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, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 001-38872
Pinterest, Inc.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
Delaware
26-3607129
505 Brannan Street
San Francisco, California
(Address of Principal Executive Offices, including zip code)
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
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $0.00001 par value
PINS
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
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 30, 2020 as reported by the New York Stock Exchange on such date was approximately $9.4 billion.
As of January 29, 2021, there were 532,423,430 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 96,091,207
shares of the Registrant’s Class B common stock outstanding.
Portions of the registrant’s definitive Proxy Statement for the 2021 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, 2020.
Documents Incorporated by Reference
PINTEREST, INC.
TABLE OF CONTENTS
Note About Forward-Looking Statements
Limitations of Key Metrics and Other Data
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
Part I
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8.
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
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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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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uncertainty regarding the duration, scope and impact of the coronavirus referred to as the COVID-19
pandemic;
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;
the pace of recovery when the COVID-19 pandemic subsides;
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 online application stores or 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;
the scope and impact of the COVID-19 pandemic on our planned investments, operations, expenses,
revenue, cash flow, liquidity and users;
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;
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disruption of, degradation in or interference with our use of Amazon Web Services and our infrastructure; and
our ability to attract and retain personnel.
These statements are based on our historical performance and on our current plans, estimates and projections in light
of information currently available to us, and therefore you should not place undue reliance on them. The inclusion of
this forward-looking information should not be regarded as a representation by us or any other person that the future
plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made in this
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.
Summary of Risk Factors
The following summarizes the principal factors that make an investment in our company speculative or risky, all of
which are more fully described in the Risk Factors section below. This summary should be read in conjunction with the
Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our
business. The following factors could result in harm to our business, reputation, revenue, financial results, and
prospects, among other impacts:
Business Strategy and Growth. Our strategic decisions and efforts to expand the business, including:
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our ability to scale our business for future growth, as we are in the early stages of our monetization efforts;
our ability to attract, grow, retain, and engage our user base;
providing content that is useful and relevant to Pinners’ personal taste and interests;
decisions consistent with our mission and values that may reduce our short- or medium-term operating
results;
removing objectionable content or blocking objectionable practices by advertisers or third parties;
our ability to compete effectively for users or advertisers and to develop effective products and tools for
advertisers;
our further expansion and monetization of our platform internationally;
effective management of our business growth; and
our acquisition of other businesses.
Operation of Our Business. The manner in which we operate our business, including:
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the disruption and harm from the recent global COVID-19 pandemic outbreak, as well as potential challenges
of post-pandemic recovery;
our dependence on and ability to maintain and enhance a strong brand and reputation;
actual or perceived compromises in our security;
our dependence on advertising for substantially all of our revenue;
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the development of tools to accurately measure the effectiveness of advertisements on our platform and
thereby attract and maintain advertisers;
the inherent challenges of measurements related to Pinner metrics and other estimates;
our ability to maintain and scale our technology infrastructure, including the speed and availability of our
service; and
the attraction, retention, and loss of our key personnel and other highly qualified personnel.
Third-Party Reliance. Our use and dependence on third-party businesses and products, or the impacts of third-party
business and products, including:
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our dependence on online application stores and internet search engines, including their methodologies,
policies, and results, to direct traffic and refer new Pinners to our service;
users’ ability to authenticate with our service through third-party login providers;
our dependence on Amazon Web Services for the vast majority of our compute, storage, data transfer, and
other services;
effectively operating with mobile operating systems, web browsers, networks, regulations, and standards,
which we do not control, and changes in our products or to those mobile operating systems, web browsers,
networks, regulations or standards; and
our reliance on software, technologies, and related services from other parties; and
technologies that can block the display of our ads.
Legal and Regulatory Matters. The legal and regulatory frameworks, actions, and requirements to which our business,
products, services, and operations are subject, including:
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any liability as a result of content or information that is published or made available on our service;
government action to restrict access to our service or certain of our products in their countries;
the data, including personal information, we receive, process, store, use, and share, which subjects us to
complex and evolving governmental regulation and other legal obligations related to data privacy, data
protection and other matters;
our involvement in any legal disputes or other disputes that are expensive to support and may be resolved
adversely;
an ability to protect our intellectual property and our use of “open source” software; and
the interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of
our operations.
Financial Statements and Performance. The preparation of our financial statements and our financial and operating
performance, including:
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our limited operating history and previously incurred operating losses, anticipated increases to operating
costs, and expenses and our ability to obtain or maintain profitability;
fluctuations in our operating results from quarter to quarter;
our ability to obtain additional financing, if needed and any default on our credit obligations;
greater than anticipated tax liabilities;
limitations in our ability to use or benefit from our net operating loss carryforwards and certain other tax
attributes; and
the requirements of being a public company.
Our Common Stock. The rights, restrictions, and structure of, and actions that we make take that impact, our common
stock, including:
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the dual class structure of our common stock;
trading price volatility of our Class A common stock;
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future offerings of debt or equity securities by us or existing stockholders that could adversely impact the
market price of our Class A common stock;
additional stock issuances, including in connection with settlement of equity awards, and any resulting
dilution;
provisions under Delaware law and our governing documents that could make a merger, tender offer, or proxy
contest difficult;
our certificate of incorporation’s designation of a state or federal court located within Delaware as the
exclusive forum for substantially all disputes between us and our stockholders; and
our intention not to pay dividends for the foreseeable future.
General. The risks common to our industry and public companies generally, including:
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our development of or investment in successful new products or improvements to existing one;
adverse global economic and financial conditions; and
changes in accounting principles generally accepted in the United States.
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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 459 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 action.
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 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, 2020, our
Pinners saved nearly 300 billion Pins across more than six 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 nearly 300 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.
Inspiring Environment. Pinners describe Pinterest as an inspiring place where they can focus on themselves, their
interests and their future. We encourage positivity on the platform through our policies and product development -- for
example, Pinterest has banned political ads, developed inclusive beauty search functionality and rolled out
compassionate search for Pinners seeking mental health support. This work is an important part of our value
proposition because people are less likely to dream about their future when they feel self-conscious, excluded,
unhappy or preoccupied with the problems of the day.
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Value Proposition for Advertisers
Valuable Audience. Pinterest reaches 459 million monthly active users, about two-thirds of whom are female. 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 “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.
Inspiring 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 and creators 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 or saved by individual users or by businesses.
When an individual user finds content like an article, image or video on the web and wants to save it, she can use our
browser extension or Save button to save a link to that idea to a board of a larger topic, along with an image
representing the idea. They can also save ideas within Pinterest as they get inspiration for ideas others have found.
Additionally, we are in the early days of introducing Story Pins, which enable creators to create Pins featuring their
own original work, like a recipe they made, a beauty, style or home decor tutorial, or a travel guide. 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, as we believe Pinners come with the intent to try something new, and welcome content from brands. We
expect that these Pins will become an even 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, Video Pins and Story Pins. More types of Pins and features will come in the future.
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Standard Pins: Images with links back to original content from around the web, used to highlight products,
recipes, style and home inspiration, DIY, 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.
Story Pins: Story Pins are multi-page videos, images, text and lists that are natively created on Pinterest. This
format enables creators to show how to bring ideas to life (e.g. how to cook a meal or design a room).
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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.
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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. Home Feed discovery is powered by
machine learning recommendations based on previous activity and the overlapping interests of Pinners with
similar taste. They will also see Pins from the people, topics and boards they choose to follow. Every home
feed is personalized to dynamically reflect the taste and interests of the Pinner.
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Text queries: Pinners can search for Pins, broad ideas, boards, or people 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. This is
powered by years of computer vision that can identify objects and attributes within scenes.
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Shopping: Pinterest is where people turn inspiration into action, as Pinners plan, save, and find things to buy
that inspire them to create a life they love. We are building a place to shop online—not just a place to find
things to buy.
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, 2020. 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.
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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.
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.
Collection ad: Used by advertisers to display products in action with a hybrid format that mixes lifestyle
imagery with featured products.
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. 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
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 (including YouTube), Snap, TikTok 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. For more information on users and engagement trends, see section titled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”
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. For more information on trends relating to advertising revenue and growth, see section titled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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. For more
information, see “Talent Management and Development” below.
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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, 2020, we had over 340 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 550
registered trademarks and trademark applications in the United States and foreign countries, 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 or that increase the liability of content platforms like us. 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.
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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, though we did not experience typical seasonal trends and saw an
increase in active user growth in the second quarter of 2020 due to shelter-in-place orders related to the COVID-19
pandemic. 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.
Talent Management and Development
In order to fulfill our mission of bringing everyone the inspiration to create a life they love, we strive to attract and
retain top talent. To attract and retain great talent, we strive to create opportunities for our employees to grow and
develop in their careers, supported by competitive compensation, benefits and health and wellness programs, and by
programs that build connections between our employees and their communities. As of December 31, 2020, we had
2,545 full-time employees.
Inclusion and Diversity
We strive to create an inclusive and diverse workplace where employees are empowered to bring their whole,
authentic selves to work every day. We seek for and respect diverse perspectives which can only help us create a
more inclusive and diverse product.
We seek inclusion and diversity at the highest level in our organization. Our board of directors includes directors from
various backgrounds, industries, skills and experience. Our board of ten directors comprises eight independent
directors, four women and is racially diverse. Our leadership team includes leaders with diverse skills, experience,
racial backgrounds and gender. To further our commitment to create an inclusive and diverse culture, we appointed
Tyi McCray as our Global Head of Inclusion and Diversity reporting directly to our CEO. We also added three new
independent directors with diverse backgrounds to our board of directors in 2020.
Annually, we’ve published a diversity report since 2015 which we make publicly available on our website. We believe it
is important to hold ourselves accountable to creating a diverse workforce. Our diversity report currently includes our
annual hiring goals and how we performed against the goals and our workforce demographic data.
We have also created employee resource groups that are aligned around dimensions of diversity, such as gender,
ethnicity, sexual orientation or other shared attributes, which we believe help build community and enable
opportunities for development.
In June 2020, subsequent to concerns raised by current and former employees, our board of directors established a
Special Committee of the board of directors to independently review Pinterest’s workplace culture. The Special
Committee engaged experienced outside counsel to advise the Special Committee in connection with its independent
review and to help develop recommendations to further support an inclusive, fair, and respectful workplace. In
December 2020, we began implementing the recommendations of the Special Committee.
Employee health, safety and benefits
The success of our business is fundamentally tied to the well-being of our people. We are committed to the health,
safety and wellness of our employees. We provide our employees and their families with access to a variety of flexible
and convenient health and wellness programs that support their physical and mental health by providing tools and
resources to help them improve or maintain their health. In response to the COVID-19 pandemic, we implemented
significant changes that we determined were in the best interest of our employees, as well as the communities in
which we operate, and which comply with government regulations. This includes currently having the vast majority of
our employees work from home, while implementing additional safety measures for employees continuing critical on-
site work.
