Q1 2023 Pinterest Inc Earnings Call
<unk> for Q2, 2023, and beyond are preliminary and are not indicative of future performance.
We are making these forward looking statements based on information available to us as of today and we disclaim any duty to update them later unless required by law for more information. Please refer to the risk factors discussed in our most recent Form 10-Q, or 10-K filed with the SEC and available on the Investor Relations section of our website.
During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, and presentation, which are distributed and available to the public through our Investor Relations website located at Investor interest, Inc. Dot Com Lastly, all growth rates discussed in todays prepared remarks should be considered.
Year over year, unless otherwise specified and now I will turn the call over to Bill.
Thank you Neil and thank you all for joining our first quarter 2023 earnings call.
Q1 was a strong quarter as we continued to deliver growth driven by foundational improvements in the core purchase experience.
And by continued focus on our strategic priorities and unique differentiators.
We ended the quarter with 463 million monthly active users up 7%.
Furthermore, we accelerated growth among our global and you can or U S and Canada mobile App users similar to last quarter and our measures of engagement, including impressions sessions and time spent continued to grow significantly faster than overall users are testament to our work to deepen engagement per user.
We generated revenue of $603 million up approximately 6% on a constant currency basis.
The strength came from the top and bottom of the funnel, including demand from our brand and performance objectives.
As you saw in our press release, we announced a multiyear strategic third party AD demand partnership with Amazon, which we believe can over time improve monetization with relevant AD content on the platform and increased profitability for users I'll discuss this later in my remarks.
While the overall demand environment remains challenging we're demonstrating we can continue to grow our business, while also operating with more efficiency.
We delivered $27 million of adjusted EBITDA for the quarter with an adjusted EBITA margin of 4% at our operating expenses came in lower than expected.
This was due to a variety of cost reductions we achieved in the quarter as well as timing shifts that moved some expenses to Q2 and later in the year.
Even with those timing shifts we have confidence that the operational rigor we are driving in the business.
Gives us a clear path to margin expansion in line with our prior commitments.
This quarter, we continued to execute on our key strategic priorities, including one growing monetization and engagement per user too.
Integrating shopping into the core of the product experience.
Three improving operational rigor and therefore margin expansion and four strengthening our leadership as a positive and brand safe platform, including taking further steps to enhance the wellbeing of our users, especially teams.
In Q1, we made solid progress in deepening engagement on the platform with our existing users.
Usually provides strong first party signals to their actions on pinterest, such as searching and browsing related items as well as saving pins on the curated boards that create product associations unique to our platform.
This signal combined with our increasingly sophisticated AI models is driving improved relevancy and personalization for users.
To that end, our mobile App users, who are most engaged and monetize will users and account for more than 80% of our total impressions and revenue grew 16% globally.
U S and Canada mobile App user growth also accelerated to 7% and our measures of engagement continue to grow faster than overall users, which is proof that users are coming back more frequently to pinterest as they find more of what they're looking for on the platform.
We continue to make good headway in adding new users, especially Gen Z users, who grew double digits and continue to be our fastest growing demographic on the platform.
<unk> users are finding value in our positive inspirational platform and are engaging with the full breadth of content, including video.
During the quarter, our video content on the platform platform grew nearly 40% quarter over quarter on top of the 30% sequential growth we drove in Q4.
Furthermore, in March we announced a new publisher deal with Das Meredith one of the largest publishers in America to bring video content to the platform across lifestyle fashion and food categories with brands, including better homes, and gardens brides food and wine and all recipes.
We're also finding that our blend of videos and images is resonating with users as images remain a vital part of the <unk> value proposition imager.
Images. In addition to video help users find inspiration relevant to them refine what theyre looking for and take action.
Our corpus of images continues to grow even off a very large base and we saw that the number of boards grew double digits in Q1.
The unique curation and depth of signal, we drive speaks to the high intent of our audience and the lean forward experience we have on Pinterest.
We're also improving monetization by making pinterest more valuable for advertisers as a full funnel platform.
At the top of the funnel, we're seeing strengthen awareness objectives as we bring greater performance for advertisers.
So our engagement wins are contributing to this growth by delivering more supply and favorable pricing.
We've been hard at work building, new AD formats that our brand advertisers have been asking for and.
In Q1, we began testing premier spotlight, our first premium awareness offering to showcase brands in an exclusive placement on our search page with advertisers like the Coca Cola company.
Based on early testing results Premier spotlight ads drive significantly higher click through rates on average compared to standard video awareness ads on pinterest.
We also remain focused on lower funnel objectives, where we believe we have a much larger opportunity to deliver convergence to advertisers looking for sales. We're doing this by growing supply better matching that supply with relevant demand and innovating on formats action ability and measurement capabilities.
And Q1 homepage optimization, which we introduced in the prior quarter continue to drive more relevant AD impressions with impressions growing faster than sessions, even as engagements improves.
As a result, our ads marketplace is getting more efficient contributing to an 8% reduction in CPA is for performance advertisers.
We've also expanded our conversion AD products with mobile deep linking or MTL.
We began beta testing <unk> in Q3 of last year for shopping ads and in Q1 <unk> was the primary contributor to our shopping revenue growth, which was up 40% year over year.
Building, new AD tools and formats is only part of the equation for monetization success.
The other part is helping advertisers measure those results through conversion visibility and attribution solutions in.
In Q1, we integrated our API for conversion with helium to drive further advertiser adoption and we're in the process of Onboarding advertisers like wayfarer onto our live ramp clean room solution in Q2.
