Q1 2025 Pinterest Inc Earnings Call
[music].
Good afternoon. Thank you for attending today's Pinterest first quarter 2025 earnings call.
All lines will be muted during the presentation portion of the call with an opportunity for questions at the end.
You'd like to queue for a question. Please dial star one on your telephone keypad.
Andrew: I will now hand, the call over to Andrew <unk> VP of Investor Relations and Treasury you May proceed.
Andrew: Good afternoon, and thank you for joining US welcome to Pinterest earnings call for the first quarter ended March 31 2025.
Andrew Sandberg: My name is Andrew Sandberg, and I'm, 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 Sandberg: 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 Sandberg: Some of the statements that we make today regarding our performance operations and outlook may be considered forward looking and such statements involve a number of assumptions risks and uncertainties that could cause actual results to differ materially in.
Andrew Sandberg: In addition, our results trends and outlook for Q2, 2025 and beyond are preliminary and are not an assurance of future performance.
Andrew Sandberg: We are 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 Sandberg: For more information about assumptions risks uncertainties and other factors that could cause that could affect our results. Please refer to our most recent Form 10-Q and Form 10-K, each filed with the SEC and available on our Investor Relations website.
Andrew Sandberg: 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.
Andrew Sandberg: They are distributed and available to the public through our Investor Relations website.
Andrew Sandberg: Lastly, all growth rates discussed in today's prepared remarks should be considered year over year, unless otherwise specified and now I will turn the call over to bill.
Bill Ready: Thanks, Andrew.
Bill Ready: Good afternoon, and thank you for joining our first quarter 2025 earnings call.
Bill Ready: In Q1, we demonstrated the strength and effectiveness of our long term strategy and remain laser focused on delivering value for our users and advertisers.
Bill Ready: We finished the quarter with another record number of users, reaching $570 million in MA used globally, reflecting 10% growth year over year.
Bill Ready: At the same time, we generated Q1 revenue of $855 million up 16% year over year due to the strong performance, we are driving for advertisers across the full funnel.
Bill Ready: We also grew adjusted EBITDA to $172 million as we continue to focus on driving profitable growth, while simultaneously investing in high ROI areas to enable us to reach our longer term opportunity.
Bill Ready: Before getting into the details of Q1 I'd like to discuss the current macro environment, we're operating in our business, including our topline revenue growth remains healthy.
Bill Ready: This is an indication that our efforts to build a more engaging and actual product for our users and a more performing product for our advertisers are working.
Bill Ready: The strong fundamentals in our business are the result of the strategic priorities, we've executed against taking pictures from a platform with declining users and modest revenue growth a few years ago into a secular share taker with a more resilient business than ever before.
Bill Ready: Today, Pinterest is a shopping destination with roughly 85% of our monthly active users coming directly to our mobile app, which is up nearly 10% 10 points for the middle of 2022.
Bill Ready: As we've made our platform more actionable and generated growing numbers of clicks and conversions, we've become a vital partner for advertisers across a range of categories seeking to reach our high intent users and drive sales.
Bill Ready: In turn we are increasingly accessing always on performance budgets, which are larger and tend to be more durable.
Bill Ready: Furthermore, an uncertain macro environment, where consumers are more intentional and discerning with their spend presents an opportunity for <unk> to deliver differentiated utility for our users.
Bill Ready: Our users are planners and often come to us for their most considered purchases.
Bill Ready: As such our ability to leverage AI to personalize our users experience is a key differentiator and has enabled us to find our best product market fit in years.
Bill Ready: It also makes us a highly valuable partner to advertisers theyre looking for early signals on how consumer trends may be shifting before it shows up in traditional purchasing data.
Bill Ready: From where I sit today I'm proud of our consistent execution. The progress we've made to improve the resiliency of our business and I remain confident that the strategy. We've employed will endure for the long term.
Bill Ready: With that I will now shift to our quarterly update on users and engagement, where I'll discuss just how we're delivering a differentiated product experience to ultimately drive deeper engagement with our users.
Bill Ready: A key driver of our success is our intentional effort to build a better more relevant platform for our users one that connects them to styles products in aesthetics. They may not have the words to describe in fact, according to academic studies, 50% of the human brain is wired for visual processing the.
Bill Ready: The ability for users to explore their interest visually and take action on them is one of our core differentiator and an important reason why users come to our platform in the first place.
Bill Ready: This is especially relevant for Gen Z, our largest and fastest growing user cohort who had been raised on an internet of visual content across images and video and who find utility in the ability to search visually.
Bill Ready: Over the years, we've been investing to strengthen our visual search and content understanding capabilities to match content from our corpus of billions of pins to a user's taste and style.
Bill Ready: This means that a search query that may begin as beach dinner outfit and with a user finding and purchasing the perfect pair of Linden pans, along with great accessories from the site or App of a brand that they love or a brand that petrus help them discover.
Bill Ready: Throughout 2025, we're doubling down on our visual search capabilities to help users discover and effortlessly shop, what inspires them all powered by our enhanced multimodal AI models.
Bill Ready: Our latest model is trained on both image and text data deepening its ability to understand the Penn by creating a more informative.
Bill Ready: And comprehensive representation of its content.
Bill Ready: This allowed the model to better interpret user input and ultimately provide better recommendations.
Bill Ready: In fact, our proprietary multi modal AI model that powers visual search on Pinterest is 30% more likely to identify and recommend relevant content from our corpus than leading off the shelf models.