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We provide robust compensation and benefits programs to help meet the needs of our employees. In addition to
salaries, these programs (which vary by country/region) include equity awards, a 401(k) Plan, healthcare and
insurance benefits, health savings and flexible spending accounts, flexible paid time off, family leave, family care
resources, flexible work schedules, employee assistance programs, charitable donation matching, among many
others.
Learning and development
We help our employees create a career that is inspiring, impactful and ultimately time well spent. We have programs
for open and ongoing conversation towards career growth goals both long term and short term. We also have
workshops dedicated to learning new skills and developing an employee’s career. We set aside a dedicated personal
learning and development budget for every employee.
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
is
located at www.pinterest.com, and our
Our website
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.
investor relations website
is
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.
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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 our Business Strategy and Growth
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 expanding our sales efforts to reach
advertisers in additional international markets), scaling our business with existing advertisers and expanding our
advertising product offerings. 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.
As we continue to grow our advertiser base, our revenue depends on our ability to effectively serve enough
advertisements that meet the objectives of our advertisers while maintaining a high quality user experience. If we are
unable to do this on our platform due to a decline in user growth or user engagement, changes in product features or
user behavior where users engage increasingly with product features where we may not be able to display as many
advertisements, our business, revenue and financial results could be harmed.
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.
Our ecosystem of Pinners and advertisers depends on our ability to attract, grow, 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, grow, retain and engage our users on our platform, who we call Pinners. Our active
Pinners may not continue to grow, and may decline.
If current and potential Pinners do not perceive their experience with our service to be useful, or the content that we
serve to them to be relevant to their personal taste and interests, we may not be able to attract new Pinners, retain
existing Pinners or maintain or increase the frequency and duration of their engagement. In addition, if our existing
Pinners do not continue to utilize our service or our user base does not continue to grow, we may be required to incur
significantly higher marketing expenses than we currently anticipate to add new Pinners or retain current Pinners.
Pinner engagement may also fluctuate depending on factors beyond our control, such as changes to daily life
resulting from the COVID-19 pandemic. Although we have seen higher engagement from Pinners during the
COVID-19 pandemic, we may see lower levels of Pinner engagement once the effects of the COVID-19 pandemic
have subsided.
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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, historically a substantial majority of our Pinners have been women of ages 18-64. 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 internet service providers that allow Pinners to access our mobile
application without it counting toward their monthly data allowance, a practice known as “zero rating.” Such contracts
may not be effective in increasing penetration or leading to user growth or revenue growth. Further, changes in
regulations could adversely impact our existing and future contracts regarding our access to, and use of, zero-rating
offers or other discounts or data usage for our service.
Our ability to serve advertisements on our platform, and therefore the value proposition for our advertisers, depends
on the size and engagement of our user base. Our growth efforts are not currently focused on increasing the number
of daily active users, and we do not anticipate that most of our users will become daily active users. Therefore, even if
we are able to increase demand for our advertising products, we may not be able to deliver those advertisements if
we cannot also increase the size and engagement of our user base, which could harm our business, revenue and
financial results.
There are many other factors that could negatively affect user growth, retention and engagement, including if:
•
•
•
•
•
•
•
•
•
•
•
our competitors mimic our products or product features, causing Pinners to utilize their products instead of, or
more frequently than, our products;
we do not provide a compelling Pinner experience because of the decisions we make regarding our products
or the type and frequency of advertisements that we display;
our content is not relevant to Pinners’ personal taste and interests;
third parties do not permit or continue to permit their content to be displayed on our platform;
Pinners have difficulty installing, updating or otherwise accessing our service on mobile devices or web
browsers;
there are changes in the amount of time Pinners spend across all applications and platforms, including ours;
technical or other problems frustrate the Pinner experience, particularly if those problems prevent us from
delivering our service in a fast and reliable manner;
we are unable to address Pinner and advertiser concerns regarding the content, privacy and security of our
service;
we are unable to combat spam, harassment, cyberbullying, discriminatory, political or other hostile,
inappropriate, misleading, 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;
• merchants on Pinterest do not provide Pinners with positive shopping experiences, for example, if products
are not of the quality depicted on the platform or not readily available for purchase; 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.
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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, creators and
advertisers and the manner in which we present that content to Pinners. Pinners engage with content that is relevant
to their country, language and gender preferences as well as their personal intent. We may not correctly identify and
serve content that is useful and relevant to Pinners. Content that is not visually pleasing, is not intuitive or easy to use
or is not in the desired language may not be engaging for Pinners, especially in non-U.S. markets. If Pinners do not
believe that we offer content that is useful and relevant to their personal taste and interests, user growth, retention or
engagement may decline, which could result in the loss of advertisers and revenue.
Some of the actions that we may take to make our content more useful and relevant may reduce traffic that we drive
from our platform to the websites of third parties, which may reduce their willingness to contribute or continue
availability of their content on our service. We endeavor to keep divisive, disturbing or unsafe content off our service.
We do this by deleting or hiding certain types of content, even if this content would be permitted on other platforms,
which could result in decrease in user growth, retention or engagement. We apply significant judgment in making
these determinations and may be unsuccessful in our efforts to remove this content in a manner that is (or perceived
to be) consistently applied and on a timely basis or at all, 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 and merchants who offer
poor quality goods or fail to deliver goods to their customers, we may lose Pinner confidence. Controversies regarding
content on other social media platforms, such as the boycott of Facebook and Twitter by some advertisers, may
impact user engagement and advertising spending on our platform, which could adversely affect our business and
revenue.
We regularly monitor how our advertising affects Pinners’ experiences in order to avoid delivering 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 maintain 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”), the California Privacy Rights Act (the "CPRA") 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.
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
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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. 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,
any of which could harm our business, revenue and financial results.
If we are unable to compete effectively for users, our business, revenue and financial results could be
harmed.
We face significant competition to attract, retain and engage users and for their time and attention. We primarily
compete with consumer internet companies that are either tools (search, ecommerce) or media (newsfeeds, video,
social networks).
We compete with larger, more established companies such as Amazon, Facebook (including Instagram), Google
(including YouTube), Snap, TikTok 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,
Facebook and Instagram have enhanced their shopping features, such as a shop tab and checkout 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 and information 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.
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If we are unable to compete effectively for advertisers, our business, revenue and financial results could be
harmed.
We face significant competition for advertising revenue across a variety of formats. To compete effectively, we must
enable our advertisers to easily create content and buy, forecast, optimize and measure the performance of
advertising on our platform. In order to grow our revenue and improve our operating results, we must increase our
share of advertising spend relative to our competitors, many of which are larger companies that offer more traditional
and widely accepted advertising products, as well as more robust tools to measure the effectiveness of advertising
campaigns.
Some of our larger competitors have substantially broader product or service offerings and leverage their relationships
based on other products or services to gain additional share of advertising spend. They have large distributed sales
forces and an increasing amount of control over mobile distribution channels. These competitors’ economies of scale
allow them to have access to larger volumes of data and platforms that are used on a more frequent basis than ours,
which may enable them to better understand their user base and develop and deliver more targeted advertising. They
may not need to rely on third-party data, including data provided by advertisers, in order to effectively target the
campaigns of advertisers, which could make their advertising products more attractive to advertisers than ours if third-
party data ceases to be available to us, whether because of regulatory changes, privacy concerns or other reasons. If
we are unable to provide our advertisers with the ability to effectively target their advertising campaigns, or if our
advertisers do not believe that our value proposition is as compelling as those of our competitors, we may not be able
to attract new advertisers or retain existing ones, and our business, revenue and financial results could be harmed.
We believe that our ability to compete for advertisers, depends upon many factors both within and beyond our control,
including:
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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;
positions or actions taken by us, Pinners, advertisers or other third parties that may impact our brand and
reputation or the desirability of advertising on social media and other online platforms in general; 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 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
adversely affect our revenue. Alternatively, new ad formats, such as video ads, may be more engaging and users may
spend less time browsing or searching on our platform, which could 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
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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;
selective or inconsistent government regulatory action or enforcement;
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, including sanctions;
compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws in other
jurisdictions;
compliance with laws governing supply chains and related business operations;
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;
• macroeconomic conditions, such as the COVID-19 pandemic and/or the subsequent recovery period, could
slow our global expansion;
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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.
If we are unable to expand internationally and manage the complexity of global operations successfully, our business,
revenue and financial results could be harmed.
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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 also find it increasingly difficult to preserve our workplace culture,
including our ability to quickly develop and launch new and innovative products and adequately oversee employees
and business functions. This is particularly true in recent times where we have shut down most of our offices
(including our headquarters) in connection with the COVID-19 pandemic and a significant majority of our workforce is
remote. Our inability to effectively manage growth of our organization may harm our business, revenue and financial
results.
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.
Risks relating to our Business Operations
The recent global COVID-19 pandemic outbreak has disrupted and harmed and is expected to continue to
disrupt and harm our business and results of operations.
The recent global COVID-19 pandemic outbreak and the various attempts to contain it have created significant
volatility, uncertainty and economic disruption. It has adversely affected the broader economies, financial markets and
overall demand for advertising.
As a result of the COVID-19 pandemic, we temporarily closed all our offices (including our corporate headquarters)
globally and implemented certain travel restrictions, both of which have disrupted and could continue to disrupt how
we operate our business, including limiting certain of our sales and marketing plans and requiring us to manage a
significant majority of our workforce remotely. Our workforce has had to spend a significant amount of time working
from home, which could impact their productivity. Moreover, as a result of the COVID-19 pandemic, the ability and
willingness of advertisers to spend on our services has fluctuated. We do not know how evolving events related to the
COVID-19 pandemic will continue to affect Pinner and advertiser behavior in the future. We may not be able to
recognize revenue, collect payment or generate future revenue from advertisers, including from those that have been
or may be forced to close their businesses or are otherwise impacted by the economic downturn. The pandemic has,
and could in the future, adversely affect our business, revenue growth rate, financial performance and stock price.
Additionally, volatility in capital markets could affect the values of our cash equivalents and marketable securities or
our ability to dispose of them to fund future working capital needs. Although we are continuing to invest in our strategic
priorities, we are actively monitoring and adjusting our spending in light of the evolving business environment resulting
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from the COVID-19 pandemic. If we are not able to successfully manage our spending and investment it could have a
material adverse effect on our balance sheet, business, results of operations and future growth.
Further, during the COVID-19 pandemic and the related shelter-in-place order we saw an increase in Pinner
engagement. The post-pandemic period may present challenges such as user engagement declining or user behavior
changing unexpectedly and in ways that are difficult to anticipate or measure, resulting in reduced or different usage
of our platform. As a result, engagement as well as metrics such as revenues, operating margins and other financial
and operating data, may not be indicative of results for future periods.
We are currently unable to accurately predict the full impact that the COVID-19 pandemic will have on our results of
operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the severity and
transmission rate of the virus, duration of the pandemic, including any resurgences, the extent and effectiveness of
containment actions and other public health measures, the development, distribution and public acceptance of
vaccines and treatments, and the impact of these and other factors on our employees, users, advertisers, partners
and vendors. The pandemic as well as any subsequent recovery period, may also have the effect of heightening many
of the other risks described in this “Risk Factor” section.
