storage, sharing, use, processing, disclosure and protection of personal
information and other data from users, employees or business partners, including the General Data Protection Regulation (“GDPR”) and the
California Consumer Privacy Act (“CCPA”). These laws expand the rights of individuals to control how their personal data is processed, collected,
used and shared creates new regulatory and operational requirements for processing personal data, increases requirements for security and
confidentiality and provides for significant penalties for non-compliance. There are also a number of legislative proposals recently enacted or
pending before the U.S. Congress, various state legislatures and foreign governments concerning content regulation and data protection that could
affect us. These and other laws and regulations that may be enacted, or new interpretation of existing laws and regulations, may require us to
modify our data processing practices and policies and to incur substantial costs in order to comply.
11
Government authorities outside the United States may also seek to restrict access to or block our service, prohibit or block the hosting of certain
content available through our service or impose other restrictions that may affect the accessibility or usability of our service in that country for a
period of time or even indefinitely. For example, access to our service has been or is currently restricted in whole or in part in China, India,
Kazakhstan and Turkey. In addition, some countries have enacted laws that allow websites to be blocked for hosting certain types of content or may
require websites to remove certain restricted content.
For additional information, see the sections titled “Risk Factors” and “—Legal Proceedings.”
Seasonality
We experience seasonality in user growth, engagement and monetization on our platform. Historically, we have had lower engagement in the
second calendar quarter. Industry advertising spend tends to be strongest in the fourth quarter, and we observe a similar pattern in our historical
advertising revenue. Significant user and monetization growth has partially offset these trends in historical periods, and thus we expect the impact of
seasonality to be more pronounced in the future.
Employees
As of December 31, 2019, we had 2,217 full-time employees.
Corporate Information
We were incorporated in Delaware in October 2008 as Cold Brew Labs Inc. In April 2012, we changed our name to Pinterest, Inc. Our principal
executive offices are located at 505 Brannan Street, San Francisco, California 94107, and our telephone number is (415) 762-7100. We completed
our initial public offering in April 2019 and our Class A common stock is listed on the New York Stock Exchange under the symbol “PINS.” Unless
the context requires otherwise, the words “Pinterest,” “we,” “Company,” “us” and “our” refer to Pinterest, Inc. and our wholly owned subsidiaries.
Available Information
Our website is located at www.pinterest.com, and our investor relations website is located at http://investor.pinterestinc.com/. Copies of our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on our
investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and
Exchange Commission, or the SEC. The SEC also maintains a website that contains our SEC filings. The address of the site is www.sec.gov. We
use our http://investor.pinterestinc.com/ and www.pinterest.com websites as a means of disclosing material nonpublic information and for complying
with our disclosure obligations under Regulation FD.
The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or
document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
12
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
Annual
Report,
you
should
carefully
consider
the
risks
and
uncertainties
described
below,
together
with
all
of
the
other
information
in
this
Annual
Report
on
Form
10-K,
including
the
section
titled
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations”
and
our
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
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.
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 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.
13
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 Annual Report on Form 10-K.
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 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.
14
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, 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
15
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.
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,
16
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 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.
17
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. 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.
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 Annual Report on Form 10-K.
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
18
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 Annual Report on Form 10-K.
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 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.
19
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 and increase the portion of the advertising budget that our existing
advertisers spend with us, we must invest in new tools and expand our sales force, and there can be no assurance that those efforts will be
successful. In addition, advertisers may view some of our products or our platform as experimental and may devote only a small portion of their
advertising spend to our platform until we develop measurement tools that demonstrate the effectiveness of our platform. In addition, many
advertisers do not have advertising creative content in a format that would be successful on our platform and may be unable or unwilling to devote
the technical or financial resources required to develop content for our platform. Advertisers will not do, or continue to do, business with us if they do
not believe that our advertisements are effective in meeting their campaign goals, if we cannot measure the effectiveness of our advertising products
or if they do not believe that their investment in advertising with us will generate a competitive return relative to other alternatives.
A substantial portion of our revenue is derived from a small number of advertisers, and is currently concentrated in certain verticals, particularly CPG
and retail. We either contract directly with advertisers or with advertising agencies on behalf of advertisers. Many of these advertising agencies are
owned by large media corporations that exercise varying degrees of control over the agencies. Our business, revenue and financial results could be
harmed by the loss of, or a deterioration in our relationship with, any of our largest advertisers or with any advertising agencies or the large media
corporations that control them.
Our advertising revenue could be harmed by many other factors, including:
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our inability to create new products that sustain or increase the value of our advertisements;
our inability to meet advertiser demand on our platform if we cannot increase the size and engagement of our user base;
our inability to find the right balance between brand and performance advertising and provide the right products and platform to support the
pricing and demand needed for each of the advertisers;
changes in Pinner demographics that make us less attractive to advertisers;
our inability to make our ads more relevant and effective;
any decision to serve contextually relevant advertisements when the price of relevant advertisements may be lower than other
advertisements that we could show Pinners that are less relevant;
the availability, accuracy and utility of our analytics and measurement solutions that demonstrate the value of our advertisements, or our
ability to further improve such tools;
changes to our data privacy practices (including as a result of changes to laws or regulations or third-party policies) that affect the type or
manner of advertising that we are able to provide;
our inability to collect and share data which new or existing advertisers find useful;
competitive developments or advertiser perception of the value of our products;
product changes or advertising inventory management decisions we make that change the type, size or frequency of advertisements on our
platform;
Pinners that upload content or take other actions that are deemed to be hostile, inappropriate, illicit, objectionable, illegal or otherwise not
consistent with our advertisers’ brand;
the impact of invalid clicks or click fraud on our advertisements;
the failure of our advertising auction mechanism to target and price ads effectively;
difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines or
experience challenges uploading and conforming their advertisements with our system requirements;
the macroeconomic climate and the status of the advertising industry in general; and
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These and other factors could reduce the amount that advertisers spend on our platform, or cause advertisers to stop advertising with us altogether.
Any of these events could harm our business, revenue and financial results.
Our ability to attract and retain advertisers depends on the development of tools to accurately measure the effectiveness of
advertisements on our platform.
Most advertisers rely on tools that measure the effectiveness of their ad campaigns in order to allocate their advertising spend among various
formats and platforms. If we are unable to measure the effectiveness of advertising on our platform or we are unable to convince advertisers that our
platform should be part of a larger advertising budget, our ability to increase the demand and pricing of our advertising products and maintain or
scale our revenue may be limited. Our tools may be less developed than those of other platforms with which we compete for advertising spend.
Therefore, our ability to develop and offer tools that accurately measure the effectiveness of a campaign on our platform is critical to our ability to
attract new advertisers and retain, and increase spend from, our existing advertisers.
Developing and improving these tools may require significant time and resources and additional investment, and in some cases we may rely on third
parties to provide data and technology needed to provide certain measurement data to our advertisers. If we cannot continue to develop and
improve our advertising tools in a timely fashion, those tools are not reliable, or the measurement results are inconsistent with advertiser goals, our
advertising revenue could be adversely affected.
Many existing advertiser tools that measure the effectiveness of advertising do not account for the role of advertising early in a Pinner's decision-
making process, which is when many Pinners come to our service. Instead, these tools measure the last ad or content that was exposed to the
Pinner that gets credit for influencing any Pinner’s purchase or action. As a result, we may not be able to demonstrate and measure for our
advertisers the value of engaging with a Pinner during the early intent phase.
In addition, web and mobile browser developers, such as Apple, Microsoft or Google, have implemented and may continue to implement changes in
browser or device functionality that impair our ability to measure and improve the effectiveness of advertising on our platform. Such changes
include, limiting the use of first-party and third-party cookies and related tracking technologies and changes to click attribution technologies that limit
the ability to collect information that allows us to attribute user actions on advertisers’ websites to the effectiveness of advertising campaigns run on
our platform. For example, Apple launched its Intelligent Tracking Prevention (“ITP”) feature in its Safari browser. ITP blocks some or all third-party
cookies by default on mobile and desktop and ITP has become increasingly restrictive over time. Apple's related Privacy-Preserving Ad Click
attribution (PPAC), intended to preserve some of the functionality lost with ITP, would limit cross-site and cross-device attribution, prevent
measurement outside a narrowly-defined attribution window, and prevent ad re-targeting and optimization. Similarly, Google recently announced
that it plans to stop supporting third-party cookies in its Google Chrome browser. These restrictions make it more difficult for us to provide the most
relevant ads to our Pinners, measure the effectiveness of, and to re-target and optimize, advertising on our platform. Developers may release
additional technology that further inhibits our ability to collect data that allows us to measure the effectiveness of advertising on our platform. Any
other restriction, whether by law, regulation, policy (including third party policies) or otherwise, on our ability to collect and share data which our
advertisers find useful, our ability to use or benefit from tracking and measurement technologies, including cookies, or that further reduce our ability
to measure the effectiveness of advertising on our platform would impede our ability to attract, grow and retain advertisers. Advertisers and other
third parties who provide data that helps us deliver personalized, relevant advertising may restrict or stop sharing this data. If they stop sharing this
data with us, it may not be possible for us to collect this data within the product or from another source.
We rely heavily on our ability to collect and share data and metrics for our advertisers to help new and existing advertisers understand the
performance of advertising campaigns. If advertisers do not perceive our metrics to be accurate representations of our user base and user
engagement, or if we discover inaccuracies in our metrics, they may be less willing to allocate their budgets or resources to our platform, which
could harm our business, revenue and financial results.
We may not be able to develop effective products and tools for advertisers.
Growth in our advertising revenue depends on our ability to continue to develop and offer effective products and tools for advertisers. New ad
formats that take up more space on our platform may result in fewer impressions, which could
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adversely affect our revenue. As the advertising market generates and develops new concepts and technology, we may incur additional costs to
implement more effective products and tools. Continuing to develop and improve these products and tools may require significant time and
resources and additional investment. If we cannot continue to develop and improve our advertising products and tools in a timely fashion, or if our
advertising products and tools are not well received by advertisers, our advertising revenue could be adversely affected.
We may not succeed in further expanding and monetizing our platform internationally and may be subject to increased international
business and economic risks.
We plan to continue expanding our business operations outside the United States and offering content and advertising to Pinners and advertisers in
other languages and countries. We plan to continue to enter new international markets where we have limited or no experience in deploying our
service or selling advertisements. In order to expand successfully, we need to offer content and products that are customized and relevant to local
Pinners and advertisers, which requires significant investment of time and resources. We may launch our advertising platform in countries where we
do not have sales staffing in place, where market perception of our service and ad platform may be low or where our audience size in a given
market may be low relative to advertiser expectations, all or any of which could limit our ability to monetize those countries. As we expand into new
international markets, we may not yet understand the full scope of Pinners’ personal taste and interests, demographics and culture in those markets,
as well as advertiser expectations, target audiences and return on advertising spend. This may cause us to expand into markets before we are able
to offer a service and advertising platform that has been sufficiently localized for those markets or where those markets lack the necessary demand
and infrastructure for long-term adoption of our service. For example, we may experience challenges adapting our content and search tools to be
localized for new markets, or establishing sufficient high quality advertising inventory to deliver relevant localized experiences in new markets. This
may cause us to limit our expansion or decrease our operations in international markets, including discontinuing advertising in those markets or not
monetizing those markets at all, which could harm our reputation and business, revenue and financial results. If the advertising market does not
scale sufficiently or we are unsuccessful in deploying or managing our operations in these markets, our business, revenue and financial results
could be harmed.
We are subject to a variety of risks inherent in doing business internationally, and our exposure to these risks will increase as we continue to expand
our operations, user base and advertiser base globally. These risks include:
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political, social and economic instability;
fluctuations in currency exchange rates and restrictions on currency conversions;
higher levels of credit risk and payment fraud;
enhanced difficulties of integrating any foreign acquisitions;
reduced protection for intellectual property rights in some countries;
difficulties in staffing and managing global operations and the increased travel, infrastructure and legal compliance costs associated with
multiple international locations and subsidiaries;
different regulations and practices with respect to employee/employer relationships, existence of workers’ councils and labor unions, and
other challenges caused by distance, language and cultural differences, making it harder to do business in certain international jurisdictions;
increasing labor costs due to high wage inflation in certain international jurisdictions;
compliance with statutory requirements relating to our equity;
regulations that might add difficulties in repatriating cash earned outside the United States and otherwise prevent us from freely moving
cash;
import and export controls and restrictions and changes in trade regulations;
compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws in other jurisdictions;
compliance with GDPR and similar data privacy and data protection laws;
compliance with laws that might restrict content or advertising or require us to provide user information, including confidential information, to
local authorities;
compliance with multiple tax jurisdictions and management of tax impact of global operations; and
the other risks and uncertainties described in this Annual Report on Form 10-K.
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If we are unable to expand internationally and manage the complexity of global operations successfully, our business, revenue and financial results
could be harmed.
We cannot assure you that we will effectively manage the growth of our business.
We have experienced rapid growth and demand for our service since inception. The growth and expansion of our business and product offerings
and the increase in full-time employees place significant challenges on our management, operational and financial resources, including managing
multiple relationships with Pinners, advertisers, technology licensors and other third parties. If we continue to grow our operations or the number of
our third-party relationships, our technology systems, procedures or internal controls may not be adequate.
As our organization continues to grow in number of employees and offices and we are required to implement more complex organizational
management structures, we may also find it increasingly difficult to preserve our corporate culture, including our ability to quickly develop and launch
new and innovative products and adequately oversee employees and business functions. Our inability to effectively manage growth of our
organization may harm our business, revenue and financial results.
We have a limited operating history and, as a result, our past results may not be indicative of future operating performance.
We have a limited operating history with the current scale of our business, which makes it difficult to forecast our future results. You should not rely
on our past results of operations as indicators of future performance. You should consider and evaluate our prospects in light of the risks and
uncertainty frequently encountered by companies like ours.
We have incurred operating losses in the past, anticipate increasing our costs and operating expenses, expect to incur operating losses
in the future and may never achieve or maintain profitability.
For all annual periods of our operating history we have experienced net losses and negative cash flows from operations. We generated net losses of
$1,361.4 million and $63.0 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had an
accumulated deficit of $2,206.7 million. We have not achieved profitability, and we may not realize sufficient revenue to achieve profitability in future
periods.
We also anticipate that our operating expenses will increase substantially in the foreseeable future if we continue to expand our operations
domestically and internationally, enhance our product offerings, broaden our Pinner and advertiser base, expand our marketing channels, hire
additional employees and develop our technology. These efforts may prove more expensive than we currently anticipate, and we may not succeed
in increasing our revenue sufficiently to offset these higher expenses. We may encounter unforeseen expenses, operating delays or other unknown
factors that may result in losses in future periods. We have significant unrecognized share-based compensation expense, which we expect to
recognize over the next several years. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Notes to Financial Statements" In addition, we have entered into certain non-cancelable commitments that limit our ability to
reduce our cost and expenses in the future. For more information, see "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Notes to Financial Statements". Any failure to increase our revenue as we implement initiatives to grow our business could
prevent us from achieving or maintaining profitability on either a quarterly or annual basis.
We may make decisions consistent with our mission and values that may reduce our short- or medium-term operating results.
Our mission—to bring everyone the inspiration to create a life they love—and company values are integral to everything we do. We frequently make
decisions regarding our business and service in accordance with our mission and values that may reduce our short- or medium-term operating
results if we believe those decisions will improve the experiences of Pinners, advertisers, employees or our community, and therefore benefit our
business. For example, we may choose to remove content that we have determined does not create an inspiring experience for Pinners or revise
our policies in ways that decrease Pinner engagement. Also, we decided to extend certain GDPR rights, such as rights of access, correction and
deletion, to all of our Pinners worldwide, as opposed to only those in Europe. These decisions may not be consistent with the expectations of
investors and any longer-term benefits may not materialize within the time frame we expect or at all, which could harm our business, revenue and
financial results.
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Our operating results are likely to fluctuate from quarter to quarter, which makes them difficult to predict.
Our quarterly operating results are tied to certain key business metrics that have fluctuated in the past and are likely to fluctuate in the future, which
makes them difficult to predict. Our operating results depend on numerous factors, many of which are outside of our control, including:
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our ability to generate revenue from our service;
our ability to improve or maintain gross margins;
the number and relevancy of advertisements shown to Pinners;
the manner in which Pinners engage with different products, where certain products may generate different amounts of revenue;
downward pressure on the pricing of our advertisements;
the timing, cost of and mix of new and existing marketing and promotional efforts as we grow and expand our operations to remain
competitive;
seasonal fluctuations in spending by our advertisers, product usage by Pinners and growth rates for Pinners and engagement, each of
which may change as our product offerings evolve or our business grows;
seasonal fluctuations in internet usage generally;
the success of technologies designed to block the display of ads;
development and introduction of new product offerings by us or our competitors;
the ability of our third-party providers to scale effectively and provide the necessary technical infrastructure for our service on a timely basis;
system failures, disruptions, breaches of security or data privacy or internet downtime, whether on our service or on those of third parties;
the inaccessibility of our service due to third-party actions;
changes in measurement of our metrics;
costs associated with the technical infrastructure used to operate our business, including hosting services;
fluctuations in the amount of share-based compensation expense;
our ability to anticipate and adapt to the changing internet business or macroeconomic conditions; and
the other risks and uncertainties described in this Annual Report on Form 10-K.
We receive, process, store, use and share data, some of which contains personal information, which subjects us to complex and evolving
governmental regulation and other legal obligations related to data privacy, data protection and other matters, which are subject to
change and uncertain interpretation.
We receive, process, store, use and share data, some of which contains personal information. There are numerous federal, state, local and foreign
laws and regulations regarding matters central to our business, data privacy and the collection, storing, sharing, use, processing, disclosure and
protection of personal information and other data from Pinners, employees and business partners, the scope of which are regularly changing,
subject to uncertain and differing interpretations and may be inconsistent among countries or conflict with other rules.
The application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we
operate, and as the focus on data privacy and data protection increases globally, we are, and will continue to be, subject to varied and evolving data
privacy and data protection laws. We are subject to GDPR which expands the rights of individuals to control how their personal data is processed,
includes restrictions on the use of personal data of children, creates new regulatory and operational requirements for processing personal data (in
particular in case of a data breach), increases requirements for security and confidentiality, restricts transfers of data outside of the European
Economic Area and provides for significant penalties for non-compliance, including fines of up to 4% of global annual turnover for the preceding
financial year or €20 million (whichever is higher) for the most serious infringements. In June 2018, the State of California enacted the CCPA, which
came into effect on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to
consumers about their data collection, use and sharing practices, allows consumers to opt out of certain data sharing with third parties and provides
a new cause of action for data breaches. It remains unclear how
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the CCPA will be interpreted. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state
consumer protection laws to impose standards for the online collection, use, dissemination and security of data. The burdens imposed by these and
other laws and regulations that may be enacted, or new interpretations of existing laws and regulations, may require us to modify our data
processing practices and policies and to incur substantial costs in order to comply and may disproportionately affect our business in comparison to
our peers that have greater resources. These laws and regulations may also impact our ability to expand advertising on our platform internationally,
as they may impede our ability to deliver targeted advertising and accurately measure our ad performance.
Any failure or perceived failure by us to comply with our privacy policies, data privacy-related obligations to Pinners or other third parties, or our data
privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable
information or other user data, or other failure to comply with these laws and regulations, or regulatory scrutiny, may result in governmental
enforcement actions or litigation that could expose our business to substantial financial penalties, or other monetary or non-monetary relief, negative
publicity, loss of confidence in our products, decline in Pinner or advertiser growth or damage to our brand and reputation. Companies in the
technology industry have recently experienced increased regulatory scrutiny relating to data privacy and data protection, and we may become
subject to enhanced scrutiny and enforcement actions from regulators to ensure compliance with data privacy and data protection laws and
regulations. The GDPR, CCPA and other such laws and regulations impose new and burdensome obligations, and include substantial uncertainty as
to their interpretation, and we may face challenges in addressing their requirements, which could result in fines or penalties, lead us to change our
data privacy policies and practices and limit our ability to deliver personalized advertising. Public statements against us by consumer advocacy
groups or others could also cause Pinners to lose trust in us, which could result in declines in user growth, retention or engagement and have an
adverse effect on our brand, reputation and business. Additionally, if third parties that we work with, such as advertisers, service providers or
developers, violate applicable laws or our policies, these violations may also put Pinners’ information at risk and could in turn have an adverse effect
on our business, revenue and financial results.
Any significant change to applicable laws, regulations or industry practices, or to interpretations of existing laws and regulations, regarding the use
or disclosure of Pinners’ data, or regarding the manner in which we obtain express or implied consent from Pinners for the use and disclosure of
such data, could require us to modify our products, possibly in a material manner, and may limit our ability to develop new products that make use of
the data that Pinners voluntarily share. There currently are a number of proposals pending before federal, state and foreign legislative and
regulatory bodies. For example, the European Union is contemplating the adoption of the “ePrivacy Regulation” that would govern data privacy and
the protection of personal data in electronic communications, in particular for direct marketing purposes. In addition, some countries are considering
or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that
could increase the cost and complexity of delivering our service, particularly as we expand our operations internationally.
Pinner metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those
metrics could harm our business, revenue and financial results.
We regularly review metrics, including the number of our active users and other measures to evaluate growth trends, measure our performance and
make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party.
While these numbers are based on what we currently believe to be reasonable estimates for the applicable period of measurement, there are
inherent challenges in measuring how our products are used across large populations globally. Our metrics calculations may be inaccurate, and we
may not be able to identify those inaccuracies. In the past, we have relied on other metrics that measure different activities, such as saving a Pin,
clicking and other activities, as indicators of user growth and engagement. We have in the past implemented, and may from time to time in the future
implement, new methodologies for calculating these metrics which may result in the metrics from prior periods changing, decreasing or not being
comparable to prior periods. For example, in the second quarter of 2018, we implemented our current methodology for tracking active users. We
have restated our active user data for periods from the fourth quarter of 2016 to the first quarter of 2018 based on the information that was available
to us under the prior methodology in a way that we believe is comparable to the current methodology. However, we were not able to restate active
users for periods prior to the fourth quarter of 2016 based on the data available to us from those periods. As a result, active user information for the
first, second and third quarters of 2016 are based on the prior methodology, although we believe the differences are not material. Our prior
methodology for measuring active users relied on different signals depending on the platform where the user activity was measured—iOS, Android,
web and mobile web—and inferred user activity
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in a way that required removal of certain data that would not indicate active use, such as background system requests. Our metrics may also differ
from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology or data used.
Our MAU metrics may also be impacted by false or spam accounts in existence on our service. We regularly deactivate spam accounts that violate
our terms of service, and exclude these users from the calculation of our MAU metrics; however, we may not succeed in identifying and removing all
spam accounts from our service. Users are not prohibited from having more than one account on our service, and we treat multiple accounts held by
a single person as multiple users for purposes of calculating our active users.
In addition, some of our Pinner demographic data may be incomplete or inaccurate. For example, because Pinners self-report their date of birth, our
age-demographic data may differ from Pinners’ actual ages, or be unavailable. We receive age-demographic data for a portion of those Pinners
from other third-party accounts that Pinners chose to authenticate with on our service, such as Facebook and Google, but there can be no
assurance that those platforms will continue to give us permission to access that data or that the data we receive from those third parties is
accurate. In addition, our data regarding the geographic location of Pinners and revenue by user geography is estimated based on a number of
factors, which may not always accurately reflect the actual location and may be different depending on the metric we are calculating. If our metrics
provide us with incorrect or incomplete information about Pinners and their behavior, we may make inaccurate conclusions about our business.
Technologies have been developed that can block the display of our ads, which could harm our business, revenue and financial results.