Bill Ready: This advantage stems from the innovations we've made to deploy this model at scale for a unique use case and from leveraging our extensive signal from the hundreds of billions of user actions that take place on our platform and make up our taste scrap which has grown 75% over the past two years.
Bill Ready: This ultimately leads to more relevant recommendations and a better experience throughout the user's journey.
Bill Ready: Leveraging this enhanced multimodal technology, we are unlocking a new level of personalization for our users earlier.
Bill Ready: Earlier this month, we launched an entirely new user flow on women's fashion pins globally that upgrades the visual search experience on pinterest, allowing our users for the first time to search and refine their tastes using multimodal image and tech space inputs.
Bill Ready: This new user experience flow starts with a search image icon in the form of a magnifying glass.
Bill Ready: Once in this flow users can select an element of the pen to zoom in on and refine their search further using suggested attributes and filters recommended through our AI models for.
Bill Ready: For example, if a user comes across our lifestyle image of a celebrity wearing a stylus pair of sneakers. They can utilize this new flow to hone and specifically on the shoes to find content with a similar aesthetic, including other products and lifestyle images. Once they do so they might see descriptor words like street wear or athleisure alongside terms like.
Bill Ready: Graphic pattern or Earth tones, which further specify visual or stylistic characteristics of the image and also allow the user to narrow down their search to the products and images that are most relevant to them.
Bill Ready: And through this new flow. We also connect users to a carousel are solvable products from a catalog that match the characteristics of what they're searching for in turn allowing them to seamlessly go from inspiration to action.
Bill Ready: With hundreds of millions of users one of the largest image corporations in the world and leading AI capabilities Pinterest is a leader in visual search ads.
Bill Ready: As the landscape continues to evolve I'm excited about the innovations, we're making to our platform to continue offering a differentiated experience for our users.
Bill Ready: Turning to monetization.
Bill Ready: All of the efforts, we've made to improve our user experience directly tied to our value proposition for advertisers. This is our flywheel.
Bill Ready: A richer user experience with more action ability to drive deeper engagement, providing it's more unique signals to serve relevant ads.
Bill Ready: Since relevant ads are additive to the user experience on pinterest and they allow end market consumers to connect with products and brands. They may like to purchase we can scale up the amount of ads, we're able to show users ultimately increasing the amount of impressions, we're able to monetize.
Bill Ready: At the same time, we are improving the overall efficiency relevancy and performance of each AD served driving higher click through and conversion rates by leveraging our AI recommendation models to better understand a user based on past activity and predict the type of ads that might be best suited for them at that given moment for example.
Bill Ready: We recently developed an innovative approach to effectively integrate large scale knowledge graph embedding into our ads ranking models to drive better performance for advertisers.
These knowledge graph and bedding is our way of extracting complex networks of user interactions and ingesting them into our ads ranking models in a format that they can better interpret.
Bill Ready: This drives improved recommendations for users leading to a 4% uplift in click through rates on ads shown in our related Penn surface.
Bill Ready: The end result of this is a more <unk> and relevant experience for the user and a more performance AD suite for our advertisers.
Bill Ready: Our flywheel comes to life for advertisers by offering the ability for them to market across the full funnel, which is synergistic with the way users engage with our product.
Bill Ready: Advertisers can reach consumers throughout their entire shopping journey.
Bill Ready: From building upper funnel awareness to driving lower funnel conversions, we're seeing that advertisers are using upper funnel objectives in tandem with lower funnel objectives to create full funnel campaigns with even better performance in.
Bill Ready: In fact, those who spend on multiple objectives see nearly two times higher conversion rates than those who spend on one objective alone.
Bill Ready: This approach addresses the longer term industry trend, we're seeing of BMO seeking to tie upper funnel brand dollars back to their own revenue growth objectives.
Bill Ready: Turning to our lower funnel ad offerings.
Bill Ready: Over the last few quarters, we've rolled out an expanded our performance solution set to drive advertiser value, while improving the efficiency of advertisers time and dollars.
Bill Ready: These efforts continue to yield benefits with clicks to advertisers up significantly year on year, even as we lap the rollout of direct links there.
Bill Ready: They also compound as advertisers adopt multiple tools, they see more benefits accrue.
Bill Ready: As a result, some of the most sophisticated performance marketers in the world are spending 5% to 10% of their advertising budgets on pinterest as they lean into our lower funnel tools and the improved performance in the form of increased clicks and conversions that we're delivering.
Bill Ready: In Q1, we made further inroads on our lower funnel performance efforts by launching additional bidding functionality into our performance plus suite with ROE as bidding which went into general availability in March.
Bill Ready: Previously our automatic bidding functionality optimized for the maximum number of conversions at the lowest cost.
Bill Ready: While this remains a core offering for many advertisers realize bidding addresses the need for some advertisers who want to bid based on basket size.
Bill Ready: For example, a retailer with a large variance in catalog price points may want to bid on conversion value versus conversion volume.
Bill Ready: While still in the early rollout days, we've received positive initial feedback and adoption from advertisers.
Bill Ready: Pac Sun, a lifestyle clothing brand popular with Gen Z saw a three times higher return on AD spend using realized bidding within their catalog campaigns compared to their previous campaigns.
Bill Ready: We also enhanced performance plus creative with imagery sizing imagery sizing of the scaled way for advertisers to bring their shopping catalog creative which may be designed are optimized for other platforms and automatically enhance the ads visuals.