Our business depends on a strong brand and reputation, and if we are unable to maintain and enhance our
brand and reputation, our ability to expand our user and advertiser base will be impaired and our business,
revenue and financial results could be harmed.
We believe that our brand, identity and reputation has significantly contributed to the success of our business. We
also believe that maintaining and enhancing the “Pinterest” brand and reputation is critical to retaining and growing
our user and advertiser base. Maintaining and enhancing our brand and reputation depends largely on our continued
ability to provide high-quality, relevant, reliable, trustworthy and innovative products, which may require substantial
investment and may not be successful. We may need to introduce new products or updates to existing products that
require Pinners to agree to new terms of service that Pinners do not like, which may negatively affect our brand and
reputation. Additionally, advertisements or actions of our advertisers may affect our brand and reputation if Pinners do
not think the advertisements help them accomplish their objectives, view the advertisements as intrusive, annoying or
misleading or have poor experiences with our advertisers. In addition, our brand, identity and reputation may be
adversely affected by perceptions of social media platforms in general, including perceptions resulting from factors
unrelated to the Company’s actions or the content or actions of Pinners, such as the boycott of Facebook and Twitter
by some 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 or
advertiser 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 consistently applied manner and on a timely basis or at all 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, employment or other practices, workplace culture, charitable giving, 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 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.
Adverse publicity, whether or not accurate, relating to events or activities attributed to us, our employees, third-party
vendors, or our advertisers, or to social media platforms in general, may tarnish our reputation and reduce the value
of our brand. 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.
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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,
Pinners, advertisers or vendors 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 and vendors, may store information that we share with them on their
networks. If these third parties fail to implement adequate data-security practices or fail to comply with our terms and
policies, Pinners’ data may be improperly accessed, used or disclosed. Even if these third parties take all the
necessary precautions, their networks may still suffer a breach, which could compromise Pinners' data.
Any incidents where Pinners’, advertisers or our information is accessed without authorization or is improperly used,
or incidents that violate our privacy policy, terms of service or other policies, or the perception that an incident has
occurred, could damage our brand and reputation, adversely impact our competitive position and result in significant
costs. We may need to notify government authorities or affected Pinners regarding security incidents, and government
authorities or affected Pinners or advertisers could initiate legal or regulatory action against us over those incidents,
which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to
modify our business practices. Maintaining the trust of Pinners and advertisers is important to sustain user growth,
retention and engagement, and we may incur significant costs in an effort to detect and prevent any security incidents.
Concerns over our information security or 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 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. The insights on user behavior we provide to advertisers may not yield effective results for the advertisers
and may reduce or stop their spend on our platform. 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 unless we
improve existing and develop new measurement tools that better 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. While we continue to develop and deploy tools to allow advertisers to create content for our platform, we
may be unable to develop tools that effectively and efficiently meet the needs of advertisers. 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.
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Our advertising revenue could be harmed by many other factors, including:
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changes in the price of advertisements;
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 conditions and the status of the advertising industry, such as the global outbreak of the
COVID-19 pandemic, its uncertain duration and recovery, which could cause businesses to spend less on
advertising and/or direct their advertising spend to larger companies that offer more traditional and widely
accepted advertising products; and
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the other risks and uncertainties described in this Annual Report on Form 10-K.
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 our ability to collect and use data and develop tools to
enable us to effectively deliver and accurately measure 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.
We are continually developing and improving these tools and such efforts have and are likely to continue to require
significant time and resources and additional investment, and in some cases we have relied on and may in the future
rely on third parties to provide data and technology needed to provide certain measurement data to our advertisers. If
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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, including requiring additional user permissions, in their browser or device operating
system 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, such as mobile
advertising identifiers, and other changes that limit our 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. Further, Apple announced certain changes, including introducing an
AppTrackingTransparency framework that will limit the ability of mobile applications to request an iOS device’s
advertising identifier and may also affect our ability to track user actions off our platform and connect their interactions
with on-platform advertising.
In addition, third-parties, such as Apple, Microsoft or Google, have implemented and may continue to 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.
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.
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, searching 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
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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 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 our information quality efforts, which are our overall efforts to reduce
malicious activity on our platform, including of false, spam and malicious automation accounts in existence on our
service. We regularly deactivate false, spam and malicious automation accounts that violate our terms of service, and
exclude these users from the calculation of our MAU metrics; however, we will not succeed in identifying and
removing all false, spam and malicious accounts from our service. We are continually seeking to improve our ability to
estimate the total number of false, spam or malicious accounts and we intend to continue to make such
improvements. In addition, 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.
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.
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. Further, in the event of a systems failure, employee error, failure or interruption of services by AWS,
malicious intent by employees or third parties, we may lose all or substantial amounts of data and we may not be able
to recover such data quickly or at all. Such loss of data could adversely affect our business 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.
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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 and benefits arrangements, may not be effective to attract and retain employees. We may also be
required to enhance wages, benefits and non-equity incentives. If we are unable to meet employees and potential
employees' expectations, we may experience difficulties attracting and retaining personnel. Following an independent
review of our workplace culture, a Special Committee of our Board has made a number of recommendations, which
we are working to implement. Our ongoing efforts to address workplace culture, implement our Special Committee's
recommendations and resolve certain related allegations or claims have resulted in, and will continue to result in,
increased costs, as well as consuming management's time and attention. Further, if our efforts are unsuccessful, we
may not be able to attract and retain talent and we may be subject to investigations, litigation and other proceedings.
Additionally, given that a significant majority of our workforce is remote due to the COVID-19 pandemic and the
uncertainty of the timing and manner of our workforce returning to the office, our continued efforts related to employee
onboarding, training and development and retention may not be successful. 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.
Risks arising from our reliance on third parties
We depend in part on online application stores and internet search engines to direct traffic and refer new
Pinners to our service. If these online application stores or 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, have and may continue to 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, have in the past and 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
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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 and in December 2020, Google made certain changes to
their search algorithms which also negatively impacted traffic and user sign-ups. 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.
In addition, we also rely on certain major online stores for distribution of our application. If either of these application
store providers modify or implement new terms, we may require to modify our product to maintain our ability to remain
in that application store. Such requirements or our inability to meet such requirements 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, Apple 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.
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
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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
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, online application stores,
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.
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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.
Risks relating to Legal and Regulatory Matters
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 but not limited to, 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.
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 and current protections from liability for third-party content in the
United States could decrease or change. For example, there have been various Congressional and regulatory efforts
to restrict the scope of the protections available to online platforms under Section 230 of the CDA. 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. If amendments to Section
230 of the CDA or other statutory or regulatory changes reduce liability protections for content published on our
service, we may be required to make significant changes to our business model, including increasing our content
moderation operations and building 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
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both the federal and state level, and in the European Union and the U.K., that could 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. and Austria, may enact
similar legislation, which would impose penalties for failure to remove certain content. Similarly, Turkey recently
amended Law No. 5651 on Regulation of Internet Broadcasts and Prevention of Crimes Committed through Such
Broadcasts to require social networking platforms to remove certain content from their platforms, appoint a local
representative, and store user data locally. The Turkish government may impose a fine or block services that fail to
comply. 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 expose our
business, users, or employees to increased costs. These costs could be prohibitively expensive for a company of our
size, which could prevent us from launching a product or require us to restrict access to 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.
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.
Governmental authorities outside the United States have restricted, and may in the future seek to restrict access to
our service if they consider us to be in violation of their laws or for other reasons. 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. We may also decide to stop offering our service in a country as a result of these
types of restrictions. 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, to appoint local representatives
in the country, or to store user data within that country. It can be challenging or impractical 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 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
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most serious infringements. Additionally, we have historically relied upon multiple legally valid transfer mechanisms to
transfer certain personal data outside of the European Economic Area, including the EU-U.S. Privacy Shield
Framework and Standard Contractual Clauses (SCCs). Recently, the Court of Justice of the European Union ruled
that the EU-U.S. Privacy Shield is an invalid transfer mechanism, but upheld the validity of the SCCs subject to future
elaboration of additional safeguards by regulators such as specific “supplemental measures” that should be
undertaken to protect EU data subjects. The validity of data transfer mechanisms and these additional safeguards
remains subject to legal, regulatory, and political developments in both Europe and the U.S. The invalidation of the
EU-U.S. Privacy Shield, the potential invalidation of other data transfer mechanisms, or the potential invalidation of
additional safeguards could have a significant adverse impact on our ability to process and transfer the personal data
of EEA users outside of the European Economic Area. 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. Though we have
regulations accompanying the legislation, the CCPA is largely untested, so it remains unclear how the CCPA will be
interpreted. Additionally, a new privacy law, the CPRA, recently was approved by California voters in the November,
2020. The CPRA significantly modifies the CCPA, resulting in further uncertainty and requiring us to incur additional
costs and expenses. 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 consent from
Pinners for the use and disclosure of such data, could require us to modify our products to allow for limited data use,
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, Member States in the European Union are working to align on a draft
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.
We could become involved in legal disputes that are expensive to support, and if resolved adversely, could
harm our business, revenue and financial results.
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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, stockholder derivative claims, employment, governance, workplace culture, 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 currently 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.
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
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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.
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.
Some jurisdictions have enacted a tax on technology companies that generate revenues from the provision of digital
services, including United Kingdom, France, Spain and Italy, and a number of other jurisdictions are considering
enacting similar digital tax regimes. The Organisation for Economic Co-operation and Development, as part of its
Base Erosion and Profit Shifting (BEPS) Action Plan, recently released proposals that provides a long-term,
multilateral framework on taxation of the digital economy. Although we do not know the exact impact, this legislation
has and may continue to result in additional tax exposure.
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.
Risks relating to our Financial Statements and Performance
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 uncertainties frequently encountered by companies like
ours.
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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.
Since our inception, we have incurred significant net losses. We generated net losses of $(128.3) million, $(1,361.4)
million and $(63.0) million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31,
2020, we had an accumulated deficit of $(2,335.0) 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 as 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.
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 improve or maintain gross margins;
the number and relevancy of advertisements shown to Pinners;
the relevancy of content 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;
fluctuations in spending by our advertisers and engagement and product usage by Pinners due to
macroeconomic conditions, such as the COVID-19 pandemic;
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;
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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.
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. In addition, the COVID-19 pandemic has
resulted in high levels of uncertainty with respect to access to additional financing and volatility in financial markets. If
our access to capital is restricted or our borrowing costs increase as a result of developments in financial markets
relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted.
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 that they will 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.
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
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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 negatively affect our financial results.
Our ability to use or benefit from our net operating loss carryforwards and certain other tax attributes may be
limited.
As of December 31, 2020, we had federal, California and other state net operating loss carryforwards of $3,282.2
million, $405.6 million and $1,214.9 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.