As I've discussed previously I also believe there's a meaningful opportunity for us to augment our auction with third party ad demand.
This is an important lever for us to increase the comprehensiveness of our ads, thereby leading to greater relevance in shop ability for users and ultimately improved monetization on the platform.
We believe Amazon is the right first partner as we bring third party demand on the Pinterest because they offer a breadth of relevant shopper will add content paired with a seamless consumer buying experience there.
<unk> broad coverage of brands and products will help accelerate our efforts to take users from inspiration to action satisfying more of the commercial intent that users have on our platform.
We're excited about this partnership and the value it can bring to users and advertisers.
A partnership of this scale will be a multi quarter implementation and therefore, it may not be until next year that we see more meaningful revenue impact.
Moving to shopping in Q1, we continue to execute on our vision to build at the home of taste based shopping.
Our survey work consistently shows that over 50% of users viewed <unk> as a place to shop and our long term goal is to make every pen shopper ball.
In Q1, we started integrating <unk> pins our products you can take action on to the home feed and improving the overall distribution of this content through investments in our core relevancy algorithm.
These changes are showing promising results click through rates and saves a solvable pins grew over 35% year on year.
We're also exploring new formats to make shopping more fun and engaging earlier in the quarter, we announced that we were testing <unk> shuffled on Penn Trust with the goal of allowing users to more seamlessly access <unk> pins from their collages.
We started integrating more shuffled content into the main Petrus App, we're seeing it shuffles with the highest number of saves have solvable content like outfit wedding at home ideas.
As we make products more easily discoverable and shop level. We're also enhancing merchant value on the platform in the last six months, we've seen nearly a 30% increase in attributed checkouts for merchants, who upload their catalogs to the platform.
As I've mentioned in past quarters, I believe our ability to execute on our key strategic priorities is enhanced by instilling a culture of operational rigor, including disciplined management of expenses.
We're not a growth at all cost company and our actions have proven that since I joined.
Shortly after I arrived last summer, we took steps to significantly slow our pace of hiring in Q3.
We kept head count flat and began driving meaningful improvement in infrastructure spend in Q4, while returning to user growth. In Q1, we took further actions to drive longer term efficiency in our business through our restructuring plan, which we announced at the end of March as part of this.
The restructuring, we reduced our real estate footprint by downsizing or completely closing several of our offices around the globe as our flexible work policies do not require our historical level of capacity.
In addition, we made a 4% reduction in our workforce in early February to better align our talent against our top strategic priorities.
We remain committed to delivering meaningful margin expansion. This year, even if the demand environment takes longer to improve Tom will address this further in his remarks.
As we grow users and engagement, we're also investing in making pinterest a more positive place on the Internet, which is important for our users and advertisers.
For many of our users Petrus as a personal space online, where they can discover grow and manifest their dreams.
Several third party studies have shown that users feel safer on <unk> and other platforms and they feel more positive on Pinterest, we think that's worth investing in.
To do that we've taken steps to further enhance the safety and wellbeing of our users, especially miners in late March we made a mandatory for users to provide their birth dates. So that we can provide age appropriate features and functionality.
Pinterest is now private by default for existing and new users under the age of 16 and their content and profiles won't be discoverable by others setting a new bar for user well being in this industry.
Our investments in being a positive platform also makes good business sense as advertisers often side, our positivity and brand safe environment as a reason for spending on the platform.
Lastly, we're excited that Sabrina Ellis will be joining <unk> as our chief product officer, Sabrina as passionate about our mission to create a world where inspiration and wellbeing go hand in hand.
I also want to thank <unk> for his 11 years of service and dedication to Pinterest.
I'll now turn the call over to Todd to go into more detail on our quarter and guidance.
Thanks, Bill and my remarks today.
<unk> financial performance and our preliminary.
All financial metrics, except for revenue will be discussing a non-GAAP term goodwill otherwise specified.
And as a reminder, all comparisons will be discussed on a year over year basis, unless otherwise noted.
Stepping back this time last year, our users were declining and pricing on our platform was elevated.
Lot has changed since then our investments in the core pinterest experience, including improvements in relevance and personalization are user reactivation engines, and adding new content, including video have been major contributors to user and engagement growth.
Additionally, we saw pricing ease over the last two quarters as we unlocked for supply through engagement gains.
AD load management on the platform.
While digital advertising remains challenging we're building for the long term and we've made significant progress to term pinterest into an attractive platform for advertisers through lower mid and upper funnel AD formats and tools as well as new measurement solutions.
Turning to users.
In Q1 463 million monthly active users came to pinterest growing 7%, adding roughly 30 million users compared to a year ago and growing across all regions and.
In the U S and Canada monthly active users were $95 million growing 1%.
We had 128 million monthly active users in Europe , which grew 7% our strongest growth in two years.
And in our rest of World markets, We had 240 million monthly active users up 9%.
In addition to growing our users our investments are driving more depth of engagement with our core and new users. We measure depth of engagement by looking at a basket of metrics such as impressions sessions and time spent.
In Q1, these metrics grew faster than our user base, which indicates that we're making good progress on this front.
Turning to our financial performance Q1 global revenue of $603 million grew approximately 5% on a reported basis and 6% excluding the impact from foreign exchange rates.
Our awareness objective demonstrated strong growth in the quarter as brand advertisers took advantage of higher engagement and lower CPM is on the platform.
Revenue growth from our conversion objectives remained resilient because we continued to demonstrate the value of our lower funnel format and measurement products.
International was also a strong contributor to growth and accounted for nearly 20% of total revenue buoyed by traction from large and SMB advertisers.