Bill Ready: Through resizing and cropping to better fit the <unk> platform.
Bill Ready: While still in beta initial results on shopping ads using imagery sizing show, a 6% improvement in click through rate compared to those without.
Bill Ready: Through the year, we expect to test and launch more scaled ways to improve advertiser creative within the performance plus suite further automating and optimizing the process of building campaign collateral for advertisers.
Bill Ready: Overall, we feel great about what we're seeing so far with performance plus.
Bill Ready: As a reminder, performance plus brings together existing AI powered advertiser tools that we've built and launched over multiple years into a simplified campaign setup, while also adding new creative and bidding functionality.
Bill Ready: We brought this new automated AI suite into general availability in Q4, and continue to make meaningful product improvements to bolster our offering and drive efficiency and value to lower funnel advertisers.
Bill Ready: We consistently see that performance plus outperforms traditional campaigns and 80% of a b tests, a testament to the continued value creation, we're driving to our advertisers.
Bill Ready: While we're pleased with our progress we're still in the early days of driving adoption and will continue to drive advertisers to adopt the full performance plus suite of solutions in the quarters and years ahead.
Bill Ready: Performance plus is just the latest product in our suite of new lower funnel tools, which are leading to a significant transformation in our business.
Bill Ready: And our U S and Canada region, where we're furthest along in lower funnel shopping we've been breaking into always on performance budgets were.
Bill Ready: We're seeing that some of the largest most sophisticated accounts are increasing their share of wallet with us and within those accounts over 85% of their trailing 12 months spend has been in the lower funnel.
We are also seeing budget penetration with the next tranche of advertisers specifically those in the 1% to $30 billion sales range.
Bill Ready: Those advertisers are seeing results from our performance tools and increasing spend following continued value creation through 'twenty 'twenty four from direct links cafe adoption.
Bill Ready: And the initial stages of the performance plus rollout.
Bill Ready: For markets outside of the U S and Canada, we are successfully exporting our lower funnel shopping playbook and increasing action ability.
Bill Ready: Revenue from our catalog shopping ads format was up meaningfully in Q1 year over year with both the Europe and rest of world regions growing shopping AD revenue over three times faster than the overall revenue growth of their respective regions as we drive deeper budget penetration in these markets and unlock new accounts focused on performance.
Bill Ready: International revenue is also benefiting from the scaled solutions, we've unlocked over the past year.
Bill Ready: Including resellers and other demand partnerships and.
Bill Ready: In Q1, we expanded our reseller efforts to eight additional markets, while making strong progress through these reseller partnerships and previously and monetize or under monetize countries.
Bill Ready: Finally, I'll touch on our commitment to improve conversion visibility and measurement as.
Bill Ready: As the industry becomes increasingly focused on data driven results the need for privacy centric measurement remains a priority even as the privacy landscape continues to evolve.
Bill Ready: In Q1, we drove increased coverage of our privacy centric measurement tools across our revenue base.
Bill Ready: Through continued adoption of our own solutions like conversions API in clean rooms, and integrations with third party measurement partners.
Bill Ready: We also recently entered into strategic partnerships with north vein and Triple whale.
Bill Ready: These partnerships aimed to improve the accuracy of Petrus performance measurement by providing more comprehensive cross channel measurement to help advertisers understand the true value of their spend on pinterest.
Overall I'm proud of our team and their continued strong execution on our strategic plan.
With that I'll turn the call over to Julia to share more details about our financial performance.
Julia Donnelly: Thanks, Bill and good afternoon, everyone today I'll be discussing our first quarter 2025 financial results and provide an update on our preliminary second quarter 2025 outlook.
Julia Donnelly: All financial metrics, except for revenue will be discussing non-GAAP terms, unless otherwise specified and all comparisons will be discussed on a year over year basis, unless otherwise noted.
Julia Donnelly: Before I get into our first quarter results I'll spend a few minutes discussing how we're thinking about our broader business strategy.
Julia Donnelly: Over the last few years, we've been executing on a durable long term strategy focused on our key differentiators as a business, including the user commercial intent on our platform the ability to create a relevant and actionable experience with ads is useful content and leveraging our full funnel playbook to drive tangible performance gains for advertisers.
Julia Donnelly: We have multiple revenue drivers that have allowed us to take share in a competitive environment across a variety of advertiser verticals.
Speaker Change: The first is continuing to grow our user base and deepen engagement, bringing users back more frequently through our efforts and action ability and curation as he stated many times relevant ads can be great content for our users and additive to the user experience and as such we see room to further grow our AD load is the increased monetize about supply to use their commercial intent.
Julia Donnelly: And more efficient ad delivery.
Julia Donnelly: Second we're continuing to drive improved performance throughout the full funnel from spotlight ads on the awareness side to rapid product velocity, especially in the lower funnel with the launch of direct links Cappy and most recently performance plus which is in the early days of multi quarter multi year advertiser adoption.
Julia Donnelly: Finally, we're finding ways to complement our strong and growing first party business through new sources of demand, including efficient ways to scale, our monetization through partnerships such as resellers, which is starting to drive more meaningful revenue contribution and under monetize and previously on monetize region.
Julia Donnelly: At the same time, we continue to be thoughtful about expenses and prioritizing investment in high ROI opportunities, which has allowed us to make considerable progress towards our longer term margin goals.