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 78.4% of the voting power of our outstanding capital stock as of December 31, 2020.
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.
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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
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.
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The trading price of our Class A common stock has been and may continue to be volatile, and you could lose
all or part of your investment.
The trading price of our Class A common stock has been, and is likely to continue 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 when
stockholders sell shares of our Class A common stock into the market to cover taxes due upon the settlement
of restricted stock units ("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 external analysts to their financial and operating estimates for our company or our performance
relative to third parties' estimates or the expectations;
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 and other third parties into our
operations or those of our competitors;
developments or disputes concerning our intellectual property or other proprietary rights;
developments or disputes concerning our culture or other diversity, equity and inclusion practices and
initiatives;
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;
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any significant change in our management;
• macroeconomic events that are beyond our control, such as the recent global outbreak of the COVID-19
pandemic; and
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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 stockholders 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
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 RSUs and shares of Class A common stock that may be issued upon
settlement of outstanding RSUs. For more
to Financial Statements”. We have
5,956,309,722 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.
information, see “Notes
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
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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:
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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;
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 (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
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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.
Nothing in our amended and restated certificate of incorporation precludes stockholders that assert claims under the
Securities Act or Exchange Act from bringing such claims in federal court, subject to applicable law.
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.
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.
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.
General Risks
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.
Adverse global economic and financial conditions could harm our business and financial condition.
Adverse macroeconomic developments could negatively impact our business and financial condition. Adverse global
economic and financial events, such as the COVID-19 pandemic, have caused, and could, in the future continue to
cause disruptions and volatility in global financial markets. Such conditions have resulted in or may result in, among
43
other things, an adverse impact on the ability and willingness of companies to spend on advertising, volatility in our
stock price and an adverse impact on the financial condition of the institutions with whom we hold deposits or the
credit quality of the issuers of our cash equivalents and marketable securities. We cannot assure you that we will
perform well in adverse macroeconomic conditions. Since the majority of our revenue is derived from advertisers
within the U.S., economic conditions in the U.S. have a greater impact on us.
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.
44
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Facilities
Our corporate headquarters is located in San Francisco, California. As of December 31, 2020, we maintained offices
in various locations in the United States and internationally totaling approximately 592,000 square feet, including
approximately 339,000 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, corporate governance, securities,
employment, workplace culture, 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.
For information on certain litigation we are involved in, see "Legal Matters" in Note 6 of the accompanying notes to our
consolidated financial statements, which is incorporated herein by reference.
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.
45
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 29, 2021, there were 110 stockholders of record of our Class A common stock and 74 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
None.
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, 2020. 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.
46
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. 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. There has been no material
change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on April
18, 2019 pursuant to Rule 424(b)(4).
47
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, 2020, 2019 and 2018 and
the consolidated balance sheets data as of December 31, 2020 and 2019 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 statements of operations data for the year ended December 31, 2017 and the
consolidated balance sheet data as of December 31, 2018 and December 31, 2017 are 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
Loss from operations
Interest income
Year Ended December 31,
2020
2019
2018
2017
(in thousands, except per share amounts)
$
1,692,658 $
1,142,761 $
755,932 $
472,852
449,358
606,194
442,807
336,803
358,903
1,207,059
611,590
354,075
241,584
251,662
259,929
77,478
830,653
178,664
207,973
162,514
61,635
610,786
(142,504)
(1,388,866)
(74,721)
(137,934)
16,119
30,164
13,152
8,313
(112)
Total costs and expenses
1,835,162
2,531,627
Interest expense and other income (expense), net
(635)
(2,137)
(995)
Loss before provision for income taxes
(127,020)
(1,360,839)
(62,564)
(129,733)
Provision for income taxes
Net loss
Net loss per share attributable to common stockholders, basic
and diluted
1,303
532
410
311
(128,323) $
(1,361,371) $
(62,974) $
(130,044)
(0.22) $
(3.24) $
(0.50) $
(1.03)
$
$
Weighted-average shares used in computing net loss per
share attributable to common stockholders, basic and diluted
Adjusted EBITDA (2)
$
596,264
420,473
127,091
126,562
305,004 $
16,706 $
(39,003) $
(92,995)
(1) Costs and expenses includes share-based compensation expense as follows (in thousands):
Year Ended December 31,
2020
2019
2018
2017
Cost of revenue
Research and development
Sales and marketing
General and administrative
$
7,865 $
31,758 $
83 $
218,718
35,645
58,792
867,191
239,315
239,517
13,155
784
837
Total share-based compensation
$
321,020 $
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.
48
As of December 31,
2020
2019
2018
2017
(in thousands)
Consolidated Balance Sheets Data:
Cash, cash equivalents and marketable securities
$
1,760,306 $
1,713,345 $
627,813 $
711,628
Working capital
Total assets
Total liabilities
Redeemable convertible preferred stock
Total stockholders' equity (deficit)
2,152,710
2,609,459
367,088
—
1,891,077
2,393,317
369,612
780,925
807,157
1,152,731
1,173,045
281,895
254,110
—
1,465,399
1,465,399
2,242,371
2,023,705
(594,563)
(546,464)
49
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, provision for
income taxes and, for the third quarter of 2020, a one-time payment for the termination of a future lease contract.
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
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.
transparency with respect
to key metrics we use
for greater
for
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
Termination of future lease contract
Adjusted EBITDA
Year Ended December 31,
2019
2020
2018
$
(128,323) $
(1,361,371) $
(62,974)
36,988
321,020
27,791
1,377,781
20,859
14,859
(16,119)
(30,164)
(13,152)
635
1,303
89,500
2,137
532
—
995
410
—
$
305,004 $
16,706 $
(39,003)
50
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, including risks and uncertainties regarding the duration, scope and impact of the
COVID-19 pandemic. Our actual results could differ materially from these forward-looking statements as a result of
many factors, including those discussed in “Risk Factors” and “Note About Forward-Looking Statements” included
elsewhere in this Annual Report on Form 10-K.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2020
compared to the year ended December 31, 2019 is presented below. A discussion regarding our financial condition
and results of operations for year ended December 31, 2019 compared to the year ended December 31, 2018 is
included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our
Annual Report on Form 10-K for the year ended December 31, 2019.
Overview of 2020 Results
Our key financial and operating results as of and for the year ended December 31, 2020 are as follows:
•
Revenue was $1,692.7 million, an increase of 48% compared to 2019.
• Monthly active users ("MAUs") were 459 million, an increase of 37% compared to December 31, 2019.
•
•
•
•
•
•
•
Share-based compensation expense was $321.0 million, a decrease of $1,056.8 million compared to 2019.
Total costs and expenses were $1,835.2 million.
Loss from operations was $(142.5) million.
Net loss was $(128.3) million.
Adjusted EBITDA was $305.0 million.
Cash, cash equivalents and marketable securities were $1,760.3 million.
Headcount was 2,545.
Update on the COVID-19 Pandemic
The COVID-19 pandemic, which resulted in authorities implementing preventative measures to contain or mitigate the
outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines and shelter-in-
place orders continues to have an impact globally. After a sharp deceleration in revenue growth in mid-March as
advertisers responded to the onset of the COVID-19 pandemic, our revenue growth began recovering in the second
quarter of 2020 before accelerating sharply in July 2020 and remaining strong through the end of 2020. Advertiser
demand was broad based as businesses have increasingly adapted to the COVID-19 environment. An increase in the
number of advertisements and a recovery in advertiser demand supported our revenue growth. In addition, people
who began using Pinterest during the COVID-19 pandemic continued to have high levels of engagement in the fourth
quarter of 2020. In fact, users in the COVID-19 pandemic cohort have had higher retention and higher engagement
(defined as impressions, closeups and saves) than a cohort of new users during the same period in 2019.
Since the impact of the COVID-19 pandemic on our results of operations and overall financial performance remains
unprecedented and highly unpredictable, our past results may not be indicative of our future performance. Given the
uncertainty, we are unable to predict the extent and duration of the impact of the COVID-19 pandemic on advertiser
demand, Pinner engagement, and our business, operations and financial results. To the extent the pandemic
continues to disrupt economic activity globally we, like other businesses, would not be immune as it could adversely
affect our business, operations and financial results. See "Risk Factors" and "Note About Forward-Looking
Statements” for additional details.
We continue to actively monitor the situation and may take further actions that alter our business operations as may
be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our
employees, advertisers, Pinners, partners and stockholders. It is not clear what the potential effects any such
alterations or modifications may have on our business, including the effects on our employees, advertisers, Pinners,
suppliers, vendors or other partners, or on our financial results.
51
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, 2020, the proportion of WAUs to MAUs was 56%.
52
Global216239231251265291300322335367416442459Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20050100150200250300350400450500United States76807580828585878890969898Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20050100150200250300350400International139160156171184206215235247277321343361Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20050100150200250300350400 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. The impact of the COVID-19
pandemic on user growth remains difficult to measure and predict, and we are unable to predict the extent to which
new or existing users will maintain their engagement once the pandemic has subsided.
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)
53
Global$173$131$161$190$273$202$261$280$400$272$272$443$706Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0$250$500$750 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.
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
54
United States$163$124$153$181$257$187$238$251$350$237$232$374$582Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0$50$100$150$200$250$300$350$400$450$500$550$600International$10$7$8$9$17$15$24$28$50$35$41$69$123Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0$50$100$150$200$250$300$350$400$450$500$550$600Global$0.83$0.58$0.69$0.79$1.06$0.73$0.88$0.90$1.22$0.77$0.70$1.03$1.57Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0.00$0.50$1.00$1.50$2.00 For the year ended December 31, 2020, global ARPU was $4.26, which represents an increase of 12% compared to
the year ended December 31, 2019. For the year ended December 31, 2020, U.S. ARPU was $15.34 and
international ARPU was $0.88, which represent increases of 27% and 62%, respectively, compared to the year ended
December 31, 2019.
We use MAUs and ARPU to assess the growth and health of our overall business and believe that these metrics best
reflect our ability to attract, retain, engage and monetize our users, and thereby drive revenue.
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, changes in terms of online application stores 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 long-term 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 helping advertisers of all sizes succeed on
Pinterest 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. Our investments in tools are focused on helping 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
55
United States$2.17$1.59$1.98$2.33$3.16$2.25$2.80$2.93$4.00$2.66$2.50$3.85$5.94Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0.00$2.00$4.00$6.00International$0.07$0.05$0.05$0.06$0.09$0.08$0.11$0.13$0.21$0.13$0.14$0.21$0.35Q4'17Q1'18Q2'18Q3'18Q4'18Q1'19Q2'19Q3'19Q4'19Q1'20Q2'20Q3'20Q4'20$0.00$2.00$4.00$6.00 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.
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. 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, 2020, we had
2,545 full-time employees, an increase of 15% compared to December 31, 2019. For information, see "Talent
Management and Development" in section Item 1. Business, which is incorporated herein by reference.