Technologies have been developed, and will likely continue to be developed, that can block the display of our ads. We generate substantially all of
our revenue from advertising, and ad blocking technologies may prevent the display of certain of our ads, which could harm our business, revenue
and financial results. Existing ad blocking technologies that have not been effective on our service may become effective as we make certain
product changes, and new ad blocking technologies may be developed. More users may choose to use products that block or obscure the display of
our ads if we are unable to successfully balance the amount of organic content and paid advertisements, or if users’ attitudes toward advertisements
become more negative. Further, regardless of their effectiveness, ad blockers may generate concern regarding the health of the digital advertising
industry, which could reduce the value of digital advertising and harm our business, revenue and financial results.
We depend on Amazon Web Services for the vast majority of our compute, storage, data transfer and other services. Any disruption of,
degradation in or interference with our use of Amazon Web Services could negatively affect our operations and harm our business,
revenue and financial results.
Amazon Web Services (“AWS”) provides the cloud computing infrastructure we use to host our website, mobile application and many of the internal
tools we use to operate our business. We have a long-term commitment with AWS. Under the agreement with AWS, in return for negotiated
concessions, we currently are required to maintain a substantial majority of our monthly usage of certain compute, storage, data transfer and other
services on AWS. This addendum is terminable only under certain conditions, including by either party following the other party’s material breach,
which may be the result of circumstances that are beyond our control. A material breach of this addendum by us, or early termination of the
addendum as a result of an acquisition of us by another cloud services provider, could carry substantial penalties, including liquidated damages. If
AWS increases pricing terms, terminates or seeks to terminate our contractual relationship, establishes more favorable relationships with our
competitors, or changes or interprets its terms of service or policies in a manner that is unfavorable, those actions could harm our business, revenue
and financial results.
Any significant disruption of, limitation of our access to or other interference with our use of AWS would negatively impact our operations and our
business could be harmed. In addition, any transition of the cloud services currently provided by AWS to another cloud services provider would be
difficult to implement and would cause us to incur significant time and expense and could disrupt or degrade our ability to deliver our products and
services. The level of service provided by AWS could affect the availability or speed of our services. If Pinners or advertisers are not able to access
our service or platform or encounter difficulties in doing so, we may lose Pinners or advertisers and could harm our business and reputation.
We utilize data center hosting facilities operated by AWS, located in various facilities. In addition, we have implemented a limited disaster recovery
program which does not allow us to serve network traffic from back-up data center services. An unexpected disruption of services provided by these
data centers could hamper our ability to
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handle existing or increased traffic, result in the loss of data or cause our platform to become unavailable, which may harm our reputation and
business.
We must effectively operate with mobile operating systems, web browsers, networks, regulations and standards, which we do not
control. Changes in our products or to those mobile operating systems, web browsers, networks, regulations or standards may harm
Pinner retention, growth and engagement.
Because our service is used on mobile devices and through web browsers, our application must remain interoperable with popular mobile operating
systems and browsers, including Android, Chrome, iOS and Safari. We have no control over these operating systems and browsers. Any changes to
these operating systems, browsers or the online stores distributing our application that impact the accessibility, speed or functionality of our service
or give preferential treatment to competitive products, could harm usage of our service. Our competitors that control the operating systems,
browsers and online stores that our application runs on, or is distributed through, could make interoperability of our service with those systems,
browsers and stores more difficult. New products introduced by us may take longer to function with these systems and browsers.
If we are unable to deliver consistent, high-quality Pinner experiences across different devices with different operating systems, user growth,
retention or engagement may decline, which could harm our business, revenue and financial results.
To deliver high-quality video and other content over mobile cellular networks, our products must work well with a range of mobile technologies,
systems, networks, regulations and standards that we do not control. The adoption of any laws or regulations that adversely affect the growth,
popularity or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and services and increase
our cost of doing business. For example, in June 2018, the Federal Communications Commission repealed the 2015 “open internet rules,” which
had prohibited broadband internet access service providers in the United States from impeding access to most content, or otherwise unfairly
discriminating against content providers. The impact of this repeal on the way Pinners access the internet and the way we interact with internet
service providers remain uncertain. Other countries also have rules requiring equal access to internet content. Regulatory changes could limit
Pinners’ ability to access our service or make our service a less attractive alternative to our competitors’ platforms and cause our user growth,
retention or engagement to decline, which could harm our business, revenue and financial results.
If it becomes more difficult for Pinners to access and use our service on their browsers or mobile devices, if Pinners choose not to access or use our
service on their mobile devices, or if Pinners choose to use mobile products that limit access to our service, user growth, retention and engagement
may decline, which could harm our business, revenue and financial results.
We rely on software, technologies and related services from other parties, and problems in their use, access or performance could
increase our costs and harm our business, revenue and financial results.
We rely on software, technologies and related services from third parties to operate critical functions of our business. Third-party technologies or
services that we utilize may become unavailable due to a variety of reasons, including outages, interruptions or failure to perform under our
agreement. Unexpected delays in their availability or function can, in turn, affect the use or availability of our service. Further, third-party software
and service providers may no longer provide such software and services on commercially reasonable terms or may fail to properly maintain or
update their software. In such instances, we may be required to seek licenses to software or services from other parties or to redesign our products
to function with new software or services. This could result in delays in the release of new products until equivalent technology can be identified,
licensed or developed, and integrated into our platform and services. Furthermore, we might be forced to limit the features available in our current or
future products. These occurrences, delays and limitations, if they occur, could harm our business, revenue and financial results.
Our business depends on our ability to maintain and scale our technology infrastructure, including speed and availability of our service.
Our reputation and ability to attract, retain and serve Pinners and advertisers is dependent upon the reliable performance of our service and our
underlying technology infrastructure and content delivery processes. From time to time, we are subject to interruptions in or disruptions of our
systems. If our platform is unavailable when Pinners or advertisers attempt to access it, if it does not load as quickly as they expect or if their content
is not saved, Pinners may not return to our platform as often in the future, or at all.
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Our advertisers must be able to easily buy, forecast, optimize and measure the performance of ads on a responsive and stable platform. Advertisers
will not continue to do business with us if our technology infrastructure is not reliable. Our systems may not be adequately designed with the
necessary reliability and redundancy to avoid performance delays or outages that could harm our business. Our systems may not be adequately
designed to avoid performance delays or outages. For example, our engineering teams' broad access to our systems is designed for speed and
release velocity, which increases the risk of disruptive intentional and unintentional (and potentially premature) updates and changes being made
directly to our live platforms and services. As our user and advertiser base and the volume and types of information shared on our service continue
to grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy the
needs of Pinners and advertisers, which could increase our costs. It is possible that we may fail to effectively scale and grow our technology
infrastructure to accommodate these increased demands, which could harm our business, revenue and financial results.
In addition, our systems and operations are vulnerable to damage, delays or interruptions from fire, flood, power loss, telecommunications failure,
spikes in usage volume, terrorist attacks, acts of war, earthquakes and similar events. We are particularly vulnerable to these types of events
because our cloud computing infrastructure is currently located in one geographic region. In addition, the substantial majority of our employees are
based in our headquarters located in San Francisco, California. If there is a catastrophic failure involving our systems or major disruptive event
affecting our headquarters or the San Francisco area in general, we may be unable to operate our service.
A substantial portion of our technology infrastructure is provided by third parties. Any disruption or failure in the services we receive from these
providers could harm our ability to handle existing or increased traffic or cause our platform to become unavailable, which could harm our business.
We exercise little control over these providers and have limited line of sight into their governance, and any financial or other difficulties these
providers face may harm our business.
The occurrence of any of the foregoing risks could result in damage to our systems and hardware or could cause them to fail completely, and our
insurance may not cover such risks or may be insufficient to compensate us for losses that may occur. These events may result in distraction of
management, loss of revenue and costs from litigation and enforcement. In addition, they could also result in significant expense to repair or replace
damaged facilities and remedy resultant data loss or corruption. A prolonged interruption in the availability or reduction in the speed or other
functionality of our products could materially harm our reputation and business.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm
our business, revenue and financial results.
We currently depend on the continued services and performance of our key personnel, including Benjamin Silbermann and others. Mr. Silbermann’s
employment, and the employment of our other key personnel, is at will, which means they may resign or be terminated for any reason at any time. In
addition, much of our key technology and systems are custom-made for our business by our personnel. The loss of key personnel, including key
members of management as well as our key engineering, design, marketing, sales and product development personnel, could disrupt our operations
and harm our business.
In addition, it is important to our business to attract and retain highly talented personnel, particularly engineers with expertise in computer vision,
artificial intelligence and machine learning. As we grow our business, we may find our recruiting and retention efforts more challenging because the
marketplace for talent is highly competitive. The incentives provided by our stock option grants, restricted stock grants and restricted stock unit
grants, or by other compensation arrangements, may not be effective to attract and retain employees. We may also be required to enhance wages,
benefits and non-equity incentives. If our company culture changes, we may experience difficulties attracting and retaining personnel. If we do not
succeed in attracting and retaining highly qualified personnel or the financial resources required to do so increase, we may not be able to meet our
business objectives, and our business, revenue and financial results could be harmed.
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Action by governments to restrict access to our service or certain of our products in their countries could harm our business, revenue
and financial results.
Government authorities outside the United States may seek to restrict access to our service if they consider us to be in violation of their laws or for
other reasons, and our service has been restricted by governments in other countries from time to time. For example, access to our service has
been or is currently restricted in whole or in part in China, India, Kazakhstan and Turkey. Other governments may seek to restrict access to or block
our service, prohibit or block the hosting of certain content available through our service, or impose other restrictions that may affect the accessibility
or usability of our service in that country for a period of time or even indefinitely. For example, some countries have enacted laws that allow websites
to be blocked for hosting certain types of content or may require websites to remove certain restricted content. It can be challenging to manage the
requirements of multiple jurisdictions governing the type and nature of the content available on our service. If prohibitions or restrictions are imposed
on our service, or if our competitors are able to successfully penetrate new geographic markets or capture a greater share of existing geographic
markets that we cannot access or where we face other restrictions, our user growth, retention and engagement may be adversely affected, and our
business, revenue and financial results could be harmed.
We may be liable as a result of content or information that is published or made available on our service.
We are subject to many U.S. federal and state and foreign laws and regulations that involve matters central to our business, including laws and
regulations that involve data privacy and protection, intellectual property (including copyright and patent laws), content regulation, rights of publicity,
advertising, marketing, health and safety, competition, protection of minors, consumer protection, taxation, anti-bribery, anti-money laundering and
corruption, economic or other trade prohibitions or sanctions or securities law compliance. We may be sued or face regulatory action for claims
relating to content or information that is published or made available on our service. Our systems, tools and personnel that help us to proactively
detect potentially policy-violating or otherwise inappropriate content cannot identify all such content on our service, and in many cases this content
will appear on our service. This risk may increase as we develop and increase the use of certain products, such as video, for which identifying such
content is challenging. Additionally, some controversial content may not be banned on our service and, even if it is not featured in advertisements or
recommendations to Pinners, may still appear in search results or be saved on boards. 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. Further, if policy-violating content is found on our service, we may be in violation of the
terms of certain of our key agreements, which may result in termination of the agreement and, in some cases, payment of damages. We could incur
significant costs in investigating and defending such claims and, if we are found liable, damages. If any of these events occur, our business, revenue
and financial results could be harmed.
We rely on a variety of statutory and common-law frameworks and defenses relevant to the content available on our service, including the Digital
Millennium Copyright Act, the Communications Decency Act and the fair-use doctrine in the United States, and the Electronic Commerce Directive
in the European Union. The DMCA limits, but does not necessarily eliminate, our potential liability for caching, hosting, listing or linking to third-party
content that may include materials that infringe copyrights. The CDA further limits our potential liability for content uploaded onto our service by third
parties. Defenses such as the fair-use doctrine (and related doctrines in other countries) may be available to limit our potential liability for featuring
third-party intellectual property content for purposes such as reporting, commentary and parody. In the European Union, the Electronic Commerce
Directive offers certain limitations on our potential liability for featuring third-party content. However, each of these statutes and doctrines is subject
to uncertain or evolving judicial interpretation and regulatory and legislative amendments, and we cannot guarantee that such frameworks and
defenses will be available for our protection. Regulators in the United States and in other countries may introduce new regulatory regimes that
increase potential liability for content available on our service, including liability for misleading or manipulative information, hate speech, privacy,
copyrighted content and other types of online harm. For example, there have been various Congressional efforts to restrict the scope of the
protections available to online platforms under Section 230 of the CDA, and current protections from liability for third-party content in the United
States could decrease or change. Similarly, the EU Directive on Copyright in the Digital Single Market (DSM) to be implemented by each EU
member state by June 2021 could alter the liability scheme for online sharing-content platforms and impose additional requirements for the content
uploaded by their users to protect copyright owners against unlicensed use of their work. It may require us to build in additional product features or
tools that may not be favorable to our business, add payment obligations or compliance costs. There are also a number of legislative proposals in
the United States, at both the federal and state level, and in the European Union and the U.K., that could
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impose new obligations in areas affecting our business, such as liability for copyright infringement and other online harm.
We could also face fines or orders restricting or blocking our service in particular countries as a result of content on our platform. For example, the
Network Enforcement Act in Germany imposes significant fines for failures to comply with certain content removal and disclosure obligations, and
other countries, including the U.K., may enact similar legislation, which would impose penalties for failure to remove certain content. Additionally, the
European Union is currently debating a regulation that would require the removal of terrorist-related content within one hour of being flagged. If the
regulation is passed, the tools we use for certain removal obligations may not work and we may have to build custom tools.
Any new legislation may be difficult to comply with in a timely and comprehensive fashion and may substantially increase our costs. These costs
could be prohibitively expensive for a company of our size, which could prevent us from launching a product in a particular market. This could
disadvantage us relative to our competitors with more resources. If the rules, doctrines or currently available defenses change, if international
jurisdictions refuse to apply similar protections that are currently available in the United States or the European Union or if a court were to disagree
with our application of those rules to our service, we could be required to expend significant resources to try to comply with the new rules or incur
liability and our business, revenue and financial results could be harmed.
We could become involved in legal disputes involving intellectual property claims or other disputes that are expensive to support, and if
resolved adversely, could harm our business, revenue and financial results.
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 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. Any
proceedings, claims or inquiries involving us, whether successful or not, may be time consuming, result in costly litigation, unfavorable outcomes,
increased costs of business, may require us to change our business practices or products, require significant amount of management’s time, may
harm our reputation or otherwise harm our business and future financial results.
We are presently involved in and have been subject to actual and threatened litigation with respect to third-party patents, trademarks, copyrights and
other intellectual property, and may continue to be subject to intellectual property litigation and threats thereof. Companies in the internet,
technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based
on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, grow our business and products,
and become increasingly high profile, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various
“non-practicing entities” that own patents and other intellectual property rights have asserted, and may in the future attempt to assert, intellectual
property claims against us to extract value through licensing or other settlements.
From time to time, we receive letters from patent holders alleging that some of our products infringe their patent rights and from trademark holders
alleging infringement of their trademark rights. We also receive letters from holders of copyrighted content alleging infringement of their intellectual
property rights, including DMCA take-down requests. Our technologies and content, including the content that Pinners pin to our service, may not be
able to withstand such third-party claims.
With respect to any intellectual property claims, we may have to seek a license to continue using technologies or engaging in practices found to be
in violation of a third party’s rights, which may not be available on reasonable terms and may significantly increase our operating expenses. A
license to continue such technologies or practices may not be available to us at all and we may be required to discontinue use of such technologies
or practices or to develop alternative non-infringing technologies or practices. The development of alternative non-infringing technologies or
practices could require significant effort and expense or may not be achievable at all. Our business, revenue and financial results could be harmed
as a result.
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If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our
business, revenue and financial results could be harmed.
We rely, and expect to continue to rely, on a combination of confidentiality, invention assignment and license agreements with our employees,
consultants and other third parties with whom we have relationships, as well as trademark, copyright, patent and trade secret protection laws, to
protect our proprietary rights. We have filed various applications for certain aspects of our intellectual property in the United States and other
countries, and we currently hold issued patents in multiple jurisdictions. Further, there can be no assurance that each of our patent applications will
result in the issuance of a patent. In addition, any resulting issued patents may have claims narrower than those in our patent applications. There
can be no assurance that each of our trademark applications will result in the issuance of a trademark or that each resulting trademark registration
will be able to be maintained. In the future we may acquire additional patents or patent portfolios, license patents from third parties or agree to
license the use of our patents to third parties, which could require significant cash expenditures. Additionally, our current and future patents,
trademarks and other intellectual property or other proprietary rights may be contested, circumvented or found unenforceable or invalid.
However, third parties may knowingly or unknowingly infringe or challenge our proprietary rights. Effective intellectual property protection may not be
available in every country in which we operate or intend to operate our business. We may not be able to prevent infringement without incurring
substantial time and expense, if at all. There can be no assurance that others will not offer technologies, products, services, features or concepts
that are substantially similar to ours and compete with our business. Similarly, particularly as we expand the scope of our business and the countries
in which we operate, we may not be able to prevent third parties from infringing, or challenging our use of, our intellectual property rights, including
those used to build and distinguish the “Pinterest” brand. If the protection of our proprietary rights is inadequate to prevent unauthorized use or
appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively
mimic our technologies, products, services or features or methods of operations. Any of these events could harm our business, revenue and
financial results.
Our use of “open source” software could subject us to possible litigation or could prevent us from offering products that include open
source software or require us to obtain licenses on unfavorable terms.
A portion of the technologies we use incorporates “open source” software, and we may incorporate open source software in the future. Open source
licenses may subject us to certain unfavorable conditions, including requirements that we offer our products that incorporate the open source
software for no cost, that we make publicly available the source code for any modifications or derivative works we create based upon, incorporating
or using the open source software, or that we license such modifications or derivative works under the terms of the particular open source license.
We also license to others some of our software through open source projects which requires us to make the source code publicly available, and
therefore can affect our ability to protect our intellectual property rights with respect to that software. If an author or other third party that distributes
open source software that we use or license were to allege that we had not complied with the conditions of the applicable license, we could be
required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from offering
our products that contained the open source software, required to release proprietary source code, required to obtain licenses from third parties or
otherwise required to comply with the unfavorable conditions unless and until we can re-engineer the product so that it complies with the open
source license or does not incorporate the open source software. Any of the foregoing could disrupt our ability to offer our products and harm our
business, revenue and financial results.
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We may acquire other businesses, which could require significant management attention, disrupt our business, dilute stockholder value
and harm our business, revenue and financial results.
As part of our business strategy, we have made and intend to make acquisitions to add specialized employees and complementary companies,
products or technologies. Our previous and future acquisitions may not achieve our goals, and we may not realize benefits from acquisitions we
make in the future. Any integration process will require significant time and resources, and we may not be able to manage the process successfully.
If we fail to successfully integrate acquisitions, or the personnel or technologies associated with those acquisitions, the business, revenue and
financial results of the combined company could be harmed. Our acquisition strategy may change over time and future acquisitions we complete
could be viewed negatively by Pinners, advertisers, investors or other parties with whom we do business. We may not successfully evaluate or
utilize the acquired technology and accurately forecast the financial impact of an acquisition, including accounting charges. We may also incur
unanticipated liabilities that we assume as a result of acquiring companies. We may have to pay cash, incur debt or issue equity securities to pay for
any such acquisition, each of which could affect our financial condition or the value of our securities. We would expect to finance any future
acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-backed acquisition financing or cash from
operations. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness would
result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations. In
the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if
at all. Our acquisition strategy could require significant management attention, disrupt our business and harm our business, revenue and financial
results.
If we are unable to obtain additional financing, if needed or if we default on our credit obligations, our operations may be interrupted and
our business, revenue and financial results could be harmed.
We may require additional financing to maintain and grow our business. Our ability to obtain financing will depend on, among other things, our
development efforts, business plans, operating performance, investor demand and the condition of the capital markets at the time we seek
financing. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional
funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights
of our common stock, and our existing stockholders may experience dilution.
Our revolving credit facility provides our lenders with a first-priority lien against substantially all of our domestic assets, as well as certain domestic
intellectual property, and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise
adversely affect our results of operations. It contains a number of covenants that limit our ability and our subsidiaries’ ability to, among other things,
incur additional indebtedness, pay dividends, make redemptions and repurchases of stock, make investments, loans and acquisitions, incur liens,
engage in transactions with affiliates, merge or consolidate with other companies, sell material businesses or assets, or license or transfer certain of
our intellectual property. We are also required to maintain certain financial covenants, including a consolidated total assets covenant and a liquidity
covenant. Complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against
companies who are not subject to such restrictions.
If we fail to comply with the covenants under the revolving credit facility, lenders would have a right to, among other things, terminate the
commitments to provide additional loans under the facility, enforce any liens on collateral securing the obligations under the facility, declare all
outstanding loans and accrued interest and fees to be due and payable and require us to post cash collateral to be held as security for any
reimbursement obligations in respect of any outstanding letters of credit issued under the facility. If any remedies under the facility were exercised,
we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could
immediately materially and adversely affect our business, cash flows, operations and financial condition. Even if we were able to obtain new
financing, it may not be on commercially reasonable terms or on terms that are acceptable to us.
Additionally, our revolving credit facility utilizes LIBOR or various alternative methods set forth in our revolving credit facility to calculate the amount
of accrued interest on any borrowings. Regulators in certain jurisdictions including the United Kingdom and the United States have announced the
desire to phase out the use of LIBOR by the end of 2021. If a published U.S. dollar LIBOR rate is unavailable, the interest rates on our debt indexed
to LIBOR will be determined using one of the alternative methods, any of which could, if the revolver is drawn, result in interest obligations that are
more than the current form, which could have a material adverse effect on our financing costs.
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The interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations could harm
our business, revenue and financial results.
The 2017 Tax Cuts and Jobs Act (the “Tax Act”) changed how the United States imposes income tax on multinational corporations in a number of
ways. The issuance of additional regulatory or accounting guidance may affect our analysis of the impact of the new law on us and may harm our
operating results and financial condition. Accordingly, we are still analyzing the Tax Act with our professional advisers. Until that analysis is
complete, the full impact of the new tax law on us during future periods is uncertain, and no assurances can be made on any potential impact.
Additionally, in March 2018, the European Commission released a proposal for a European Council directive on taxation of specified digital services.
The proposal calls for an interim tax on certain revenues from digital activities, as well as a longer-term regime that creates a taxable presence for
digital services and imposes a tax on digital profits. We do not yet know the impact this proposal will have on our financial results. Some jurisdictions
have enacted a tax on technology companies that generate revenues from the provision of digital services, including France and Italy, and a number
of other jurisdictions, including the United Kingdom, are considering enacting similar digital tax regimes. These efforts are alongside Organisation for
Economic Co-operation and Development’s ongoing work, as part of its Base Erosion and Profit Shifting (BEPS) Action Plan, to issue a final report
in 2020 that provides a long-term, multilateral proposal on taxation of the digital economy.
Further changes to the U.S. or non-U.S. taxation of our operations may increase our worldwide effective tax rate, result in additional taxes or other
costs or have other material consequences, which could harm our business, revenue and financial results.
We may have greater than anticipated tax liabilities, which could harm our business, revenue and financial results.
We operate in a number of tax jurisdictions globally, including in the United States at the federal, state and local levels, and in many other countries,
and plan to continue to expand the scale of our operations in the future. Thus, we are subject to review and potential audit by a number of U.S.
federal, state, local and non-U.S. tax authorities. Significant judgment is required in determining our worldwide provision for income taxes and other
tax liabilities. Further, tax authorities may disagree with tax positions we take and challenge our tax positions. Successful unilateral or multi-
jurisdictional actions by various tax authorities, including in the context of our current or future corporate operating structure and third-party and
intercompany arrangements (including transfer pricing and the manner in which we develop, value and use our intellectual property), may increase
our worldwide effective tax rate, result in additional taxes or other costs or have other material consequences, which could harm our business and
financial results. In December 2019, we completed an intra-entity asset transfer of certain of our intellectual property rights to our Irish subsidiary,
which resulted in an increase in foreign deferred tax assets. We cannot be certain that this transfer will not lead to any unanticipated tax
consequences which could harm our financial results.