Julia Donnelly: For example, we continue to focus our AI investments towards initiatives that have a near term uplift in engagement and monetization such as improving our visual search capabilities as bill described earlier.
Julia Donnelly: It's improving the technology.
Julia Donnelly: Underpins, our AD serving efficiency, such as whole page optimization and performance plus <unk>.
Julia Donnelly: Simultaneously, we are investing in areas, which accelerate employee productivity for example over 25% of our code is now generated through AI, which is up 10 points since the beginning of the year.
Julia Donnelly: Similarly, we have begun testing productivity tools to automate repetitive tasks and standardised content for our sales force ultimately, allowing our sellers to spend more time with clients.
Bill Ready: Ultimately as Bill noted upfront we are confident in the long term durability of our strategy and the continuation of our steady execution of that strategy through our prudent investment philosophy.
Bill Ready: Now, let's move to our first quarter results.
Bill Ready: We ended the quarter with $570 million global monthly active users or MAA is growing 10% and reaching another record high.
We continue to demonstrate user growth across all of our geographic regions in Q1, our U S.
Bill Ready: <unk> had $102 million and he is growing 4% or.
Bill Ready: Our Europe region had $148 million.
Bill Ready: Is 5%.
Bill Ready: And the rest of world markets, we had $320 million and they use growing 14%.
Bill Ready: Shifting to revenue and.
Bill Ready: In Q1, our global revenue with $855 million up 16% or up 17% on a constant currency basis, we saw strength across our awareness and conversion objectives.
Bill Ready: From a vertical perspective, we continued to see broad based strength in retail.
Bill Ready: <unk> emerging verticals led by financial services continued to be a source of strength as expected the drag from the food and beverage sub sector of C. P. G lessons lately as we lapsed the full quarter, a softer Q1, 'twenty 'twenty four trends in that category.
Bill Ready: Turning to our geographical breakout is for Q1.
Bill Ready: In the U S and Canada, we generated $663 million in revenue growing 12% strength came from retail and emerging verticals, including financial services.
Bill Ready: In Europe revenue was $147 million growing 24% on a reported basis or 27% on a constant currency basis strength in Europe was driven by retail.
Bill Ready: Revenue from rest of World was $45 million growing 49% on a reported basis or 15, 9% on a constant currency basis.
Bill Ready: In Q1 AD impressions grew 49%, while AD pricing declined 22% year over year.
Bill Ready: As we've discussed for multiple quarters, the sequential acceleration in AD impressions and corresponding decline in AD pricing is primarily driven by international mix shift as last year, we began to serve ads in previously and monetize our under monetize international markets, which carry lower AD pricing in our more mature markets.
Bill Ready: Moving to expenses.
Bill Ready: In Q1 cost of revenue was $193 million up 10% year over year and up 1% versus Q4 due to increased infrastructure spend related to users and engagement growth.
Bill Ready: Our non-GAAP operating expense was $494 million up 12%. The increase was primarily in R&D due to increases in head count with a smaller increase in sales and marketing IRA.
Bill Ready: Our robust revenue growth and expense discipline led to another strong quarter of adjusted EBITDA coming in at $172 million with an adjusted EBITDA margin of 20% an increase of 300 basis points versus Q1 last year.
Bill Ready: We also delivered Q1 free cash flow of $356 million.
Bill Ready: Consistent with prior years Q1 is seasonally our strongest quarter of free cash flow due to higher Q1 collections. Following peak Q4 revenue.
Bill Ready: We ended the quarter with cash cash equivalents in marketable securities of $2 6 billion.
Bill Ready: In Q1, we allocated $175 million towards share repurchase.
Bill Ready: Share repurchases and 94 million of net share settlement of equity awards as part of our ongoing efforts to mitigate dilution.
Bill Ready: Now I'll discuss our preliminary guidance for the second quarter.
Speaker Change: Before addressing specifics I want to acknowledge the current evolving landscape as Bill noted our business trends remain healthy overall and we feel good that the product investments we've made over the last three years three years are working.
Speaker Change: While we are not immune to the macro environment. We are confident in our multiple revenue initiatives the steady ongoing execution of our plans and our ability to compete effectively across a number of scenarios.
Speaker Change: We expect Q2 revenue to be in the range of $960 million to $980 million, representing 12% to 15% growth year over year.
Speaker Change: Based on the current spot rates, we expect modest impact from foreign exchange in Q2.
Speaker Change: Moving down the P&L.
Speaker Change: We expect Q2 2025, adjusted EBITDA to be in the range of $217 million to $237 million.
Speaker Change: We anticipate Q2 2025 non-GAAP cost of revenue to grow at a similar rate on a year over year basis as we saw in Q1.
Speaker Change: Within non-GAAP operating expense our primary area of investment in Q2 will continue to be head count within R&D, which will support our efforts in AI and other product initiatives as well as investing in sales and marketing, which tends to be seasonally higher in Q2 than in Q1 due to the timing of certain marketing expenses.
Speaker Change: From where we sit today, we expect to deliver adjusted EBITDA margin expansion year over year for the full year 2025, though consistent with our commentary last quarter the level of expansion will be lower than the outsized expansion we delivered in 2024.
Speaker Change: In closing I'm extremely pleased with our team's performance in Q1, we're focused on executing against the levers firmly in our control like growing and deepening user engagement through a better more relevant products and driving performance for our advertisers all while balancing investing in the business and driving long term profitable growth.