Finally, emerging verticals were a source of strength with solid growth from several non core categories, such as travel and autos.
Advertisers in these verticals are turning to pinterest to harness the unique commercial intent that our users express on our platform.
For example, southwest Airlines leaned into spring break search activity on Pinterest by utilizing the pinterest trends tool as a planning guide.
Southwest featured pins are exciting destinations that drove flight searches on their site.
Breaking out revenue by region U S and Canada revenue was $486 million an increase of 3%.
Total revenue from Europe was $93 million growing 12% on a constant currency basis or 6% on a reported basis.
In total revenue from our rest of World region was $24 million growing 42% on a constant currency basis, and 38% on a reported basis.
We're confident that the intent based shopping mindset that our users bring when they come to pinterest.
Coupled with improvements in shopping on the platform and our conversion based ads business will bode well for advertisers and the long term.
Now I'd like to discuss our expense profile and EBITDA.
Cost of revenue came in at $167 million and declined 6% sequentially as we continued to efficiently manage our infrastructure costs.
Operating expenses were $413 million for the quarter, a 15% increase year over year and a 19% decrease.
Order over quarter.
This was lower than our guidance for two reasons.
First we shifted some investments from Q1 into Q2 and later in the year and second we made further progress on our expense control across business functions.
Adjusted EBITDA was $27 million in the quarter with an adjusted EBITDA margin of 4%.
As Bill mentioned, we announced a restructuring plan at the end of March in order to reallocate our resources against our highest priority areas.
This resulted in a charge of approximately $121 million.
Of which $113 million is noncash.
On our capital allocation strategy as we mentioned last quarter, our board of directors authorized a share repurchase program of up to $500 million to.
To help manage dilution from stock based compensation.
Made progress.
Purchasing over $100 million worth of shares through April 24th.
Finally, we ended the quarter with approximately $2 $7 billion in cash cash equivalents and marketable securities.
Before I discuss our Q2 financial guidance I wanted to provide some additional context on our monthly active user trends.
Q2 is our seasonally softest quarter as people tend to travel and spend more time outside starting in June .
This seasonality is particularly pronounced for us as we measure monthly active users on a 30 day look back from the last day in June .
In addition, we expect that some of the recent updates we've made like mandate mandatory birthday collection.
However, we continue to invest in product experiences that we believe will grow users drive deeper engagement and improve monetize able supply over time.
Now onto our revenue guidance the ads market continues to be uncertain, given the macroeconomic environment, we've seen stabilization and while Q1 growth was marginally better than Q4, we still do not have visibility into an acceleration in demand as a result, we expect our second quarter year over year.
<unk> growth.
To be roughly consistent with the growth we saw over the last two quarters and the fourth quarter of 2022, and the first quarter of 2023.
While foreign exchange headwinds are moderating, we still expect a small impact in Q2, which is reflected in our guide.
Moving to our non-GAAP operating expense outlook, we expect our Q2 operating expenses to grow low teens percentage points quarter over quarter, partially due to shifting some investments from Q1 to Q2.
As a reminder, our opex outlook does not include the cost of revenue.
Finally, as it relates to stock based compensation, our annual employee equity America Merit Awards will be granted in the second quarter. So we expect stock based compensation to increase sequentially from Q1 levels.
Now I'll turn the call back over to Bill for some final comments.
I am proud of our team's execution to deliver strong results in Q1.
I'm confident that we're making the appropriate investments that will position us to gain share when the demand environment returns.
Also we're excited to share more about our progress and long term strategy at our first Investor Day, which we're currently planning for September .
I want to thank our teams at Pinterest, our advertising partners and all of the people that come to pinterest to find inspiration and with that we can open up the call for questions.
Thank you.
Ask the question on fixed price thoughtful up by one on the telephone keypad.
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<unk> ask your question. Please enjoy the devices on muted locally.
Our first question today comes from Eric Sheridan from Goldman Sachs. Your line is open.
Sure.
Thank you so much for taking the question I wanted to come back to the broader revenue commentary from the letter and your comments on the call can you just help us parse out a little bit of how the outside environment or the environment outside of your control is impacting elements of verticals or types of advertising like brand advertising or direct response advertising versus.
As the potential for <unk> to build in your business around some of the initiatives that you've been trying to build 2022 going into 2023, and how we should we thinking about those headwinds and <unk> looking out over the next two to three quarters. Thanks, so much.
Thanks, Eric I appreciate the question.
So first thing I would say, we feel really great about the quarter and the progress we've made on revenue from everything we've seen we continue to grow faster than the industry on revenue. So while there is still there.
And there is still some challenge in the macro environment. When we look at our performance relative to the broader advertising industry, we feel really good about that as we decompose.
What's happening in our revenue what we're seeing is that there is a lot to be really excited about in terms of.
Those advertisers that are implementing our measurement solutions like conversion API in clean rooms consistently find that theyre getting better performance from Pinterest and what they had previously understood and how they see that.
They double down and invest more in pinterest, so as the industry goes through an adoption curve on privacy safe measurement solutions, we think that bodes quite well for pentrust given the high intent on our platform and the way that we're leaning into better at better AD platform performance and seeing increasing engagement for our users.
Great supply on the platform.
For those advertisers to connect with in fact, I think that's one of the real highlights of the quarter is that not only have we clearly.
Demonstrated all returned to user growth.
But as we've talked about before there's sort of compounding layers, there where our user growth being at 7% compares to our engagement growth that is solidly in the double digit range and then our AD impressions aided by whole page optimization, where we can bring dynamic AD load with greater relevance for users is north of 30% growth and so theres multi.