Although we do not currently incur significant tax costs due to our history of operating losses, our tax liabilities may increase if our profitability
increases in the future. In addition, our effective tax rate may change from year to year based on changes in the mix of activities and income
allocated or earned among various jurisdictions, tax laws and the applicable tax rates in these jurisdictions (including future tax laws that may
become material), tax treaties between countries, our eligibility for benefits under those tax treaties and the valuation of deferred tax assets and
liabilities. Such changes could result in an increase in the effective tax rate applicable to all or a portion of our income, which would reduce our
profitability.
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Our ability to use or benefit from our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2019, we had federal, California and other state net operating loss carryforwards of $1,880.8 million, $245.2 million and
$599.7 million, respectively. If not utilized, these will begin to expire in 2028, 2028 and 2026, respectively. Utilization of our net operating loss
carryforwards and other tax attributes, such as research and development tax credits, may be subject to annual limitations, or could be subject to
other limitations on utilization or benefit due to the ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code of
1986, as amended (the “Code”), and other similar provisions. Further, the Tax Act changed the federal rules governing net operating loss
carryforwards. For net operating loss carryforwards arising in tax years beginning after December 31, 2017, the Tax Act limits a taxpayer’s ability to
utilize such carryforwards to 80% of taxable income. In addition, net operating loss carryforwards arising in tax years ending after December 31,
2017 can be carried forward indefinitely, but carryback is generally prohibited. Net operating loss carryforwards generated before January 1, 2018
will not be subject to the Tax Act’s taxable income limitation and will continue to have a twenty-year carryforward period. Nevertheless, our net
operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations, which could harm our business
and financial results.
Our financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting
principles. A change in these principles or interpretations could harm our revenue and financial results, and could affect the reporting of transactions
completed before the announcement of a change.
Risks Related to Ownership of Our Class A Common Stock
The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital
stock prior to the completion of our initial public offering ("IPO"), including our co-founders, executive officers, employees and directors,
their affiliates, and all of our other pre-IPO stockholders (including those unaffiliated with any of our co-founders, executive officers,
employees or directors). This will limit or preclude your ability to influence corporate matters.
Our Class B common stock has twenty votes per share, and our Class A common stock has one vote per share. Because of the 20-to-1 voting ratio
between our Class B and Class A common stock, the holders of our outstanding Class B hold approximately 92.1% of the voting power of our
outstanding capital stock. Because the holders of our Class B common stock hold in the aggregate significantly more than a majority of the
combined voting power of our capital stock, such holders (which include all of our pre-IPO stockholders, including those holders unaffiliated with any
of our co-founders, executive officers, employees or directors) control all matters submitted to our stockholders for approval. The holders of Class B
common stock will no longer hold in the aggregate over 50% of the voting power of our outstanding capital stock once the Class B common stock
represents in the aggregate less than approximately 4.76% of our outstanding capital stock.
As a result, for the foreseeable future, holders of our Class B common stock could have significant influence over the management and affairs of our
company and over the outcome of all matters submitted to our stockholders for approval, including the election of directors and significant corporate
transactions, such as a merger, consolidation or sale of substantially all of our assets, even if their stock holdings were to represent in the aggregate
less than 50% of the outstanding shares of our capital stock. In addition, this may prevent or discourage unsolicited acquisition proposals or offers
for our capital stock that you may feel are in your best interest as one of our stockholders. These holders of our Class B common stock may have
interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This control may
adversely affect the trading price of our Class A common stock. Despite no longer being employed by us, Paul Sciarra, one of our co-founders,
remains able to exercise significant voting power. If we terminate our other co-founders’ employment, they would also continue to have the ability to
exercise significant voting power to the extent they were to retain their Class B common stock while our other existing holders disposed of their
Class B common stock.
Transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, except certain transfers to
entities, including certain charities and foundations, to the extent the transferor retains sole dispositive power and exclusive voting control with
respect to the shares of Class B common stock, and
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certain other transfers described in our amended and restated certificate of incorporation. In addition, all shares of Class B common stock will
automatically convert into shares of Class A common stock on (i) the seven-year anniversary of the closing date of our IPO, except with respect to
shares of Class B common stock held by any holder that continues to beneficially own at least 50% of the number of shares of Class B common
stock that such holder beneficially owned immediately prior to completion of our IPO, and (ii) a date that is between 90 to 540 days, as determined
by the board of directors, after the death or permanent incapacity of Mr. Silbermann. Conversions of Class B common stock to Class A common
stock have already had and will continue to have the effect, over time, of increasing the relative voting power of those holders of Class B common
stock who retain their shares in the long term. If, for example, one or more of our existing stockholders were to retain a significant portion of their
holdings of Class B common stock for an extended period of time while all the other existing stockholders disposed of their Class B common stock,
then those existing stockholders that retain significant holdings (while all the others dispose) could, in the future, control a majority of the combined
voting power of our outstanding capital stock.
Our dual class structure may depress the trading price of our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock or in adverse
publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-
class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion
of shares of public companies on certain indices, including the S&P 500, pursuant to which, companies with multiple classes of shares of common
stock are excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a
result, the dual class structure of our common stock may cause stockholder advisory firms to publish negative commentary about our corporate
governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices or any actions or publications
by stockholder advisory firms critical of our corporate governance practices or capital structure could adversely affect the value and trading market
of our Class A common stock.
An active trading market for our Class A common stock may not be sustained.
Our Class A common is listed on the NYSE under the symbol “PINS.” However, we cannot assure you that an active trading market for our Class A
common stock will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our Class A common stock will
be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired or the prices that you
may obtain for your shares.
The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
The trading price of our Class A common stock is likely to be volatile and could be subject to fluctuations in response to various factors, some of
which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock since you might
be unable to sell your shares at or above the price you paid. Factors that could cause fluctuations in the trading price of our Class A common stock
include the following:
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price and volume fluctuations in the overall stock market from time to time;
volatility in the trading prices and trading volumes of technology stocks;
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in
particular;
sales, or anticipated sales, of shares of our Class A common stock by us or our stockholders, including if stockholders sell shares of our
Class A common stock into the market to cover taxes due upon the settlement of RSUs or the exercise of stock options, or conversions, or
anticipated conversions, of a substantial number of shares of our Class B common stock by our stockholders;
actions by institutional stockholders;
failure by industry or securities analysts to maintain coverage of us, downgrade of our Class A common stock by analysts or provision of a
more favorable recommendation of our competitors; failure by analysts to regularly publish research reports or the publication of an
unfavorable or inaccurate report about our business; changes by analysts of their financial and operating estimates by with respect to our
company or our failure to meet these estimates or the expectations of investors;
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forward-looking financial or operating information or financial projections we may provide to the public, any changes in that information or
projections or our failure to meet projections;
any indebtedness we may incur in the future;
whether investors or securities analysts view our stock structure unfavorably, particularly our dual class structure and the significant voting
control of holders of our Class B common stock;
announcements by us or our competitors of new products, features, services, technical innovations, acquisitions, strategic partnerships,
joint ventures or capital commitments;
announcements by us or estimates by third parties of actual or anticipated changes in the size of our user base or level of engagement, or
those of our competitors;
the public’s perception of the quality and accuracy of our key metrics on our user base and engagement;
the public’s reaction to our press releases, other public announcements and filings with the SEC;
rumors and market speculation involving us or other companies in our industry;
actual or anticipated fluctuations in our user growth, retention, engagement, revenue or other operating results;
actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;
developments or disputes concerning our intellectual property or other proprietary rights;
announced or completed acquisitions of businesses, products, services or technologies by us or our competitors;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
changes in accounting standards, policies, guidelines, interpretations or principles;
any significant change in our management; and
general economic conditions and slow or negative growth of our markets.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class
action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a
diversion of our management’s attention and resources.
Future offerings of debt or equity securities by us or existing shareholders may adversely affect the market price of our Class A common
stock.
In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional capital stock or offering debt or
other securities, including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or shares of
preferred stock. Future acquisitions could also require substantial additional capital in excess of cash from operations.
Issuing additional shares of capital stock or other securities, including securities convertible into equity, may dilute the economic and voting rights of
our existing stockholders, reduce the market price of our Class A common stock or both. Upon liquidation, holders of debt securities and preferred
shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our common
stock. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase
the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating
distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our
decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect
the amount, timing or nature of our future offerings. In addition, the large number of shares of our common stock eligible for public sale or subject to
rights requiring us to register them for public sale could depress the market price of our Class A common stock. The market price of our Class A
common stock could decline as a result of sales of a large number of shares of our Class A common stock in the market, and the perception that
these sales could occur may
36
also depress the market price of our Class A common stock. As a result, holders of our Class A common stock bear the risk that our future offerings
or future sales of shares may reduce the market price of our Class A common stock and dilute their stockholdings in our company.
Additional stock issuances, including in connection with settlement of equity awards, could result in significant dilution to our
stockholders.
Future issuances of shares of our Class A common stock or the conversion of a substantial number of shares of our Class B common stock to Class
A common stock, or the perception that these sales or conversions may occur, could depress the market price of our Class A common stock and
result in significant dilution for holders of our Class A common stock. We currently have Class B common stock that may be issued upon exercise of
outstanding stock options or upon settlement of outstanding restricted stock units ("RSUs") and shares of Class A common stock that may be issued
upon settlement of outstanding RSUs. For more information, see “Notes to Financial Statements”. We have 6,128,499,579 shares of authorized but
unissued Class A common stock that are currently not reserved for issuance under our equity incentive plans or charitable giving program. We may
issue all of these shares of Class A common stock without any action or approval by our stockholders, subject to certain exceptions. We also intend
to continue to evaluate acquisition opportunities and may issue Class A common stock or other securities in connection with these acquisitions. Any
common stock issued in connection with our equity incentive plans, acquisitions, the exercise of outstanding stock options, settlement of RSUs or
otherwise would dilute the percentage ownership held by our Class A common stockholders.
We have broad discretion over the use of the net proceeds from our IPO and we may not use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we received from our IPO. Our management will have broad
discretion in the application of the net proceeds from our IPO, and you will not have the opportunity as part of your investment decision to assess
whether the net proceeds are being used appropriately. The failure by our management to apply these proceeds effectively could harm our
business, results of operations and financial condition. Pending their use, we may invest our proceeds in a manner that does not produce income or
that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the price of our Class A common
stock.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a
merger, tender offer or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law (the “DGCL”) may discourage,
delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three
years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition,
our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our
company more difficult, including the following:
•
•
•
•
•
•
•
our dual class common stock structure, which provides our holders of Class B common stock with the ability to significantly influence the
outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding
common stock;
our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed
from office for cause;
certain amendments to our amended and restated certificate of incorporation will require the approval of 662⁄3% of the then-outstanding
voting power of our capital stock;
approval of 662⁄3% of the then-outstanding voting power of our capital stock, voting as a single class, is required for stockholders to amend
or adopt any provision of our bylaws;
our stockholders can take action only at a meeting of stockholders and not by written consent;
vacancies on our board of directors can be filled only by our board of directors and not by stockholders;
no provision in our amended and restated certificate of incorporation or amended and restated bylaws provides for cumulative voting, which
limits the ability of minority stockholders to elect director candidates;
37
•
•
•
•
•
only our chairman of the board of directors, our chief executive officer, our president or another officer selected by a majority of the board of
directors are authorized to call a special meeting of stockholders;
certain litigation against us can only be brought in Delaware;
nothing in our amended and restated certificate of incorporation precludes future issuances without stockholder approval of the authorized
but unissued shares of our Class A common stock;
our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and
shares of which may be issued, without the approval of the holders of our capital stock; and
advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual
meeting of stockholders.
These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could
also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate
actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares
of our common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
Our amended and restated certificate of incorporation designates a state or federal court located within the State of Delaware as the
exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the
judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole
and exclusive forum for certain actions involving us or any of our current or former directors, officers or other employees to us or our stockholders,
shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, any state or federal district court in
the state of Delaware), in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants.
Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to this
provision. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing. If a court were to find the
exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur
additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid dividends on our capital stock. We currently intend to retain any future earnings, and we do not expect to declare or
pay any dividends in the foreseeable future. As a result, stockholders must rely on sales of their Class A common stock after price appreciation as
the only way to realize any future gains on their investment. In addition, our revolving credit facility contains restrictions on our ability to pay
dividends.
The requirements of being a public company have and may continue to strain our resources, divert management’s attention and may
result in more litigation.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street
Reform and Consumer Protection Act, the listing requirements of the NYSE and other applicable securities rules and regulations. Complying with
these rules and regulations has increased and will continue to increase our legal and financial compliance costs, make some activities more difficult,
time-consuming or costly, and increase demand on our systems and resources, particularly as we transition away from qualifying as an “emerging
growth company,” as defined in section 2(a) of the Securities Act, and become subject to increased disclosure and other requirements.
As a public company we are required to publicly disclose additional details about our business and financial condition information, which may result
in threatened or actual litigation, including by competitors and other third parties. If those claims are successful, our business, revenue and financial
results could be harmed. Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them
could divert our management’s resources and harm our business, revenue and financial results.
38
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Facilities
Our corporate headquarters is located in San Francisco, California. As of December 31, 2019, we maintained offices in various locations in the
United States and internationally totaling approximately 707,000 square feet, including approximately 457,000 square feet for our corporate
headquarters and in the surrounding areas. We believe that our facilities are sufficient for our existing needs.
Item 3. 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.
Item 4 - Mine Safety Disclosures
Not applicable.
39
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our Class A common stock, par value $0.00001 per share, is listed on the New York Stock Exchange, under the symbol “PINS” and began trading
on April 18, 2019. Prior to that date, there was no public trading market for our Class A common stock. There is no public trading market for our
Class B common stock, par value $0.00001 per share.
Holders of Record
As of January 31, 2020, there were 77 stockholders of record of our Class A common stock and 120 stockholders of record of our Class B common
stock. The actual number of holders of our Class A and Class B common stock is greater than the number of record holders and includes
stockholders who are beneficial owners, but whose shares are held in street name by brokers or other nominees. The number of holders of record
presented here also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid dividends on our capital stock and do not intend to pay any dividends in the foreseeable future. Any future
determination to declare dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on then
existing conditions, including our financial condition, operating results, capital requirements, general business conditions and other factors that our
board of directors may deem relevant. In addition, the terms of our revolving credit facility place certain limitations on the amount of dividends we
can pay, even if no amounts are currently outstanding.
Unregistered Sales of Equity Securities
RSU Issuances
From January 1, 2019 through April 23, 2019, we granted to our directors, officers, employees, consultants and other service providers an
aggregate of 29,613,852 RSUs to be settled in shares of our common stock under our 2009 Stock Plan (the "2009 Plan").
Option Exercises
From January 1, 2019 through April 23, 2019, we issued an aggregate of 145,855 shares of our common stock in connection with the exercise of
stock options previously granted to our directors, officers, employees, consultants and other service providers under our 2009 Plan.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the offers,
sales, and issuances of the above securities were exempt from registration under the Securities Act (or Regulation D or Regulation S promulgated
thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or
in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided
under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates
issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these
securities were made without any general solicitation or advertising.
40
Stock Performance Graph
This
performance
graph
shall
not
be
deemed
“soliciting
material”
or
to
be
“filed”
with
the
SEC
for
purposes
of
Section
18
of
the
Securities
Exchange
Act
of
1934,
as
amended
(Exchange
Act),
or
otherwise
subject
to
the
liabilities
under
that
Section,
and
shall
not
be
deemed
to
be
incorporated
by
reference
into
any
filing
of
Pinterest,
Inc.
under
the
Securities
Act
of
1933,
as
amended,
or
the
Exchange
Act.
The following graph shows a comparison of the cumulative total return for our Class A common stock, the Standard & Poor's 500 Stock Index (S&P
500 Index) and the Dow Jones Internet Composite Index (DJINET Composite Index). An investment of $100 and reinvestment of all dividends is
assumed to have been made in our Class A common stock and in each index on April 18, 2019, the date our Class A common stock began trading
on the NYSE, and its relative performance is tracked through December 31, 2019. The graph uses the closing market price on April 18, 2019 of
$24.40 per share as the initial value of our common stock. The stock price performance of the following graph is not necessarily indicative of future
stock price performance.
Use of Proceeds from Public Offering of Class A Common Stock
On April 23, 2019, we closed our IPO, in which we sold 75,000,000 shares of our Class A common stock at a price to the public of $19.00 per share.
The offer and sale of the shares in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-
230458), which was declared effective by the SEC on April 17, 2019. We raised $1,368.0 million in net proceeds after deducting underwriters'
discounts and commissions of $57.0 million and before deducting offering costs of $9.8 million. On April 29, 2019, we issued and sold an additional
11,250,000 shares of Class A common stock at $19.00 per share pursuant to the underwriters’ option to purchase additional shares. We received
additional net proceeds of $205.2 million after deducting underwriting discounts and commissions. We utilized a portion of the net proceeds to
satisfy our tax withholding and remittance obligations arising from the settlement of RSUs for which the service condition had been satisfied prior to
our IPO and for which the performance condition was satisfied upon completion of our IPO. We expect to use the remaining net proceeds for
general corporate purposes, including working capital and operating expenses. Additionally, we may use a portion of the net proceeds to acquire or
invest in businesses, products, services or technologies. However, we do not have agreements or commitments for any material acquisitions or
investments at this time. We cannot specify with certainty the particular uses of the net proceeds that we received from our IPO. Accordingly, we will
have broad discretion in using these proceeds. Pending the use of proceeds from our IPO as described above, we may invest the net proceeds that
we received in our IPO in short-duration fixed income securities, including government and investment-grade corporate debt securities and money
market funds.
41
Item 6. Selected Financial Data
The following selected historical consolidated financial data should be read in conjunction with Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, our consolidated financial statements and the related notes included in Item 8, “Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K.
The consolidated statements of operations data for each of the years ended December 31, 2019, 2018 and 2017 and the consolidated balance
sheets data as of December 31, 2019 and 2018 are derived from our audited consolidated financial statements included in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K. The consolidated balance sheet data as of December 31, 2017 is
derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. Our historical results are not
necessarily indicative of our results in any future period.
Consolidated Statements of Operations Data:
Revenue
Costs and expenses(1):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Loss from operations
Interest income
Interest expense and other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share attributable to common stockholders, basic and diluted
Weighted-average shares used in computing net loss per share attributable
to common stockholders, basic and diluted
Adjusted EBITDA (2)
(1) Costs and expenses includes share-based compensation expense as follows (in thousands):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total share-based compensation
Year Ended December 31,
2019
2018
2017
(in
thousands,
except
per
share
amounts)
$
1,142,761 $
755,932 $
472,852
358,903
1,207,059
611,590
354,075
2,531,627
(1,388,866)
30,164
(2,137)
(1,360,839)
532
241,584
251,662
259,929
77,478
830,653
(74,721)
13,152
(995)
(62,564)
410
178,664
207,973
162,514
61,635
610,786
(137,934)
8,313
(112)
(129,733)
311
$
$
$
(1,361,371) $
(62,974) $
(130,044)
(3.24) $
(0.50) $
(1.03)
420,473
127,091
16,706 $
(39,003) $
126,562
(92,995)
Year Ended December 31,
2019
2018
2017
$
$
31,758 $
83 $
867,191
239,315
239,517
13,155
784
837
1,377,781 $
14,859 $
372
19,811
6,267
2,354
28,804
(2) See “Non-GAAP Financial Measure” below for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and
presented in accordance with generally accepted accounting principles in the United States ("GAAP"), to Adjusted EBITDA.
42
Consolidated Balance Sheets Data:
Cash, cash equivalents and marketable securities
Working capital
Total assets
Total liabilities
Redeemable convertible preferred stock
Total stockholders' equity (deficit)
As of December 31,
2019
2018
2017
(in
thousands)
$
1,713,345 $
627,813 $
711,628
1,891,077
2,393,317
369,612
—
2,023,705
780,925
1,152,731
281,895
1,465,399
(594,563)
807,157
1,173,045
254,110
1,465,399
(546,464)
43
Non-GAAP Financial Measure
To supplement our 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):
Net Loss
Depreciation and amortization
Share-based compensation
Interest income
Interest expense and other (income) expense, net
Provision for income taxes
Adjusted EBITDA
Year Ended December 31,
2019
2018
2017
$
(1,361,371) $
(62,974)
$
(130,044)
27,791
1,377,781
(30,164)
2,137
532
20,859
14,859
(13,152)
995
410
16,135
28,804
(8,313)
112
311
$
16,706 $
(39,003)
$
(92,995)
44
ITEM 7. 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
consolidated
financial
statements
and
related
notes
and
other
financial
information
appearing
elsewhere
in
this
Annual
Report
on
Form
10-K.
This
discussion
and
analysis
contains
forward-looking
statements
that
involve
risks,
uncertainties
and
assumptions.
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
Annual
Report
on
Form
10-K.
A
discussion
regarding
our
financial
condition
and
results
of
operation
for
the
year
ended
December
31,
2019
compared
to
the
year
ended
December
31,
2018
is
presented
below.
A
discussion
regarding
our
financial
condition
and
results
of
operations
for
year
ended
December
31,
2018
compared
to
the
year
ended
December
31,
2017
is
included
under
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations”
in
our
prospectus
filed
pursuant
to
Rule
424(b)
on
April
18,
2019.
Overview of 2019 Results
Our key financial and operating results as of and for the year ended December 31, 2019 are as follows:
•
Revenue was $1,142.8 million, an increase of 51% compared to 2018.
• Monthly active users ("MAUs") were 335 million, an increase of 26% compared to December 31, 2018.
•
•
•
•
•
•
•
Share-based compensation expense was $1,377.8 million, an increase of $1,362.9 million compared to 2018.
Total costs and expenses were $2,531.6 million.
Loss from operations was $1,388.9 million.
Net loss was $1,361.4 million.
Adjusted EBITDA was $16.7 million.
Cash, cash equivalents and marketable securities were $1,713.3 million.
Headcount was 2,217.
• We now serve ads in 28 countries, up from seven at December 31, 2018.
45
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)
Note:
United
States
and
International
may
not
sum
to
Global
due
to
rounding.
A portion of our MAUs visit Pinterest on a weekly basis. We define a weekly active user (“WAU”) 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 seven-day period ending on the date of measurement. We actively monitor the relationship of WAUs to MAUs, which has stayed
relatively consistent over time. As of December 31, 2019, the proportion of WAUs to MAUs was 57%.
46
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.
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)
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
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.
47
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
For the year ended December 31, 2019, global ARPU was $3.81, which represents an increase of 21% compared to the year ended December 31,
2018. For the year ended December 31, 2019, U.S. ARPU was $12.07 and international ARPU was $0.54, which represent increases of 34% and
115%, respectively, compared to the year ended December 31, 2018.
48
Factors Affecting Our Performance
Growth in MAUs. User growth trends, which are reflected in the number of MAUs, are a key factor that affects our revenue and financial results. As
our user base and the quality of engagement of our users grow, we believe the potential to increase our revenue grows.
We are focused on increasing the ways Pinners use and get value from our platform and on expanding our user base, with an emphasis on
international markets.
We may face challenges enhancing the quality of engagement and increasing the size of our user base, including competition from alternative
products and services, saturation of existing markets, difficulties scaling in international markets, a lack of sufficiently relevant content available on
Pinterest, actions by external parties (such as changes in search engine methodologies and policies and disruptions in single sign-on access) or
changes in regulations (which require changes to our products in a manner that negatively impacts our user growth, retention and engagement). We
expect revenue growth will be driven more by the quality of user engagement and higher monetization of users than by sheer growth of users. To
the extent our user growth slows, our revenue growth will become increasingly dependent on our ability to increase the quality of user engagement.