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. We must compete effectively for users and
advertisers in order to grow our business and increase our revenue. For more information, see "Our Competition" in
section Item 1. Business and Item 1A. Risk Factors, which are incorporated herein by reference.
Seasonality. We experience seasonality in user growth, engagement and monetization on our platform. Historically,
we have had lower engagement in the second calendar quarter, though we did not experience typical seasonal trends
and saw an increase in active user growth in the second quarter of 2020 due to shelter-in-place orders related to the
COVID-19 pandemic. 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 and restricted stock awards ("RSAs") 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 and RSAs on a straight-line basis over the requisite service period.
As of December 31, 2020, we had $742.7 million of unrecognized share-based compensation expense, which we
expect to recognize over a weighted-average period of 3.0 years.
For more information about the factors impacting our performance, see “Risk Factors.”
56
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,
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 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
and 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 income, interest expense and other income (expense), net,
provision for income taxes and, for the third quarter of 2020, a one-time payment for the termination of a future lease
contract. 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.
57
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
Year Ended December 31,
2020
2019
2018
$
1,692,658 $
1,142,761 $
755,932
449,358
606,194
442,807
336,803
358,903
1,207,059
611,590
354,075
1,835,162
2,531,627
241,584
251,662
259,929
77,478
830,653
(142,504)
(1,388,866)
(74,721)
16,119
30,164
(635)
(2,137)
13,152
(995)
(127,020)
(1,360,839)
(62,564)
1,303
532
410
$
$
(128,323) $
(1,361,371) $
(62,974)
305,004 $
16,706 $
(39,003)
Year Ended December 31,
2020
2019
2018
$
7,865 $
31,758 $
218,718
35,645
58,792
867,191
239,315
239,517
83
13,155
784
837
Total share-based compensation
$
321,020 $
1,377,781 $
14,859
(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.
58
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, 2020 and 2019
Revenue
Revenue
Year Ended December 31,
2020
2019
2018
100 %
100 %
100 %
27
36
26
20
108
(8)
1
—
(8)
—
(8) %
31
106
54
31
222
(122)
3
—
(119)
—
(119) %
32
33
34
10
110
(10)
2
—
(8)
—
(8) %
Year Ended December 31,
2020
2019
% change
(in thousands)
$
1,692,658 $
1,142,761
48 %
Revenue for the year ended December 31, 2020 increased by $549.9 million compared to the year ended December
31, 2019. Revenue growth was driven by a 12% increase in ARPU supported by a 37% increase in MAUs. These
resulted in a 27% increase in the number of advertisements served and a 17% increase in the price of
advertisements.
For the year ended December 31, 2020 compared to the year ended December 31, 2019, revenue based on our
estimate of the geographic location of our users increased by 39% in the United States to $1,424.5 million driven by a
27% increase in U.S. ARPU supported by an 11% increase in U.S. MAUs. International revenue increased by 129% to
$268.2 million driven by a 62% increase in international ARPU supported by a 46% increase in international MAUs.
Cost of Revenue
Cost of revenue
Percentage of revenue
Year Ended December 31,
2020
2019
% change
(in thousands)
$
449,358
$
358,903
25 %
27 %
31 %
Cost of revenue for the year ended December 31, 2020 increased by $90.5 million compared to the year ended
December 31, 2019. The increase was primarily due to higher absolute hosting costs due to user growth offset by a
$23.9 million decrease in share-based compensation expense due to our IPO in 2019.
59
Research and Development
Research and development
Percentage of revenue
Year Ended December 31,
2020
2019
% change
(in thousands)
$
606,194
$ 1,207,059
(50) %
36 %
106 %
Research and development for the year ended December 31, 2020 decreased by $600.9 million compared to the year
ended December 31, 2019. The decrease was primarily due to a $648.5 million decrease in share-based
compensation expense due to our IPO in 2019 offset by a 17% increase in average headcount, which drove higher
personnel expenses, as well as higher consulting expenses.
Sales and Marketing
Sales and marketing
Percentage of revenue
Year Ended December 31,
2020
2019
% change
(in thousands)
$
442,807
$
611,590
(28) %
26 %
54 %
Sales and marketing for the year ended December 31, 2020 decreased by $168.8 million compared to the year ended
December 31, 2019. The decrease was primarily due to a $203.7 million decrease in share-based compensation
expense due to our IPO in 2019 and lower marketing expenses, offset by a 22% increase in average headcount,
which drove higher personnel expenses.
General and Administrative
General and administrative
Percentage of revenue
Year Ended December 31,
2020
2019
% change
(in thousands)
$
336,803
$
354,075
(5) %
20 %
31 %
General and administrative for the year ended December 31, 2020 decreased by $17.3 million compared to the year
ended December 31, 2019. The decrease was primarily due to a $180.7 million decrease in share-based
compensation expense due to our IPO in 2019, offset by a one-time payment of $89.5 million for the termination of a
future lease contract, a $22.5 million settlement with our former Chief Operating Officer, an increase in outside advisor
and legal-related expenses, and a 14% increase in average headcount, which drove higher personnel expenses.
Other Income
Interest income
Interest expense and other income (expense)
Other income
Year Ended December 31,
2020
2019
% change
(in thousands)
16,119 $
(635)
15,484 $
30,164
(2,137)
28,027
$
$
(47) %
70 %
(45) %
Other income for the year ended December 31, 2020 decreased by $12.5 million compared to the year ended
December 31, 2019. The decrease was primarily due to lower returns on our marketable securities as a result of lower
interest rates.
60
Provision for Income Taxes
Provision for income taxes
Year Ended December 31,
2020
2019
% change
(in thousands)
1,303 $
$
532
145 %
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,
2020
2019
% change
(in thousands)
$
$
(128,323) $
(1,361,371)
305,004 $
16,706
91 %
1726 %
Net loss for the year ended December 31, 2020 was $(128.3) million, as compared to $(1,361.4) million for the year
ended December 31, 2019. Adjusted EBITDA was $305.0 million for the year ended December 31, 2020, as
compared to $16.7 million for the year ended December 31, 2019, 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.
61
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, 2020. 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 in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K. Our historical operating data may not be
indicative of our future performance.
Three Months Ended
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019 (1)
Mar. 31,
2019
$ 705,617 $ 442,616 $ 272,485 $ 271,940 $ 399,898 $ 279,703 $ 261,249 $ 201,911
(in thousands, except per share amounts)
Revenue
Costs and expenses
(2):
Cost of revenue
129,023
112,844
108,259
99,232
96,274
83,520
105,415
73,694
Research and
development
163,710
160,187
136,593
145,704
165,033
167,703
Sales and marketing 120,766
118,531
86,483
117,027
127,537
110,740
801,879
296,919
72,444
76,394
General and
administrative (3)
Total costs and
expenses
Income (loss) from
operations
86,969
148,087
45,680
56,067
54,241
51,450
224,179
24,205
500,468
539,649
377,015
418,030
443,085
413,413
1,428,392
246,737
205,149
(97,033) (104,530) (146,090)
(43,187) (133,710) (1,167,143)
(44,826)
Interest income
1,854
2,896
4,218
7,151
8,141
9,837
8,127
4,059
Interest expense and
other income
(expense), net
Income (loss) before
provision for income
taxes
Provision for (benefit
from) income taxes
1,509
(51)
(16)
(2,077)
(133)
(1,056)
(448)
(500)
208,512
(94,188) (100,328) (141,016)
(35,179) (124,929) (1,159,464)
(41,267)
671
32
420
180
539
(197)
37
153
Net income (loss)
$ 207,841 $ (94,220) $ (100,748) $ (141,196) $ (35,718) $ (124,732) $ (1,159,501) $ (41,420)
Net income (loss) per
share attributable to
common stockholders: $ 207,841 $ (94,220) $ (100,748) $ (141,196) $ (35,718) $ (124,732) $ (1,159,501) $ (41,420)
Basic
Diluted
Adjusted EBITDA (4)
$
$
0.34 $
(0.16) $
(0.17) $
(0.25) $
(0.06) $
(0.23) $
(2.62) $
(0.33)
0.30 $
(0.16) $
(0.17) $
(0.25) $
(0.06) $
(0.23) $
(2.62) $
(0.33)
$ 299,182 $ 93,042 $ (33,900) $ (53,320) $ 77,308 $
3,871 $
(26,037) $ (38,436)
(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,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
Three Months Ended
Cost of revenue
$
1,816 $
2,298 $
2,325 $
1,426 $
2,018 $
1,568 $ 28,157 $
Research and development
Sales and marketing *
General and administrative
62,097
11,842
10,464
61,357
11,958
16,019
46,358
48,906
(2,074)
13,919
15,536
16,773
73,030
15,915
21,237
83,539
709,996
21,243
202,128
23,938
194,318
15
626
29
24
Total share-based compensation
$ 86,219 $ 91,632 $
62,145 $ 81,024 $ 112,200 $ 130,288 $ 1,134,599 $
694
*
Share-based compensation expense was negative for the three months ended June 30, 2020 due to the reversal of previously
recognized share-based compensation expense related to unvested RSUs forfeited by our former Chief Operating Officer.
62
(3)
In August 2020, we entered into an agreement to terminate a future lease contract which involved a one-time payment of $89.5 million.
(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,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
Three Months Ended
Reconciliation of Net Income
(Loss) to Adjusted EBITDA
Net Income (Loss)
$ 207,841 $ (94,220) $
(100,748) $ (141,196) $ (35,718) $ (124,732) $ (1,159,501) $ (41,420)
Depreciation and amortization
7,814
8,943
8,485
11,746
8,295
7,293
6,507
Share-based compensation
86,219
91,632
62,145
81,024
112,200
130,288
1,134,599
5,696
694
Interest income
(1,854)
(2,896)
(4,218)
(7,151)
(8,141)
(9,837)
(8,127)
(4,059)
Interest expense and other
(income) expense, net
Provision for (benefit from)
income taxes
Termination of future lease
contract
(1,509)
671
51
32
16
2,077
133
1,056
448
420
180
539
(197)
—
89,500
—
—
—
—
500
153
—
37
—
Adjusted EBITDA
$ 299,182 $ 93,042 $
(33,900) $ (53,320) $ 77,308 $
3,871 $
(26,037) $ (38,436)
The following table sets forth the components of our unaudited quarterly consolidated statements of operations (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
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
Three Months Ended
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
18
23
17
12
71
29
—
—
30
—
25
36
27
33
122
(22)
1
—
40
50
32
17
138
(38)
2
—
36
54
43
21
154
(54)
3
(1)
24
41
32
14
111
(11)
2
—
30
60
40
18
148
(48)
4
—
40
307
114
86
547
(447)
3
—
36
36
38
12
122
(22)
2
—
(21)
(37)
(52)
(9)
(45)
(444)
(20)
—
—
—
—
(9) %
—
—
—
(45) %
(444) %
(21) %
Net Income (loss)
29 %
(21) %
(37) %
(52) %
63
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, 2020, we had $1,760.3 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,
2020, $82.1 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, 2020.