Bill Ready: With that I'll hand, it over to Bill for some final words.
Thanks Julia.
Speaker Change: Want to thank our teams at Pinterest, our advertising partners and all the people that come to pinterest to find inspiration and take action.
Bill Ready: And with that we can open the call up for questions.
Bill Ready: We will now open the line for questions if you'd like to ask a question. Please dial star one on your telephone keypad. If you need to remove your question you can dial star two.
Bill Ready: We do ask in the interest of time that you limit yourself to one question on today's call.
We'll pause here briefly.
Bill Ready: And take the next question.
Speaker Change: The first question is from the line of Ross Sandler with Barclays. You May ask your question.
Ross Sandler: Great Bill.
Ross Sandler: Starting with the guidance <unk> looks pretty solid all things considered just a very modest DSO.
Speaker Change: We know you have Easter in the second quarter this year.
Ross Sandler: Which may help a little bit, but just curious what youre seeing in the pipeline.
Ross Sandler: And are any of the kind of high tariffs exposed categories in retail and CPG showing any softness thus floor. How do you see this playing out throughout the year. Thanks a lot.
Speaker Change: Thanks, Ross I'll I'll take that one so you know first and foremost as we noted in our prepared remarks, we're seeing strength in our business and trends remain healthy both in Q1 and the early signals on Q2.
Speaker Change: Our products are really working well as we leverage AI to drive gains in relevance personalization and action ability for users and drive increasing performance gains for our advertisers across a range of verticals.
Speaker Change: Your specific question on the Q2 guide you know given the situation remains somewhat fluid our guidance reflects a slightly expanded revenue range you know as always our Q2 revenue outlook factors in both what we are seeing in quarter to date trends as well as what we're hearing from our advertising partners directly about their spend expectations for the remainder of the call.
Speaker Change: Order as of today.
Speaker Change: There have been small pockets of spend that had been impacted by tariffs and recent weeks for example, like other platforms. We have observed a reduction in spend from Asia based ecommerce retailers in the U S. Given the change in the de minimus exemption.
Speaker Change: However, we've also seen a geographic diversification from some of those Asia based retailers to our European and rest of world user regions and that's a theme that has continued to play out over multiple quarters now and continues today.
Speaker Change: So stepping back into the fundamentals of our business remains strong and our investments over the past three years have against our multiple revenue levers have helped build helped us build a more resilient platform and that is a vital partner to advertisers you know more so than ever before and will continue to execute on the key strategic initiatives within our control.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
Eric Sheridan: Thank you so much for taking the question Bill It felt like last quarter, and then building a momentum this quarter. There was a shift in new framing where the platform and its products were going in terms of the things that were inside of your control. So leaving the macro aside for a minute I know, we'll talk a lot about on this call, but all of the things in your control in terms of where you want to take.
Eric Sheridan: The platform and how you want to evolve products, where do you think you are in that.
Eric Sheridan: Journey and what is the receptivity of course, the advertising landscape to what you've built so far and how do you think about what might build.
Eric Sheridan: Deeper into the year. Thanks, so much.
Eric Sheridan: Yeah. Thanks, Eric.
Speaker Change: You know as we've talked about going all the way back to our Investor Day, you know, we see multiple ways to win in multiple strategic initiatives.
Eric Sheridan: They have been playing out to support the direction, we're taking the platform.
Eric Sheridan: At the core of that are you know we've made pinterest a destination for our user, particularly a shopping destination Pinterest is where gen Z goes to shop.
Eric Sheridan: And you see that reflected not only in the all time highs and users, but also as we shared in our 10-K a record levels of engagement per user and that's really a combination of AI, becoming a core competency for us the unique signal on our platform and the fact that uses our here with great.
Speaker Change: is there better commercial intent and actionability than ever before on Pinterest for our users.
Speaker Change: As advertisers have better and better tools to easily take action on that, they're finding that not only can they come to action, performance plus cutting, you know, campaign creation time and half, but also giving them, you know, great return on their ad spend and letting them meet users in a unique moment in their commercial journey where they clearly have intent but haven't yet decided what to buy which is, you know, something really special. [inaudible]
about Pinterest.
Speaker Change: that in the Western world, we're the only platform that has...
Speaker Change: on the single surface in the same app, the user at every stage of the funnel, and we pair that with our unicuration.
Speaker Change: This giving us really, really unique signals, letting us do really great things with AI and the relevant to our recommendations as I noted with our new multimodal model on the call, you know, that's getting to great relevancy for users.
Speaker Change: making it so that we can give more and more commercial content from our advertisers to them so that a really great fly will affect between those things.
Speaker Change: And then, as we look at that, as we noted, we focused first on our home market as we were building that out.
Speaker Change: But as we're moving into international markets, we see that same shopping and lower funnel playbook really really working well.
Speaker Change: So I think, you know, not only continue to grow our user-based deep and engagement [inaudible]
Speaker Change: Proving that relevant ads can be great content. We're driving improved performance throughout the full funnel. Now starting to move that into international markets that are approximately 80% of our users but only roughly 20% of our revenue.
Speaker Change: So we're seeing the beginning of that, and we're bringing in new sources of demand as well, so we're making it so that we meet advertisers where they are, both on measurement and the ability to bring in new demand.
Speaker Change: and across all of that together, it's really creating a great...
Shopping Destination for Users, a great...
Performance ad platform for advertisers.
