Q4 2024 Pinterest Inc Earnings Call
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Good afternoon. Thank you for attending today's Pinterest, Inc, fourth quarter and full year 2024 earnings call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
If you'd like to queue for a question on today's call you can do so by dialing star one on your telephone keypad.
Speaker Change: I'll now hand, the call over to Andrew Sandburg, Vice President of Investor Relations and Treasury to begin Andrea you May proceed.
Speaker Change: Good afternoon.
Andrew Sandburg: And thank you for joining US welcome to Pinterest earnings call for the fourth quarter and full year ended December 31st 2024.
Andrew Berg: My name is Andrew Berg, and I am Vice President of Investor Relations and Treasury for Pinterest, joining me on today's call are bill ready Pinterest, CEO and Julia Donnelly our CFO.
Andrew Berg: This conference call is being webcast and we are also providing a slide presentation to accompany our commentary. Please refer to our Investor Relations website at Investor Dot Pinterest Dot com to find today's presentation webcast and earnings press release.
Andrew Berg: Some of the statements that we make today regarding our performance operations and outlook, maybe considered forward looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially.
Andrew Berg: In addition, our results trends and outlook for Q1, 2025 and beyond are preliminary and are not an assurance of future performance.
Andrew Berg: We're making these forward looking statements based on information available to us as of today, and we expressly disclaim any duty or obligation to update them later unless required by law.
Andrew Berg: For more information about risks uncertainties and other factors that could affect our results. Please refer to our most recent Form 10-K filed with the SEC and available on our Investor Relations website.
Andrew Berg: During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non-GAAP measures to the most directly comparable 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.
Lastly, all growth rates discussed in today's prepared remarks should be considered year over year, unless otherwise specified and now I'll turn the call over to bill.
Andrew Berg: Andrew Good afternoon, and thank you for joining our fourth quarter and full year 2024 earnings call.
Bill: My remarks today will cover the progress we made this past year and preview some of our key initiatives in 2025 to drive continued execution of our long term goals.
Bill: 2024, with a transformative year for Pinterest, we reached record high global users, surpassing $550 million and I use globally and $100 million and you can while more than doubling our full year revenue growth rate from 2023.
Bill: At the same time, we we delivered over $1 billion in adjusted EBITDA, a roughly 50% increase as we continue to drive profitable growth.
Bill: Our 2024 results are a testament that our long term strategy is working well.
We've transformed our user experience to focus on why people come to pinterest investing and action ability relevance and curation all distinguishing ourselves as a positive place online.
Bill: The user journey from inspiration to action maps directly to our advertiser funnel, allowing advertisers to reach users at every stage of their purchase journey and in todays advertising environment proving performance has never been more important.
Bill: As such we've spent the last two and a half years building a suite of lower funnel tools the captures our users inherent commercial intent.
Bill: Our efforts are paying off in Q4, we achieved our first $1 billion revenue quarter as we grew revenue, 18% and drove a record number of clicks during the critical holiday season.
Bill: As we look forward to 2025, we intend to double down on our multi year initiatives that underpin our strategy.
Bill: We will continue to leverage AI and our unique first party signals to drive a more personalized and relevant experience for our users at.
Bill: At the same time, we will invest in our curation experiences in a shop ability of our platform to allow our users to move more seamlessly from inspiration to action.
Bill: Finally, we will continue to innovate and improve our lower funnel tools, allowing advertisers to successfully reach customers who are demonstrating high commercial intent.
Bill: Now like last quarter I'll start with an overview of how were utilizing AI to drive results across our business.
Bill: AI is deeply integrated into nearly every aspect of our user experience and advertising business.
Bill: But AI is only as good as a signal that acts upon into Pinterest, we have very unique signal.
Bill: We have hundreds of billions of first party user actions on our platform, including acts of human curation that give us unique insight into each individual pins relationship not just to the user who saved it but also to the ideas and the aesthetic reflected by the content of the board. It is saved in and the search queries related to it.
Bill: These associations between pins searches boards products and users makeup our taste graph, which is the foundation of our AI recommendation engines and is used to amplify the quality of our computer vision and discovery experiences and.
Bill: In practice, our taste scrap isn't a central part of the AI that determines the content we show our users and why users find our recommendations so highly relevant.
As our platform has grown.
Bill: And as we've incorporated more signals from user actions, our taste scrap has become more dense with more connections and associations between pens searches boards product end users.
Bill: In fact, our tastes graph contains many billions of connections and has grown by 75% over the past two years, bringing together user activity content and products across the platform.
Bill: This larger tastes graph enhances our ability to understand how images and products are related and surface exceptionally relevant content. For example, if we know a user is searching for and saving to aboard labeled Super Bowl outfits.
Bill: We recommend ideas based on the activity of all the other users on Pinterest to have similar taste in fashion and are interacting with game day apparel.
And since we know this user is likely hosting or attending a Super Bowl party, we're able to help users laterally explore their tastes to find other content or use cases that might be interesting to them like game day decor or recipes that are personalized and relevant to them based on what we know about them from our tastes graph.
Bill: And doing so we can drive deeper engagement and encourage re visitation, thereby strengthening our flywheel.
Bill: Looking back at 2024, I want to highlight a few key AI based initiatives many of which have been informed by our taste scrap that have led to positive outcomes across the business.
Bill: We've made a lot of progress incorporating more context on user history into our recommendation algorithms and.
Bill: In 2024, we leveraged cutting edge machine learning techniques and increase the context window on user actions, such as saves and clicks that fed into our AI based models by over 30 fold.
Bill: More context on users and more powerful machine learning models.
Bill: Deeper understanding of the content they might enjoy and as a result, we saw approximately 250 basis points of lift in sales and a 150 basis point lift in outbound clicks across the platform importantly through our teams deep technical expertise. Our engineering teams were able to achieve this 30 fold increase in signal ingestion.