Growth in Monetization. Monetization trends, which are reflected in ARPU, are a key factor that affects our revenue and financial results.
We are in the early stages of our monetization efforts. We are focused on increasingly serving more mid-market and unmanaged advertisers and
expanding our sales efforts to reach advertisers in additional international markets, with an initial focus on Western Europe and other select markets
to follow. We are working on building more self-serve tools to help our mid-market and unmanaged advertisers with ad creation, campaign scaling
and measurement.
There are many variables that impact ARPU, including the number of ad impressions shown on our platform and the price per ad, which depends on
a number of factors including the engagement of our audience and the quality of that engagement, the number and diversity of advertisers, our
ability and decision to serve contextually relevant advertisements, the amount of advertising spend, an advertiser’s objectives, ad performance and
the effectiveness of our advertising products and our ability to measure that effectiveness for our advertisers, as well as the effect of geographic
differences on each of these factors. Due to our decision to focus our earliest monetization efforts in the United States, we have less experience
monetizing international markets and therefore may experience challenges scaling and monetizing these markets due to differences in Pinners' taste
and interests and advertisers' expectations. The international advertising market is also smaller and less mature than the U.S. digital advertising
market.
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.
Investment in Technology. We make investments in technology that we believe will enhance Pinner and advertiser experiences. Key investment
areas for our platform include machine learning, computer vision and our recommendation engine. We also invest heavily in our advertising
products, including our self-serve platform and first- and third-party measurement tools. Our ability to grow our user base, attract new advertisers
and increase our revenue will depend, in part, on our ability to continue innovating in visual search and discovery and our ability to successfully
launch new products for Pinners and advertisers. We plan to continue making significant investments in research and development and may
develop products for Pinners that cannot be monetized immediately, if ever.
Investment in Talent. Our business relies on our ability to attract and retain talent. As of December 31, 2019, we had 2,217 full-time employees, an
increase of 23% compared to December 31, 2018.
Competition. We face significant competition in almost every aspect of our business. We primarily compete with consumer internet companies that
are either tools (search, ecommerce) or media (newsfeeds, video, social networks). We also compete for advertising revenue across a variety of
formats. Some of our competitors have greater financial resources and substantially larger user bases. 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. We must compete effectively for users and advertisers in order to
grow our business and increase our revenue. We believe that our ability to compete for users depends on a number of factors, including the quality
of our users’ experience on our service and on other platforms. We believe that our ability to compete effectively for advertisers depends on a
number of factors, including our ability to offer attractive advertising products with robust targeting and measurement tools.
49
Seasonality. We experience seasonality in user growth, engagement and monetization on our platform. Historically, we have had lower
engagement in the second calendar quarter. Industry advertising spend tends to be strongest in the fourth quarter, and we observe a similar pattern
in our historical advertising revenue. Significant user and monetization growth has partially offset these trends in historical periods, and thus we
expect the impact of seasonality to be more pronounced in the future.
Share-Based Compensation. We began granting restricted stock units ("RSUs") in March 2015. We measure RSUs based on the fair market value
of our common stock on the grant date.
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. 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.
As of December 31, 2019, we had $635.1 million of unrecognized share-based compensation expense, which we expect to recognize over a
weighted-average period of 3.2 years.
For more information about the factors impacting our performance, see “Risk Factors.”
50
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 cost per click ("CPC") basis, views an ad contracted on a cost per thousand impressions
("CPM") basis or views a video ad contracted on a cost per view ("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 (benefit from) 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.
51
Results of Operations
The following tables set forth our consolidated statements of operations data (in thousands):
Revenue
Costs and expenses (1):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Loss from operations
Interest income
Interest expense and other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Adjusted EBITDA (2)
(1)
Includes share-based compensation expense as follows (in thousands):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total share-based compensation
Year Ended December 31,
2019
2018
2017
$
1,142,761 $
755,932 $
472,852
358,903
1,207,059
611,590
354,075
2,531,627
(1,388,866)
30,164
(2,137)
(1,360,839)
532
241,584
251,662
259,929
77,478
830,653
(74,721)
13,152
(995)
(62,564)
410
178,664
207,973
162,514
61,635
610,786
(137,934)
8,313
(112)
(129,733)
311
(1,361,371) $
(62,974) $
(130,044)
16,706 $
(39,003) $
(92,995)
Year Ended December 31,
2019
2018
2017
31,758 $
83 $
867,191
239,315
239,517
13,155
784
837
1,377,781 $
14,859 $
372
19,811
6,267
2,354
28,804
$
$
$
$
(2) See “Selected Financial Data—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.
52
The following table sets forth our consolidated statements of operations data (as a percentage of revenue):
Revenue
Costs and expenses:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Loss from operations
Interest income
Interest expense and other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Years Ended December 31, 2019 and 2018
Revenue
Revenue
Year Ended December 31,
2019
2018
2017
100 %
100 %
100 %
31
106
54
31
222
(122)
3
—
(119)
—
32
33
34
10
110
(10)
2
—
(8)
—
38
44
34
13
129
(29)
2
—
(27)
—
(119) %
(8) %
(28) %
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
1,142,761 $
755,932
51 %
Revenue for the year ended December 31, 2019 increased by $386.8 million compared to the year ended December 31, 2018. Revenue based on
our estimate of the geographic location of our users increased by 43% in the United States to $1,025.5 million and by 187% internationally to $117.2
million for the year ended December 31, 2019 compared to the year ended December 31, 2018.
For the year ended December 31, 2019, U.S. revenue growth was driven by a 34% increase in U.S. ARPU supported by a 8% increase in U.S.
MAUs, and international revenue growth was driven by a 115% increase in international ARPU supported by a 35% increase in international MAUs.
ARPU growth in the U.S. and internationally was driven by higher monetization of both of those user bases largely due to an increase in advertising
demand from new and existing advertisers on our platform, which resulted in an increase in the number of advertisements served. The increase in
advertising demand resulted in an increase in the price of U.S. advertisements, while the price of international advertisements decreased due to our
continued expansion into new countries. However, the impact of pricing changes was not significant in the U.S. or internationally.
53
Cost of Revenue
Cost of revenue
Percentage of revenue
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
358,903
$
241,584
49 %
31 %
32 %
Cost of revenue for the year ended December 31, 2019 increased by $117.3 million compared to the year ended December 31, 2018. The increase
was primarily due to higher absolute hosting costs due to user growth and a $31.7 million increase in share-based compensation expense recorded
following our IPO.
Research and Development
Research and development
Percentage of revenue
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
1,207,059
$
251,662
380 %
106 %
33 %
Research and development for the year ended December 31, 2019 increased by $955.4 million compared to the year ended December 31, 2018.
The increase was primarily due to a $854.0 million increase in share-based compensation expense following our IPO and a 23% increase in
average headcount, which drove higher personnel and facilities-related expenses.
Sales and Marketing
Sales and marketing
Percentage of revenue
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
611,590
$
259,929
135 %
54 %
34 %
Sales and marketing for the year ended December 31, 2019 increased by $351.7 million compared to the year ended December 31, 2018. The
increase was primarily due to a $238.5 million increase in share-based compensation expense following our IPO and a 34% increase in average
headcount, which drove higher personnel and facilities-related expenses, as well as higher marketing expenses.
General and Administrative
General and administrative
Percentage of revenue
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
354,075
$
77,478
357 %
31 %
10 %
General and administrative for the year ended December 31, 2019 increased by $276.6 million compared to the year ended December 31, 2018.
The increase was primarily due to a $238.7 million increase in share-based compensation expense following our IPO and a 24% increase in
average headcount, which drove higher personnel and facilities-related expenses.
54
Other Income (Expense), Net
Interest income
Interest expense and other income (expense)
Other income (expense), net
Year Ended December 31,
2019
2018
% change
$
$
(in
thousands)
30,164 $
(2,137)
28,027 $
13,152
(995)
12,157
129 %
(115) %
131 %
Other income (expense), net for the year ended December 31, 2019 increased by $15.9 million compared to the year ended December 31, 2018.
The increase was primarily due to higher returns on our marketable securities as a result of higher interest rates and higher invested balances
following our investment of the proceeds of our IPO.
Provision for Income Taxes
Provision for income taxes
Year Ended December 31,
2019
2018
% change
$
(in
thousands)
532 $
410
30 %
Provision for income taxes was primarily due to profits generated by our foreign subsidiaries.
Net Loss and Adjusted EBITDA
Net loss
Adjusted EBITDA
Year Ended December 31,
2019
2018
% change
(in
thousands)
$
$
(1,361,371) $
16,706 $
(62,974)
(39,003)
(2,062) %
143 %
Net loss for the year ended December 31, 2019 was $1,361.4 million, as compared to $63.0 million for the year ended December 31, 2018.
Adjusted EBITDA was $16.7 million for the year ended December 31, 2019, as compared to $(39.0) million for the year ended December 31, 2018,
due to the factors described above. See “Selected Financial Data—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.
55
Quarterly Results of Operations Data
The following tables set forth our unaudited quarterly consolidated results of operations for each of the eight quarters in the period ended December
31, 2019. Our unaudited quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements,
and we believe they reflect all normal recurring adjustments necessary for the fair statement of our results of operations for these periods. This
information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on
Form 10-K. Our historical operating data may not be indicative of our future performance.
Dec. 31,
2019
Sep. 30,
2019
Jun. 30, 2019
(1)
Three Months Ended
Mar. 31,
2019
Dec. 31,
2018
Sep. 30,
2018
Jun. 30,
2018
Mar. 31,
2018
$ 399,898 $
279,703 $
261,249 $
201,911 $
273,184 $
190,197 $
161,192 $
131,359
(in
thousands,
except
per
share
amounts)
96,274
165,033
127,537
54,241
83,520
167,703
110,740
51,450
105,415
801,879
296,919
224,179
73,694
72,444
76,394
24,205
68,308
66,470
72,285
22,061
63,649
63,541
66,722
18,716
57,974
61,604
65,148
17,834
51,653
60,047
55,774
18,867
Revenue
Costs and expenses (2):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
443,085
413,413
1,428,392
246,737
229,124
212,628
202,560
186,341
Income (loss) from operations
(43,187)
(133,710)
(1,167,143)
(44,826)
Interest income
8,141
9,837
8,127
4,059
44,060
3,780
(22,431)
(41,368)
(54,982)
3,547
3,187
2,638
Interest expense and other
income (expense), net
Income (loss) before provision
for income taxes
Provision for (benefit from)
income taxes
Net income (loss)
Less: Net income allocated to
participating securities (3)
Net income (loss) attributable to
common stockholders
Net income (loss) per share
attributable to common
stockholders, basic and diluted
Adjusted EBITDA (4)
(133)
(1,056)
(448)
(500)
(621)
82
(214)
(242)
(35,179)
(124,929)
(1,159,464)
(41,267)
47,219
(18,802)
(38,395)
(52,586)
539
(197)
37
153
203
72
12
123
$
(35,718) $ (124,732) $ (1,159,501) $
(41,420) $
47,016 $
(18,874) $
(38,407) $
(52,709)
—
—
—
—
(47,016)
—
—
—
$
(35,718) $ (124,732) $ (1,159,501) $
(41,420) $
— $
(18,874) $
(38,407) $
(52,709)
$
$
(0.06) $
(0.23) $
(2.62) $
(0.33) $
— $
(0.15) $
(0.30) $
(0.42)
77,308 $
3,871 $
(26,037) $
(38,436) $
51,682 $
(13,426) $
(31,898) $
(45,361)
(1) Upon pricing our IPO, the performance condition for RSUs granted under our 2009 Plan was deemed satisfied, and we recorded cumulative share-based compensation
expense for those RSUs for which the service condition had been satisfied at that date. For the three months ended June 30, 2019, we recorded total share-based
compensation expense of $1,134.6 million.
(2)
Includes share-based compensation expense as follows (in thousands):
Dec. 31,
2019
Sep. 30,
2019
Jun. 30, 2019
Three Months Ended
Mar. 31,
2019
Dec. 31,
2018
Sep. 30,
2018
Jun. 30,
2018
Mar. 31,
2018
Cost of revenue
Research and development
Sales and marketing
General and administrative
$
2,018 $
1,568 $
28,157 $
15 $
15 $
16 $
20 $
73,030
15,915
21,237
83,539
21,243
23,938
709,996
202,128
194,318
626
29
24
2,113
3
47
3,380
188
304
3,608
352
(21)
Total share-based compensation
$ 112,200 $ 130,288 $ 1,134,599 $
694 $
2,178 $
3,888 $
3,959 $
32
4,054
241
507
4,834
56
(3) Represents assumed noncumulative dividends on undistributed earnings that, if declared, would have been distributed to holders of our redeemable convertible preferred
stock.
(4) The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to
Adjusted EBITDA (in thousands):
Dec. 31,
2019
Sep. 30,
2019
Jun. 30, 2019
Mar. 31,
2019
Dec. 31,
2018
Sep. 30,
2018
Jun. 30,
2018
Mar. 31,
2018
Three Months Ended
Reconciliation of Net Income (Loss)
to Adjusted EBITDA
Net Income (Loss)
Depreciation and amortization
Share-based compensation
Interest income
Interest expense and other (income)
expense, net
Provision for (benefit from) income
taxes
Adjusted EBITDA
$
(35,718) $ (124,732) $ (1,159,501) $ (41,420) $
8,295
112,200
(8,141)
7,293
130,288
(9,837)
6,507
1,134,599
(8,127)
5,696
694
(4,059)
47,016 $ (18,874) $ (38,407) $ (52,709)
4,787
4,834
(2,638)
5,117
3,888
(3,547)
5,444
2,178
(3,780)
5,511
3,959
(3,187)
133
1,056
448
500
621
(82)
214
539
(197)
37
153
203
72
12
242
123
$
77,308 $
3,871 $
(26,037) $ (38,436) $
51,682 $ (13,426) $ (31,898) $ (45,361)
The following table sets forth the components of our unaudited quarterly consolidated statements of operations for each of the periods presented (as
a percentage of revenue):
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Three Months Ended
Mar. 31,
2019
Dec. 31,
2018
Sep. 30,
2018
Jun. 30,
2018
Mar. 31,
2018
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Revenue
Costs and expenses:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Income (loss) from operations
Interest income
Interest expense and other income
(expense), net
Income (loss) before provision for
income taxes
Provision for (benefit from) income
taxes
24
41
32
14
111
(11)
2
—
(9)
—
Net Income (loss)
(9) %
30
60
40
18
148
(48)
4
—
(45)
40
307
114
86
547
(447)
3
—
(444)
36
36
38
12
122
(22)
2
—
(20)
—
(45) %
—
(444) %
—
(21) %
25
24
26
8
84
16
1
—
17
—
17 %
33
33
35
10
112
(12)
2
—
(10)
36
38
40
11
126
(26)
2
—
(24)
39
46
42
14
142
(42)
2
—
(40)
—
(10) %
—
(24) %
—
(40) %
57
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 December 31, 2019, we had $1,713.3 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 December 31, 2019, $21.7
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 December 31, 2019.
On April 23, 2019, we closed our IPO in which we issued and sold 75,000,000 shares of Class A common stock at $19.00 per share. We received
net proceeds of $1,368.0 million after deducting underwriting discounts and commissions and before deducting offering costs of $9.8 million. We
utilized a portion of the net proceeds from this offering to pay approximately $302.7 million to satisfy the tax withholding and remittance obligations
related to the settlement of RSUs.
On April 29, 2019, we issued and sold an additional 11,250,000 shares of Class A common stock at $19.00 per share pursuant to the underwriters’
option to purchase additional shares. We received additional net proceeds of $205.2 million after deducting underwriting discounts and
commissions.
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 may require additional capital resources in
the future.
For the years ended December 31, 2019, 2018 and 2017, our net cash flows were as follows (in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Year Ended December 31,
2019
2018
2017
$
$
$
657 $
(586,501) $
1,128,198 $
(60,369) $
114,063 $
(2,216) $
(102,913)
(57,250)
150,264
58
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
$61.0 million for the year ended December 31, 2019 compared to the year ended December 31, 2018, primarily due to a decrease 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, sales and maturities of which we use
to fund our ongoing working capital requirements. Net cash used in investing activities increased by $700.6 million for the year ended December 31,
2019 compared to the year ended December 31, 2018, primarily due to increased purchases of marketable securities and less proceeds from
maturities of marketable securities.
Financing Activities
Cash flows from financing activities consist of net proceeds from our IPO, tax withholdings on release of RSUs and proceeds from the exercise of
stock options. Net cash provided by financing activities increased by $1,130.4 million for the year ended December 31, 2019 compared to the year
ended December 31, 2018 primarily due to net proceeds from our IPO, offset by tax withholdings on release of RSUs.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2019.
Contractual Obligations
The following table summarizes our contractual obligations and commitments as of December 31, 2019 (in thousands):
Operating leases
Purchase commitments
Total
Total
2020
2021-2022
2023-2024
Thereafter
$
$
276,757 $
171,316
448,073 $
56,807 $
83,245 $
26,895 $
109,810
—
—
171,316
—
56,807 $
83,245 $
198,211 $
109,810
In May 2017, we amended the enterprise agreement governing our use of services from AWS with an addendum. Under the agreement, as
amended by the addendum, we agreed that a substantial majority of our monthly usage of certain compute, storage, data transfer and other
services must be provided under the addendum, and we are required to purchase at least $750.0 million of cloud services, which we primarily use
for compute, storage and data transfer services, from AWS through July 2023. If we fail to meet the contractual commitment, we are required to pay
the difference, except in limited circumstances, such as termination due to acquisition of us by another cloud services provider (which would result in
an obligation to pay liquidated damages under the addendum), but we are not otherwise subject to annual purchase commitments during the
remainder of the six-year term of the addendum. The addendum restricts our ability to terminate the agreement until the minimum spend
commitment is satisfied, other than termination only under certain additional conditions (such as the other party’s material breach or acquisition of us
by another cloud services provider). As of December 31, 2019, the remaining contractual commitment was $171.3 million, which we expect to meet
during the term of the addendum primarily through our use of AWS cloud services.
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. The estimated commencement and expiration dates are in 2022 and 2033, 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 $420.0 million, which is excluded from the table above, 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.
59
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. Preparing our 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.
Refer to Note 1 to our consolidated financial statements for further information on our other significant accounting policies.
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
We have granted RSUs since March 2015. We measure RSUs based on the fair market value of our common stock on the grant date.
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.
Valuation of Common Stock and Redeemable Convertible Preferred Stock Warrants
Until our IPO, we determined the fair value of our common stock and redeemable convertible preferred stock warrants using the most observable
inputs available to us, including recent sales of our stock as well as income and market valuation approaches. The income approach estimates the
value of our business based on the future cash flows we expect to generate discounted to their present value using an appropriate discount rate to
reflect the risk of achieving the expected cash flows. The market approach estimates the value of our business by applying valuation multiples
derived from the observed valuation multiples of comparable public companies to our expected financial results.
We used the Probability Weighted Expected Return Method ("PWERM") to allocate the value of our business among our outstanding stock and
share-based awards. We applied the PWERM by first defining the range of potential future liquidity outcomes for our business, such as an IPO, and
then allocating its value to our outstanding stock and share-based awards based on the relative probability that each outcome will occur. We used
the Option Pricing Method to allocate the value of our business to our outstanding stock and share-based awards under the non-IPO outcome we
considered within the PWERM.
60
Applying these valuation and allocation approaches involved the use of estimates, judgments, and assumptions that are highly complex and
subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, valuation multiples, the selection of
comparable public companies, and the probability of future events. Changes in any or all of these estimates and assumptions, or the relationships
between these assumptions, impacted our valuation as of each valuation date and may have a material impact on the valuation of our common
stock and redeemable convertible preferred stock warrants.
Following our IPO, there is an active market for our Class A common stock and the warrants to purchase shares of our preferred stock were net
exercised, so we no longer apply these valuation and allocation approaches.
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 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 consolidated financial statements for recent accounting pronouncements.
61
Item 7a. 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 consolidated
financial statements as of and for the years ended December 31, 2019, 2018 and 2017.
Interest Rate Risk
As of December 31, 2019, we held cash, cash equivalents and marketable securities of $1,713.3 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
$5.8 million and $3.2 million as of December 31, 2019 and 2018, respectively.
62
Item 8. Financial Statements and Supplementary Data
PINTEREST, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholder's Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
64
65
66
67
68
69
70
The supplementary financial information required by this Item 8, is included in Part II, Item 7 under the caption "Quarterly Results of Operations
Data," which is incorporated herein by reference.
63
To the Stockholders and the Board of Directors of Pinterest, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Pinterest, Inc. (the Company) as of December 31, 2019 and 2018, the related
consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash
flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2019 in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
San Francisco, CA
February 6, 2020
64
PINTEREST, INC.