Speaker Change: and we're starting to take that global all that underpin by unicuration signal and core competency in AI that I think again is that durable flywheel that we've been talking about for some time, we've continued to build upon and I would say...
Speaker Change: You know, while we still have a lot more in front of us than behind us, you know, we're early innings still on so much of this. I think we're well down the path in demonstrating just how unique the value proposition is both for users and advertisers. Hopefully that helps.
Speaker Change: And then the second one bill maybe maybe a big picture. One you continue to deliver really rapid clicks click growth to your advertisers I remember last quarter was 90% plus growth at 100% et cetera. What do you think is the biggest opportunity to sort of further close that gap between that rapid click growth youre selling to your advertisers versus your advertise.
Speaker Change: Our gross advertising dollar growth. Thanks.
Speaker Change: Yeah. Thanks, Brian.
Speaker Change: So.
Speaker Change: In terms of how we think about the uplift from performance plus you know shared some stats on the call you know around the uplift in rollouts from different components. It's important to note is a suite of products, but we've also given the ability for advertisers to adopt all the cart.
Speaker Change: So what we're seeing is that.
Speaker Change: Those that have adopted they're seeing.
Speaker Change: Really strong performance.
Speaker Change: That you know when paired with our measurement tools, we rolled out is leading to.
Speaker Change: Share shift and budget gains for us with those advertisers and while we've not broken that out to say whats the percentage lift from that again, given that sort of advertisers can you take the whole suite or sort of choose all the card. We are seeing quite consistently as I noted in the 80% of the campaigns on performance plus outperformed traditional campaign we are.
Speaker Change: Really good about that progress even as we still have a lot more functionality that we are building. There. So again, we feel like the progress is quite strong, but a lot more ahead.
Speaker Change: As we've talked about all these things just think about these as sort of compounding effects that build on themselves you know creating longer term durable growth.
Speaker Change: No hockey sticks.
Speaker Change: One time, a femoral results, but these are like steady build that just make us a better and more performance AD platform for advertisers and getting into more of those always on performance budgets that tend to be much more much more durable. So we feel really great about those things you know more to go there, but you know when you see things.
Speaker Change: 80% of campaigns on performance plus you're outperforming that's quite strong the beta test results I mentioned of 20% CPA improvements on shopping campaigns. These are things that are leading to you know when you look at our growth rates overall being strong relative to the industry. These are reasons why we become a secular share taker, but we think we have a lot more runway ahead of us than behind us both in.
Speaker Change: [noise] adoption as well as then the dollar share shift and then to your question on the click growth.
Speaker Change: And sort of closing the gap between the click growth in the odd dollar growth.
Speaker Change: What I would say that we are seeing that drive us.
Speaker Change: It's been change you know the two things we've talked about pretty consistently have been getting better implementation of measurement tools. So we've called out many new partnerships meeting advertisers, where they are I called out two new ones.
Speaker Change: In my prepared remarks.
Speaker Change: That again are just part of our ongoing effort to meet advertisers, where they are integrate into their AD systems, because even if we're driving them quicker if it's not showing up in their performance measurement systems, you know it won't lead to the share shift because we've been driving more and more implementation of privacy centric measurement meeting advertisers, where they are we see that helping theres more of that.
Speaker Change: To go and then the other is around making campaign creation easier and easier. So we've talked about with performance plus that cutting down campaign creation time.
Speaker Change: As much as 50% or more that's making it easier and easier for the advertisers to bring new campaigns on if you just step all the way back from it.
Speaker Change: Where we only just went into <unk> with performance plus late in the year last year and <unk>.
Speaker Change: Direct links with a year before that so if you look at sort of you know throughout 2024.
Speaker Change: We were you know.
Speaker Change: We had launched direct links that was driving clicks and conversions.
Speaker Change: And then we were pushing conversion API measurement tool integrations, making sure. The advertiser can measure. It. So then they can see the clicks and conversions than late in the year last year, we started to address the ease of campaign creation and optimization through performance plus and so those are really sort of the legs of the stool and they've only just all come together, but even with that you see US you know.
Speaker Change: Taking share given the unique value proposition of what we're doing for our users. So again I think that will continue to help us demonstrate that that durable growth in our business that you've been seeing from us.
Speaker Change: That helps.
Speaker Change: Thank you.
Speaker Change: The next question is from Ashwin <unk> with Wolfe Research. Your line is now open.
Ashwin Wolfe: Okay. Thanks, a lot for taking my question, we've seen some press reports about your testing with multiple partners can you. Please give us an update on your strategy for third party demand. Thanks a lot.
Speaker Change: Yeah. Thank you I appreciate the question. So first thing I'd say that nothing about our programmatic or third party advertising strategy has changed.
Speaker Change: <unk> always said that our first party demand that comes from our internal sales force will be the primary driver of our business and that we would seek out demand from third party to the complement to our first party business really to round out gaps in our auction.
Speaker Change: As such we've we're consistently and constantly testing and iterating within our business to find the right sources of demand around our gaps are auction and drive greater accessibility for our users and we've been consistent about having envision multiple partners and you saw us start with some of the largest players.
Speaker Change: Amazon and Google.
Speaker Change: But there are also a number of smaller players that can bring incremental demand to the platform.
Speaker Change: In service of that we've been testing with local providers to open up access and we've decided to work with Mag night, a leading SSP as our next partner to help us aggregate smaller sources of demand.