The layers of growth there and while the demand environment still has puts and takes Senate I think all of that bodes really well for where we sit in the medium to long term and in the near term visibility and.
Visibility remains a challenge and you have puts and takes like for example, consumer spending and retail broadly for the whole retail industry down in February and March.
In my mind premature to call an acceleration when you still have those kinds of things out there in the macro but our relative performance, we've grown faster than others in our space. We feel like we continue to take share and what we hear from advertisers implementing our latest best AD solutions, including things like conversion API in clean rooms, we performed really well.
<unk> and gained share of wallet as they.
Implementing those things I think that's a very positive trend for us over the medium to long term, even though near term visibility given the macro.
Remains a challenge.
On the second part of your question with regard to Amazon and the third party AD demand partnership there.
As I've shared on prior on prior calls.
Relative to the significant amount of commercial intent on Patrick I think we are a platform that is still under monetize relative to the amount of intent on the platform and so.
You see us I mentioned, driving a 30% plus increase in AD impressions on the platform, even while driving engagement. This shows as we bring more relevant ads onto the platform.
That is not only aiding our our revenue growth aiding advertiser value. It's good for users and a commercial context AD can be great content, so coming back to the third party AD demand opportunity.
We see a significant opportunity to bring more relevant ads onto the platform from a greater breadth of brands and products.
And when we look at Amazon as a first partner.
They bring great breath on brands and products.
Paired with a really great consumer buying experience that we think can aid progress on shop ability in our platform.
Finally, I will just say back to your question of what's in our control we've talked a lot about shopping on our platform.
Our early indicators of success on shopping we could not feel better about as we have brought more sample content into our core surfaces, we've seen 30% plus increases in engagement on <unk> and 30% plus year on year increase in attributed checkouts for merchants, who are uploading their.
Catalogs to us so.
Question of can we take users from window shopping to taking action, we have very strong signs of progress there and while that will be a multiyear adoption curve, we couldnt feel better about the progress that we're making there.
Thanks, so much for all the color.
Thanks, Eric.
Operator, and our next question comes from Brian .
Morgan Stanley Your line is open.
Great. Thanks for taking my questions guys.
I have two the first one kind of goes back to your comment you made about about window shopping and sort of changing the user experience through <unk>. It seems like a lot of generative AI a lot of new tools that are coming could really help that in a material way I guess talk to us about how how long do you think that could take to really have a.
Meaningful impact on the revenue and how should we think about the potential near term investments in the gross margin pressure from pushing more machine learning and AI investment into the P&L and then Todd just one on.
You may use in users.
As we're going through the <unk> commentary are you expecting the North America users to be up sequentially. So are through those puts and takes or how are you. How are you thinking through the users and the guidance. Thanks.
Yes, thanks for the question Brian .
On the impact of next generation AI.
It is here you see it in our results when we look at the significant progress. We've made on user engagement that is largely driven by improvements we have made and personalization and relevancy for users and really applying.
Nexgen AI techniques, including things like Gpus.
But pairing those with the really unique signal on our platform again I think.
Can you shed a little bit of commentary about this in the past I think the primitives of.
Generative AI are going to be broadly accessible via cloud compute I think there's any real differentiators are.
One of the places that have really unique signal upon which to train that AI AI is only as good as a single upon which it back thing and we have really unique first party signal.
Not just around the intent of the user but about things like product associations from the really unique activity to happen on our platform like boards and curation and associated products together in ways that let us make really great conclusions through our AI training on those signals you need to our platform. So when you look at the improvements in.
Use of Irrelevancy.
And the personalization there theres a lot of work around AI that is driving those things.
To your next part of the question around the gross margin impacts from what does that mean.
Yes, these things as measured on their own can can be you can provide additional expense, but we also see them Lincoln the greater revenue for us already as well. So for example, using larger AI models and Gpus has been part of our progress and our AD stack. So tangible example of that.
As we've been testing the deployment of significantly larger AI models for more relevant ads are CPC campaign saw a greater than 5% increase in click through rate.
The world of AD stack optimization of 5% plus increase in click through rate is phenomenal.
So we're leaning heavily into that it's been a core competency for us for a long time, so we're leaning heavily into that and applying it to.
And applying that to the unique signals on our platform and last point the shop ability progress.
We've been making there.
A few of these points already but it's another place where AI is helping us a lot on those product recommendations of relevant team and again as we've started to bring sharpeville content into the core of our product into the main surfaces.
We're seeing 35% greater than 35% increase in.
And engagement on shopper will pins.
And we're seeing things like.
Our shopping AD revenue continuing to grow 40% plus year on year improvements in the buying experience like mobile deep linking.
Being a significant driver of that 40% increase in shopping AD revenue. So again the proof points of our users are the users not only going to window shop are they going to take action or they can engage further really strong really clear proof points on that and Nexgen AI is a big part of how we're powering those things.
Behind the scene the hottest scenes, particularly when paired with a really unique signal on our platform ill give to talk for the other part of your question a couple.
One addition to what Bill had talked about obviously the investments in infrastructure, we would expect to have a return but from a financial perspective, Brian you are probably looking at the gross margin.
Being at 72% this quarter versus where we were a year ago and to Bill's point.
We're getting a return on that but the Q1 revenue that we see is seasonally weakest seasonally the softest quarter in the year and while we would expect that we will invest more dollars. After two quarters of sequential declines in infrastructure, we would expect to start spending more absolute dollars in infrastructure or our cost of revenue.