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 continue to monitor the effects of the COVID-19 pandemic on our working capital needs and may
require additional capital resources in the future. In addition, the COVID-19 pandemic has caused disruption in the
capital markets. It could make financing more difficult and/or expensive, and we may not be able to obtain such
financing on terms acceptable to us or at all.
For the years ended December 31, 2020, 2019 and 2018, 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,
2020
2019
2018
$
$
$
28,826 $
657 $
(47,623) $
(586,501) $
19,638 $
1,128,198 $
(60,369)
114,063
(2,216)
64
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 $28.2 million for the year ended December 31, 2020
compared to the year ended December 31, 2019, primarily due to a decrease in our net loss after adjusting for non-
cash reconciling items offset by an increase in accounts receivable.
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 decreased by $538.9 million for the year ended December 31,
2020 compared to the year ended December 31, 2019, primarily due to increased 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 decreased by $1,108.6 million
for the year ended December 31, 2020 compared to the year ended December 31, 2019 primarily due to the net
proceeds related to our IPO in 2019 offset by a decrease in tax withholdings on release of RSUs.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Contractual Obligations
The following table summarizes our contractual obligations and commitments as of December 31, 2020 (in
thousands):
Operating leases
Total
$
$
231,006 $
231,006 $
52,472 $
52,472 $
56,783 $
56,783 $
24,242 $
24,242 $
97,509
97,509
Total
2021
2022-2023
2024-2025
Thereafter
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. In August 2020, we entered into an agreement to
terminate the lease which involved a one-time payment of $89.5 million. As a result of the termination, we eliminated
potential future total minimum lease payments of approximately $440.0 million.
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.
Some of our estimates may require increased judgment due to the significant volatility, uncertainty and economic
disruption of the COVID-19 pandemic. We continue to monitor the effects of the COVID-19 pandemic, and our
estimates and judgments may change materially as new events occur or additional information becomes available to
us.
Refer to Note 1 to our consolidated financial statements for further information on our other significant accounting
policies.
65
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.
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 at inception 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.
66
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, 2020, 2019 and 2018.
Interest Rate Risk
As of December 31, 2020, we held cash, cash equivalents and marketable securities of $1,760.3 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 $7.6 million and $5.8 million as of December 31, 2020 and 2019, respectively.
67
Item 8. Financial Statements and Supplementary Data
PINTEREST, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports 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 Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
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.
69
72
73
74
75
76
77
68
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Pinterest, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Pinterest, Inc. (the Company) as of December 31,
2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 4, 2021, expressed an unqualified opinion
thereon.
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 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. 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
69
Description of the
Matter
How We Addressed
the Matter in Our
Audit
Revenue Recognition
As described in Note 1 to the consolidated financial statements, the Company generates
substantially all of its revenues by delivering ads on the Pinterest website and mobile
application. Revenue is recognized after transferring control of the promised goods or
services to customers, which occurs when a user clicks on an ad contracted on a cost per
click basis, views an ad contracted on a cost per thousand impressions basis or views a
video ad contracted on a cost per view basis.
The Company’s revenue recognition process utilizes complex proprietary systems and tools
for the initiation, processing, delivery and recording of advertising transactions which includes
a high volume of transactions. This process is dependent on the effective design and
operation of multiple systems, processes, data sources and controls which require significant
audit effort. Also, the identification and evaluation of non-standard terms and conditions
requires incremental judgements to determine the distinct performance obligations and
potential impact to the timing of revenue recognition.
With the support of our information technology professionals, we identified and tested the
relevant systems and tools used for the determination of initiation, processing, delivery of
advertisements and recording of revenue, which included processes and controls related to
access to the relevant systems and data, changes to the relevant systems and interfaces,
and configuration of the relevant systems. We further obtained an understanding, evaluated
the design, and tested the operating effectiveness of the Company’s internal controls over
the identification and evaluation of non-standard terms and conditions and the resulting
impact on timing and amount of revenue recognition.
To test the Company’s recognition of revenue, our audit procedures included, among others,
testing the completeness and accuracy of the underlying data within the Company’s revenue
and billing systems, and comparing revenue recognized to accounts receivables and cash
receipts. Additionally, we examined standard customer terms and conditions and we selected
a sample of non-standard contractual arrangements to test that all distinct performance
obligations were identified and to test the timing and amount of revenue recognition.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
San Francisco, California
February 4, 2021
70
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Pinterest, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Pinterest, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission 2013 framework (the COSO criteria). In our opinion, Pinterest, Inc. (the Company) maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the
COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, 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, 2020, and
the related notes and our report dated February 4, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
San Francisco, California
February 4, 2021
71
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 $8,811 and $2,851 as of December 31, 2020
and 2019, 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 AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Total current liabilities
Operating lease liabilities
Other liabilities
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.00001 par value, 6,666,667 shares authorized, 530,140
and 360,850 shares issued and outstanding as of December 31, 2020 and 2019,
respectively; Class B common stock, $0.00001 par value, 1,333,333 shares
authorized, 96,232 and 209,054 shares issued and outstanding as of December 31,
2020 and 2019, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2020
2019
$
669,230 $
649,666
1,091,076
1,063,679
563,733
33,502
316,367
37,522
2,357,541
2,067,234
69,375
155,916
13,562
9,110
3,955
91,992
188,251
14,576
25,339
5,925
$
2,609,459 $
2,393,317
$
49,491 $
155,340
204,831
139,321
22,936
367,088
34,334
141,823
176,157
173,392
20,063
369,612
6
6
4,574,934
4,229,778
2,480
647
(2,335,049)
(2,206,726)
2,242,371
2,023,705
$
2,609,459 $
2,393,317
The accompanying notes are an integral part of these consolidated financial statements.
72
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,
2020
2019
2018
$
1,692,658 $
1,142,761 $
755,932
449,358
606,194
442,807
336,803
358,903
1,207,059
611,590
354,075
1,835,162
2,531,627
241,584
251,662
259,929
77,478
830,653
(142,504)
(1,388,866)
(74,721)
16,119
30,164
(635)
(2,137)
13,152
(995)
(127,020)
(1,360,839)
(62,564)
1,303
532
410
$
$
(128,323) $
(1,361,371) $
(62,974)
(0.22) $
(3.24) $
(0.50)
596,264
420,473
127,091
The accompanying notes are an integral part of these consolidated financial statements.
73
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Net loss
Other comprehensive income (loss), net of taxes:
Year Ended December 31,
2020
2019
2018
$
(128,323) $
(1,361,371) $
(62,974)
Change in unrealized gain (loss) on available-for-sale marketable
securities
Change in foreign currency translation adjustment
Comprehensive loss
1,670
163
2,057
11
(443)
(212)
$
(126,490) $
(1,359,303) $
(63,629)
The accompanying notes are an integral part of these consolidated financial statements.
74
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except per share amounts)
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
Redeemable
Convertible Preferred
Stock
Common Stock
Shares
Amount
Shares
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Stockholders’
Equity
(Deficit)
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
Release of restricted stock units
Shares repurchased for tax withholdings on release of restricted
stock units
Issuance of common stock for cash upon exercise of stock
options, net
Issuance of common stock related to charitable contributions
Issuance of restricted stock awards, net
Share-based compensation
Other comprehensive income
Net loss
—
—
—
—
—
—
—
—
527
—
—
—
—
—
—
—
671
14,859
—
—
—
—
(655)
—
—
—
—
671
14,859
(655)
(62,974)
(62,974)
308,373 $ 1,465,399
127,298 $
1 $ 252,212 $
(1,421) $
(845,355) $
(594,563)
—
—
—
—
28,084
1
—
—
—
(475,015)
(308,373)
(1,465,399)
308,622
3
1,470,074
86,250
1
1,563,382
19,650
—
41,344
—
—
—
—
1,377,781
—
—
—
—
—
—
—
—
—
—
2,068
—
—
1
(475,015)
—
1,470,077
—
—
—
—
1,563,383
41,344
1,377,781
2,068
—
(1,361,371)
(1,361,371)
569,904 $
6 $ 4,229,778 $
647 $
(2,206,726) $
2,023,705
19,890
—
34,149
150
2,279
—
—
—
—
—
—
—
—
—
—
—
—
(56,894)
78,282
2,748
—
321,020
—
—
—
—
—
—
—
—
1,833
—
—
—
—
—
—
—
—
(56,894)
78,282
2,748
—
321,020
1,833
—
(128,323)
(128,323)
626,372 $
6 $ 4,574,934 $
2,480 $
(2,335,049) $
2,242,371
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance as of December 31, 2020
— $
The accompanying notes are an integral part of these consolidated financial statements.
75
PINTEREST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to net cash provided by (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
Year Ended December 31,
2020
2019
2018
$
(128,323) $
(1,361,371) $
(62,974)
36,988
321,020
11,080
27,791
1,377,781
(3,990)
20,859
14,859
1,027
(253,173)
(94,224)
(86,094)
4,128
41,898
15,721
23,647
7,161
32,378
11,636
31,890
(44,160)
(28,395)
28,826
657
(17,401)
(33,783)
(1,216,260)
(1,075,875)
265,422
920,300
316
162,198
360,959
—
18,142
18,492
6,533
26,336
(17,549)
(60,369)
(22,194)
(518,711)
94,381
561,087
(500)
Net cash provided by (used in) investing activities
(47,623)
(586,501)
114,063
Financing activities
Proceeds from initial public offering, net of underwriters' discounts and commissions
Proceeds from exercise of stock options, net
—
78,282
1,573,200
41,344
Shares repurchased for tax withholdings on release of restricted stock units
(56,894)
(475,015)
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 $
15,089 $
—
671
—
(2,552)
(335)
(2,216)
(157)
51,321
83,969
—
—
(1,750)
(11,331)
19,638
327
1,168
677,743
1,128,198
99
542,453
135,290
678,911 $
677,743 $
135,290
820 $
4,772 $
76,387 $
1,884
11,416
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
Total cash, cash equivalents, and restricted cash
$
$
669,230 $
649,666 $
122,509
571
9,110
2,738
25,339
1,057
11,724
678,911 $
677,743 $
135,290
The accompanying notes are an integral part of these consolidated financial statements.
76
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, 2020,
2019 and 2018, we recorded total share-based compensation expense of $321.0 million, $1,377.8 million and $14.9
million, respectively.
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.
Some of our estimates may require increased judgment due to the significant volatility, uncertainty and economic
disruption of the COVID-19 pandemic. We continue to monitor the effects of the COVID-19 pandemic, and our
estimates and judgments may change materially as new events occur or additional information becomes available to
us.
Segments
We operate as a single operating segment. Our chief operating decision maker is our Chief Executive Officer ("CEO"),
who reviews financial information presented on a consolidated basis, accompanied by disaggregated information
77
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 2020 and 2019.
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 and restricted stock awards ("RSAs") 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 and RSAs on a straight-line basis over the requisite service period.
We measure RSUs and RSAs based on the fair market value of our common stock on the grant date, and we account
for forfeitures as they occur.