Speaker Change: While there's been some speculation out there there are no additional SSP that we plan to scale within the immediate future, but we do think just helps us to aggregate more of those sources of demand from from other players.
Speaker Change: Through our magnetic partnership and I view this as a steady progression and build of the business, which is consistent with what we've outlined so just like prior efforts. These things will take time to integrate and.
Speaker Change: Implant a thoughtful go to market launch and scale. So again don't expect any big hockey stick moments, but as part of the ongoing build of the business.
Speaker Change: I wouldn't think of this as immediate change in revenue trajectory of the business, but again as part of that compounding effect of just making it easier and easier for advertisers to reach the really great commercial intent on our platform in us meeting advertisers more and more where they are.
Speaker Change: Thank you.
Speaker Change: Next question is from Ken Goralski with Wells Fargo. Your line is now open.
Speaker Change: Thank you very much for the opportunity.
Speaker Change: Could we talk a little bit about the b accelerating impression growth and you know.
Speaker Change: The associated kind of price declines on a on a per impression basis could you talk I know that's a global number and you referred to earlier some of the mix shift to international and adding I think you said eight additional territories.
Speaker Change: Could you talk a little bit about what youre seeing and you can kind of have your most mature area in your most well developed could you talk about the trends there and what youre seeing from an impression basis and also maybe potentially on the on the price per impression basis or are you seeing.
Speaker Change: Are you starting to see some pricing leverage in the new Kim Thank you very much.
Speaker Change: Hi, Ken Thanks for the question. So you know we've said for many quarters in a row now.
Speaker Change: The dynamics that we're seeing in terms of global AD impression growth and global pricing decline is primarily driven by international International mix shift is as Youll recall last year, we began to serve ads and monetize our previously unmonitored eyes or previously under monetize international markets.
Speaker Change: And so naturally these international markets have lower total addressable market and also have lower cost per impression or E. C. P. M on average.
Speaker Change: So this international mix shifts puts downward pressure on global pricing, but its clearly been a positive to net revenue overall and importantly, you're seeing that show up in the accelerating revenue trends in our rest of world market for the last several quarters to.
Speaker Change: To your question on sort of you can specifically it is worth noting if you were to look at and if you can impression growth and pricing alone. He would tell a very different story and the trends are far less pronounced because the primary driver on a global level really is this mix shift impact due to international growth.
Speaker Change: Thank you.
Speaker Change: The next question is from John Blackledge with TD Securities. Your line is now open.
Speaker Change: Okay, great. Thanks.
Speaker Change: Any further color on the broader macro volatility.
Speaker Change: Impacting AD spend, particularly with more brand oriented advertisers and is the introduction of performance plus helping drive and kind of tie together that full funnel campaign dynamic that you referenced earlier on the call. Thank you.
John Blackledge: Yes, thanks for the question John.
John Blackledge: You're spot on with your question in.
John Blackledge: The ability to tie together that full funnel you know that's been.
John Blackledge: Pinterest has talked about that for years, but I think now that our lower funnel business has become.
John Blackledge: Very compelling, it's really helping us bring the promise of the full funnel to life in a stair I share that stat and in my prepared remarks about how advertisers that do both upper and lower funnel.
John Blackledge: Objectives with us see two times the click through rate. This is really what cmo's have always known is that you know great CMO as noted.
John Blackledge: Whole decision doesn't get made just in those last three seconds before the last click. It was just the thing that was most measurable and they knew they needed to be able to tell more of their story to differentiate their brand and connect with customers, but that wasn't very measurable for them.
John Blackledge: With us having both the upper funnel and.
John Blackledge: And Midland lower funnel all in the same surface the same consumer experience.
John Blackledge: We are.
John Blackledge: Able to tie that together for our users and our advertisers are the users getting a seamless shopping experience from.
John Blackledge: Upper funnel inspiration all the way through to the click and the conversion, but it is exactly as you know you alluded to in your question.
John Blackledge: And really helping us deliver on that full funnel and I actually think in this moment where.
John Blackledge: No.
John Blackledge: As we go through periods of uncertainty.
John Blackledge: So if you if you talk to <unk> about past times of uncertainty when they get that call from the CFO to ask them to focus their spend.
John Blackledge: That would all rush to the low funnel, but then they'd feel like they had left something on the table by not being able to tell their brand story, which is how they really ultimately connect with customers to eventually get to that last click.
John Blackledge: With what we're doing the full funnel, we're really giving them a twofer that they can do upper funnel and lower funnel, but then that CMO can turn to their CFO and say see when I did the upper funnel with the lower funnel on Pinterest. It was double click through rate. So my upper funnel does perform and therefore that CMO can still tullow brand story, even while driving.
John Blackledge:
John Blackledge: <unk> funnel last click on our on our platform. So we think that is quite compelling and I think is again. Another example of how we we've been building.
John Blackledge: In a way that is <unk>.
John Blackledge: Long term durable, but I think even in a moment of uncertainty where we have unique offerings that we can come forward with for both our users and our advertisers.
John Blackledge: Thank you.
Ron Josey: The next question is from Ron Josey with Citigroup. Your line is now open.
Ron Josey: Great. Thanks for taking the question maybe another one on particularly isn't so the first one is just on advertising filling Julia we've been talking about strength in the emerging verticals for a few quarters now actually since since analyst day before and we've mentioned financial services. So I wanted to hear more about these additional verticals that pinterest is seeing success.