Bill: At only a fractional increase in infrastructure spend.
Bill: On the monetization side, our AI powered whole page optimization product has enabled us to flex up relevant AD load to users in moments of high commercial intent.
Bill: This means we can show users in the lower funnel phase of their shopping journey more ads to help them take action and convert while keeping AD load lighter when users are in an upper funnel discovery phase.
Bill: We've also made investments to keep the relevance bar high for our ads and fact relevance on our search surface has more than doubled for top AD slots over the past two years.
Bill: Since our users come with commercial intent. These ads are additive to the user journey.
Bill: We're also utilizing AI internally to promote employee productivity across our engineering team.
Bill: <unk> assistance to help our developers accelerate co production and improve co quality.
Bill: The majority of our engineering team uses coding assistance and 15% of our current codebase is generated through AI.
Bill: Lastly, I'd be remiss not to point outperformance plot, which I'll talk about in more depth later on in my remarks.
Bill: Performance plus is a key advancement in our lower funnel AD product suite that utilizes AI to bring greater performance and better efficiency to our advertisers while automating much of the campaign set up process.
Bill: With that I'd also like to discuss some of the user and engagement wins from Q4 and 2024.
Bill: Throughout 2024, we focused heavily on improving the user experience and the reasons users came to pinterest in the first place.
Bill: This meant investing in a better curation experience through boards and collages and driving further action ability across our core surfaces.
Bill: In Q4, we continued to deepen our efforts to show users how they could utilize <unk> for shopping.
Bill: Today's shopping season kicked off with a bang and we saw users with high commercial intent lean into pinterest to find and shop, the best ideas and products for their loved ones.
Bill: Our holiday shopping efforts, which included gift guides on promotions drove deeper more actionable sessions and help more users find and buy the perfect gift on Pinterest.
For example, we created gift guide spanning 27 categories from fashion and beauty to travel and gaming partnering with celebrities creators and brands to showcase nearly 40000 of the best products from our catalog a mix of both expertly curated and Pinterest recommended content to maximize relevance for our users.
Bill: We then distributed these guides through personalized recommendation modules showcasing the guys that are the most relevant to a user's interests pass activity in search queries we.
Bill: We saw a gift guide to resonate with users as click through rates from products recommended through gift guides were over 40% higher than the average product plan.
Bill: I am pleased that our efforts to improve the action ability of our platform are paying off in the form of another quarter of record users.
Bill: At the same time, we reported our highest ever weekly active to monthly active user ratio of 62%. In 2024. This means users are coming back more frequently as we continued to drive strong product market fit and performance for advertisers.
Bill: In fact in Q4, we grew clicks to advertisers over 90% even after lapping the initial launch of direct links that began in Q4 of last year, which is clear evidence that is showing more relevant and shopping content aligns with both the needs of our users and advertisers.
Bill: Next I want to mention one of my favorite reports that we share annually pensions predicts.
Using consumer insights and predictive analytics based user behavior like clicks saves in searches that happened on Pinterest every day, we've identified the 20 emerging pentrust trends that we believe will hit the mainstream in 2025.
Bill: And over the last five years, 80% of the predictions we've made have come through these.
Bill: These trends reveal what people will shop try and buy next across all verticals.
Bill: For example, our trend Cherry coded predicts that Gen Z and millennials will infuse cherries into their makeup menus anaesthetics this year and trend peak travel predicts that mountain ranges will become the ultimate travel destination for Gen Z and Gen X.
Bill: Interest predicts also serves as a valuable lever for advertisers to reach customers by aligning company initiatives with up and coming trends.
Speaker Change: Mary a bond boy leaned into the peak travel trend partner with Pinterest to bring it to life through a pop up concierge desk in New York City surprising people with peak travel themed giveaways.
Speaker Change: Theyre also sponsoring the trend on the platform through an exclusive predicts badge there'll be live throughout 2025 on a variety of peak travel related pens, the highlight exciting Marriott bonds away properties and mountainous locales.
Speaker Change: Looking to 2025 I'm incredibly excited for the evolution of our platform as we further lean into product features that can grow users deepen engagement and increase re visitation.
Speaker Change: We will continue to invest and why users come to Pinterest and what makes our platform valuable to advertisers.
Speaker Change: This means further investing in curation functionality that allows users to identify and refine their tastes and incorporating action ability throughout our core surfaces to allow users to take action and shop the products They love.
Speaker Change: Next I'd like to discuss how we are improving monetization by increasing <unk> value and performance for advertisers.
Speaker Change: In 2024, we made impressive strides against our monetization priorities, particularly to transform our AD platform into a true lower funnel performance engine, which led us to deliver 19% revenue growth in 2024 compared to 9% in 2023.
Speaker Change: Looking back at some of our key lower funnel launches, we began with mobile deep linking and direct links to bring users directly to an advertiser's web or mobile property, enabling us to significantly grow clicks.
Speaker Change: We complemented these efforts with adoption of our privacy centric measurement tools to prove our performance, giving advertisers the tools they need to accurately measure spend and vote with their dollars we.
Speaker Change: We also created new formats like promotion ads to help retailers showcase special offers during key promotional periods.
Speaker Change: Advertisers leaned into this format over the Q4 holiday season with those who included a promotion for their conversion campaign seeing an 18% increase in conversion rate compared to the same ads without a promotion.
Speaker Change: Finally, we built and launched performance plus to transform the advertiser experience driving performance improvements through lower through lower CPC and CPA.
Speaker Change: And automating much of their campaign workflow.
Speaker Change: These efforts culminated in a record Q4 as we delivered over $1 billion in revenue in a single quarter for the first time in our company's history.