Given the seasonality in revenue, we would expect to see some operating leverage against that line.
That's the financial interpretation of the returns that bill was describing.
In terms of the user question and what you're asking about in terms of seasonality.
It's important to remember.
The way, we the way we measure our users and report as a 30 day look back at the end of every quarter and so in the second quarter. This year, we'll look back across the month of June .
That is the month, where people tend to be out and about and we've seen our seasonally softest quarter as a result of that in the second quarter. So typically Q1 to Q2 users.
You count has been seasonally our softest quarter.
In addition to that this year, we're making some product investments and a better user experience and leading the industry around privacy centrism with our user base and that will moderate our year over year growth at our so we have a compounding impact of.
From a year over year perspective, some product investments that we think are good for our users over the long term coupled with a seasonally soft quarter.
Hopefully that answers your question.
Great. Thank you both.
Thank you.
Our next question comes from Russia, unless from Barclays. Your line is open.
Everybody.
Bill a quick question on the.
Amazon deal to follow up on the previous one I think some folks on the line here, including me.
Given your prior role.
With Amazon So can you walk us through like.
What was it about the setup here.
Then the first one is there exclusivity or not.
I think you had said.
Previously that it wasn't going to be exclusive and then.
Yes.
Inventory is this going to be applied through the kind of across the board or is there going to be certainly like geos.
Product types.
This kind of partnership makes the most sense and is the CPI is going to be on a net basis I think that would be.
Helpful to get clarification on and then Tom just one quick follow up on the macro U S decelerated a tab in the first quarter.
And given all the momentum and shopping at.
<unk>.
Anything to call out there on the U S hydro thanks a lot.
Yes.
Thanks, Ross I appreciate the questions.
So on the Amazon deal.
Pretty consistently commented that in a future state.
We would imagine that we would adjust third party demand from multiple different parties, which I think is consistent with what you'd see from most mature most mature AD platforms out there that you would have multiple sources of third party demand augment in the auction.
So without commenting on any other party.
We chose Amazon as our first partner because we saw not only.
A really great.
Opportunity to bring more brands and more products onto the platform, which we think can help comprehensiveness of shop ability.
But it's also paired with a really great consumer buying experience I talked about the fantastic progress, we're making in shopping overall as well as lower funnel lower funnel objectives, where we.
We're driving strength, there also with shopping and conversion objectives.
So having a great consumer buying experience, we think really helps us take a step forward on our overall shopping efforts.
And it's great for users great for advertisers. So we felt like that was.
A key contributor to why Amazon is a great first partner for us and it will have other partners.
Nothing that precludes us from that in the long term in the near term we want to make sure. We get this first partnership really right.
Sure it can be a multi quarter implementation and so in the near term, we're really focused on making sure that we get that really right in the medium to long term. This is a broader move to leveraging third party demand on the platform to enhance our our comprehensiveness our relevance for users of our shop ability and again, we feel great about this is a first step you had some other detailed question.
<unk> on the deal that might be a little bit more detail than I can answer but the overall.
I think we feel great.
<unk> fantastic mutual value in this for us and our partner Amazon.
And we think that can be the same for how we continue to work with other partners across the industry. So again feel great about the progress there not just in the partnership but really what it means for users and bringing advertiser value onto our platform.
Yes, Ross on the question about U S. Canada revenue growth I would look back over a two year stack and if you look at it on that basis, we have added a little bit of a harder comp.
Over the year ago period. So if you look at it over two years were pretty consistent at around 18%.
However, within that Bill.
Bill talked about this at the outset around what we're seeing in pockets of our advertiser base for those advertisers who have capital.
Through value positivity and brand safety they value the insights led selling that we can offer the convert against the commercial intent of our users and who have adopted and C quality performance using our latest measurement solutions, we've talked a lot about conversion API, we talked about clean room solutions those out.
<unk> are performing exceptionally well, but you can look at the headlines and see that not everyone in retail is performing.
Well, so theres a mix of performance in some of these segments.
Thank you.
Our next question comes from Lloyd Walmsley from UBS. Your line is open.
Thanks.
Stick with the Amazon.
Amazon partnership in general partner monetization theme.
And perhaps drag you drag you into the weeds here, but.
Yes, we talked to a lot of investors about this you just don't understand the basic nuts and bolts of it so to the extent you can elaborate more about how the Amazon partnership will work or the other other like retail media network partnerships.
How that would work from an <unk> perspective like is that Amazon kind of deploying their advertisers' budget on Pinterest is it also amazon deploying their own budget or all of the kind of.
Click kind of drive people back to Amazon.
Anything you can share to just help explain at at a basic level.
How it is going to work in practice and then the second one related to this is just like thinking about the geographical benefit.
And other partnerships.
I guess, our impulse thats been to think that you all have been kind of slow to migrate the AD business outside the U S and there's a lot of markets, where you have a lot of engagement already but you just don't have a big AD business. Yet is there any reason to think you can't leverage these partnerships to get kind of like a U S.
Market share level of digital and other international markets on the back of these are we right to think that one of the big benefits of these partnerships.
Yes, thanks for the question.
So a lot to unpack there.
So your macro the macro point in your question, which is spot on is that.
Our platform I've talked about before our platform overall, Nathan more nascent AD platform and relative to the very high consumer.
Commercial intent on a platform where quite under monetized.
And.
Theres, a real opportunity for us to simultaneously drive better and better user engagement.
Through highly relevant ads.
That help users satisfy commercial intent, while also driving up.