CONSOLIDATED BALANCE SHEETS
(In
thousands,
except
par
value)
ASSETS
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net of allowances of $2,851 and $3,097 as of December 31, 2019 and 2018, respectively
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Goodwill and intangible assets, net
Restricted cash
Other assets
Total assets
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Operating lease liabilities
Other liabilities
Total liabilities
Commitments and contingencies
December 31,
2019
2018
$
649,666 $
1,063,679
316,367
37,522
2,067,234
91,992
188,251
14,576
25,339
5,925
122,509
505,304
221,932
39,607
889,352
81,512
145,203
14,071
11,724
10,869
$
$
2,393,317 $
1,152,731
34,334 $
141,823
176,157
173,392
20,063
369,612
22,169
86,258
108,427
151,395
22,073
281,895
Redeemable convertible preferred stock, $0.00001 par value; no shares authorized, issued or outstanding as of
December 31, 2019; 928,676 shares authorized, 308,373 shares issued and outstanding as of December 31,
2018; aggregate liquidation preference of $1,466,902 as of December 31, 2018
—
1,465,399
Stockholders’ equity (deficit):
Common stock, $0.00001 par value, no shares authorized, issued or outstanding as of December 31, 2019;
1,932,500 shares authorized, 127,298 shares issued and outstanding as of December 31, 2018
Class A common stock, $0.00001 par value, 6,666,667 shares authorized, 360,850 shares issued and
outstanding as of December 31, 2019; Class B common stock, $0.00001 par value, 1,333,333 shares
authorized, 209,054 shares issued and outstanding as of December 31, 2019; no shares authorized, issued
or outstanding as of December 31, 2018 for either class
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders’ equity (deficit)
—
6
4,229,778
647
(2,206,726)
2,023,705
1
—
252,212
(1,421)
(845,355)
(594,563)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
$
2,393,317 $
1,152,731
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
65
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands,
except
per
share
amounts)
Revenue
Costs and expenses:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total costs and expenses
Loss from operations
Interest income
Interest expense and other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share attributable to common stockholders, basic and diluted
Weighted-average shares used in computing net loss per share attributable to common
stockholders, basic and diluted
Year Ended December 31,
2019
2018
2017
$
1,142,761 $
755,932 $
472,852
358,903
1,207,059
611,590
354,075
2,531,627
(1,388,866)
30,164
(2,137)
(1,360,839)
532
241,584
251,662
259,929
77,478
830,653
(74,721)
13,152
(995)
(62,564)
410
178,664
207,973
162,514
61,635
610,786
(137,934)
8,313
(112)
(129,733)
311
$
$
(1,361,371) $
(62,974) $
(130,044)
(3.24) $
(0.50) $
(1.03)
420,473
127,091
126,562
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
66
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In
thousands)
Net loss
Other comprehensive income (loss), net of taxes:
Change in unrealized gain (loss) on available-for-sale marketable securities
Change in foreign currency translation adjustment
Comprehensive loss
Year Ended December 31,
2019
2018
2017
$
(1,361,371) $
(62,974) $
(130,044)
2,057
11
(443)
(212)
(302)
79
$
(1,359,303) $
(63,629) $
(130,267)
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
67
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in
thousands,
except
per
share
amounts)
Redeemable Convertible
Preferred Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Stockholders’
Equity
(Deficit)
Balance as of December 31, 2016
Cumulative effect of adoption of ASC 842
Issuance of Series H redeemable
convertible preferred stock for cash of
$150,000 at $21.537276 per share,
net of issuance costs of $216
Issuance of common stock related to
acquisitions, net
Issuance of common stock related to
purchase of intangible assets
Issuance of common stock for cash upon
exercise of stock options, net
Vesting of early exercised stock options
Share-based compensation
Other comprehensive loss
Net loss
301,408 $ 1,315,615
—
—
126,433 $
—
6,965
149,784
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
30
93
215
—
—
—
—
1
—
—
—
—
—
—
—
—
—
$
204,530 $
—
—
1,239
1,227
551
331
28,804
—
—
(543) $
—
(652,274) $
(63)
(448,286)
(63)
—
—
—
—
—
—
(223)
—
—
—
—
—
—
—
—
(130,044)
—
1,239
1,227
551
331
28,804
(223)
(130,044)
Balance as of December 31, 2017
308,373 $ 1,465,399
126,771 $
1
$
236,682 $
(766) $
(782,381) $
(546,464)
Issuance of common stock for cash upon
exercise of stock options, net
Share-based compensation
Other comprehensive loss
Net loss
Balance as of December 31, 2018
Release of restricted stock units
Shares repurchased for tax withholdings
on release of restricted stock units
Conversion of redeemable convertible
preferred stock and redeemable
convertible preferred stock warrants to
common stock in connection with
initial public offering
Issuance of common stock in connection
with initial public offering net of
underwriters' discounts and
commissions and offering costs
Issuance of common stock for cash upon
exercise of stock options, net
Share-based compensation
Other comprehensive income
Net loss
Balance as of December 31, 2019
—
—
—
—
—
—
—
—
527
—
—
—
308,373 $ 1,465,399
—
—
127,298 $
28,084
—
—
—
—
—
—
—
1
1
—
671
14,859
—
—
—
—
(655)
—
—
—
—
(62,974)
$
252,212 $
—
(1,421) $
—
(845,355) $
—
671
14,859
(655)
(62,974)
(594,563)
1
(475,015)
—
—
(475,015)
(308,373)
(1,465,399)
308,622
3
1,470,074
—
—
1,470,077
—
—
—
—
—
— $
—
86,250
1
1,563,382
—
—
1,563,383
—
—
—
—
—
19,650
—
—
—
—
—
—
—
41,344
1,377,781
—
—
—
—
2,068
—
—
—
—
(1,361,371)
41,344
1,377,781
2,068
(1,361,371)
569,904 $
6
$ 4,229,778 $
647 $ (2,206,726) $ 2,023,705
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
68
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Share-based compensation
Other
Changes in assets and liabilities:
Accounts receivable
Prepaid expenses and other assets
Operating lease right-of-use assets
Accounts payable
Accrued expenses and other liabilities
Operating lease liabilities
Net cash provided by (used in) operating activities
Investing activities
Purchases of property and equipment and intangible assets
Purchases of marketable securities
Sales of marketable securities
Maturities of marketable securities
Other investing activities
Net cash provided by (used in) investing activities
Financing activities
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
Proceeds from initial public offering, net of underwriters' discounts and commissions
Proceeds from exercise of stock options, net
Shares repurchased for tax withholdings on release of restricted stock units
Fees paid for revolving credit facility
Payment of deferred offering costs and other financing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Net increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash, beginning of period
Cash, cash equivalents, and restricted cash, end of period
Supplemental cash flow information
Accrued property and equipment
Operating lease right-of-use assets obtained in exchange for operating lease liabilities
$
$
$
Year Ended December 31,
2019
2018
2017
$
(1,361,371) $
(62,974) $
(130,044)
27,791
1,377,781
(3,990)
(94,224)
7,161
32,378
11,636
31,890
(28,395)
657
(33,783)
(1,075,875)
162,198
360,959
—
(586,501)
—
1,573,200
41,344
(475,015)
—
(11,331)
1,128,198
99
542,453
135,290
20,859
14,859
1,027
(86,094)
18,142
18,492
6,533
26,336
(17,549)
(60,369)
(22,194)
(518,711)
94,381
561,087
(500)
114,063
—
—
671
—
(2,552)
(335)
(2,216)
(157)
51,321
83,969
677,743 $
135,290 $
16,135
28,804
653
(47,833)
(1,345)
8,611
11,969
20,596
(10,459)
(102,913)
(41,192)
(515,165)
199,600
298,512
995
(57,250)
149,784
—
480
—
—
—
150,264
145
(9,754)
93,723
83,969
4,772 $
76,387 $
1,884 $
11,416 $
9,659
101,307
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets
$
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Restricted cash
649,666 $
122,509 $
2,738
25,339
1,057
11,724
Total cash, cash equivalents, and restricted cash
$
677,743 $
135,290 $
71,468
851
11,650
83,969
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
69
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 consolidated financial statements in accordance with generally accepted accounting principles in the United States
("GAAP"). The consolidated financial statements include the accounts of Pinterest, Inc. and its wholly owned subsidiaries. We have eliminated all
intercompany balances and transactions.
Reclassifications
We have reclassified certain amounts in prior periods to conform with current presentation.
Initial Public Offering
On April 23, 2019, we closed our initial public offering ("IPO") in which we issued and sold 75,000,000 shares of Class A common stock
at $19.00 per share. We received net proceeds of $1,368.0 million after deducting underwriting discounts and commissions and before deducting
offering costs of $9.8 million. Immediately prior to the completion of our IPO, all shares of our outstanding redeemable convertible preferred stock
and redeemable convertible preferred stock warrants converted into 308,621,636 shares of Class B common stock on a one-for-one basis, and
immediately thereafter but still prior to the completion of our IPO, all of our outstanding common stock were reclassified into 456,213,756 shares of
Class B common stock on a one-for-one basis.
On April 29, 2019, we issued and sold an additional 11,250,000 shares of Class A common stock at $19.00 per share pursuant to the underwriters’
option to purchase additional shares. We received additional net proceeds of $205.2 million after deducting underwriting discounts and
commissions.
Upon pricing our IPO, the performance condition for restricted stock units ("RSUs") granted under our 2009 Stock Plan (the "2009 Plan") was
deemed satisfied, and we recorded cumulative share-based compensation expense for those RSUs for which the service condition had been
satisfied at that date. For the years ended December 31, 2019, 2018 and 2017, we recorded total share-based compensation expense of
$1,377.8 million, $14.9 million and $28.8 million, respectively.
Stock Split
On March 28, 2019, we effected a 1-for-3 reverse split of our capital stock. We have adjusted all share and per share amounts in the accompanying
consolidated financial statements and notes to reflect the reverse stock split.
Use of Estimates
Preparing our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect amounts reported
in the 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.
70
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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 December 31, 2019 and 2018.
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.
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. 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.
Valuation of Common Stock and Redeemable Convertible Preferred Stock Warrants
Until our IPO, we determined the fair value of our common stock and redeemable convertible preferred stock warrants using the most observable
inputs available to us, including recent sales of our stock as well as income and market valuation approaches. The income approach estimates the
value of our business based on the future cash flows we expect to generate discounted to their present value using an appropriate discount rate to
reflect the risk of achieving
71
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the expected cash flows. The market approach estimates the value of our business by applying valuation multiples derived from the observed
valuation multiples of comparable public companies to our expected financial results.
We used the Probability Weighted Expected Return Method ("PWERM") to allocate the value of our business among our outstanding stock and
share-based awards. We applied the PWERM by first defining the range of potential future liquidity outcomes for our business, such as an IPO, and
then allocating its value to our outstanding stock and share-based awards based on the relative probability that each outcome will occur. We used
the Option Pricing Method to allocate the value of our business to our outstanding stock and share-based awards under the non-IPO outcome we
considered within the PWERM.
Applying these valuation and allocation approaches involved the use of estimates, judgments, and assumptions that are highly complex and
subjective, such as those regarding our expected future revenue, expenses, and cash flows, discount rates, valuation multiples, the selection of
comparable public companies, and the probability of future events. Changes in any or all of these estimates and assumptions, or the relationships
between these assumptions, impacted our valuation as of each valuation date and may have a material impact on the valuation of our common
stock and redeemable convertible preferred stock warrants.
Following our IPO, there is an active market for our Class A common stock and the warrants to purchase shares of our redeemable convertible
preferred stock are no longer outstanding so we no longer apply these valuation and allocation approaches.
Income Taxes
We account for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for temporary differences
between the financial reporting and tax bases of assets and liabilities using the enacted statutory tax rates in effect for the years in which we expect
the differences to reverse. We establish valuation allowances to reduce deferred tax assets to the amounts we believe it is more likely than not we
will be able to realize. We recognize tax benefits from uncertain tax positions when we believe it is more likely than not that the tax position is
sustainable on examination by tax authorities based on its technical merits. We recognize taxes on Global Intangible Low-Taxed Income ("GILTI") as
a current period expense when incurred.
Advertising Expenses
We record advertising expenses as incurred and include these in sales and marketing in the consolidated statements of operations. Advertising
expenses were $55.0 million, $19.2 million and $13.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Marketable Securities
We invest in highly liquid corporate debt securities, U.S. treasury securities, asset-backed securities, U.S. government agency securities, money
market funds and certificates of deposit. We classify marketable investments with stated maturities of ninety days or less from the date of purchase
as cash equivalents and those with stated maturities greater than ninety days from the date of purchase as marketable securities.
We classify our marketable securities as available-for-sale investments in our current assets because they are available for use to support current
operations. We carry our marketable investments at fair value and record unrealized gains or losses, net of taxes, in accumulated other
comprehensive income (loss) in stockholders’ equity (deficit). We determine realized gains and losses on the sale of marketable investments using a
specific identification method and record these and any other-than-temporary impairments in interest expense and other income (expense), net.
Restricted Cash
Our restricted cash primarily consists of certificates of deposit underlying secured letters of credit issued in connection with our operating leases.
Restrictions typically lapse at the end of the lease term, and we classify restricted cash as current or non-current based on the remaining term of the
restriction.
72
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Measurements
We account for certain assets and liabilities at fair value, which is the amount we believe market participants would receive to sell an asset or pay to
transfer a liability in an orderly transaction. We categorize these assets and liabilities into the three levels below based on the degree to which the
inputs we use to measure their fair values are observable in active markets. We use the most observable inputs available to us when measuring fair
value.
•
•
•
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets
Level 2: Observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or
liabilities in inactive markets, or inputs that are derived principally from or corroborated by observable market data or other means
Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities
Accounts Receivable and Allowances for Doubtful Accounts and Sales Credits
We record accounts receivable at the original invoiced amount. We maintain an allowance for doubtful accounts for any receivables we may be
unable to collect. We estimate uncollectible receivables based on our receivables’ age, our customers’ credit quality and current economic
conditions, among other factors that may affect our customers’ ability to pay. We also maintain an allowance for sales credits, which we determine
based on historical credits issued to customers. We include the allowances for doubtful accounts and sales credits in accounts receivable, net in the
consolidated balance sheets.
Property and Equipment
We carry property and equipment at cost less accumulated depreciation and calculate depreciation using the straight-line method over our assets’
estimated useful lives, which are generally:
Property and Equipment
Computer and network equipment
Furniture and fixtures
Leasehold improvements
Useful Life
3 years
4 years
Lesser of estimated useful life or remaining lease term
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 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 consolidated statements of operations on a straight-line basis over the lease term and record
variable lease payments as incurred.
Business Combinations
We include the results of operations of businesses that we acquire in our consolidated financial statements beginning on their respective acquisition
dates. We allocate the fair value of the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values.
When the fair value of the purchase consideration exceeds the fair values of the identifiable assets and liabilities acquired, we record the excess as
goodwill.
73
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-Lived Assets, Including Goodwill and Intangible Assets
We record definite-lived intangible assets at fair value less accumulated amortization. We calculate amortization using the straight-line method over
the assets’ estimated useful lives of up to ten years.
We review our property and equipment and intangible assets for impairment whenever events or circumstances indicate that an asset’s carrying
value may not be recoverable. We measure recoverability by comparing an asset’s carrying value to the future undiscounted cash flows that we
expect it to generate. If this test indicates that the asset’s carrying value is not recoverable, we record an impairment charge to reduce the asset’s
carrying value to its fair value. We did not record material property and equipment or intangible asset impairments during the periods presented.
We review goodwill for impairment at least annually or more frequently if current circumstances or events indicate that the fair value of our single
reporting unit may be less than its carrying value. We did not record any goodwill impairment during the periods presented.
Website Development Costs
We capitalize costs to develop our website and mobile application when preliminary development efforts are successfully completed, management
has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended. Due to
the iterative process by which we perform upgrades and the relatively short duration of our development projects, development costs meeting our
capitalization criteria were not material during the periods presented.
Loss Contingencies
We are involved in various lawsuits, claims and proceedings that arise in the ordinary course of business. We record a liability for these when we
believe it is probable that we have incurred a loss and can reasonably estimate the loss. We regularly evaluate current information to determine
whether we should adjust a recorded liability or record a new one.
Foreign Currency
The functional currency of our international subsidiaries is generally their local currency. We translate these subsidiaries’ financial statements into
U.S. dollars using month-end exchange rates for assets and liabilities and average exchange rates for revenue and costs and expenses. We record
translation gains and losses in accumulated other comprehensive loss in stockholders’ equity (deficit). We record foreign exchange gains and losses
in interest expense and other income (expense), net. Our net foreign exchange gains and losses were not material for the periods presented.
Concentration of Business Risk
We have an agreement with Amazon Web Services (“AWS”) to provide the cloud computing infrastructure we use to host our website, mobile
application and many of the internal tools we use to operate our business. We are currently required to maintain a substantial majority of our
monthly usage of certain compute, storage, data transfer and other services on AWS. Any transition of the cloud services currently provided by AWS
to another cloud services provider would be difficult to implement and would cause us to incur significant time and expense.
Concentration of Credit Risk
Financial instruments that may potentially expose us to concentrations of credit risk primarily consist of cash, cash equivalents, marketable
securities and restricted cash. Our investment policy is meant to preserve capital and maintain liquidity. The policy limits our marketable investments
to investment-grade securities and limits our credit exposure by limiting our concentration in any one corporate issuer or sector and by establishing a
minimum credit rating for marketable investments we purchase. Although we deposit cash and marketable investments with multiple financial
institutions, our deposits may exceed insurable limits.
74
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
One customer accounted for 10% of our revenue for the year ended December 31, 2019 and another accounted for 10% of our revenue for the year
ended December 31, 2017. No customer accounted for more than 10% of our revenue for the year ended December 31, 2018.
Our accounts receivable are generally unsecured. We monitor our customers’ credit quality on an ongoing basis and maintain reserves for estimated
credit losses. Bad debt expense was not material for the years ended December 31, 2019, 2018 and 2017.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the 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 recognition of
credit losses. We will adopt ASU 2016-13 effective January 1, 2020 and do not expect adoption to materially affect our consolidated financial
statements.
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. ASU 2019-12 will be effective for us
beginning January 1, 2021, and early adoption is permitted. We are currently evaluating the impact of adoption on our consolidated financial
statements.
2. Cash, Cash Equivalents and Marketable Securities
Cash, cash equivalents and marketable securities consist of the following (in thousands):
December 31, 2019
Amortized Cost Unrealized Gains
Unrealized
Losses
Fair Value
$
323,194 $
— $
— $
Cash and cash equivalents:
Cash
Money market funds
Commercial paper
Corporate bonds
Certificates of deposit
Total cash and cash equivalents
Marketable securities:
Corporate bonds
U.S. treasury securities
Commercial paper
Asset-backed securities
Certificates of deposit
Total marketable securities
Total
—
(6)
(1)
—
(7)
(44)
(9)
(7)
(14)
(6)
(80)
323,194
214,413
105,354
3,791
2,914
649,666
450,433
201,640
196,328
114,599
100,679
1,063,679
(87) $
1,713,345
214,413
105,359
3,792
2,914
649,672
449,496
201,561
196,304
114,425
100,647
1,062,433
$
1,712,105 $
—
1
—
—
1
981
88
31
188
38
1,326
1,327 $
75
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash and cash equivalents:
Cash
Money market funds
Commercial paper
Total cash and cash equivalents
Marketable securities:
Corporate bonds
U.S. treasury securities
Commercial paper
Asset-backed securities
Certificates of deposit
Total marketable securities
Total
December 31, 2018
Amortized Cost Unrealized Gains
Unrealized
Losses
Fair Value
$
48,238 $
— $
— $
785
73,492
122,515
204,826
36,003
90,207
107,382
68,343
506,761
—
—
—
115
—
4
6
26
151
—
(6)
(6)
(771)
(82)
(15)
(730)
(10)
(1,608)
$
629,276 $
151 $
(1,614) $
48,238
785
73,486
122,509
204,170
35,921
90,196
106,658
68,359
505,304
627,813
Gross unrealized losses for marketable securities that had been in an unrealized loss position for greater than 12 consecutive months were not
material as of December 31, 2019 and 2018. We evaluated all available evidence and concluded that our marketable securities are not other than
temporarily impaired as of December 31, 2019 and 2018.
The fair value of our marketable securities by contractual maturity is as follows (in thousands):
Due in one year or less
Due after one to five years
Total
Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.
December 31, 2019
$
$
768,347
295,332
1,063,679
76
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. 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):
Cash equivalents:
Money market funds
Commercial paper
Corporate bonds
Certificates of deposit
Marketable securities:
Corporate bonds
U.S. treasury securities
Commercial paper
Asset-backed securities
Certificates of deposit
Prepaid expenses and other current assets:
Certificates of deposit
Restricted cash:
Certificates of deposit
Cash equivalents:
Money market funds
Commercial paper
Marketable securities:
Corporate bonds
U.S. treasury securities
Commercial paper
Asset-backed securities
Certificates of deposit
Prepaid expenses and other current assets:
Certificates of deposit
Restricted cash:
Certificates of deposit
Other liabilities:
Level 1
Level 2
Level 3
Total
December 31, 2019
$
214,413 $
— $
—
—
—
—
201,640
—
—
—
—
105,354
3,791
2,914
450,433
—
196,328
114,599
100,679
2,738
— $
—
—
—
—
—
—
—
—
—
214,413
105,354
3,791
2,914
450,433
201,640
196,328
114,599
100,679
2,738
$
— $
25,339 $
— $
25,339
Level 1
Level 2
Level 3
Total
December 31, 2018
$
785 $
—
—
35,921
—
—
—
—
—
— $
73,486
— $
—
785
73,486
204,170
—
90,196
106,658
68,359
1,057
11,724
—
—
—
—
—
—
—
204,170
35,921
90,196
106,658
68,359
1,057
11,724
Redeemable convertible preferred stock warrants
$
— $
— $
4,934 $
4,934
77
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
We classify our redeemable convertible preferred stock warrants within Level 3 because we determine their fair values using significant
unobservable inputs, including the fair value of our redeemable convertible preferred stock, which we determine in the same manner as our common
stock. Refer to our significant accounting policies in Note 1 for additional information.
We record changes in the fair value of our redeemable convertible preferred stock warrants in interest expense and other income (expense), net.
These amounts were not material for the years ended December 31, 2019, 2018 and 2017.
4. Other Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
Leasehold improvements
Furniture and fixtures
Computer and network equipment
Total property and equipment
Less: accumulated depreciation
Construction in progress
Property and equipment, net
December 31,
2019
2018
109,807 $
22,353
22,963
155,123
(73,270)
10,139
91,992 $
93,843
18,529
19,606
131,978
(51,249)
783
81,512
$
$
Depreciation expense was $26.3 million, $20.1 million and $14.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consists of the following (in thousands):
Accrued hosting expenses
Accrued compensation
Operating lease liabilities
Other accrued expenses
Accrued expenses and other current liabilities
5. Goodwill and Intangible Assets, Net
Goodwill was unchanged during the years ended December 31, 2019 and 2018.
78
December 31,
2019
2018
$
$
27,322 $
26,574
46,527
41,400
141,823 $
19,288
18,192
20,538
28,240
86,258
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets, net consists of the following (in thousands):
Acquired patents
Acquired technology and other intangibles
Total intangible assets, net
Acquired patents
Acquired technology and other intangibles
Total intangible assets, net
December 31, 2019
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-Average
Useful Life (1)
$
$
9,037 $
4,385
13,422 $
(1,370) $
(4,381)
(5,751) $
7,667
4
7,671
9.1 years
1.5 years
December 31, 2018
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Weighted-Average
Useful Life (1)
$
$
7,038 $
4,385
11,423 $
(465) $
(3,792)
(4,257) $
6,573
593
7,166
9.4 years
1.5 years
(1) Based on the weighted-average useful life established as of acquisition date.
Amortization expense was $1.5 million, $0.7 million and $1.5 million for the years ended December 31, 2019, 2018 and 2017,
respectively. Estimated future amortization expense as of December 31, 2019, is as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
79
Intangible Asset
Amortization
1,013
1,009
1,009
1,009
1,009
2,622
7,671
$
$
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Commitments and Contingencies
As of December 31, 2019, our non-cancelable contractual commitments are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
Purchase Commitments
Purchase
Commitments
Operating Leases
Total Commitments
$
$
— $
—
—
171,316
—
—
56,807 $
47,623
35,622
14,953
11,942
109,810
171,316 $
276,757 $
56,807
47,623
35,622
186,269
11,942
109,810
448,073
In May 2017, we amended the enterprise agreement governing our use of cloud computing infrastructure provided by AWS with an addendum.
Under the agreement, as amended by the addendum, we are currently required to purchase at least $750.0 million (the contract commitment) of
cloud services from AWS through July 2023 and were required to purchase at least $125.0 million (the initial commitment) of the contract
commitment through June 2018. Except in limited circumstances, such as termination due to acquisition of us by another cloud services provider
(which would result in an obligation to pay liquidated damages under the addendum, we are required to pay the difference if we fail to meet either
commitment, but we are not otherwise subject to annual purchase commitments during the remainder of the six-year term of the addendum. As of
December 31, 2019, we have fulfilled our initial commitment and our remaining contract commitment is $171.3 million. We expect to meet our
remaining commitment.
Operating Leases
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. The estimated commencement and expiration dates are in 2022 and 2033, 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 $420.0 million, which is excluded from the table above, 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.
Revolving Credit Facility
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.
80
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Our total borrowing capacity under the revolving credit facility is $500.0 million as of December 31, 2019. We have not issued any letters of credit
against the revolving credit facility and are in compliance with all covenants under the revolving credit facility as of December 31, 2019.
Letters of Credit
We had $25.5 million and $10.6 million of secured letters of credit outstanding as of December 31, 2019 and 2018, respectively. 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 consolidated balance sheets based on the term of the remaining restriction.
7. Leases
We have entered into various non-cancelable office space operating leases with original lease periods expiring between 2020 and 2033. These do
not contain material variable rent payments, residual value guarantees, covenants or other restrictions. Operating lease costs for the years ended
December 31, 2019, 2018 and 2017, are as follows (in thousands):
Lease cost:
Operating lease cost
Short-term lease cost
Total
Year Ended December 31,
2019
2018
2017
$
$
40,257 $
3,456
43,713 $
27,469 $
2,765
30,234 $
16,632
2,739
19,371
The weighted-average remaining term of our operating leases was 8.1 years and 10.7 years and the weighted-average discount rate used to
measure the present value of our operating lease liabilities was 4.6% and 5.1% as of December 31, 2019 and 2018, respectively.