Speaker Change: With our AD platform delivering significant gains compared to last year, given all the product innovation I just laid out.
Speaker Change: Digging into Q4, our advertisers saw immense value creation with over 90% growth in clicks to advertisers year over year.
Speaker Change: On top of over 100% growth last Q4, as we lap the initial direct links product rollout.
Speaker Change: The value. We created also led to significant value capture as retailers leaned into Pinterest to drive results. In fact, we saw the largest volume of revenue ever over the cyber five holiday surge, while simultaneously decreasing CPA by over 30% year over year.
In 2025, we have a strong roadmap to continue to drive value to advertisers and capture additional share of wallet.
Performance plus is one component of this.
Speaker Change: Stepping back it's worth noting that performance plus is at the beginning of a multiyear product cycle. We will continue to release, new features and functionality, while simultaneously continuing to drive adoption and increased the percent of revenue eligible to take advantage of key features within the automation suite.
Speaker Change: And while we're still early I am excited about the momentum we're building.
Speaker Change: We're seeing performance improvements positive advertiser feedback on the simplified campaign setup and promising initial adoption of performance plus campaigns and features while recognizing it's still in the early phases of rolling out.
Speaker Change: Expanding on our launch from last fall. We will also build new features for performance plus in 2025.
Speaker Change: Including enhanced bidding and creative functionality.
Speaker Change: ROE as bidding, which optimizes bids to maximize return on AD spend will be live to all eligible advertisers by the end of Q1.
Speaker Change: A large retailer with a sizable product catalog leaned into this product and saw strong results with a significant improvement in return on AD spend and their internal measurement system.
Speaker Change: Following their test the retailer increase their shopping budget in Q4 to take advantage of the strong results.
Speaker Change: Our performance plus creative tools will also be an area of focus in 2020 fun. We're.
Speaker Change: We're doubling down to give advertisers more creative control, which we've seen have a positive impact on their performance.
Speaker Change: That means automated cropping adjusting image brightness and adding logo overlays. So their brand is present all of which we expect to add in the first half of this year.
Speaker Change: Complementing the lower funnel product set is our commitment to improving conversion visibility of measurement.
Speaker Change: This helps advertisers build stronger more accurate data foundations that they need in order to scale their budgets on pinterest.
Speaker Change: Advertisers use a variety of different methods to see and measure their spend.
Speaker Change: In order to show up as accurately as possible wherever and advertisers measuring their spend we will invest in scalable ways to continue to connect our conversion data into third party measurement sources of truth.
Speaker Change: Our lower funnel advertiser offering is made possible by our ability to make ads relevant content for our users.
Speaker Change: As we've long said when users come to Pinterest, they have a very different mindset than traditional social media often coming to invest in themselves find inspiration shop and take action.
Speaker Change: If you take our three main surfaces home feed search and related pens, you can see the purchase funnel come to life with roughly one third of our engagement on the home feed while lower funnel search and related pens, a form of visual search make up roughly two thirds of our engagement.
Speaker Change: Because of this relevant ads can improve the user experience and drive even more value to advertisers by more efficiently, reaching the right audience at the right time.
Speaker Change: This flywheel improves over time as more intense signals feed more relevant content to help users shop and provide even more intense signals.
Speaker Change: Moreover, we have tangible evidence that the flywheel is working.
Speaker Change: Monthly active users continue to grow double digits, reaching all time highs each consecutive quarter of 2024.
Speaker Change: Adam <unk>, our growing while clicks to advertisers are growing faster than AD impressions and AD relevance on our search surface doubled over the past two years as our models are able to capture more signals and more efficiently place ads in the right place at the right time.
Speaker Change: In 2025, we are continuing to leverage AI to grow AD load, while growing users improving relevance and increasing shopping and action ability on the platform.
Speaker Change: Finally, I'll touch briefly on our monetization initiatives to diversify demand through partnerships and international growth.
Speaker Change: 2024 marked a year of scaling our first third party demand partnerships with Amazon ads and Google.
Speaker Change: We complemented these efforts by launching resellers in 30 markets in Q3.
Speaker Change: These efforts are paying off as rest of world revenue growth accelerated throughout 2024.
Speaker Change: As I think about all we've accomplished in 2024 and build a pride about the work our teams delivered across our strategic priorities and feel optimistic about what's to come in the year ahead.
Speaker Change: More importantly, I'm proud of how we are building our business with.
Speaker Change: We've proven that our business model built on positivity not only benefits our users particular Gen Z users who value pinterest as a place to manifest their dreams away from the toxicity found elsewhere in social media, but it leads to better business outcomes.
Speaker Change: We've consciously invested in products and policies that tune AI for positivity and ultimately help our users feel their best for.
Speaker Change: For example body type ranges and skin tone and hair pattern search, let our users see themselves represented in the content on the platform and fab users, who search with these refinement tools save on average, 75% more pins than users who search without using these tools.
Speaker Change: Additionally, our ethos around positivity is a unique value proposition to advertisers, who wish to align their brand with a positive environment.
Speaker Change: And with that said I'll turn the call over to Julia to share more details about our financial performance in Q4.
Julia: Thanks, Bill and good afternoon, everyone.
Julia: I'll be discussing our full year and fourth quarter 2024 financial results and provide an update on our preliminary first quarter 2025 outlook all financial metrics, except for revenue will be discussed in non-GAAP terms, unless otherwise specified and all comparisons will be discussed on a year over year basis, unless otherwise noted.
Julia: Before I dive into the details of the fourth quarter I want to pause and reiterate Bill's comments about how 2024. It was a transformative year for Pinterest last year, we generated $3 $65 billion in revenue, representing 19% growth more than doubling our growth rate from 2023.
Julia: Importantly, this growth illustrates the significant progress we've made to become a true full funnel platform.