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.
78
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advertising Expenses
We record advertising expenses as incurred and include these in sales and marketing in the consolidated statements
of operations. Advertising expenses were $30.3 million, $55.0 million and $19.2 million for the years ended December
31, 2020, 2019 and 2018, 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 expected credit losses 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.
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, Net of Allowances
We record accounts receivable at the original invoiced amount. We maintain an allowance for credit losses 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 credit losses 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
79
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 at inception 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.
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.
80
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 income (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.
No customer accounted for more than 10% of our revenue for the years ended December 31, 2020 and December
31, 2018. One customer accounted for 10% of our revenue for the year ended December 31, 2019.
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,
2020, 2019 and 2018.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement
and recognition of expected credit losses for financial assets not held at fair value. ASU 2016-13 replaces the existing
incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier
recognition of credit losses. We adopted ASU 2016-13 as of January 1, 2020, using the modified retrospective
method, and while the effects of adoption on our consolidated financial statements were not material, we continue to
monitor the effects of the COVID-19 pandemic on expected credit losses.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general
principles for income taxes. We elected to early adopt ASU 2019-12 effective as of January 1, 2020, and the effects of
adoption on our consolidated financial statements were not material.
81
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Cash, Cash Equivalents and Marketable Securities
Cash, cash equivalents and marketable securities consist of the following (in thousands):
Cash and cash equivalents:
Cash
Money market funds
Commercial paper
U.S. treasury securities
Certificates of deposit
Total cash and cash equivalents
Marketable securities:
Corporate bonds
U.S. treasury securities
Commercial paper
Certificates of deposit
Municipal securities
U.S. agency bonds
Non-U.S. government and supranational bonds
Asset-backed securities
December 31, 2020
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
$
352,061 $
— $
— $
352,061
225,643
48,530
39,997
2,996
669,227
452,723
202,795
234,170
134,828
17,604
16,012
15,938
14,752
—
2
1
—
3
1,782
260
86
57
22
6
13
61
—
—
—
—
—
(18)
(1)
(3)
(3)
(7)
—
(1)
—
225,643
48,532
39,998
2,996
669,230
454,487
203,054
234,253
134,882
17,619
16,018
15,950
14,813
Total marketable securities
1,088,822
2,287
(33)
1,091,076
Total
$
1,758,049 $
2,290 $
(33) $
1,760,306
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
December 31, 2019
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
$
323,194 $
— $
— $
323,194
214,413
105,359
3,792
2,914
649,672
449,496
201,561
196,304
114,425
100,647
—
1
—
—
1
981
88
31
188
38
—
(6)
(1)
—
(7)
(44)
(9)
(7)
(14)
(6)
214,413
105,354
3,791
2,914
649,666
450,433
201,640
196,328
114,599
100,679
Total marketable securities
1,062,433
1,326
(80)
1,063,679
Total
$
1,712,105 $
1,327 $
(87) $
1,713,345
Our allowance for credit losses for our marketable securities was not material as of December 31, 2020 and 2019. We
continue to monitor the effects of the COVID-19 pandemic on expected credit losses.
82
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
December 31, 2020
$
$
787,395
303,681
1,091,076
Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.
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
U.S. treasury securities
Certificates of deposit
Marketable securities:
Corporate bonds
Commercial paper
U.S. treasury securities
Certificates of deposit
Municipal securities
U.S. agency bonds
Non-U.S. government and supranational bonds
Asset-backed securities
Prepaid expenses and other current assets:
Certificates of deposit
Restricted cash:
December 31, 2020
Level 1
Level 2
Level 3
Total
$
225,643 $
— $
— $
225,643
—
39,998
—
—
—
203,054
—
—
—
—
—
—
48,532
—
2,996
454,487
234,253
—
134,882
17,619
16,018
15,950
14,813
571
—
—
—
—
—
—
—
—
—
—
—
—
48,532
39,998
2,996
454,487
234,253
203,054
134,882
17,619
16,018
15,950
14,813
571
Certificates of deposit
$
— $
9,110 $
— $
9,110
83
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
December 31, 2019
Level 1
Level 2
Level 3
Total
$
214,413 $
— $
— $
214,413
—
—
—
—
201,640
—
—
—
—
105,354
3,791
2,914
450,433
—
196,328
114,599
100,679
2,738
—
—
—
—
—
—
—
—
—
105,354
3,791
2,914
450,433
201,640
196,328
114,599
100,679
2,738
Certificates of deposit
$
— $
25,339 $
— $
25,339
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.
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,
2020
2019
$
101,242 $
109,807
24,516
27,230
152,988
(83,770)
157
$
69,375 $
22,353
22,963
155,123
(73,270)
10,139
91,992
Depreciation expense was $36.0 million, $26.3 million and $20.1 million for the years ended December 31, 2020,
2019 and 2018, 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
December 31,
2020
2019
$
39,233 $
33,215
43,633
39,259
27,322
26,574
46,527
41,400
Accrued expenses and other current liabilities
$
155,340 $
141,823
84
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Goodwill and Intangible Assets, Net
Goodwill was unchanged during the years ended December 31, 2020 and 2019.
Intangible assets, net consists of the following (in thousands):
Acquired patents
Acquired technology and other intangibles
Total intangible assets, net
December 31, 2020
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
9,037 $
4,385
13,422 $
(2,380) $
(4,385)
(6,765) $
6,657
—
6,657
Weighted-
Average Useful
Life (1)
9.1 years
1.5 years
Acquired patents
Acquired technology and other intangibles
Total intangible assets, net
December 31, 2019
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
9,037 $
4,385
13,422 $
(1,370) $
(4,381)
(5,751) $
7,667
4
7,671
Weighted-
Average Useful
Life (1)
9.1 years
1.5 years
(1) Based on the weighted-average useful life established as of acquisition date.
Amortization expense was $1.0 million, $1.5 million and $0.7 million for the years ended December 31, 2020, 2019
and 2018, respectively. Estimated future amortization expense as of December 31, 2020, is as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
Intangible Asset
Amortization
$
$
1,009
1,009
1,009
1,009
999
1,622
6,657
85
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Commitments and Contingencies
As of December 31, 2020, our non-cancelable contractual commitments, consisting of operating leases, are as follows
(in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
Operating Leases
Total
Commitments
$
52,472
35,224
21,559
11,942
12,300
97,509
$
231,006
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. In August 2020, we entered into an agreement to
terminate the lease which involved a one-time payment of $89.5 million. As a result of the termination, we eliminated
potential future total minimum lease payments of approximately $440.0 million.
Legal Matters
We are involved in various lawsuits, claims and proceedings that arise in the ordinary course of business, including
those described below. While the results of legal matters are inherently uncertain, we do not believe there is a
reasonable possibility that 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.
On November 23, 2020, Pinterest and our CEO and Chief Financial Officer were named as defendants in a putative
securities class action filed in the U.S. District Court for the Northern District of California. The lawsuit alleges claims
under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and alleges that
defendants made material false and misleading public statements about our revenue and user growth in 2019. The
complaint seeks damages, litigation costs, and interest. We continue to evaluate these claims but do not believe this
litigation will have a material impact on our financial position or results of operations.
In November and December 2020, certain or our executives and members of our board of directors were named as
defendants in derivative lawsuits filed in the U.S. District Court for the Northern District of California. Pinterest was
also named as a nominal defendant. The lawsuits purport to assert claims for breach of fiduciary duty in connection
with allegations of gender and racial discrimination at Pinterest. In addition, the lawsuits purport to assert claims for
waste, abuse of control, aiding and abetting breaches of fiduciary duties, unjust enrichment, and violations of Section
14(a) of the Exchange Act. The complaints seek declaratory and injunctive relief, corporate governance changes,
monetary damages, interest, disgorgement, and fees and costs. We continue to evaluate these claims but do not
believe this litigation will have a material impact on our financial position or results of operations.
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.
86
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Our total borrowing capacity under the revolving credit facility is $500.0 million as of December 31, 2020. 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, 2020.
Letters of Credit
We had $7.5 million and $25.5 million of secured letters of credit outstanding as of December 31, 2020 and 2019,
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 2021 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, 2020, 2019 and 2018, are as follows (in
thousands):
Lease cost:
Operating lease cost
Short-term lease cost
Total
Year Ended December 31,
2020
2019
2018
$
$
51,285 $
40,257 $
3,933
3,456
55,218 $
43,713 $
27,469
2,765
30,234
The weighted-average remaining term of our operating leases was 8.1 years and 8.1 years, and the weighted-
average discount rate used to measure the present value of our operating lease liabilities was 4.8% and 4.6% as of
December 31, 2020 and 2019, respectively.
Maturities of our operating lease liabilities, which do not include short-term leases, as of December 31, 2020, are as
follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less imputed interest
Total operating lease liabilities
87
Operating
Leases
51,396
35,224
21,559
11,942
12,300
97,509
229,930
(46,976)
182,954
$
$
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash payments included in the measurement of our operating lease liabilities were $54.3 million, $38.4 million and
$26.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
As of December 31, 2020, we have not entered into any 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, RSAs 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, 2020.
Our 2019 Plan became effective upon closing of our IPO and succeeds our 2009 Plan. Our 2019 Plan provides for the
issuance of stock options, RSAs, 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. 99,801,162 shares of our Class A
common stock were reserved for future issuance under our 2019 Plan as of December 31, 2020.
The number of shares of our Class A common stock available for issuance under the 2019 Plan will be increased by
the number of shares of our Class B common stock subject to awards outstanding under our 2009 Plan 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 through 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, 2020, was as follows (in thousands, except per share
amounts):
Stock Options Outstanding
Shares
Weighted-
Average
Exercise Price
56,966 $
1,130
(34,149)
23,947 $
23,099 $
2.25
22.35
2.29
3.15
2.45
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value (1)
3.5 $
933,299
2.9 $
2.7 $
1,502,604
1,465,680
Outstanding as of December 31, 2019
Granted
Exercised
Outstanding as of December 31, 2020
Exercisable as of December 31, 2020
(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, 2020, 2019 and 2018,
was $3.3 million, $2.2 million and $18.6 million, respectively. The aggregate intrinsic value of stock options exercised
during the years ended December 31, 2020, 2019 and 2018, was $1,023.9 million, $425.1 million and $5.9 million,
respectively.
88
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Unit and Restricted Stock Award Activity
RSU and RSA activity during the year ended December 31, 2020, was as follows (in thousands, except per share
amounts):
Outstanding as of December 31, 2019
Granted
Released
Forfeited
Outstanding as of December 31, 2020
Share-Based Compensation
Restricted Stock Units
Outstanding
Shares
Weighted
Average Grant
Date Fair Value
56,791 $
31,224
(23,304)
(10,632)
54,079 $
20.19
19.75
19.57
18.89
20.45
Share-based compensation expense during the years ended December 31, 2020, 2019 and 2018, was as follows (in
thousands):
Cost of revenue
Research and development
Sales and marketing
General and administrative
Year Ended December 31,
2020
2019
2018
$
7,865 $
31,758 $
218,718
35,645
58,792
867,191
239,315
239,517
83
13,155
784
837
Total share-based compensation
$
321,020 $
1,377,781 $
14,859
As of December 31, 2020, we had $742.7 million of unrecognized share-based compensation expense, which we
expect to recognize over a weighted-average period of 3.0 years.