Maturities of our operating lease liabilities, which do not include short-term leases, as of December 31, 2019, are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less imputed interest
Total operating lease liabilities
Operating Leases
55,700
47,623
35,622
14,953
11,942
109,810
275,650
(55,730)
219,920
$
$
Cash payments included in the measurement of our operating lease liabilities were $38.4 million, $26.2 million and $15.2 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
81
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2019, we have $420.0 million of undiscounted future payments under an operating lease that has not yet commenced, which
are excluded from the table above. See Note 6 for additional information. As of December 31, 2019, we have not entered into any other material
leases that have not yet commenced.
8. 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 December 31, 2019.
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, 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. 89,911,091 shares of our Class A common stock were reserved for future issuance under our 2019 Plan as of December 31, 2019.
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 year ended December 31, 2019, was as follows (in thousands, except per share amounts):
Outstanding as of December 31, 2018
Exercised
Forfeited
Outstanding as of December 31, 2019
Exercisable as of December 31, 2019
Stock Options Outstanding
Shares
Weighted-Average
Exercise Price
76,635 $
(19,650)
(19)
56,966 $
56,943 $
2.22
2.10
4.06
2.25
2.26
Weighted-Average
Remaining Contractual
Term
(in
years)
Aggregate Intrinsic
Value (1)
4.5 $
1,285,338
3.5 $
3.5 $
933,299
932,968
(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 years ended December 31, 2019, 2018 and 2017, was $2.2 million, $18.6 million
and $37.1 million, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019, 2018 and
2017, was $425.1 million, $5.9 million and $3.7 million, respectively.
82
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Unit Activity
RSU activity during the year ended December 31, 2019, was as follows (in thousands, except per share amounts):
Outstanding as of December 31, 2018
Granted
Released
Forfeited
Outstanding as of December 31, 2019
Share-Based Compensation
Restricted Stock Units Outstanding
Shares
Weighted Average
Grant Date Fair Value
77,882 $
36,526
(50,161)
(7,456)
56,791 $
17.79
20.91
17.53
16.55
20.19
Share-based compensation expense during the years ended December 31, 2019, 2018 and 2017, was as follows (in thousands):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total share-based compensation
Year Ended December 31,
2019
2018
2017
$
$
31,758 $
83 $
867,191
239,315
239,517
13,155
784
837
1,377,781 $
14,859 $
372
19,811
6,267
2,354
28,804
As of December 31, 2019, we had $635.1 million of unrecognized share-based compensation expense, which we expect to recognize over a
weighted-average period of 3.2 years.
9. Redeemable Convertible Preferred Stock
Immediately prior to the completion of our IPO, all shares of our outstanding redeemable convertible preferred stock converted into 308,372,983
shares of Class B common stock on a one-for-one basis. There were no shares of redeemable convertible preferred stock issued and outstanding
as of December 31, 2019.
Prior to the completion of our IPO, the holders of our redeemable convertible preferred stock had the following preferences and privileges:
Dividends
The holders of Seed 1, Seed 2, Series A-1, Series A-2, Series B, Series C, Series D, Series E, Series F, Series G and Series H redeemable
convertible preferred stock were entitled to receive non-cumulative dividends, out of any assets legally available therefore, prior and in preference to
any declaration or payment of any dividend on the common stock at the rate of $0.00096, $0.00216, $0.00924, $0.01356, $0.057408, $0.373368,
$0.518838, $0.6974736, $0.8152884, $1.7229822 and $1.7229822 per share (as adjusted for stock splits, stock dividends, combinations,
subdivisions, recapitalizations, or the like) per annum on each outstanding share, when, as, and if declared by the board of directors. We have never
declared or paid a dividend.
83
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Liquidation Preferences
In the event of any deemed liquidation event or a voluntary or involuntary liquidation, dissolution, or winding up of Pinterest, the holders of each
series of redeemable convertible preferred stock then outstanding would have been entitled to be paid out our assets available for distribution to
stockholders, before any payment made to the holders of common stock, an amount per share equal to the greater of (a) the original issue price for
such series of redeemable convertible preferred stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have
been payable had such shares of redeemable convertible preferred stock been converted into common stock immediately prior to such liquidation,
dissolution, or winding up of Pinterest. The original purchase price of Seed 1, Seed 2, Series A-1, Series A-2, Series B, Series C, Series D, Series
E, Series F, Series G and Series H redeemable convertible preferred stock was $0.012, $0.02724, $0.11568, $0.169968, $0.7175796, $4.667136,
$6.48546, $8.71842, $10.191108, $21.537276 and $21.537276 per share (as adjusted for stock splits, stock dividends, combinations, subdivisions,
recapitalizations, or the like).
Unless the holders of our redeemable convertible preferred stock elected otherwise, a deemed liquidation would have occurred if Pinterest was
merged or consolidated into another company in which the stockholders of Pinterest owned less than a majority of the voting stock of the surviving
company, or if substantially all of our assets were sold, transferred, leased or exclusively licensed.
If, upon any such liquidation, dissolution, or winding up of Pinterest, our assets available for distribution to stockholders had been insufficient to pay
the holders of shares of redeemable convertible preferred stock the full amount to which they were entitled, the holders of shares of redeemable
convertible preferred stock would have shared ratably in any distribution of the assets available for distribution in proportion to the respective
amounts that would have otherwise been payable in respect of the shares held by them upon such distribution if all amounts payable on the shares
were paid in full.
10. 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):
Year Ended December 31,
2019
2018
2017
Class A
Class B
Common
Common
Numerator:
Net loss attributable to common stockholders
$
(459,412) $
(901,959) $
(62,974) $
(130,044)
Denominator:
Weighted-average shares used in computing net loss per share attributable to
common stockholders, basic and diluted
141,894
278,579
127,091
126,562
Net loss per share attributable to common stockholders, basic and diluted
$
(3.24) $
(3.24) $
(0.50) $
(1.03)
84
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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):
Redeemable convertible preferred stock
Outstanding stock options
Unvested restricted stock units
Redeemable convertible preferred stock warrants
Common stock warrants
Shares subject to repurchase
Total
11. Income Taxes
The components of loss before provision for income taxes are as follows (in thousands):
United States
Foreign
Loss before provision for income taxes
Provision for income taxes consists of the following (in thousands):
Current:
Federal
State
Foreign
Total current tax expense
Deferred:
Federal
State
Foreign
Total deferred tax expense (benefit)
Provision for income taxes
Year Ended December 31,
2019
2018
2017
95,469
72,999
69,800
77
—
—
308,373
76,911
68,795
158
96
—
305,409
78,830
48,238
—
167
40
238,345
454,333
432,684
Year Ended December 31,
2019
2018
2017
(1,266,677) $
(94,162)
(1,360,839) $
(31,641) $
(30,923)
(62,564) $
(90,906)
(38,827)
(129,733)
Year Ended December 31,
2019
2018
2017
— $
—
1,677
1,677
(555)
(76)
(514)
(1,145)
— $
—
500
500
4
4
(98)
(90)
$
532 $
410 $
—
—
390
390
(23)
4
(60)
(79)
311
$
$
$
The difference between income taxes computed at the statutory federal income tax rate and the provision for income taxes is attributable to the
following (in thousands):
85
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tax at U.S. statutory rate
State income taxes, net of benefit
Foreign losses not benefited
Permanent book/tax differences
Share-based compensation
Change in valuation allowance
U.S corporate tax rate reduction
Tax credits
Other
Provision for income taxes
Year Ended December 31,
2019
2018
2017
$
(285,776) $
(13,138) $
(77)
20,932
2,453
(84,366)
422,315
—
(74,399)
(550)
$
532 $
4
6,891
1,967
(864)
15,952
—
(10,460)
58
410 $
(44,109)
4
13,518
127
646
(50,017)
86,063
(5,923)
2
311
Due to our history of net operating losses and the full valuation allowance against our deferred tax assets, our provision for income taxes primarily
relates to foreign taxes for the periods presented.
Significant components of our deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
Research tax credits
Reserves, accruals, and other
Lease obligation
Share-based compensation
Total deferred tax assets
Less: valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Prepaid expenses
Total deferred tax liabilities
Net deferred tax assets
December 31,
2019
2018
$
416,709 $
120,456
167,489
15,960
52,734
133,067
785,959
(737,003)
48,956
(46,398)
(1,862)
(48,260)
$
696 $
53,459
5,379
41,808
36,397
257,499
(216,866)
40,633
(38,417)
(2,031)
(40,448)
185
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Act).
The Tax Act reduced the U.S. statutory corporate tax rate to 21%, effective January 1, 2018. Consequently, we recorded a decrease to our federal
deferred tax assets of $86.1 million, which was fully offset by a reduction in our valuation allowance for the year ended December 31, 2017.
In December 2019, we completed an intra-entity asset transfer of certain of our intellectual property rights to an Irish subsidiary where our
international business is headquartered. The transfer resulted in a step-up in the tax basis of the transferred intellectual property rights and a
correlated increase in foreign deferred tax assets. As of December 31, 2019, we believe it is more likely than not that these additional foreign
deferred tax assets will not be realized and, therefore, are offset by a full valuation allowance.
Due to our history of losses we believe it is more likely than not that our U.S. deferred tax assets will not be realized as of December 31, 2019.
Accordingly, we have established a full valuation allowance on our U.S. deferred tax assets. Our valuation allowance increased by $520.1 million
and $25.3 million during the years ended December 31, 2019 and 2018, respectively, primarily due to U.S. federal and state tax losses and credits
incurred during the period.
86
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2019, we had federal, California and other state net operating loss carryforwards of $1,880.8 million, $245.2 million and $599.7
million, respectively. If not utilized, these will begin to expire in 2028, 2028 and 2026, respectively. Utilization of our net operating loss carryforwards
may be subject to annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state
provisions. Our net operating loss carryforwards could expire before utilization if subject to annual limitations.
As of December 31, 2019, we had federal and California research and development credit carryforwards of $151.4 million and $111.3 million,
respectively. If not utilized, our federal carryforwards will begin to expire in 2030. Our California carryforwards do not expire.
Changes in gross unrecognized tax benefits were as follows (in thousands):
Balance as of December 31, 2017
Increases for tax positions of current year
Balance as of December 31, 2018
Decreases for tax positions of prior years
Increases for tax positions of current year
Balance as of December 31, 2019
Gross Unrecognized Tax
Benefits
$
$
$
30,167
8,383
38,550
(50)
90,685
129,185
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. On July 22, 2019, Altera filed a petition for a
rehearing before the full Ninth Circuit. On November 12th, the Ninth Circuit Court denied Altera’s request for rehearing. Altera may subsequently
appeal to the Supreme Court. We will continue to monitor future developments and their potential effects on our consolidated financial statements.
Recognizing the $129.2 million of gross unrecognized tax benefits we had as of December 31, 2019 would not affect our effective tax rate as their
recognition would be offset by the reversal of related deferred tax assets, which are subject to a full valuation allowance. We do not expect our gross
unrecognized tax benefits to change significantly within the next 12 months. We recognize interest and penalties related to uncertain tax positions in
provision for income taxes. Accrued interest and penalties are not material as of December 31, 2019 and 2018.
We are subject to taxation in the U.S. and various other state and foreign jurisdictions. As we have net operating loss carry forwards for U.S. federal
and state jurisdictions, the statute of limitations is open for all tax years. For material foreign jurisdictions, the tax years open to examination include
the years 2014 and forward.
We have not recognized deferred taxes for the difference between the financial reporting basis and the tax basis of our investment in our foreign
subsidiaries because we have the ability and intent to maintain our investments for the foreseeable future.
87
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Geographical Information
Revenue disaggregated by geography based on our customers’ billing addresses is as follows (in thousands):
United States
International(1)
Total revenue
Year Ended December 31,
2019
2018
2017
$
$
1,010,186 $
132,575
1,142,761 $
697,170 $
58,762
755,932 $
443,842
29,010
472,852
(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):
United States
International(1)
Total property and equipment, net and operating lease right-of-use assets
December 31,
2019
2018
$
$
266,763 $
13,480
280,243 $
222,188
4,527
226,715
(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.
88
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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 Annual Report on Form 10-K. Based on such evaluation, our CEO and CFO have
concluded that as of December 31, 2019, 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 Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, 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.
Item 9B. Other Information
None.
89
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the sections titled “Proposal 1 - Election of Directors” and “Other Matters” that
will be included in our Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission (SEC) within 120 days for the year ended December 31, 2019.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the section titled “Proposal 3 – Advisory Vote on Say-on-Pay Frequency” that
will be included in our Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days for the year
ended December 31, 2019.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the section titled “Other Matters” that will be included in our Definitive Proxy
Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days for the year ended December 31, 2019.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the sections titled “Proposal 1 – Election of Directors” and “Other Matters” that
will be included in our Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days for the year
ended December 31, 2019.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the sections titled “Proposal 2 – Ratification of Selection of Independent
Auditor” that will be included in our Definitive Proxy Statement for the 2020 Annual Meeting of Stockholders to be filed with the SEC within 120 days
for the year ended December 31, 2019.
90
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
The consolidated financial statements are filed as part of this Annual Report on Form 10-K under “Item 8. Financial Statements and
Supplementary Data.”
2. Financial Statement Schedules
The financial statement schedules are omitted because they are either not applicable or the information required is presented in the
financial statements and notes thereto under “Item 8. Financial Statements and Supplementary Data.”
3. Exhibits
The exhibits listed in the following Exhibit Index are filed, furnished, or incorporated by reference as part of this Annual Report on Form 10-
K.
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed Herewith
Incorporated by Reference
3.1
3.2
4.1
4.2
10.1
10.2+
10.3
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
Amended and Restated Certificate of Incorporation of the
Company.
Amended and Restated Bylaws of the Company.
Amended and Restated Investor Rights Agreement among
the Company and certain holders of its capital stock, dated
as of June 2, 2017.
Description of our Common Stock.
Form of Indemnification Agreement between the Company
and each of its directors and executive officers.
Form of Executive Severance & Change in Control
Agreement.
Revolving Credit Agreement, by and among the Company,
the Guarantors and JP Morgan Chase Bank, N.A., as
administrative agent, dated as of November 15, 2018.
Employment Agreement by and between Cold Brew Labs
Inc. and Benjamin Silbermann, dated as of July 14, 2009.
Confidential Information and Invention Assignment
Agreement by and between Cold Brew Labs Inc. and
Benjamin Silbermann, dated as of October 28, 2008.
Offer Letter and Confidential Agreement and Invention
Assignment Agreement by and between the Company and
Todd Morgenfeld, dated as of September 19, 2016.
Offer Letter and Confidential Agreement and Invention
Assignment Agreement by and between the Company and
Lawrence Ripsher, dated as of April 11, 2017.
Pinterest, Inc. 2009 Stock Plan, as amended.
Pinterest, Inc. 2009 Stock Plan Notice of Stock Option Grant
and Stock Option Agreement by and between the Company
and Benjamin Silbermann, dated as of April 25, 2013.
8-K
8-K
S-1
10-K
001-38872
001-38872
333-230458
3.2
3.3
4.2
April 23, 2019
April 23, 2019
March 22, 2019
S-1/A
333-230458
10.1
April 8, 2019
S-1/A
333-230458
10.14
April 8, 2019
S-1
333-230458
S-1/A
333-230458
10.2
10.3
March 22, 2019
March 29, 2019
S-1/A
333-230458
10.4
March 29, 2019
S-1/A
333-230458
10.5
March 29, 2019
S-1/A
S-1
333-230458
333-230458
10.6
10.7
March 29, 2019
March 22, 2019
S-1
333-230458
10.8
March 22, 2019
X
91
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
10.16+
10.17+
10.18+
21.1
23.1
24.1
31.1
31.2
32.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Form of Pinterest, Inc. 2009 Stock Plan Restricted Stock Unit
Grant Notice and Restricted Stock Unit Agreement
Acceleration Addendum to Pinterest, Inc. 2009 Stock Plan
Restricted Stock Unit Grant Notice and Agreement by and
between the Company and Todd Morgenfeld, dated as of
December 20, 2017.
Pinterest, Inc. 2019 Omnibus Incentive Plan.
Form of Pinterest, Inc. 2019 Omnibus Incentive Plan Restricted
Stock Unit Grant Notice and Agreement.
Form of Pinterest, Inc. 2019 Omnibus Incentive Plan Restricted
Stock Grant Notice and Agreement.
Form of Pinterest, Inc. 2019 Omnibus Incentive Plan Stock
Option Grant Notice and Agreement.
Non-Employee Director Compensation Policy.
Form of Executive Severance & Change in Control Agreement.
Pinterest, Inc. 2009 Stock Plan Notice of Stock Option Grant
and Stock Option Agreement.
List of Subsidiaries of Pinterest, Inc.
Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm.
Power of Attorney.
Certification of Principal Executive Officer pursuant to Exchange
Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Exchange
Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Inline XBRL Instance Document (the instance document does
not appear in the Interactive Data File because its XBRL tags
are embedded within the Inline XBRL document)
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
Cover Page Interactive Data File (formatted as Inline XBRL and
contained in Exhibit 101)
Item 16. Form 10-K Summary
None.
92
S-1
333-230458
10.9
March 22, 2019
S-1
S-1/A
333-230458
333-230458
10.10
10.11
March 22, 2019
March 29, 2019
S-1/A
333-230458
10.12
April 8, 2019
10-K
10-K
S-1/A
S-1/A
333-230458
333-230458
10.13
10.14
April 8, 2019
April 8, 2019
S-8
333-230999
4.3
April 23, 2019
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 6, 2020
By:
/s/ Todd Morgenfeld
PINTEREST, INC.
Todd Morgenfeld
Chief Financial Officer
(Principal
Financial
Officer)
POWER OF ATTORNEY
The undersigned directors and officers of Pinterest, Inc. hereby constitute and appoint Benjamin Silbermann, Todd Morgenfeld and
Christine Flores, and each of them, any of whom may act without joinder of the other, the individual’s true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign this
Registration Statement and any or all amendments, including post-effective amendments to the Registration Statement, including a prospectus or an
amended prospectus therein and any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462 under the
Securities Act, and to file the same, with all exhibits thereto, and all other documents in connection therewith to be filed with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact as agents or any of them, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates indicated.
Name
/s/ Benjamin Silbermann
Benjamin Silbermann
/s/ Jeffrey Jordan
Jeffrey Jordan
/s/ Leslie J. Kilgore
Leslie J. Kilgore
/s/ Jeremy S. Levine
Jeremy S. Levine
/s/ Evan Sharp
Evan Sharp
Title
Chairman, Co-Founder, President and Chief Executive Officer (Principal
Executive Officer)
Director
Director
Director
Director
93
Date
February 6, 2020
February 6, 2020
February 6, 2020
February 6, 2020
February 6, 2020
Name
/s/ Michelle Wilson
Michelle Wilson
/s/ Fredric G. Reynolds
Fredric G. Reynolds
/s/ Todd Morgenfeld
Todd Morgenfeld
/s/ Tse Li (Lily) Yang
Tse Li (Lily) Yang
Title
Director
Director
Date
February 6, 2020
February 6, 2020
Chief Financial Officer (Principal Financial Officer)
February 6, 2020
Chief Accounting Officer (Principal Accounting Officer)
February 6, 2020
94
Exhibit 4.2
PINTEREST, INC.
Description of our Common Stock
The following description of Pinterest Class A and Class B common stock summarizes the material terms and provisions, but is not complete. For
the complete terms of our common stock, please refer to our amended and restated certificate of incorporation and our amended and restated
bylaws, as each may be amended from time to time and filed as exhibits to our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Our certificate of incorporation authorizes Pinterest to issue up to 8,666,666,667 shares of common stock, including 6,666,666,667 shares of Class
A common stock, 1,333,333,333 shares of Class B common stock and 666,666,667 shares of preferred stock. Our board of directors has the
authority, without stockholder approval except as required by the listing standards of the NYSE, to issue additional shares of our Class A common
stock.
Our Class A common stock, par value $0.00001 per share, is listed on the New York Stock Exchange, under the symbol “PINS” and began trading
on April 18, 2019. Prior to that date, there was no public trading market for our Class A common stock. There is no public trading market for our
Class B common stock, par value $0.00001 per share.
Subject to limitations prescribed by Delaware law, our board of directors may also issue preferred stock, without stockholder approval. There is no
preferred stock outstanding.
Common Stock Rights
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting, conversion and transfer
rights.
Voting
Rights: The holders of the Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of
the stockholders. Holders of Class B common stock are entitled to 20 votes for each share held on all matters submitted to a vote of stockholders.
The holders of our Class A common stock and Class B common stock generally vote together as a single class on all matters submitted to a vote of
our stockholders, unless otherwise required by Delaware law or our amended and restated certificate of incorporation.
Except for the election of directors, if a quorum is present, an action on a matter is approved if it receives the affirmative vote of the holders of a
majority of the voting power of the shares of capital stock present in person or represented by proxy at the meeting and entitled to vote on the
matter, unless otherwise required by applicable law, Delaware law, our amended and restated certificate of incorporation or our amended and
restated bylaws. The election of directors will be determined by a plurality of the votes cast in respect of the shares present in person or represented
by proxy at the meeting and entitled to vote, meaning that the nominees with the greatest number of votes cast, even if less than a majority, will be
elected. The rights, preferences and privileges of holders of common stock are subject to, and may be impacted by, the rights of the holders of
shares of any series of preferred stock that we may designate and issue in the future.
Dividend
Rights: We have never declared or paid any dividends on our capital stock. Dividends will be payable only as and when declared from time
to time by our board of directors out of assets legally available at the time. If we do declare dividends, both Class A and Class B shareholders will
receive equal dividend amounts per share unless different treatment of the shares of each such class is approved by the affirmative vote of the
holders of majority of the outstanding shares of Class A and Class B common stock entitled to vote thereon, each voting separately as a class.
Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock are entitled to receive ratably
those dividends, if any, as may be declared by the board of directors out of legally available funds.
Liquidation
Rights:
Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to share equally and ratably in
the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the prior rights of
any preferred stock then outstanding.
No
Preemptive
or
Similar
Rights: Except for the conversion provisions with respect to our Class B common stock described below, holders of our
common stock have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions
applicable to our common stock.
Conversion
Rights: Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A
common stock. Each share of our Class B common stock will convert automatically into one share of our Class A common stock upon any transfer,
whether or not for value, except certain transfers to entities, including certain charities and foundations, to the extent the transferor retains sole
dispositive power and exclusive voting control with respect to the shares of Class B common stock, and certain other transfers described in our
amended and restated certificate of incorporation. Upon the death or permanent incapacity of each holder of Class B common stock who is a natural
person, the Class B common stock held by that person or his or her permitted estate planning entities will convert automatically into Class A
common stock. However, shares of Class B common stock held by Benjamin Silbermann or his permitted estate planning entities or other permitted
transferees will not convert automatically into Class A common stock until a time that is between 90 and 540 days after his death or permanent
incapacity, as determined by the board of directors. In addition, all shares of Class B common stock will automatically convert into shares of Class A
common stock on (i) the seven-year anniversary of the closing date of our initial public offering (IPO), except with respect to shares of Class B
common stock held by any holder that continues to beneficially own at least 50% of the number of shares of Class B common stock that such holder
beneficially owned immediately prior to completion of our IPO, and (ii) a date that is between 90 and 540 days, as determined by the board of
directors, after the death or permanent incapacity of Mr. Silbermann. Once transferred and converted into Class A common stock, the Class B
common stock will not be reissued.
Anti-takeover Provisions
Certain provisions of our amended and restated certificate of incorporation, our amended and restated bylaws, and Delaware law, which are
summarized below, may have the effect of delaying, deferring or discouraging another person from acquiring control of us. They are also designed,
in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased
protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to
acquire us because negotiation of these proposals could result in an improvement of their terms.