Julia: <unk> grew revenue primarily from our lower funnel clicks and conversions based objective, which signal that our new lower final performance tools and strategy are working.
Julia: We've also remained strategic about our investments focusing on high ROI opportunities across users and monetization. This.
Julia: This includes utilizing AI to improve personalization and content recommendation to enhance the user experience and building automation tools to drive better performance for advertisers.
Julia: And we're doing this all while continuing to exercise expense discipline.
Julia: This focus on profitable growth has led to a roughly 50% increase in adjusted EBITDA dollars year over year in 2024 with margins expanding by 510 basis points.
Julia: Finally, we achieved a significant milestone in 2020 for reaching GAAP profitability on a net income basis for the first time since 2021.
Julia: Now, let's dive into the fourth quarter.
Julia: We ended the quarter with $553 million global monthly active users or MAA is growing 11% and reaching another record high users also continued to grow year over year across all of our geographic regions in Q4, our U S and Canada region had $101 million in May is accelerating to 4% growth.
Julia: Our Europe region had $145 million in MA is growing 7% and in the rest of world markets, We had $307 million is growing 15%.
Julia: Moving to revenue in Q4, our global revenue with 115 $4 billion.
Julia: Up 18% on a reported and constant currency basis the.
Julia: The revenue strength this quarter highlights how we are driving value for advertisers across the full funnel with particular strength coming from our lower funnel consideration objective, which optimizes for clicks.
Julia: From a vertical perspective, we continued to see broad based strength in retail. Additionally, emerging verticals like technology and financial services continued to be a source of strength.
Julia: As expected growth was partially offset by softness within the food and beverage sub sector of CPG.
Julia: Additionally, as a reminder, unlike other platforms, we do not accept political advertising and therefore, it did not see a benefit from election related spend in Q4.
Julia: While the majority of our growth came from our core first party demand generated by our internal sales force as expected. We also saw revenue from third party demand partnerships ramp in Q4 growing sequentially off the revenue base. We delivered in Q3 as they continued to round out gaps in our auction and complement our growing first party demand.
Julia: Turning to our geographical breakouts for Q4 in the U S and Canada.
Julia: Okay.
Julia: Millions of dollars in revenue growing 16%.
Julia: <unk> came from retail in emerging categories, including technology and financial services.
Julia: In Europe revenue was $196 million growing 21% on a reported basis or 20% on a constant currency basis strength in Europe was driven by retail.
Julia: Revenue from rest of World was $58 million growing 44% on a reported basis or 53% on a constant currency basis.
Julia: In Q4 AD impressions grew 43%, while AD pricing declined 18% year over year.
Julia: As we've discussed for multiple quarters, our efforts to begin serving ads and monetize international markets our previous gaps in our auction had been accretive to net revenue.
Julia: However, as we've begun to scale. These initiatives. It is naturally led to an increase in AD impressions growth and downward pressure on overall global platform pricing due to this ongoing mix shift.
Julia: Moving to expenses.
Julia: Q4 cost of revenue was $191 million up 10% year over year and up 5% versus Q3 due to increased infrastructure spend related to users and engagement growth.
Julia: Our non-GAAP operating expense was $496 million up 12% the.
Julia: The increase was primarily due to R&D, where we are investing in head count with the smaller increase in sales and marketing.
Julia: Our revenue strength and expense discipline led to another strong quarter of adjusted EBITDA coming in at $471 million with an adjusted EBITDA margin of 41% an increase of 320 basis points versus Q4 last year.
Julia: In Q4, we also recorded a $1 6 billion income tax benefit. This was driven by the release of evaluation allowance against a significant portion of our U S deferred tax assets due to our sustained profitability and continued forecasted income.
Julia: I'd like to take a moment now to discuss our cash flow our ability to generate significant free cash flow, which we define as cash flow from operating activities less purchases of property and equipment speaks to the inherent profitability of our business and asset light nature of our model.
Julia: For the full year 2020 for free cash flow increased 55% to $940 million. This.
Julia: This compares to 2024, adjusted EBITDA of 1.0 billion, representing free cash flow conversion of 91%.
Julia: Investors should analyze our free cash flow annually as quarterly free cash flow can fluctuate due to the seasonality of our business among other factors.
Julia: We ended the quarter with cash cash equivalents in marketable securities of $2 5 billion.
Julia: As a reminder, at our Investor day in fall 2023, we laid out the four pillars of our capital allocation framework, which remain unchanged.
Julia: First investing in product and technology innovation.
Julia: Balance sheet optimization third dilution management and fourth preserving flexibility for opportunistic and disciplined M&A.
Julia: Four we made further progress mitigating dilution as we allocated $100 million towards share repurchases, bringing our full year 2020 for share repurchases to $600 million for a total of $19 1 million shares.
Julia: In addition, we utilized $390 million of cash in the year on net share settlement of equity awards combined for full year 2024. These actions have driven an approximately one 7% decline in year over year fully diluted share count.
Julia: Now I'll discuss our preliminary guidance for the first quarter. Please note that starting this quarter. We are transitioning to provide adjusted EBITDA guidance and will no longer provide an outlook for non-GAAP operating expenses.
Julia: We expect Q1 revenue to be in the range of $837 million to $852 million, representing 13% to 15% growth year over year or 15% to 17% growth on a constant currency basis as our guidance assumes the impact of foreign exchange to be approximately two points of headwind based on current spot rates.
Julia: Our guidance also reflects the effects of lapping leap day, and the earlier Easter timing in Q1 2024.
Julia: We expect Q1, adjusted EBITDA to be in the range of $155 million to $170 million.
We anticipate Q1 2025 non-GAAP cost of revenue expense to be relatively consistent with Q4 of 2024.