9. Net Loss Per Share Attributable to Common Stockholders
We present net loss per share attributable to common stockholders using the two-class method required for multiple
classes of common stock and participating securities. Holders of our Class A and Class B common stock have
identical rights except with respect to voting, conversion and transfer rights and therefore share equally in our net
losses. Prior to our IPO, we considered 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, RSAs, 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):
89
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Numerator:
Net loss attributable to common
stockholders
Denominator:
Weighted-average shares used in
computing net loss per share attributable to
common stockholders, basic and diluted
Net loss per share attributable to common
stockholders, basic and diluted
Year Ended December 31,
2020
2019
2018
Class A
Class B
Class A
Class B
Common
$
(96,499) $
(31,824) $
(459,412) $
(901,959) $
(62,974)
448,392
147,872
141,894
278,579
127,091
$
(0.22) $
(0.22) $
(3.24) $
(3.24) $
(0.50)
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 and restricted stock awards
Redeemable convertible preferred stock warrants
Common stock warrants
Total
10. Income Taxes
Year Ended December 31,
2020
2019
2018
—
40,067
63,603
—
—
95,469
72,999
69,800
77
—
308,373
76,911
68,795
158
96
103,670
238,345
454,333
The components of loss before provision for income taxes are as follows (in thousands):
United States
Foreign
Loss before provision for income taxes
Year Ended December 31,
2020
2019
2018
$
$
49,973 $
(1,266,677) $
(176,993)
(94,162)
(127,020) $
(1,360,839) $
(31,641)
(30,923)
(62,564)
90
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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)
Year Ended December 31,
2020
2019
2018
$
— $
— $
79
691
770
654
5
(126)
533
—
1,677
1,677
(555)
(76)
(514)
(1,145)
532 $
—
—
500
500
4
4
(98)
(90)
410
Provision for income taxes
$
1,303 $
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):
Tax at U.S. statutory rate
State income taxes, net of benefit
Foreign losses not benefited
Permanent book/tax differences
Legal settlement
Share-based compensation
Change in valuation allowance
Tax credits
Other
Provision for income taxes
Year Ended December 31,
2020
2019
2018
$
(26,674) $
(285,776) $
(13,138)
84
37,716
1,051
2,290
(303,245)
352,410
(77)
20,932
2,453
—
(84,366)
422,315
(63,205)
(74,399)
876
$
1,303 $
(550)
532 $
4
6,891
1,967
—
(864)
15,952
(10,460)
58
410
The primary difference between our effective tax rate and the federal statutory rate is the full valuation allowance we
have established on our federal, state and foreign net operating losses and credits.
91
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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,
2020
2019
$
784,721 $
269,658
18,106
44,446
96,932
1,213,863
416,709
167,489
15,960
52,734
133,067
785,959
(1,176,910)
(737,003)
36,953
48,956
(34,576)
(1,523)
(36,099)
$
854 $
(46,398)
(1,862)
(48,260)
696
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,
2020, 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. and Irish deferred tax assets will not be
realized as of December 31, 2020. Accordingly, we have established a full valuation allowance on our U.S. and Irish
deferred tax assets. Our valuation allowance increased by $439.9 and $520.1 million during the years ended
December 31, 2020 and 2019, respectively, primarily due to U.S. federal and state tax losses and credits incurred
during the period.
As of December 31, 2020, we had federal, California and other state net operating loss carryforwards of $3,282.2
million, $405.6 million and $1214.9 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,
2020, we had $37.9 million of Irish net operating loss carryforwards that can be carried forward indefinitely.
As of December 31, 2020, we had federal and California research and development credit carryforwards of $241.6
million and $181.7 million, respectively. If not utilized, our federal carryforwards will begin to expire in 2030. Our
California carryforwards do not expire.
92
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in gross unrecognized tax benefits were as follows (in thousands):
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
Increases for tax positions of prior years
Decreases for tax positions of prior years
Increases for tax positions of current year
Balance as of December 31, 2020
Gross Unrecognized
Tax Benefits
$
$
$
38,550
(50)
90,685
129,185
886
(37,250)
47,339
140,160
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, the taxpayer filed a
petition for a rehearing before the full Ninth Circuit. and the request was denied on November 12, 2019. On February
10, 2020, the taxpayer filed a petition to appeal the decision to the Supreme Court and on June 22, 2020, the
Supreme Court denied the petition. As a result of the Supreme Court’s action, our U.S. deferred tax asset related to
net operating losses was reduced by $24.4 million and we no longer consider this to be an uncertain tax position.
There is no impact on our effective tax rate for the year ended December 31, 2020, due to our full valuation allowance
against our deferred tax assets.
Recognizing the $140.2 million of gross unrecognized tax benefits we had as of December 31, 2020 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, 2020 and 2019.
We are subject to taxation in the U.S. and various other state and foreign jurisdictions. As we have net operating loss
carryforwards 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 2015 and forward. The Internal Revenue
Service has started an examination of our U.S. consolidated federal income tax return for calendar year 2018. We
believe that we have adequately reserved for any adjustments to the provision for income taxes or other tax items that
may ultimately result from these examinations.
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.
93
PINTEREST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. 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,
2020
2019
2018
$
$
1,404,282 $
1,010,186 $
288,376
132,575
1,692,658 $
1,142,761 $
697,170
58,762
755,932
(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,
2020
2019
$
$
213,831 $
11,460
225,291 $
266,763
13,480
280,243
(1) No individual country other than the United States exceeded 10% of our total property and equipment, net and operating lease right-of-use
assets for any period presented.
94
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,
2020, our disclosure controls and procedures are effective to provide reasonable assurance that information we are
required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC),
and that such information is accumulated and communicated to our management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of
our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the
assessment, management has concluded that its internal control over financial reporting was effective as of
December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements in accordance with U.S. GAAP. Our independent registered public accounting firm, Ernst &
Young LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in
Part II, Item 8 of this Annual Report on Form 10-K.
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. Further, while the majority of our
employees are working remotely, we have not experienced any material impact in our internal control over financial
reporting as a result of the COVID-19 pandemic. We continue to monitor for and assess any effects the COVID-19
pandemic may have on the design or operating effectiveness of our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting,
management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls
and procedures and internal control over financial reporting must reflect the fact that there are resource constraints
and that management is required to apply judgment in evaluating the benefits of possible controls and procedures
relative to their costs.
Item 9B. Other Information
None.
95
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 2021 Annual Meeting of
Stockholders to be filed with the Securities and Exchange Commission (SEC) within 120 days of December 31, 2020.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the section titled “Proposal 3 – Advisory Non-
Binding Vote on our Named Executive Officers' Compensation” that will be included in our Definitive Proxy Statement
for the 2021 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2020.
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 2021 Annual Meeting of Stockholders to be filed with the SEC within
120 days of December 31, 2020.
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 2021 Annual Meeting of
Stockholders to be filed with the SEC within 120 days of December 31, 2020.
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 2021 Annual Meeting
of Stockholders to be filed with the SEC within 120 days of December 31, 2020.
96
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+
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.
8-K
8-K
001-38872
001-38872
3.2
3.3
April 23, 2019
April 23, 2019
S-1
333-230458
4.2
March 22, 2019
Description of our Common Stock.
10-K
001-38872
4.2
February 7, 2020
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.
S-1/A
333-230458
10.1
April 8, 2019
S-1/A
333-230458
10.14
April 8, 2019
S-1
333-230458
10.2
March 22, 2019
S-1/A
333-230458
10.3
March 29, 2019
S-1/A
333-230458
10.4
March 29, 2019
S-1/A
333-230458
10.5
March 29, 2019
10.7+
Pinterest, Inc. 2009 Stock Plan, as amended.
S-1
333-230458
10.7
March 22, 2019
10.8+
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.
S-1
333-230458
10.8
March 22, 2019
97
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.
S-1
333-230458
10.9
March 22, 2019
S-1
333-230458
10.10
March 22, 2019
Pinterest, Inc. 2019 Omnibus Incentive Plan.
S-1/A
333-230458
10.11
March 29, 2019
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.
S-1/A
333-230458
10.12
April 8, 2019
10-K
001-38872
10.14
February 7, 2020
10-K
001-38872
10.15
February 7, 2020
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
10.15+
Non-Employee Director Compensation Policy.
S-1/A
333-230458
10.13
April 8, 2019
S-1/A
333-230458
10.14
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
10.16+
10.17+
21.1
23.1
24.1
31.1
31.2
32.1
101.INS
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.(a) and 15d-14(a),
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)
101.SCH
Inline XBRL Taxonomy Extension Schema
Document
101.CAL
101.DEF
101.LAB
Inline XBRL Taxonomy Extension Calculation
Linkbase Document
Inline XBRL Taxonomy Extension Definition
Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase
Document
101.PRE
Inline XBRL Taxonomy Extension Presentation
Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101)
+ Indicates a management contract or compensatory plan
Item 16. Form 10-K Summary
None.
98
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 4, 2021
By:
/s/ Todd Morgenfeld
PINTEREST, INC.
Todd Morgenfeld
Chief Financial Officer and Head of Business
Operations
(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 any or all amendments to this
Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection
therewith 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
connection therewith, 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 and agents or any of them, or their 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
Title
Date
/s/ Benjamin Silbermann
Benjamin Silbermann
Chairman, Co-Founder, President and Chief Executive Officer
(Principal Executive Officer)
February 4, 2021
/s/ Jeffrey Jordan
Jeffrey Jordan
Director
/s/ Leslie J. Kilgore
Director
Leslie J. Kilgore
/s/ Jeremy S. Levine
Director
Jeremy S. Levine
/s/ Evan Sharp
Evan Sharp
Director
99
February 4, 2021
February 4, 2021
February 4, 2021
February 4, 2021
Name
Title
Date
/s/ Michelle Wilson
Michelle Wilson
Director
/s/ Fredric G. Reynolds
Director
Fredric G. Reynolds
/s/ Gokul Rajaram
Gokul Rajaram
Director
/s/ Andrea Wishom
Director
Andrea Wishom
/s/ Salaam Coleman Smith
Director
Salaam Coleman Smith
February 4, 2021
February 4, 2021
February 4, 2021
February 4, 2021
February 4, 2021
/s/ Todd Morgenfeld
Chief Financial Officer and Head of Business Operations
February 4, 2021
Todd Morgenfeld
(Principal Financial Officer)
/s/ Tse Li (Lily) Yang
Chief Accounting Officer (Principal Accounting Officer)
February 4, 2021
Tse Li (Lily) Yang
100