Amended
and
Restated
Certificate
of
Incorporation
and
Amended
and
Restated
Bylaw
Provisions: Our amended and restated certificate of
incorporation and our amended and restated bylaws include a number of provisions that could deter hostile takeovers or delay or prevent changes in
control of our board of directors or management team, including the following:
•
•
•
•
•
•
•
Dual
class
stock. We have a dual class common stock structure, which provides our stockholders prior to our IPO, co-founders, executives,
employees, directors and their affiliates with significant influence over all matters requiring stockholder approval, including the election of
directors and significant corporate transactions, such as a merger or other sale of our company or our assets.
Board
of
directors
vacancies.
Only our board of directors is authorized to fill vacant directorships, including newly created seats. In addition,
the number of directors constituting our board of directors is permitted to be set only by a resolution adopted by a majority vote of our entire
board of directors.
Classified
board
of
directors. Our board of directors is classified into three classes of directors with staggered three-year terms.
Stockholder
action;
special
meeting
of
stockholders. Our stockholders are not able to take action by written consent for any matter and may
only take action at annual or special meetings. In addition, special meetings of our stockholders may be called only by the chairman of our
board of directors, our chief executive officer, our president or another officer selected by a majority of our board of directors, thus limiting
the ability of a stockholder to call a special meeting.
Advance
notice
requirements
for
stockholder
proposals
and
director
nominations. We have advance notice procedures and content
requirements for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election
as directors at our annual meeting of stockholders.
No cumulative voting. We do not permit stockholders to cumulate votes in the election of directors.
Directors removed only for cause. Our stockholders may remove directors only for cause.
•
•
Amendment of charter and bylaws provisions. Certain amendments to our amended and restated certificate of incorporation require the
approval of 662⁄3% of the then-outstanding voting power of our capital stock. In addition, approval of stockholders holding 662⁄3% of the
then-outstanding voting power of our capital stock is required for stockholders to amend or adopt any provision of our bylaws.
Issuance of undesignated preferred stock. Our board of directors has the authority, without further action by our stockholders, to issue up to
666,666,667 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our
board of directors.
Delaware
Law: We are subject to Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, this law
prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for three years after the
person became an interested stockholder unless, subject to specified exceptions, the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset sale, stock
sale or other transaction that results in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who,
together with affiliates and associates, owns, or within three years prior, did own 15% or more of the corporation’s voting stock. These provisions
may have the effect of delaying, deferring or preventing a change in control of Pinterest without further action by the stockholders.
Exclusive Forum
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole
and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty
owed by any of our current or former directors, officers or other employees to us or our stockholders, (iii) any action arising pursuant to any provision
of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any other action asserting a
claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not
have jurisdiction, any state or federal district court in the State of Delaware), in all cases subject to the court having jurisdiction over indispensable
parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of
and consented to this provision. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware
law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and
officers.
Exhibit 10.14
PINTEREST, INC.
2019 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK GRANT NOTICE
Pinterest, Inc., a Delaware corporation (the “Company”), pursuant to the Pinterest, Inc. 2019 Omnibus Incentive Plan and any applicable sub-
plan for a particular country, as applicable (together, the “Plan”), has granted to the participant set forth below (the “Participant”), as of the date set
forth below (the “Date of Grant”), a restricted stock award consisting of the number of shares of Common Stock set forth below (the “Shares”). The
Shares are subject to all of the terms and conditions set forth in this Restricted Stock Grant Notice (the “Grant Notice”) and the Restricted Stock
Agreement (the “Restricted Stock Agreement”) and the Plan, both of which are attached hereto and incorporated herein in their entirety. Capitalized
terms not explicitly defined in this Grant Notice but defined in the Plan or the Restricted Stock Agreement will have the same definitions as in the
Plan or the Restricted Stock Agreement. In the event of any conflict between the terms of the Grant Notice and the Plan, the terms of the Plan will
control.
Participant:
Date of Grant:
Total Number of Shares:
Vesting Commencement Date:
Award ID:
Vesting Schedule:
Mandatory Sale to Cover Tax
Withholding Obligations /
Company Repurchase:
So long as Participant’s Continuous Service Status does not terminate (and provided that no vesting
shall occur following the date of such termination), the Shares shall vest in accordance with the vesting
schedule attached to the end of this Grant Notice. Prior to vesting, Participant shall not assign,
encumber or dispose of any interest in such Unvested Shares.
As a condition to acceptance of this award of Shares, to the greatest extent permitted under the Plan
and Applicable Laws, any Tax Withholding Obligations will be satisfied through the sale of a number of
the Shares upon vesting determined in accordance with Section 5 of the Restricted Stock Agreement
and the remittance of the cash proceeds of such sale to the Company. Under the Restricted Stock
Agreement, the Company is authorized and directed by Participant to make payment from the cash
proceeds of the sale directly to the appropriate taxing authorities in an amount equal to the Tax
Withholding Obligations. Notwithstanding the foregoing, in its sole discretion, pursuant to the Restricted
Stock Agreement, the Company may instead require Participant to deliver a number of the Shares upon
vesting to the Company determined in accordance with Section 5 of the Restricted Stock Agreement
and make payments from its own funds to the appropriate taxing authorities in an amount equal to the
Tax Withholding Obligations, or may enter into any other arrangement with the Participant to satisfy
Participant’s Tax Withholding Obligations in accordance with Section 5 of the Restricted Stock
Agreement. It is the Company’s intent that the mandatory sale of Shares on the market or to the
Company to cover Tax Withholding Obligations imposed by the Company on Participant in connection
with the receipt of this Award comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the
Exchange Act and be interpreted to comply with the requirements of Rule 10b5-1(c).
1
By clicking “Accept” or otherwise accepting this grant, Participant hereby agrees to all of the following:
•
•
•
This award of Shares is granted under and governed by the terms and conditions of this Grant Notice, the Plan, the Restricted Stock
Agreement (which includes the Country-Specific Addendum, if any), and any ancillary documents, all of which are attached to and made a
part of this Grant Notice.
Participant acknowledges and agrees that Participant has reviewed the Plan and the Restricted Stock Agreement in their entirety, has had
an opportunity to obtain the advice of counsel prior to accepting the Shares, and fully understands all provisions of the Plan, this Grant
Notice and the Restricted Stock Agreement.
Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating
to the Plan and Restricted Stock Agreement.
By clicking “Disagree”, you decline to accept this grant and your Shares grant will be immediately cancelled in its entirety.
2
PINTEREST, INC.
2019 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK AGREEMENT
Pursuant to your Restricted Stock Grant Notice (the “Grant Notice”) and this Restricted Stock Agreement (the “Agreement”), Pinterest, Inc.,
a Delaware corporation (the “Company”), has granted you (“Participant”), as of the Date of Grant set forth in the Grant Notice, a restricted stock
award consisting of the number of Shares set forth in the Grant Notice pursuant to the Company’s 2019 Omnibus Incentive Plan and any applicable
sub-plan for a particular country (together, the “Plan”). Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but defined in
the Plan or in the Grant Notice shall have the meaning ascribed to them in the Plan or in the Grant Notice. In the event of any conflict between the
terms of this Agreement and the Plan, the terms of the Plan will control.
1.
Grant of Restricted Stock. Subject to the terms and conditions of this Agreement and the Grant Notice, the Company hereby grants to
Participant the number of shares of the Company’s Common Stock (the “Shares”) set forth in the Grant Notice as consideration of services rendered
by Participant to the Company and/or Participant’s Employer (the “Employer”). As used elsewhere herein, the term “Shares” refers to all of the
Shares granted hereunder and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in
replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or
other property to which Participant is entitled by reason of Participant’s ownership of the Shares. Shares that have not yet vested as of a given time
pursuant to the Vesting Schedule described in the Grant Notice are referred to herein as “Unvested Shares.” By Participant’s acceptance of this
grant and the Company’s making of this grant, Participant and the Company agree that this grant of Shares is governed by the terms and conditions
of this Agreement, as well as the Grant Notice and the Plan, which are attached to and made a part of this Agreement.
2.
Continuous Service Status through such vesting date. Fractional shares shall be rounded down to the nearest whole share.
Vesting Schedule. Except as otherwise provided in the Plan, the Shares shall vest as described in the Grant Notice, subject to Participant’s
3.
the Plan, Participant shall not assign, encumber or dispose of any interest in the Unvested Shares.
Limitations on Transfer. In addition to any other limitation on transfer created by Applicable Laws, this Agreement, the Grant Notice and
(a) Compliance with Insider Trading Policy. Without limitation of any other restriction on transfer set forth in this Agreement, the Grant
Notice or the Plan, Participant shall comply with the Company’s Insider Trading Policy as may be adopted or amended from time to
time by the Board (the “Insider Trading Policy”). To the extent Participant is not an employee of the Company, Participant shall
comply with the Company’s Insider Trading Policy in the same manner as if Participant were deemed an employee of the Company
as defined in the Insider Trading Policy. Participant shall not sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of (“Transfer” or “Transferred”) any Common Stock at any time other than during trading windows as
proscribed by the Company from time to time in accordance with the Insider Trading Policy, except as otherwise permitted by the
Insider Trading Policy (e.g., in connection with certain bona fide gifts).
(b) Forfeiture Upon Termination of Participant’s Continuous Service Status. Notwithstanding any contrary provision of this Agreement,
the Grant Notice or the Plan, in the event of any voluntary or involuntary termination of Participant’s Continuous Service Status prior
to vesting pursuant to the Vesting Schedule set forth in Section 2 above for any reason (including death or Disability), with or
without Cause, the then Unvested Shares will thereupon be forfeited and automatically transferred to and reacquired by the
Company at no cost to the Company upon the date of such termination, and Participant will have no further rights or interests with
respect to such Unvested Shares. Further, unless otherwise approved by the Company, Participant’s right to vest in the Shares will
terminate as of the date of the termination of Participant’s Continuous Service Status and will not be extended by any contractual
notice period or any period of “garden leave” or similar notice period mandated under employment laws in the jurisdiction where
Participant is employed or the terms of Participant’s employment agreement, if any.
3
4.
Escrow of Unvested Shares. Participant hereby acknowledges that any Unvested Shares will be held in escrow and shall bear restrictive
legends. Participant further acknowledges that the Company will appoint an escrow holder, which may be any stock administrator or other service
provider of the Company designated by the Company for this purpose, and which designation may be changed from time to time, and that said
appointment is coupled with an interest and is accordingly irrevocable. Participant agrees that said escrow holder shall have the power to take all
such actions and to effectuate all such transfers and/or releases as are required in accordance with the terms of this Agreement or the Plan.
Participant agrees that said escrow holder shall not be liable to any party hereof (or to any other party). The escrow holder may rely upon any letter,
notice or other document purported to be validly executed and genuine and may resign at any time. Participant agrees that, following the vesting of
any Unvested Shares, the Company shall cause any restrictive legends to be removed, shall cause such Shares to be released from escrow, may
cause such Shares to be transferred to being held by the Company’s stock administrator, equity plan administrator or other service provider, and
may permit Participant to cause such Shares to be transferred to a stock broker.
Responsibility for Taxes. As a condition to the grant and vesting of the Shares, Participant acknowledges that, regardless of any action
5.
taken by the Company or, if different, the Employer, the ultimate liability for all income tax, social security contributions (including employer’s social
security contributions to the extent such amounts may be lawfully recovered from the Participant), social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items (or any equivalent or similar taxes, contributions or other relevant tax-related items in any relevant
jurisdiction) or required deductions, withholdings or payments legally applicable to him or her and related to the receipt or vesting of the Shares, the
subsequent sale of the Shares or the participation in the Plan (“Tax-Related Items”) is and remains Participant’s responsibility and may exceed the
amount actually withheld by the Company or the Employer. Participant further acknowledges and agrees that Participant is solely responsible for
filing all relevant documentation that may be required in relation to the Shares or any Tax-Related Items (other than filings or documentation that is
the specific obligation of the Company, its Parent, Subsidiaries or Affiliates (the “Company Group”) pursuant to Applicable Laws), such as, but not
limited to, personal income tax returns or reporting statements in relation to the receipt or vesting of the Shares, the holding of Shares or any bank
or brokerage account, the subsequent sale of Shares, and the receipt of any dividends.
Participant further acknowledges that the Company and/or the Employer: (i) make no representations or undertakings regarding the
treatment of any Tax-Related Items in connection with any aspect of the Shares, including, but not limited to, the receipt or vesting of the Shares,
the subsequent sale of the Shares and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of
the grant or any aspect of the Shares to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result.
Participant also understands that Applicable Laws may require varying Share valuation methods for purposes of calculating Tax-Related Items, and
the Company assumes no responsibility or liability in relation to any such valuation or for any calculation or reporting of income or Tax-Related Items
that may be required of Participant under Applicable Laws.
By entering into this Agreement, Participant agrees to indemnify the Company, and any relevant Parent, Subsidiary or Affiliate, against all
and any liability for any taxes or Tax-Related Items which may arise in respect of or in connection with the Shares (or, for the avoidance of doubt,
any shares granted or provided to Participant by way of rollover, assumption or replacement of the Shares).
Further, if Participant is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant
taxable or tax withholding event, as applicable, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable)
may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Pursuant to this Agreement and subject to Applicable Laws, Participant authorizes the Company and/or the Employer, or their respective
agents, at their discretion, to satisfy Participant’s Tax Withholding Obligations by (i) withholding from Participant’s wages or other compensation paid
to Participant by the Company or the Employer, (ii) withholding from proceeds of the sale of the Shares either through a voluntary sale or through a
mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization) without further consent, (iii) requiring the delivery of
a number of the Shares to the Company upon vesting or (iv) such other method as determined by the Company.
Depending on the method of satisfying the Tax Withholding Obligations, the Company may pay, withhold or account for such Tax
Withholding Obligations by considering applicable minimum statutory withholding amounts or
4
other applicable tax or withholding rates, including maximum applicable rates, in which case Participant will (depending on the laws of the relevant
jurisdiction) receive a refund of any over-withheld or over-paid amount in cash or otherwise be able to claim relief in respect of any such over-
withheld or over-paid amount, and will in any event have no entitlement to the Share equivalent.
Participant agrees to pay to the Company or the Employer any amount of Tax Withholding Obligations that the Company or the Employer
may be required to pay, withhold or account for as a result of Participant’s receipt or vesting of the Shares or the participation in the Plan that cannot
be satisfied by the means previously described. The Company may refuse to release the Shares from escrow if Participant fails to comply with his or
her obligations in connection with the Tax Withholding Obligations.
Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s receipt, the vesting of the Shares
and/or the disposition of such Shares. Participant represents that Participant has consulted any tax consultants Participant deems advisable in
connection with the receipt of the Shares, the vesting of the Shares and/or the disposition of such Shares and that Participant is not relying on the
Company (or the Employer) for any tax advice.
6.
Section 83(b) Election. Participant understands that Section 83(a) of the Code, taxes as ordinary income the difference between the
amount paid, if any, for the Shares and the Fair Market Value of the Shares as of each vesting date. Participant understands that Participant may
elect to be taxed at the time the Shares are granted, rather than when such Shares vest, by filing an election under Section 83(b) (an “83(b)
Election”) of the Code with the Internal Revenue Service within thirty (30) days from the date of grant of the restricted stock award. Participant
understands that failure to file such an election in a timely manner may result in adverse tax consequences for Participant. Participant acknowledges
that the foregoing is only a summary of the effect of United States federal income taxation with respect to grant of the Shares hereunder, does not
purport to be complete, and is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Participant
further acknowledges that the Company has directed Participant to seek independent advice regarding the applicable provisions of the Code, the
income tax laws of any municipality, state or foreign country in which Participant may reside, and the tax consequences of Participant’s death, and
Participant has consulted, and has been fully advised by, Participant’s own tax advisor regarding such tax laws and tax consequences or has
knowingly chosen not to consult such a tax advisor. Participant further acknowledges that neither the Company nor any subsidiary or representative
of the Company has made any warranty or representation to Participant with respect to the tax consequences of Participant’s receipt of the Shares
or of the making or failure to make an 83(b) Election. PARTICIPANT (AND NOT THE COMPANY, ITS AGENTS OR ANY OTHER PERSON) SHALL
BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING SUCH FORM WITH THE IRS, EVEN IF PARTICIPANT REQUESTS THE
COMPANY, ITS AGENTS OR ANY OTHER PERSON MAKE THIS FILING ON PARTICIPANT’S BEHALF. Participant agrees that, if Participant
decides to make an 83(b) Election, Participant will complete, execute and promptly deliver to the Company a copy of Participant’s completed and
executed 83(b) Election, in the form attached hereto as Exhibit A.
7.
Nature of Grant. In accepting the Shares, Participant acknowledges, understands and agrees that:
(a)
(b)
(c)
(d)
(e)
(f)
the Plan is established voluntarily by the Company, is discretionary in nature, and may be amended, suspended or terminated by
the Company at any time, to the extent permitted by the Plan;
the grant of the Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of
restricted stock, or benefits in lieu of restricted stock, even if shares of restricted stock have been granted in the past;
all decisions with respect to future restricted stock or other grants, if any, will be at the sole discretion of the Company;
Participant is voluntarily participating in the Plan;
the Shares are not intended to replace any pension rights or compensation and are outside the scope of Participant’s employment
contract, if any;
the Shares, and the income and value of same, are not part of normal or expected compensation for any purpose, including, without
limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of- service payments, bonuses, long-
service awards, pension or retirement or welfare benefits or similar payments;
5
(g)
(h)
unless otherwise provided in the Plan or by the Company in its discretion, the Shares and the benefits evidenced by this Agreement
do not create any entitlement to have the Shares or any such benefits transferred to, or assumed by, another company nor to be
exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
no entity in the Company Group shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and
the United States Dollar or the selection by the Company or any member of the Company Group in its sole discretion of an
applicable foreign exchange rate that may affect the value of the Shares (or the calculation of income or Tax-Related Items
thereunder) or of any amounts due to Participant pursuant to the subsequent sale of the Shares.
8.
Stockholder Rights. Subject to the terms of this Agreement, prior to the date on which a Share vests, the Participant shall have, with
respect to such Share, all rights of a stockholder of the Company, including the right to vote such Share and the right to receive all dividends paid
with respect to such Share at the same time as stockholders generally; provided, that (i) the right to vote and receive dividends shall terminate
immediately with respect to any Shares upon forfeiture pursuant to this Agreement, the Grant Notice or the Plan and (ii) stock dividends shall be
subject to the provisions of this Agreement, the Grant Notice and the Plan in the same manner as the corresponding Share to which such dividends
or distributions relate.
No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any
9.
recommendations regarding Participant’s participation in the Plan, or Participant’s receipt, vesting or sale of the Shares. Participant is hereby
advised to consult with Participant’s own personal tax, legal and financial advisors regarding Participant’s participation in the Plan and the receipt of
Shares before accepting this Agreement or otherwise taking any action related to the Shares or the Plan.
Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other
10.
form, of Participant’s personal data as described in this Agreement and any other Award materials by and among the entities in the
Company Group for the purpose of implementing, administering and managing Participant’s participation in the Plan. Participant
understands that the Company Group may hold certain personal information about Participant, including, but not limited to, Participant’s
name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job
title, any Shares or directorships held in the Company, details of all Awards, or any other entitlement to Shares awarded, canceled,
exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the purpose of implementing, administering and managing
the Plan. Participant understands that Data will be transferred to such stock plan service provider as may be selected by the Company,
presently or in the future, which may be assisting the Company with the implementation, administration and management of the Plan.
Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country
(e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant authorizes the
Company, the stock plan service provider as may be selected by the Company, and any other possible recipients which may assist the
Company, presently or in the future, with implementing, administering and managing the Plan to receive, possess, use, retain and
transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Participant’s participation in
the Plan. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does
not consent, or if Participant later seeks to revoke Participant’s consent, or instructs the Company to cease processing of the Data,
Participant’s Continuous Service Status will not be adversely affected; the only adverse consequence of refusing or withdrawing
Participant’s consent, or instructing the Company to cease processing, is that the Company would not be able to grant Participant the
Shares, Awards or any other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or
withdrawing Participant’s consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of
Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact Participant’s local human
resources representative.
11.
Miscellaneous.
(a)
Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement,
6
(b)
(c)
(d)
(e)
(f)
(g)
relating to it, or arising from it, the parties hereby submit and consent to the sole and exclusive jurisdiction of the courts of the city
and county of San Francisco, California, or the federal courts for the United States for the Northern District of California, and no
other courts, where this grant is made and/or to be performed.
Addendum and Sub-Plans. Notwithstanding any provisions in this Agreement, the Shares shall be subject to any special terms
and conditions set forth in any Addendum to this Agreement for Participant’s country. Moreover, if Participant relocates to one of
the countries included in any such Addendum, the special terms and conditions for such country will apply to Participant, to the
extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or
administrative reasons. Any such Addendum constitutes part of this Agreement. Further, the Plan shall be deemed to include any
special terms and conditions set forth in any applicable sub-plan for Participant’s country, and, if Participant relocates to a country
for which the Company has established a sub-plan, the special terms and conditions for such country will apply to Participant, to the
extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or
administrative reasons; provided, however, that the French Sub-Plan shall not apply with respect to the grant of Shares hereunder.
Entire Agreement; Enforcement of Rights; Amendment. This Agreement, together with the Plan and the Grant Notice, sets forth
the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior or
contemporaneous discussions between them. Except as contemplated by the Plan, no modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this
Agreement to the extent it would materially and adversely affect the rights of Participant. The failure by either party to enforce any
rights under this Agreement shall not be construed as a waiver of any rights of such party.
Severability. If one or more provisions of this Agreement, the Grant Notice or the Plan are held to be unenforceable under
Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties do not reach a mutually
agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, the Grant
Notice and the Plan, (ii) the balance of the Agreement, the Grant Notice and the Plan shall be interpreted as if such provision were
so excluded and (iii) the balance of the Agreement, the Grant Notice and the Plan shall be enforceable in accordance with its terms.
Language. If Participant has received this Agreement, the Grant Notice, the Plan or any other document related to the Shares
and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the
English version, the English version will control.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in
the Plan and on the Shares to the extent the Company determines it is necessary or advisable for legal or administrative reasons,
and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
Participant also acknowledges that the Applicable Laws of the country in which Participant is residing or working at the time of
receipt, vesting and/or sale of Shares (including any rules or regulations governing securities, foreign exchange, tax, labor, or other
matters) may subject Participant to additional procedural or regulatory requirements that Participant is and will be solely responsible
for and must fulfill. Such requirements may be outlined in but are not limited to an Addendum. Notwithstanding any provision herein,
the Shares and Participant’s participation in the Plan shall be subject to any applicable special terms and conditions or disclosures
as set forth in any Addendum.
Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be
deemed sufficient when delivered personally or by overnight courier or sent by email or fax, or forty-eight (48) hours after being
deposited in the U.S. mail or a comparable foreign mail service, as certified or registered mail with postage or shipping charges
prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified
by written notice, or if no address is specified on the signature page, at the most recent address, email or fax number set forth in
the Company’s books and records.
7
(h)
(i)
(j)
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument. Facsimile, email or other electronic execution and delivery of this Agreement
(including but not limited to execution by electronic signature or click-through electronic acceptance) shall constitute valid and
binding execution and delivery for all purposes and shall be deemed to be, and have the effect of, an original signature.
Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the
Company’s successors and assigns. The rights and obligations of Participant under this Agreement may only be assigned with the
prior written consent of the Company.
Electronic Delivery. The Company may, in its sole discretion, decide to deliver to Participant by email or any other electronic
means any documents, elections or notices related to this Agreement, the Shares, Participant’s current or future participation in the
Plan, securities of the Company or any member of the Company Group or any other matter, including documents, elections and/or
notices required to be delivered to Participant by applicable securities law or any other Applicable Laws or the Company’s Amended
Certificate of Incorporation or Bylaws. By accepting this Agreement, whether electronically or otherwise, Participant hereby
consents to receive such documents and notices by such electronic delivery and agrees to participate in the Plan through an on-line
or electronic system established and maintained by the Company or a third party designated by the Company, including but not
limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions.