Revenue on the platform, so you've seen that with like a whole page optimization and the fact that we're able to grow AD load, 30% plus while still having positive progress on engagement. This demonstrates that highly relevant ads that help the user satisfy their intent can be great content.
For the user and be enhancing in both engagement and revenue simultaneously. So that's our macro opportunity as you rightly called out.
While we are under monetize overall, we are really under monetize internationally and if you look at our results you see.
Really positive growth on a percentage basis internationally for us.
Which is evidence that there is a lot more potential there and so that's something we're investing in directly with our first party sales, but also something where we think partnerships can certainly be helpful. In accelerating that progress and so we think that.
Overall.
There is a significant opportunity to drive.
The the monetization of our platform at a much greater rate than growth and not only users, but also the growth rate of engagement that we can drive monetization faster that particularly as we are demonstrating good results for advertisers, particularly as they implement new measurement tools, new privacy safe tools.
So we feel like that is a significant opportunity for us and partnerships can definitely.
Be helpful. There.
Okay.
One other part of it I think starting with one other part of your question I didn't answer you asked about sort of teasing apart the nuances of Amazon like one thing in your question that probably can go into.
Extremely nitty gritty detail, but this is Amazon ads not Amazon as retailer, we certainly you could've found lots of it.
Amazon ads on our platform previously from Amazon as retailer this is Amazon ads.
And so this is bringing ads from brands and.
And other products that are leveraging the Amazon AD platform that Amazon Ad platform.
One of the things that were.
Quite excited about is that it does also bring great buying experiences.
Those buying experiences.
It can include things.
For other brands and retailers.
And so that is part of what is compelling about this partnership is that.
It's.
And AD platform with a lot of brands a lot of products that can help drive comprehensiveness for our users, but also paired with a great buying experience.
For many retailers and brands that are participating.
And the Amazon App platform.
Alright, well. Thank you congrats on the deal.
Thank you.
Our next question comes from Rich Greenfield from <unk> Partners. Your line is open.
Hi, Thanks for taking the question.
Got it.
<unk>.
I guess when you think about video I think Bill you last quarter, you said something like 10% of time spent with video, but it was like 30% of your revenue and I'm. Just wondering as you think about sort of the power of video.
Talk about sort of the increase in video content on the platform, but I guess I'm curious sort of how much time spent and how that 10% may have changed as we look through the remainder of 2023, given the importance of video consumption not video consumption.
Consumption of video is.
Driving your revenue.
How should we think about like what you're doing and how that sort of the video transition content I know, it's not removing sort of pictures. How do you think about that video transition over the course of 2023 and then just a quick follow up on Amazon just youre trying to buy everything you said is the ultimate takeaway is that we're going to end up.
<unk> are more shopper will add because of the Amazon partnership as it sort of gets implemented.
Pinterest.
These growth figures when we feel like there'll be a far greater number of shop.
And between now and the end of the year as this plays out.
Yes to the last part of your question yes.
You're already seeing that happen where.
Previously.
Users more than half of users said they were coming to pinterest, a sharp pencil to really solving digital window shopping, but the action ability was low so it sort of like petrol is looking to do window shopping but the stores were closed we are opening the stores and the comments I made around the progress that we already have.
With shopping is growing 40% year on year mobile deep linking driving great great conversion and being a big driver behind that growth.
35% increase in engagement on <unk> as we're bringing those onto our main surfaces is already the case that users are starting to find that much more of the things that they were finding on pinterest before they would've found on pinterest, but couldn't take action on Pinterest, which was leaked engagement to other platforms and leak monetization. Other platforms. They are now able to take action on direct.
<unk> on Pinterest and so our goal is to make every pen shop boy Thats, a long term goal that won't all get solved in a single year, but we feel really good about the progress we're already making and yes. We think this partnership absolutely can.
Can help contribute to that as I said before it's a multi quarter implementation.
I think we will see more of that effect coming into next year.
But.
Separate from just the one partnership just overall, we're already seeing your macro pointed like will users see more action ability on the platform. They already are.
Great progress on it and as we get to this holiday shopping season, we would expect that users are going to be able to engage with much more of the shop more content on pinterest and what they would have previously.
That's that's that's due to efforts that we already have in flight that are already in front of users in that we're growing aggressively.
But it will also be augmented by what we do with third party partnerships like the one with Amazon.
Okay.
On your video point.
So video continues to be north of 10% of our engagement.
It's also the case that it continues to be a significantly greater percentage of our our monetization. So this dynamic that we described last quarter were.
That's why I talked about we've got 10% plus of our engagement on video, but 30% plus of our revenue. We continue to see that kind of dynamic and your question about the interplay between video and images.
We feel like we're finding a really great balance between those two things we have a format that is bringing both videos and images to the user.
Simultaneously versus those being separate surfaces and as we're doing that we're seeing that that's resonating well with users because again users come here with intent and with purpose.
And sometimes that intent and purpose is aided by video and they have the option to engage with that.
But oftentimes if they want to refine that intend to get closer to action ability images can help them a lot with that as well and so we continue to work through that optimization, but we feel like we are where we.
We're getting that balance to a good place and we're going to continue to lean into the balance of those two things.
Sure.
That gives the user the best of both worlds because we see that users absolutely want both and both of those things helped the users drive more action ability last thing I'll say on video I talked about how the video corpus is growing our image corpus continues to grow as well.
Our boards are growing 10% plus is also a good indication of the core activities that user engage with on the platform as we are leaning into those those are <unk>.
Not only alive and well, but things that users are engaging with more and more.