Julia: Within non-GAAP operating expense our primary area of investment will continue to be head count within R&D, which will support our efforts in AI as well as other product initiatives, which enhanced the user experience and monetization.
Julia: Last year, we made significant progress in margin expansion towards our long term goals growing 2024, adjusted EBITDA margin by 510 basis points year over year.
Julia: We expect margin expansion again in 2025, though we anticipate the rate of margin expansion to be lower than the outsized expansion. We delivered in 2024, as we continue to invest behind our initiatives and drive profitable growth.
Julia: In closing I'm extremely pleased with our team's performance in Q4 and full year 2024, we have made significant progress against our strategic priorities growing users and engagement executing on our lower funnel opportunity all while driving profitable growth.
Bill: With that I'll hand, it over to Bill for some final words. Thanks.
Bill: Thanks Julien.
Speaker Change: I want to thank our teams at Pinterest, our advertising partners and all the people that come to pinterest to find inspiration and to shop and with that we can open the call up for questions.
Speaker Change: Thank you we will now open the line for questions.
Speaker Change: If you'd like to queue for a question. Please dial star one on your telephone keypad. If for any reason you would like to remove that question. Please dial star two.
Speaker Change: Again to ask a question it is star one please.
Speaker Change: Please note that we do ask that analysts limit themselves to one question on today's call.
Speaker Change: The first question is from the line of Eric Sheridan with Goldman Sachs. You May proceed.
Eric Sheridan: Thanks, so much for taking the question and thanks for all the details in the prepared remarks.
Eric Sheridan: Third remarks, I want to know what your key takeaways are from 24 in terms of how the platform evolves and maybe with the forward one of the two or three biggest strategic priorities, you're setting up to try to execute against based on those learnings in 'twenty four as we proceed deeper into 2025. Thanks so much.
Eric Sheridan: Thanks, Eric.
Eric Sheridan: If you take a step back 2024 as I mentioned was a transformative year for our business, we more than doubled our revenue growth rate going from 9% growth and 23% to 19% in 2024.
Eric Sheridan: We brought on a record number of users while deepening engagement.
Eric Sheridan: Best evidenced by our highest ever weekly active to monthly active ratio.
Eric Sheridan: We just finished Q4 at 18% revenue growth and are guiding Q1, 15% to 17% on a constant currency basis. So all of this really represents the considerable progress against our stated longer term goals and we feel good about the sustainability of the revenue growth that we've been driving so as a result, we're doubling down on our strategy and we see multiple initial.
Eric Sheridan: Lives with strong balanced execution to drive our growth in 2025 and beyond <unk>.
Eric Sheridan: First is continuing to grow our user base and deepen engagement and bring back users more frequently through our efforts and action ability and curation.
As we stated many times relevant ads can be great content for our users and additive to the user experience, particularly when they're in commercial context, and as such we see room to further grow our AD load, particularly in high intense surfaces and verticals on our platform and for those users that again or in a commercial mindset.
Eric Sheridan: Secondly, we will continue to drive improved performance for advertisers through lower funnel product innovation and AD platform efficiencies.
Eric Sheridan: Performance, plus which we just rolled out rolled out late last year, we will continue to be enhanced through features like ROE as bidding and performance plus creative.
Eric Sheridan: As I've always said, we expect performance plus to be a steady build with a multiyear product and adoption cycle no hockey stick and growth in one particular quarter, but a steady build over a multi year product adoption cycle.
Eric Sheridan: And finally, we will continue to complement our strong and growing first party business through new sources of demand as you've seen us do through the launch of resellers and third party partners and will continue to optimize and test with incremental sources of demand over time.
Eric Sheridan: And maybe just to add a little bit more color there from a vertical standpoint retail has been strong for us in 2024, and there's certainly more room to go there in 2025, we can see.
Eric Sheridan: Turning to see opportunities to capture more value from on the clicks were driving especially as we rollout performance plus the lower funnel and more.
Eric Sheridan: More granular bidding functionality, allowing advertisers to effectively bid on a wider swath of their catalogs.
Eric Sheridan: As I noted in the prepared remarks, you know emerging verticals such as financial services and technology also continue to remain a nice driver for US we saw strength in those categories in Q4 and really much of 2024 those are AD verticals with billions of dollars in digital AD spend and we still have a very small percentage market share today. So we see lots of opportunity there.
Eric Sheridan: Within the food and beverage sub sector of CPG, which was softer in 2024 due to a category specific headwinds in 2025, we begin to anniversary the weaker trends in that category and while we are seeing very early green shoots there in Q1, it's too early to say the headwind in food and beverage is fully behind us.
Eric Sheridan: So as Bill described we have several initiatives that play and we continue to feel confident in the sustainability of our current trajectory and a steady ongoing execution of our plans.
Eric Sheridan: Thank you.
Speaker Change: The next question is from Brian Nowak with Morgan Stanley. Your line is now open.
Speaker Change: Thanks for taking the question. This is Matt on for Brian can you talk a little bit about the GPU enabled in machine learning and jet AI areas that you think can be the most material drivers to further platform improvement in 2025.
Speaker Change: Certainly thanks for the question.
Speaker Change: As a visual search platform AI as a core competency here of interest.
Speaker Change: <unk> every pen and products shown as a result of our cutting edge AI technique and recommendation algorithms that and Jeff hundreds of billions of user actions to understand what a user might be interested in as I mentioned in the prepared remarks. There was a really unique user actions that only take place on pensions, where users are curating, you're making product associated.
Speaker Change: <unk> and.
Speaker Change: And so that's what's really driven significant improvements in the relevance of our recommendations. So our strategy remains unwavering, we're going to continue to invest in AI that drives create experiences for our users and better performance for advertisers. This is included things like switching from CPU GPU, serving to leverage larger model that improve organic and.