8
IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, THE FILING OF SUCH ELECTION IS YOUR
RESPONSIBILITY.
THE FORM FOR MAKING THIS SECTION 83(B) ELECTION IS ATTACHED TO THIS AGREEMENT.
YOU MUST FILE THIS FORM WITHIN 30 DAYS OF PURCHASING THE SHARES.
YOU (AND NOT THE COMPANY, ANY OF ITS AGENTS OR ANY OTHER PERSON) SHALL BE SOLELY
RESPONSIBLE FOR FILING SUCH FORM WITH THE IRS, EVEN IF YOU REQUEST THE COMPANY, ITS AGENTS
OR ANY OTHER PERSON TO MAKE THIS FILING ON YOUR BEHALF AND EVEN IF THE COMPANY, ANY OF ITS
AGENTS OR ANY OTHER PERSON HAS PREVIOUSLY MADE THIS FILING ON YOUR BEHALF.
The election should be filed by mailing a signed election form by certified mail, return receipt requested to the IRS Service Center where you file
your tax returns. See www.irs.gov.
9
EXHIBIT A
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in taxpayer’s gross income for the
current taxable year, the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:
NAME OF TAXPAYER: _________________________________________
NAME OF SPOUSE: __________________________________________
ADDRESS: ___________________________________
___________________________________
IDENTIFICATION NO. OF TAXPAYER: ____________________
IDENTIFICATION NO. OF SPOUSE: _____________________
TAXABLE YEAR: _______________________
2. The property with respect to which the election is made is described as follows: ______________________ shares of Class A common stock of
Pinterest, Inc., a Delaware corporation (the “Company”), par value $0.00001 per share (the “Shares”).
3. The date on which the property was transferred is: __________________
4. The property is subject to the following restrictions:
The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company.
These restrictions lapse upon the satisfaction of certain conditions contained in such agreement, including continued service.
5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never
lapse, of such property is: USD $______________________.
6. The amount (if any) paid for such property: USD $______________________.
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s
receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said
property.
The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.
Dated:
PARTICIPANT:
(Signature)
Spouse of Holder (if applicable)
10
Exhibit 10.15
PINTEREST, INC.
2019 OMNIBUS INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Pinterest, Inc., a Delaware corporation (the “Company”), pursuant to the Pinterest, Inc. 2019 Omnibus Incentive Plan and any applicable sub-
plan for a particular country, as applicable (together, the “Plan”), has granted to the participant set forth below (the “Participant”), as of the date set
forth below (the “Date of Grant”), a stock option to purchase the number of shares of the Company’s Common Stock set forth below (the “Option”).
The Option is subject to all of the terms and conditions set forth in this Stock Option Grant Notice (the “Grant Notice”) and the Stock Option
Agreement (the “Option Agreement”) and the Plan, both of which are attached hereto and incorporated herein in their entirety. Capitalized terms not
explicitly defined in this Grant Notice but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option
Agreement. In the event of any conflict between the terms of the Grant Notice and the Plan, the terms of the Plan will control.
Participant:
Date of Grant:
Total Number of Shares:
Exercise Price per Share:
Total Number of Shares:
Type of Option:
Exercise Price per Share:
Expiration Date:
Vesting Commencement Date:
Award ID:
French Sub-Plan Applicable:
[Incentive Stock Option]/[Nonstatutory Stock Option]
[YES]/[NO]
Vesting Schedule:
Termination Period:
So long as Participant’s Continuous Service Status does not terminate (and provided that no vesting shall
occur following the date of such termination), the Option shall vest and become exercisable in accordance with
the vesting schedule attached to the end of this Grant Notice.
The unvested portion of the Option held by Participant shall immediately terminate upon the termination of
Participant’s Continuous Service Status. Subject to the terms of the Plan and the Option Agreement,
Participant may exercise the vested portion of this Option for ninety (90) days after termination of Participant’s
Continuous Service Status other than upon Disability, Death or for Cause (but in no event later than the
Expiration Date set forth above). In the event of a termination of Participant’s Continuous Service Status upon
Disability, Death or for Cause, Section 9(d)(iii), (iv) or (v) of the Plan, as applicable, shall govern. Participant is
responsible for keeping track of these exercise periods following the termination of Participant’s Continuous
Service Status for any reason. The Company will not provide further notice of such periods.
By clicking “Accept” or otherwise accepting this grant, Participant hereby agrees to all of the following:
•
•
This Option is granted under and governed by the terms and conditions of this Grant Notice, the Plan, the Option Agreement (which
includes the Country-Specific Addendum), and any ancillary documents, all of which are attached to and made a part of this Grant Notice.
Participant acknowledges and agrees that Participant has reviewed the Plan and the Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to accepting the Option, and fully understands all provisions of the Plan, this Grant Notice
and the Option Agreement.
1
•
Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating
to the Plan and Option Agreement.
By clicking “Disagree”, you decline to accept this Option grant and your Option grant will be immediately cancelled in its entirety.
[Subject to Participant accepting this grant, the Company hereby agrees that this award of Options is granted to Participant under and
governed by the terms and conditions of this Grant Notice, the Plan, the Option Agreement (which includes the Country-Specific Addendum), and
any ancillary documents referred to above.
Pinterest, Inc.
By: ____________________________________________________
Name: _________________________________________________
Title: __________________________________________________]1
1 This signature block should only be used for awards to Participants located in the UK or who are anticipated to move to the UK
2
PINTEREST, INC.
2019 OMNIBUS INCENTIVE PLAN
STOCK OPTION AGREEMENT
1.
Grant of Option. Pursuant to your Stock Option Grant Notice (the “Grant Notice”) and this Stock Option Agreement (the
“Agreement”), Pinterest, Inc., a Delaware corporation (the “Company”), has granted you (the “Optionee”), as of the Date of Grant set forth in the
Grant Notice, an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Grant Notice, at the
exercise price per Share set forth in the Grant Notice (the “Exercise Price”) pursuant to the Pinterest, Inc. 2019 Omnibus Incentive Plan and any
applicable sub-plan for a particular country (together, the “Plan”). Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but
defined in the Plan or in the Grant Notice shall have the meaning ascribed to them in the Plan or in the Grant Notice. In the event of any conflict
between the terms of this Agreement and the Plan, the terms of the Plan will control.
2.
Designation of Option. This Option is intended to be an Incentive Stock Option only to the extent so designated in the Grant
Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a
Nonstatutory Stock Option.
Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other
incentive stock options within the meaning of Section 422 of the Code granted to Optionee by the Company or any Parent or Subsidiary, including
under other plans) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date
of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory
Stock Option, in accordance with Section 5(c) of the Plan.
3.
Exercise of Option. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Grant
Notice and with the provisions of Section 9(c) of the Plan or otherwise as set forth below:
a. Right to Exercise.
i.
ii.
This Option may not be exercised for a fraction of a share.
In the event of Optionee’s death, Disability or other termination of Continuous Service Status, the exercisability of
this Option is governed by Section 7 below, subject to the limitations contained in this Section 3.
iii.
In no event may this Option be exercised after the Expiration Date set forth in the Grant Notice.
b. Method of Exercise.
i.
This Option shall be exercisable by click-through exercise via the web portal made available by the Company’s
equity plan administrator and approved by the Company for such purpose, or by any other form of notice approved
for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of
Shares in respect of which this Option is being exercised, and such other representations and agreements as to
the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the
provisions of the Plan. Such notice shall be signed by Optionee (including electronically or by click-through
acceptance, if permitted by the Company) and shall be delivered to the Company by such means as are
determined by the Company in its discretion to constitute adequate delivery. The giving of such notice shall be
deemed to be an undertaking to make payment of the aggregate Exercise Price for the purchased Shares (as
described in Section 4 hereof) and to satisfy any applicable Tax-Related Items (as defined below).
1
ii.
Subject to compliance with Applicable Laws, this Option shall be deemed to be exercised upon receipt by the
Company of the appropriate notice of exercise (as described in Section 3(b)(i) hereof).
4.
Method of Payment. Payment of the Exercise Price shall be made by a method described in Section 9(b) of the Plan, as
determined by the Administrator. Optionee understands and agrees that any cross-border cash remittance made to exercise this Option (or transfer
proceeds received upon the sale of Shares) may need to be made through a locally authorized financial institution or registered foreign exchange
agency and may require Optionee to provide to such entity certain information regarding the transaction.
5.
Responsibility for Taxes. As a condition of the grant, vesting and exercise of the Option, Optionee acknowledges that, regardless
of any action taken by the Company or, if different, Optionee’s employer (the “Employer”), the ultimate liability for all income tax, social security
contributions (including employer’s social security contributions to the extent such amounts may be lawfully recovered from the Optionee), social
insurance, payroll tax, fringe benefits tax, payment on account or other tax related items (or any equivalent or similar taxes, contributions or other
relevant tax-related items in any relevant jurisdiction) or required deductions, withholdings or payments legally applicable to him or her and related to
the grant, vesting or exercise of the Option, the issuance or subsequent sale of the Shares subject to the Option, or the participation in the Plan
(“Tax-Related Items”) is and remains Optionee’s responsibility and may exceed the amount actually withheld by the Company or the Employer.
Optionee further acknowledges and agrees that Optionee is solely responsible for filing all relevant documentation that may be required in relation to
this Option or any Tax-Related Items (other than filings or documentation that is the specific obligation of the Company, its Parent, Subsidiaries or
Affiliates (the “Company Group”) pursuant to Applicable Laws), such as, but not limited to, personal income tax returns or reporting statements in
relation to the grant, vesting or exercise of this Option, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and
the receipt of any dividends.
Optionee further acknowledges that the Company and/or the Employer: (i) make no representations or undertakings regarding the treatment
of any Tax-Related Items in connection with any aspect of this Option, including, but not limited to, the grant, vesting or exercise of this Option, the
subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no
obligation to structure the terms of the grant or any aspect of this Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve
any particular tax result. Optionee also understands that Applicable Laws may require varying Option or Share valuation methods for purposes of
calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation or for any calculation or
reporting of income or Tax-Related Items that may be required of Optionee under Applicable Laws.
By entering into this Agreement, Optionee agrees to indemnify the Company, and any relevant Parent, Subsidiary or Affiliate, against all and
any liability for any taxes or Tax-Related Items which may arise in respect of or in connection with this Option (or, for the avoidance of doubt, any
option granted or provided to Optionee by way of rollover, assumption or replacement of this Option) or the Shares (or, for the avoidance of doubt,
other shares or securities) issued or transferred pursuant to the exercise of this Option (or, for the avoidance of doubt, any option granted or
provided to Optionee by way of rollover, assumption or replacement of this Option).
Further, if Optionee is subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant
taxable or tax withholding event, as applicable, Optionee acknowledges that the Company and/or the Employer (or former employer, as applicable)
may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, Optionee agrees to make adequate arrangements satisfactory to the
Company and/or the Employer to satisfy all Tax-Related Items. In this regard, pursuant to this Agreement and subject to Applicable Laws, Optionee
authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy Optionee’s Tax Withholding Obligations by
(i) withholding from Optionee's wages or other compensation paid to Optionee by the Company or the Employer, (ii) withholding from proceeds of
the sale of Shares acquired at exercise of this Option either through a voluntary sale or through a mandatory sale arranged by the Company (on
Optionee’s behalf pursuant to this authorization) without further consent, (iii) withholding Shares that would otherwise be issued upon exercise of the
Option or (iv) such other method as determined by the Company.
2
Depending on the method of satisfying the Tax Withholding Obligations, the Company may pay, withhold or account for such Tax
Withholding Obligations by considering applicable minimum statutory withholding amounts or other applicable tax or withholding rates, including
maximum applicable rates, in which case Optionee will (depending on the laws of the relevant jurisdiction) receive a refund of any over-withheld or
over-paid amount in cash or otherwise be able to claim relief in respect of any such over-withheld or over-paid amount, and will in any event have no
entitlement to the Share equivalent.
Optionee agrees to pay to the Company or the Employer any amount of Tax Withholding Obligations that the Company or the Employer
may be required to pay, withhold or account for as a result of Optionee’s receipt, vesting or exercise of this Option, the issuance of Shares subject to
the Option and/or the disposition of such Shares or Optionee’s participation in the Plan that cannot be satisfied by the means previously described.
The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Optionee fails to comply with his or her obligations
in connection with the Tax Withholding Obligations.
Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s receipt, the vesting and/or exercise of
the Option, the issuance of Shares subject to the Option and/or the disposition of such Shares. Optionee represents that Optionee has consulted
any tax consultants Optionee deems advisable in connection with the receipt of the Option, the vesting and/or exercise of the Option, the issuance
of Shares subject to the Option and/or the disposition of such Shares and that Optionee is not relying on the Company (or the Employer) for any tax
advice.
6.
Nature of Grant. In accepting this Option, Optionee acknowledges, understands and agrees that:
a.
b.
the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by
the Company at any time, to the extent permitted by the Plan;
the grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future grants of
options, or benefits in lieu of options, even if options have been granted in the past;
c. all decisions with respect to future options or other grants, if any, will be at the sole discretion of the Company;
d. Optionee is voluntarily participating in the Plan;
e.
f.
this Option and the Optioned Stock are not intended to replace any pension rights or compensation and are outside the scope of
Optionee’s employment contract, if any;
this Option and the Optioned Stock, and the income and value of same, are not part of normal or expected compensation for any
purpose, including, without limitation, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service
payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
g. unless otherwise provided in the Plan or by the Company in its discretion, this Option and the benefits evidenced by this Agreement
do not create any entitlement to have this Option or any such benefits transferred to, or assumed by, another company nor to be
exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
h. no entity in the Company Group shall be liable for any foreign exchange rate fluctuation between Optionee’s local currency and the
United States Dollar or the selection by the Company or any member of the Company Group in its sole discretion of an applicable
foreign exchange rate that may affect the value of this Option (or the calculation of income or Tax-Related Items thereunder) or of
any amounts due to Optionee pursuant to the exercise of this Option or the subsequent sale of the Shares.
7.
Termination of Relationship. Following the termination of Optionee’s Continuous Service Status, Optionee may exercise this
Option only as set forth in the Plan (as modified by the Grant Notice). Unless otherwise approved by the Company, (i) Optionee’s right to vest in this
Option will terminate as of such date and will not be
3
extended by any contractual notice period or any period of “garden leave” or any similar notice period mandated under employment laws in the
jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any; and (ii) the period (if any) during which Optionee
may exercise the vested portion of the Option (if any) after such termination of Optionee’s Continuous Service Status will commence as of such date
and will not be extended by any contractual notice period or any period of “garden leave” or any similar notice period mandated under employment
laws in the jurisdiction where Optionee is employed or the terms of Optionee’s employment agreement, if any. If Optionee does not exercise this
Option within the applicable post-termination exercise period set forth in the Plan (as modified by the Grant Notice), this Option shall terminate in its
entirety. In no event may any Option be exercised after the Expiration Date of this Option as set forth in the Grant Notice.
8.
Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms
and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be
bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions
and interpretations of the Administrator regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of
the Plan and the terms and provisions of the Grant Notice and this Agreement, the Plan terms and provisions shall prevail.
9.
Data Privacy. Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or
other form, of Optionee’s personal data as described in this Agreement and any other Option grant materials by and among the entities in
the Company Group for the purpose of implementing, administering and managing Optionee’s participation in the Plan.
Optionee understands that the Company Group may hold certain personal information about Optionee, including, but not limited
to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary,
nationality, job title, any Shares or directorships held in the Company, details of all options or any other entitlement to Shares awarded,
canceled, exercised, vested, unvested or outstanding in Optionee’s favor (“Data”), for the purpose of implementing, administering and
managing the Plan.
Optionee understands that Data will be transferred to such stock plan service provider as may be selected by the Company,
presently or in the future, which may be assisting the Company with the implementation, administration and management of the Plan.
Optionee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country
(e.g., the United States) may have different data privacy laws and protections than Optionee’s country. Optionee authorizes the Company,
the stock plan service provider as may be selected by the Company, and any other possible recipients which may assist the Company,
presently or in the future, with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data,
in electronic or other form, for the purposes of implementing, administering and managing Optionee’s participation in the Plan. Further,
Optionee understands that he or she is providing the consents herein on a purely voluntary basis. If Optionee does not consent, or if
Optionee later seeks to revoke his or her consent, or instructs the Company to cease the processing of the Data, his or her Continuous
Service Status will not be adversely affected; the only adverse consequence of refusing or withdrawing Optionee’s consent or instructing
the Company to cease processing, is that the Company would not be able to grant Optionee Options or other equity awards or administer
or maintain such awards. Therefore, Optionee understands that refusing or withdrawing his or her consent may affect Optionee’s ability
to participate in the Plan. For more information on the consequences of Optionee’s refusal to consent or withdrawal of consent, Optionee
understands that he or she may contact his or her local human resources representative.
10.
No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any
recommendations regarding Optionee’s participation in the Plan, or Optionee’s acquisition or sale of the Optioned Stock. Optionee is hereby advised
to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before accepting the Option or
taking any action related to Option or the Plan.
4
11.
Miscellaneous.
a. Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the
parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of law. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement,
relating to it, or arising from it, the parties hereby submit and consent to the sole and exclusive jurisdiction of the courts of the city
and county of San Francisco, California, or the federal courts for the United States for the Northern District of California, and no
other courts, where this grant is made and/or to be performed.
b. Addendum and Sub-Plans. Notwithstanding any provisions in this Agreement, this Option grant shall be subject to any special
terms and conditions set forth in any Addendum to this Agreement for Optionee’s country. Moreover, if Optionee relocates to one of
the countries included in the Addendum, the special terms and conditions for such country will apply to Optionee, to the extent the
Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative
reasons. The Addendum constitutes part of this Agreement. Further, the Plan shall be deemed to include any special terms and
conditions set forth in any applicable sub-plan for Optionee’s country, and, if Optionee relocates to a country for which the
Company has established a sub-plan, the special terms and conditions for such country will apply to Optionee, to the extent the
Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative
reasons; provided, however, that the French Sub-Plan shall only apply if the Grant Notice explicitly provides for such application.
c. Entire Agreement; Enforcement of Rights; Amendment. This Agreement, together with the Plan and the Grant Notice, sets forth
the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior or
contemporaneous discussions between them. Except as contemplated by the Plan, no modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this
Agreement to the extent it would materially and adversely affect the rights of Optionee. The failure by either party to enforce any
rights under this Agreement shall not be construed as a waiver of any rights of such party. Notwithstanding anything to the contrary
in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its
sole discretion and without the consent of Optionee, to comply with Code Section 409A or to otherwise avoid imposition of any
additional tax or income recognition under Section 409A of the Code in connection with the Option.
d. Severability. If one or more provisions of this Agreement, the Grant Notice or the Plan are held to be unenforceable under
Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties do not reach a mutually
agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, the Grant
Notice and the Plan, (ii) the balance of this Agreement, the Grant Notice and the Plan shall be interpreted as if such provision were
so excluded and (iii) the balance of this Agreement, the Grant Notice and the Plan shall be enforceable in accordance with its
terms.
e. Language. If Optionee has received this Agreement, the Grant Notice, the Plan or any other document related to this Option and/or
the Plan translated into a language other than English and if the meaning of the translated version is different than the English
version, the English version will control.
f.
Imposition of Other Requirements. The Company reserves the right to impose other requirements on Optionee’s participation in
the Plan, on this Option and on any Optioned Stock, to the extent the Company determines it is necessary or advisable for legal or
administrative reasons, and to require Optionee to sign any additional agreements or undertakings that may be necessary to
accomplish the foregoing. Optionee also acknowledges that the Applicable Laws of the country in which Optionee is residing or
working at the time of grant, vesting and exercise of the Option or the sale of Shares received pursuant to the Option (including any
rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Optionee to additional
procedural or regulatory
5
requirements that Optionee is and will be solely responsible for and must fulfill. Such requirements may be outlined in but are not
limited to the Addendum. Notwithstanding any provision herein, the Option and Optionee’s participation in the Plan shall be subject
to any applicable special terms and conditions or disclosures as set forth in the Addendum.
g. Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be
deemed sufficient when delivered personally or by overnight courier or sent by email or fax, or forty-eight (48) hours after being
deposited in the U.S. mail or a comparable foreign mail service, as certified or registered mail, with postage or shipping charges
prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified
by written notice, or if no address is specified on the signature page, at the most recent address, email or fax number set forth in
the Company’s books and records.
h. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument. Facsimile, email or other electronic execution and delivery of this Agreement
(including but not limited to execution by electronic signature or click-through electronic acceptance) shall constitute valid and
binding execution and delivery for all purposes and shall be deemed to be, and have the effect of, an original signature.
i. Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the
Company’s successors and assigns. The rights and obligations of Optionee under this Agreement may only be assigned with the
prior written consent of the Company.
j. Electronic Delivery. The Company may, in its sole discretion, decide to deliver to Optionee by email or any other electronic means
any documents, elections or notices related to this Agreement, the Option, the Optioned Stock, Optionee’s current or future
participation in the Plan, securities of the Company or any member of the Company Group or any other matter, including
documents, elections and/or notices required to be delivered to Optionee by applicable securities law or any other Applicable Laws
or the Company’s Amended Certificate of Incorporation or Bylaws. By accepting this Agreement, whether electronically or
otherwise, Optionee hereby consents to receive such documents and notices by such electronic delivery and agrees to participate
in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the
Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and
conditions.
6
The following is a list of subsidiaries of Pinterest, Inc., omitting subsidiaries which, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary as of December 31, 2019:
Subsidiaries of the Company
Name of Subsidiary
Pinterest Europe Limited
Jurisdiction of Incorporation
Ireland
Exhibit 21.1
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-230999) pertaining to the
2009 Stock Plan and the 2019 Omnibus Incentive Plan of Pinterest, Inc. of our report dated February 6, 2020, with respect
to the consolidated financial statements of Pinterest, Inc., included in this Annual Report (Form 10-K) for the year ended
December 31, 2019.
/s/ Ernst & Young LLP
San Francisco, California
February 6, 2020
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Benjamin Silbermann, certify that:
1. I have reviewed this Annual Report on Form 10-K of Pinterest, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such disclosure controls and procedures, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
PINTEREST, INC.
Date: February 6, 2020
By:
/s/ Benjamin Silbermann
Benjamin Silbermann
Co-Founder, President and Chief Executive Officer
(Principal
Executive
Officer)
CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Todd Morgenfeld, certify that:
1. I have reviewed this Annual Report on Form 10-K of Pinterest, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
PINTEREST, INC.
Date: February 6, 2020
By:
/s/ Todd Morgenfeld
Todd Morgenfeld
Chief Financial Officer
(Principal
Financial
Officer)
Exhibit 32.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Benjamin Silbermann, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
the Annual Report on Form 10-K of Pinterest, Inc. for the fiscal year ended December 31, 2019 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Pinterest, Inc.
I, Todd Morgenfeld, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report on Form 10-K of Pinterest, Inc. for the fiscal year ended December 31, 2019 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material
respects, the financial condition and results of operations of Pinterest, Inc.
PINTEREST, INC.
Date: February 6, 2020
By:
/s/ Benjamin Silbermann
Benjamin Silbermann
Co-Founder, President and Chief Executive Officer
(Principal
Executive
Officer)
Date: February 6, 2020
By:
/s/ Todd Morgenfeld
Todd Morgenfeld
Chief Financial Officer
(Principal
Financial
Officer)
The foregoing certifications are furnished and are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (Exchange Act), and are not deemed to be incorporated by reference into any filing of Pinterest, Inc.
under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Pinterest, Inc. specifically incorporates them by
reference.