And talk about Gen Z.
Fastest growing demographic, they're also Jim.
Many of the fastest growing demographic is not just about.
Big growth rate on a small denominator Gen Z is the largest contributor of engagement growth as we talked about engagement growth. So we to put it very pointedly, we are winning with Gen Z and I think this was a big question about the platform a year ago, we return to unit growth, we're clearly winning with Gen Z and winning with Jin.
<unk> in a unique way, where we don't need to win with them on where they go for entertainment, we're winning with them on where they go when they have intent and purpose and where they go when they are looking for and Oasis away from the toxicity of the rest of social media and that's working quite well for us, including how we're leaning into.
More investments and their well being on our platform.
But we Shouldnt think about video 20 plus percent that's not your goal for a year from now it's more about balance versus a dramatic scaling up of client spend being bid.
Yes.
We're very focused on what gives the user the best satisfaction of their intent and their purpose and what we're finding with that is that's a balance of video and images.
And you can expect us to continue progressing that in a thoughtful methodical way that helps the user.
Satisfy their intent and in a way a big contrast from us with other platforms. Most of the platforms. We're talking about video as a headwind to revenue and Youre hearing US talk about video is helping to drive engagement, but we have more revenue on video than we have on engagements that sort of the inverse of what you would see on other platforms.
We think we can continue to manage it in that kind of fashion hopefully that helps.
Alright, operator next question.
Our next question comes from Colin Sebastian from Baird.
Your line is open.
Thank you good afternoon guys.
I guess a couple of questions from me as well I guess first off curious was there anything else to call out with respect to the acceleration in international users and revenues, obviously I think as Lloyd mentioned and you guys mentioned, that's a huge monetization opportunity and showing good progress there and then we're getting a few questions on the expense guide for Q2.
<unk>.
The sequential increase I think it might be helpful. Todd to understand a little bit more unpack the moving parts there.
The timing shift and then does that serve as the baseline for modeling the sequential.
<unk> expenses for the rest of the year I think more color there might be helpful. Thanks.
Yes on the international side I'd say.
First thing is.
Back to the user point.
What we're doing to deliver great engagement for users is working well across geographies saw a return to user growth is happening across geographies.
Both U can and international.
So in terms of.
Our platform returning to user growth.
And bringing more supply onto the platform that is consistent across geographies, we feel great about that.
I think your point on monetization.
We're a fraction of the monetization that we could be internationally.
And particularly when you look at places like Europe .
That.
There is there's clear line of sight too.
How there's more monetization opportunity in places like like Europe .
<unk>.
Our growth rates you can see the growth rates there are high but the denominators are low.
And we think that's a lot of go forward potential potential with us, but those high growth rates, even on a small denominator I think are the good indications of as we as we build out those investments as we build out our AD capabilities in those international markets. Our sales teams are able to go make effective progress there and we think there's a lot more of that to come find on international.
We called out.
Large advertisers are growing with us there and we have SMB growth in international as well. So a good balanced mix of where we think theres opportunity in international for us.
And then on the color on the expense guide.
If you remember back we talked about this for a couple of quarters, we had a big increase in expenses last year that were largely payroll driven or head count based so in the first half of last year, we had a lot of attrition in the first quarter, we backfill the accelerated hiring going into the end of Q2.
And then as bill referenced in his opening comments, we paused the rate of hiring in early Q3, and then that those efforts kind of accelerated.
As we moved into the end of last year and then through Q1.
We also.
Called out historically, we had a lot of marketing spend that was variable in nature in the back half of last year that drove a lot of our expense growth in Q3 and Q4.
We're lapping as a result of.
All of those comments were lapping the payroll expense growth as we go into Q3 and Q4.
And then in the back half of the year, we're lapping a lot of variable marketing spend.
The implication of all of that is that we will see a deceleration in year over year expense growth that will pick up next quarter, and then accelerate going into Q3 and Q4.
Which will drive the margin improvement that we've been talking about now for a few quarters. So I know the guide.
Jess that we will see a step up.
And sequential expenses a lot of that is timing around a couple of marketing programs and other investments that we're making.
But we would not expect to see that continue to grow in absolute dollar terms and certainly as a percentage of revenue we would expect to see that decelerate dramatically over the course of especially in the back half of the year.
Alright very helpful. Thank you.
Our next question comes from Doug Anmuth from Jpmorgan. Your line is open.
Thanks, so much for taking the questions I just wanted to take another stab at the <unk> revenue outlook.
I guess just trying to understand is it is it really purely just caution on macro.
Keeps me a little bit more muted, perhaps in the range of <unk> and <unk> versus acceleration that we're seeing from others in the industry and as part of that are you seeing any notable differences.
<unk> Omnichannel and in just pure.
And then secondly, just related to AI.
Can you just kind of parse out how how are you.
It's clear you are using AI.
Think about it across rankings and recommendations and AD monetization, but then also how we users of Pinterest take advantage of degenerative AI tools going forward. Thanks.
Yes.
I think on sort of.
What we're seeing on the macro as I shared before there's a lot that we feel great about but there are puts and takes out there I think.
And.
The fact that we're growing revenue faster than the broader industry. I think is something that we certainly feel great about that is hard fought.
But we feel great that we're growing revenue faster than the industry.
And we have shared earlier.
The number of things that give us confidence that we're demonstrating good value for advertisers, even though those advertisers are digesting a lot of change I think as you.
That compares to others I think there are places that maybe that are strengths for us that our strength for others like international small business and international those kinds of things, but those are smaller portion of our overall business, but you do see those accelerating for us as well, they're just a smaller portion of our overall business, but when you look at multiple major platforms still having year on year.