Speaker Change: <unk>, serving integrating <unk> into our AI to drive user experiences like guided search and computer vision tech for experiences like shop, the look ways the style et cetera.
Speaker Change: As I also mentioned in the prepared remarks, we're using coding assistance to help engineers accelerated velocity of produce code and to help with improving code test coverage and quality.
Speaker Change: We see really strong internal uptake in these tools and like I said, roughly 50% of our code base is AI generated through these coding assistance. So we see these results clearly in our topline numbers with Wilder MAU at an all time high users at an all time high clicks to advertisers continued to be strong.
Speaker Change: Even at those all time high user numbers. So again AI really is a core competency of the platform and I talked about performance plus being at the beginning of a multi year.
Speaker Change: Product adoption cycle, we think theres a lot of improvement there and again with with what we're seeing in AI. We think will continue to drive great advancements in what we can do for user experience and advertising performance.
Speaker Change: Thank you.
Speaker Change: The next question is from John Blackledge with TD Securities. Your line is now open.
John Blackledge: Oh, great. Thank you on the <unk> 25 guidance could you discuss the quarter to date average advertising trends that youre seeing and then what are kind of the puts and takes that got you to the <unk> 25 revenue outlook. Thank you.
Speaker Change: Thanks, John.
Finished Q4 with revenue growth of 18% and guided Q1 to 15% to 17% on a constant currency basis.
Speaker Change: And then if you look at Q1 on a two year stack basis, Youll see our guidance implies a sequential acceleration this quarter.
So in Q1, we will look to continue to drive performance across the lower and upper funnel or new lower funnel toolset continues to drive improved value to advertisers. Most recently driving over 90% increase in clicks to advertisers year over year in Q4, we still have more value capture to go as advertisers increasingly turned to pinterest to drive performance.
Speaker Change: We're seeing nice adoption of newer AD formats and capabilities, including ongoing growth of spotlight ads and the adoption of more granular bidding capabilities to give advertisers more bidding control across our catalog.
Speaker Change: And finally as Bill mentioned, we're at the beginning of a multiyear product cycle for performance plus we're seeing early good results that more of the opportunity is in front of us than behind US. We expect the adoption of impact to steadily build as it would with any new product rollout and want to reemphasize its multi quarter multi year as new functionality continues to be rolled out.
Speaker Change: While challenges still remain within the food and beverage category. We are now lapping the early stages of that softness which started in December of 2023 as such we're expecting the overall drag from food and beverage to our topline revenue to lessen slightly in Q1 as we start to see very early signs of green shoots in that category, but it's too early.
Speaker Change: To say the headwind is fully behind us and that is factored into our guidance as well.
Speaker Change: So those are some of the factors as we think about Q1 overall and our 15% to 17% constant currency guidance.
Speaker Change: Thank you.
Speaker Change: The next question is from Mark Kelley with Stifel. Your line is now open.
Mark Kelley: Great. Thank you very much I wanted to ask you.
Speaker Change: You touched on this a little bit in the prepared remarks, but.
Speaker Change: Looking back at last year, I guess can you talk through the contribution from the third party partnerships.
Speaker Change: I guess would you characterize them as in line with expectations better maybe a little bit slower and then how much can we expect those partnerships to contribute this year. Thanks very much.
Speaker Change: Thanks Mark.
Speaker Change: Since the beginning we've said that our efforts to bring in new demand inclusive of third party demand and resellers was targeted at rounding out gaps in our auction with a particular focus on improving shop ability as a complement to our first party sales efforts.
Speaker Change: Step back we've seen great progress here on multiple fronts, our platform is more <unk> than ever as evidenced by the strength of our holiday shopping performance.
Speaker Change: And we've made significant progress in rounding out gaps or auction with first party relationships, leading the way exactly as we would hope and new demand efforts, providing a compliment when needed.
Speaker Change: As our capabilities.
Speaker Change: True lower funnel platform take hold we are driving strong first party demand at the same time, we've enhanced our ability to bring in programmatic demand as well as demand through resellers then.
Speaker Change: Net effect of that is we've driven significant improvements in the shop ability of our platform by closing gaps in our auction with ads and search results now being two times as relevant as they were two years ago.
Speaker Change: Lastly, as we strengthen our first party business and advertisers come to us directly which is what we want we're finding we have fewer gaps or auction, especially in our more mature markets. Therefore as the as the core first party business grows it reduces the need for third party demand again, that's a very healthy dynamic for our.
Speaker Change: Our overall business.
Speaker Change: However, what's exciting is that our capability to ingest demand from many sources, such as resellers and multiple third party demand partners.
Speaker Change: And thereby reduce gaps in our auction is more advanced than it's ever been which allowed us to respond more dynamically when and if there are shifting demand patterns. So this is an area that we'll continue to optimize in advance as we move forward.
Mark Kelley: Anything you'd either yes, I guess I would say mark. Thanks for the question and we've been very consistent that will not break out revenue from third party partners or resellers separately.
We've noted that these initiatives were new and began to scale in 2024 with each quarter ramping sequentially and we'll continue to test and optimize as we move forward as Bill noted.
Mark Kelley: You know as we've mentioned there are many levers for growth in 2025, including and growing users engagement, increasing AD load on high intent surfaces synergistically with that engagement, improving AD relevance and ongoing kind of full funnel AD product innovation. In addition to some of the opportunities to continue to take share in retail and some of the emerging.
Category as I noted earlier like financial services and technology. So on balance we see multiple initiatives with strong balanced execution going forward to help drive our growth in 2025.
Mark Kelley: Thank you.
Speaker Change: The next question is from rich Greenfield with light shed partners. Your line is now open.
Speaker Change: Hi, Thanks for taking the question Bill and Julia.
Speaker Change: In the release Theres the quote.
Speaker Change: Coming to Pinterest more often and obviously bill you talked a few times about the improvement in weekly monthly weekly users relative to monthly, but could you help us understand engagement a bit better you've got U S and they use up 4% should we take your comments on Wow is growing substantially faster than MAU to mean.
Speaker Change: Our wells growing high single digits double digits like any way to think about given the importance of the U S market to revenues just how to think about how fast that that engagement metric is growing or any engagement metric within that is growing and then.
Speaker Change: You are at 101 million <unk> in the U S and Canada is that I don't want to put a timeframe, but is that long term a $150 million is the ceiling $200 million. How do you think about the domestic Tam for your business.
Speaker Change: Yeah. Thanks rich.
Speaker Change: So as I noted our our weekly active monthly active ratio is at an all time high for the platform at 62% for our global user base, which is a sign of deepening engagement even at record number of users that as I noted before.
Speaker Change: Oftentimes you add large volumes of new users that can be dilutive to your overall engagement, but yet we still achieved record highs in that weekly active monthly active ratio.
Speaker Change: It's worth, noting your parsing sort of global versus U can.
Speaker Change: Our Wilder MAU is highest in our most mature regions like you can in Europe. So ive said for quite a long time.
Speaker Change: It.
Speaker Change: Especially in our mature markets, it's really about deepening engagement per user versus chasing new users in our particularly our most mature markets and were getting the dynamics that we'd want there.
Speaker Change: Again, great deep engraving, great deep engagement across the platform.
Speaker Change: The greater frequency from weekly monthly active ratios and with those being highest in our most mature regions. So users continue to grow nicely.
Speaker Change: As noted we had another quarter of all time user highs and our strategy remains the same to bring action ability to the forefront of the user experience drive curation through boards and collages and create a positive space for our users which are increasingly gen Z at our largest fastest growing audience.
Speaker Change: Those efforts are an action ability shopping curation really resonating.
Speaker Change: Across our user base, especially with Gen Z and.
Speaker Change: That deeper action ability on the platform.
Speaker Change: Noted that's also leading to clicks to advertisers growing at over 90% year on year in Q4, even after lapping the initial impact of direct links.
Speaker Change: <unk> Q4 of 23 were those clicks were up more than 100% year on year. So even let had really strong growth again, 90% lifting clicks to advertisers are really finding a great dynamic around positive MAU trajectory positive engagement and tying the user engagement to things are highly monetized Bowl.
Speaker Change: Even as.
Speaker Change: Users engage more and more with that.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of <unk> with Wolfe Research. Your line is now open.
Speaker Change: Thanks, a lot for taking my question.
Speaker Change: I have one on AD products and features.
Speaker Change: Should we think about contribution of all this product innovation that you have got and we will do this year as we think about one to three years out from performance pluses spotlight ads, new bidding capabilities, increasing AD load deep linking everything.
Speaker Change: And what's to come.
Speaker Change: What are you most excited about in terms of the magnitude of the impact and how should we think about.
Speaker Change: When we see the impact from each of these different things to call. It one to three years, how do you see it evolve. Thank you.
Speaker Change: Yeah. Thanks for the question.
Speaker Change:
Speaker Change: As I mentioned in my remarks.
Speaker Change: 'twenty 'twenty four and it was quite transformative for us we more than doubled our revenue growth rate from 23% to 24.
Speaker Change: Our lower funnel objectives being the strongest and we've been on a journey over the last two and a half years.
Speaker Change: To really make pinterest, a true performance advertising platform.
Speaker Change: And the things that we've done.
Speaker Change: As I've said before I wouldn't think of them as like one off launches they have compounding effects over not just multiple quarters, but multiple years.
Speaker Change: We created immense value for advertisers in 2024 through our lower funnel innovation, including direct links mobile deep linking.
Speaker Change: Conversion of Ipi.
Speaker Change: Clicks were up 90% in Q4 after lapping a 100% click growth from the prior year doubled AD relevance on search.
Speaker Change: This all culminated in the doubling of the growth rate in revenue from 2004 compared to 23, and our first billion dollar.
Speaker Change:
Speaker Change: Quarter in Q4, so all of these again all of these launches are compounding on each other.
Speaker Change: But that's an effect that we see continuing forward you know as we look forward, we're not changing our strategy, we're doubling down and there's still a lot more yield from these various efforts as they continue to mature for example performance plus.
Speaker Change: Is very much in its early days it.
Speaker Change: It just went into general availability in October.
Speaker Change: And this is a longer term multiyear innovation cycle and adoption curve.
Speaker Change: And if you think back to when other platforms launched similar products. It kicked off a multiyear adoption cycles for them as well, notably these platforms, we're still iterating and enhancing those products today three years to 40 years after their initial launch.
Speaker Change: We think about the similar thing.
Speaker Change: There's tremendous benefit.
Speaker Change: Yet to come and more benefit in front of US then.
Speaker Change: Behind us.
Speaker Change: However, we feel really good about the product performance, we've seen with testing showing a 20% CPA improvement for advertisers using performance plus.
Speaker Change: Shopping ad campaigns.
Speaker Change: Advertisers also require 50% less inputs to create a campaign now.
Speaker Change: Those are using our performance plus products and that's a significant improvement in campaign set up so while while early advertiser adoption is also going well and with that said again, it's a multiyear product cycle with more of the opportunity in front of us than behind us.
Speaker Change: We will continue to roll out features and performance plus suite over the course of this year and next.
Speaker Change: And we will also introduce performance plus functionality to more formats and advertisers.
Speaker Change: To grow eligibility and just consistent with what we've done over the last two and a half years, where you have seen a steady build steady execution on these things.