And we're putting up solid growth and we feel like we've got even though visibility is limited we feel like we've got visibility to continued growth even as other larger platforms.
So, but you're still seeing year on year declines I think thats, a good indication of our relative performance and I don't see that changing.
See that visibility is limited and it feels premature to call a bottom when you have things like consumer spending on retail still declining year on year.
So our our view of the medium and long term, we could not feel better about it in fact, if I go back to our strategic priorities and where we were a year ago.
As Todd mentioned in his script a year ago, we had multiple quarters of year on year decline with users we were a supply constrained platform.
Advertiser value was in question because.
That.
The supply constraints.
Where we sit today, we have returned to user growth.
We're clearly growing with Gen Z as our as our fastest growing demographic, we're delivering great value for advertisers and the more advertisers implement better measurement the more they see that we're delivering value for them shopping on the platform that was a real question a year ago with like could we drive more shopping behavior very strong proof points on that even though.
We're early on in adoption curve all of those things on every one of our strategic imperatives.
Where we've executed and I think our our beyond the progress we would have expected.
And with AD impressions up 30% plus.
Has demand been constant.
The growth will be screaming right, but we can't predict when that demand volatility.
Sure.
Sort of.
Goes goes back to normal better than anybody else and there continue to be a lot of puts and takes I think you've seen that reflected in others' commentary.
With that I'd also calling either experiencing year on year declines or calling that visibility still poor for them as well as evidenced by a wide range of outcomes and those kinds of things.
Can you just repeat your second question.
Just just on AI.
How how users will take advantage of generative AI tools on the insurance platform.
Yes, I think we're looking at this.
Degenerative AI, we think there's a lot we can do to deliver better experiences in ways that the user.
They will feel natural for the user and I think thats, what youre seeing from us already that we're using next generation AI to.
To bring better recommendations more shop ability better product experiences ads that are more relevant and convert better.
So you're already seeing that in the platform. So we're thinking about ways that we can bring next generation AI to users in a way that feels natural to them and given that we're a highly visual platform. We think we'll have a lot more of those kinds of opportunities around great recommendation.
Users, making clauses on shuffles Theres a lot of great AI, that's behind the way that we're doing those kinds of things. So there's a lot of that kind of stuff.
That you already youre seeing from us, where we're going to be methodical about it.
There's still a lot of open questions out there.
Around how do you make sure those good value exchange between platforms and publishers, how do you make sure.
There are.
<unk>.
Image rights and all these kinds of things that are these are meaningful issues that we're going to be thoughtful and methodical about it and we're not going to rush into sort of head first.
We're finding really great ways to leverage this technology is already driving user benefits and you can expect to see more of that from us.
Great. Thank you operator, we'll take operator, we'll take one last question.
Our final question comes from Tom Champion from Piper Sandler Your line is open.
Good afternoon.
It sounds like Youre seeing really strong growth on mobile and Bill just curious how.
Mobile or location becomes an element to the customer signal that.
Maybe youre able to leverage in addition to lean forward.
<unk> element or the growth.
So I'm just curious if that figures into your thinking at all and then.
Maybe just a SEC.
One.
Curious, how you feel about assembling your team and leadership.
Yes.
At the company and Im curious if the.
Analyst day.
Announcement tentative plan.
Procedures in other announcements thank you.
Yes.
So.
<unk>.
So on your second question around the team.
I feel great about the team that we have.
This is a team that's winning this is the team is delivering great results.
And you've seen us do.
Doing that consistently over the last three quarters.
And so these things are are oftentimes relay races.
And so even in places, where we've had somebody who's.
Let a strong leg of of <unk>.
Are the rates.
We've brought in great talent.
Augment the next leg of the race.
And so.
If part of your question there was around our CFO transition.
It's a good opportunity.
What I was already planning to do which is to thank Todd again for having ran a really strong leg of the race.
Probably a couple of legs of the race given how long has been here.
And how thoughtful he has been in the transition and so while we don't have new news to share there right now.
We have seen exceptional engagement.
From a number of candidates.
And we feel quite confident that that that that process is progressing on track both in terms of.
How thoughtful and engaged Todd has been in managing that transition as well as our ability to make sure that we're going to have great talent going forward there as well.
Sabrina, who I've mentioned.
In my prepared remarks.
I think is going to be a fantastic addition to the team even as we also say thank you to Devine, who also ran multiple really strong legs of the race for us as well so that part.
We feel great about.
And so on the mobile part of it and answer the first part of your question.
Again, another really positive.
Part of our progress.
As I shared 80% plus of our engagement and revenue comes from mobile App users and those mobile app users both in U can and international growing much faster for us than users overall, so our most engaged users are growing the fastest and that's giving us the opportunity to have greater depth.
<unk> of engagements so the progress on mobile feels great.
Without commenting on sort of future product announcements for those kinds of things having to user in our mobile app lets us control our destiny much more.
And we feel fantastic about the progress there and what that lets us do to drive deeper and deeper engagement for users and deliver greater value for advertisers.
So with that again, thank you everybody for the questions.
Thank you again Todd since this is the last earnings call. Thank you again for a fantastic tenure here at Pinterest very much appreciate the partnership.
Thank you to everyone. The call. Thank you to all our customers our team members.
And we look forward to continue the conversation with all of you. Thank you.
Ladies and gentlemen, today's call is now complete age I'd like to thank you for your participation you may now disconnect your lines.
[music].
Yes.
Okay.