Speaker Change: Don't think of these as a moment in time, whereas a hockey stick in a given moment. These have a steady build over time in a compounding effect of these things as they build on each other and again, we see that as a multi year cycle that we're still in the early innings of.
Thank you.
Speaker Change: The next question is from the line of Ron Josey with Citigroup. Your line is now open.
Great. Thanks for taking the question Bill maybe as a quick follow up just what I was just there I really enjoyed your comment not onetime launches the compounding over multiple years, we're now a year and a direct link maybe a year and a quarter and so with outbound clicks growing 90% as I would love to hear how advertiser adoption of these direct links is going the sales processes.
Speaker Change: Going et cetera, and really how that compound into more advertisers.
Speaker Change: Devoting more always on AD spending and then maybe more tactically whats rollout bidding.
Speaker Change: The launch I think you said end of the quarter I'd love to understand just the benefits and the real opportunity around realized it is doing what do you what do you think or how do we think about what could happen here once launch. Thank you.
Speaker Change: Yes.
Speaker Change: So.
Speaker Change: On this compounding effect.
Speaker Change: And.
Speaker Change: Direct links mobile deep linking.
Speaker Change: We talked about we launched those in.
Speaker Change: In Q4 of 'twenty three is when we launched direct links.
Speaker Change: And we said then that we were focused first on value creation, and then value capture seconds. So we launched mobile deep linking and direct links in the back half of 'twenty three.
Speaker Change: Then that gave advertisers a reason to go launch.
Speaker Change: <unk> tools with us and so we've really focused on getting more advertisers adopting our measurement tools through 'twenty four based on the evidence of the click traffic, we are able to drive and we saw as those advertisers adopted performance measurement with us privacy safe measurement that consistently that would lead to then being able to see the value that we're driving and then shifting budget.
Speaker Change: And our direction and we see more of that to go both on that value capture from the measurement implementations that are happening as well as the next phase of work, which we talked about which was after we created value meta. So they can measure the value then with performance plus that makes it so they can.
Speaker Change: Easily take action on that value with easy campaign creation and setup.
Speaker Change: And so we've created tremendous value through direct links through mobile deep linking and really just the shop ability of our users.
Speaker Change: It's not just a format changes that as we've made shopping better for users were seeing users engage more with shopping.
Speaker Change: More on the platform taking action more on the platform.
Speaker Change: And advertisers taking advantage of all of that value creation again, we see more of that value in front of us than behind us, which is what gives us.
Speaker Change: A lot of confidence in the pipeline ahead, there's not just a pipeline of strong products. It's a pipeline of value that we've created that we're giving advertisers better and better ability to take advantage of.
Speaker Change: And again, we're still in the relatively early days of that even though we see very clear signs of those users taking action to give you. A tangible example of just how much action, we see advertisers taking for.
Speaker Change: Some of our largest advertisers the lower funnel revenue objective now accounts for over 80% of their spend with us which was up significantly over the last two years.
Speaker Change: And significantly higher than the overall mix of lower funnel that we see across the business. So when you step back and say two and a half years ago, we embarked on a mission to really turn <unk> into a performance advertising platform for some of the largest most sophisticated advertisers.
Speaker Change: We're getting to.
Speaker Change: 5% of their total AD budgets, 10% plus other of their digital AD budgets, demonstrating that we can be a much larger portion of the overall ad market.
Speaker Change: Even as we started first with those largest advertisers.
Speaker Change: And doing that with focus on durable low funnel budgets.
Speaker Change: And with some of the largest getting to 80% plus of our spend in that lower funnel and over the course of the last year. We've seen this trend for the next tranche of advertisers.
Speaker Change: Think of it as I've said before in the 1% to $30 billion range and that next tranche is still quite sizable.
Speaker Change: As they recognize the value creation that we've driven in the form of doubling the amount of clicks year on year.
Speaker Change: We continue to see room to grow share of wallet with both of these cohorts.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Then the last question is from Jason <unk> with Oppenheimer. Your line is now open.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: In the quarter you saw a sequential improvement in both U S and Europe Mou.
Speaker Change: How should we think about I mean, you grow.
Speaker Change: As for this year and then how are you thinking about further improvement in the.
Speaker Change: The <unk> ratio after the improvement in 24, thank you.
Speaker Change: So we don't guide to users so.
Speaker Change: I'm not going to answer the question.
Speaker Change: <unk>, but you know as I've shared in my remarks.
Speaker Change: We see really positive trajectory.
Speaker Change: And giving better recommendations to our users the curation on the platform leading them to.
Speaker Change: Worked through more of their decision, making journey and the action ability that we brought into platform, making it easier for them to take action. So those are the things when we look at why we're getting to record highs and mouse.
Speaker Change: The deepening engagement as evidenced in the Wilder MAU ratios are at all time highs.
Speaker Change: It is leveraging AI against our unique signal to make really great recommendations to our users that are fed by the unique curation signal that we have in.
Speaker Change: And that compounding effect, we see continuing forward so while we don't guide to users.
Speaker Change: Underlying effects that are driving user engagement and Mal growth, we see those as long term durable effects.
Speaker Change:
As I mentioned in my remarks.
Speaker Change: We have a lot more to do to continue doubling down on that work when you think about.
Speaker Change: How much shopping activity occurs in the broader ecosystem the size of that market Theres a lot more of that out there for us to capture so again, while we don't guide to users I think the effects that we see we believe our durable.
Speaker Change: And based on the uniqueness of our platform and we continue to focus on that as we look ahead.
Speaker Change: And with that I'd like to thank all of you again for joining the call and for your questions. We look forward to keeping the dialogue going and we hope you enjoy the rest of your day.
Speaker Change: That concludes today's conference call. Thank you for your participation you may now disconnect your lines.
Speaker Change: Okay.