Ron Josey: And maybe talk about some of the use cases and what interest is a good fit for these advertisers just given the focus on retail and Commerce and then Julia you highlighted in your in your comments, 25% of code is generated by AI, that's up 10 points for the quarter and a quarter I think you said, but would love to hear your comments on the benefit here is it product philosophy.
Ron Josey: Everything right, but benefits from product velocity time to market, but also cost savings as well. Thank you.
Speaker Change: Thanks, Rod maybe I'll take the first one just to start out here on emerging verticals.
Speaker Change: And you're right. We've called out you know financial services for many quarters now is one of several categories, where we're seeing strong growth.
Speaker Change: Some of the others that we've mentioned over time that then technology Telecom Entertainment, which includes streaming services. So.
Speaker Change: We're certainly underpenetrated in these categories with lots of room to grow.
Speaker Change: In terms of sort of use cases, pinterest attracts users during key life moments like wedding, starting a family buying a car remodeling a home. These are times when consumers are often seeking new financial services, such as insurance or credit cards. This make pinterest an ideal platform for these advertisers who want to connect with their audience under.
Speaker Change: These significant life events.
Speaker Change: Advertisers also value pinterest insights into consumer trends in spending habits, which informed our content and messaging strategies.
Speaker Change: With Gen Z users, who may be selecting insurance providers or credit card issuers for the very first time.
Speaker Change: So in summary, I think we're seeing strength in these categories and believe there is an ongoing longer term fit for these advertisers on our platform as we demonstrate performance for some of these categories and we're starting to see some of these advertisers really really leaning in.
Speaker Change: On your second question about 25% of code now being accepted generated by AI, but accepted by a human review.
Speaker Change: You know that being up 10 points versus the prior quarter. We're really pleased with the progress that we're seeing there I think we've talked to you. Many times about how AI is a core competency for our business and how we're leveraging it to power both user and engagement growth, including some of the newer visual search experiences that we talked about on the call earlier that bill referenced and how we're doing on AD serving stack.
Speaker Change: But I think we're also using it internally throughout our business to help accelerate engineering velocity and I think you're starting to see just that piece of our philosophy really start to improve from us over the last year.
Speaker Change: That's a great example of that it's it's both employee productivity, including engineering velocity, but also it allows us to be thoughtful about the places we're investing in our business and continue to be prudent as we think about those high RLI up opportunities over time.
Speaker Change: Thank you.
Speaker Change: Next question is from rich Greenfield with like I said partners. Your line is now open.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: I was listening to a DTC marketing exec at catch on the Chuan is podcast recently and the woman was talking about ROE as across various digital platforms and she gave some specific commentary around pinterest from her and her experience and relationships in the business and one of the things you sort of said was that it's a long game because when you.
Speaker Change: Talk about ROE as on Pinterest, it's a long game because consumers pin things and then they come back and they do buy them, but they buy them. Later was wondering how you react to that comment from a marketer and how some of the changes you've been making to the product to make it easier to shop and more visible from a shopping standpoint, how that narrative may be changing.
Speaker Change: Or whether you disagree with it entirely but just would be curious how you react to it.
Speaker Change: Yes. Thanks for the question Rich, what I would say that I think that commentary is.
Speaker Change: Right.
Speaker Change: <unk> right in the sense that like yes, we do see consumers coming to pinterest when they have sort of a kernel of an idea a beginning of an intent, but haven't yet decided what to buy which again is a magic moment for the advertiser to meet that consumer historically <unk> had that but didn't have that last click.
Speaker Change: Didn't have the conversion, we absolutely are delivering the clicks and conversions and I've shared that.
Speaker Change: Some folks that.
Speaker Change: It may not have looked at it more recently or may not have adopted all of our tools or maybe we're not yet integrated into their measurement solution, which is why it has so much focus on those things that sort of illustrates a little bit of.
Speaker Change: There was an earlier question around.
Speaker Change: How do you how do we bridge the delta between the extremely strong growth in clicks and conversions relative to the revenue growth that gets to a little bit of that that from a user perspective. The users absolutely are clicking and buying on the platform. In addition to what they used to do which was curate.
Speaker Change: Planning ahead now it is all of those things that truly is the full funnel, but as we've noted before we're working through an adoption cycle with our advertisers and the largest most sophisticated advertisers have.
Speaker Change: <unk>.
Speaker Change: So I've talked about them coming on the most quickly because they integrate through API, they're the most sophisticated they see the arbitrage very quickly and that's where we saw our strengths first and then we talked about that next group down in the sort of $1 to $30 billion in sales range is the groups, we're starting to penetrate more and more with performance plus.
Speaker Change: And with our work to go meet the advertiser, where they are through their measurement solutions, but we see that continuing on to more and more advertisers doesn't make it easier and easier to engage there and the last thing I'd say is again in this moment.
Speaker Change: You know one of the things that we are uniquely equipped to do is that there are places or if youre using third party cookies things like that where people can see what users clicked on board, we're able to see what users are planning to do before they do it in a moments where you may have uncertainty, where there may be rapidly shifting consumer trends.
Speaker Change: We get insight into that well before it shows up and.
Speaker Change: Third party purchasing data or are those kinds of areas and that makes us a great partner to advertisers, particularly.
Speaker Change: Those that are savvy enough and fleet of foot enough to go respond to rapidly shifting consumer demand. So again, that's a a and.
Speaker Change: An emerging area of strength for us that's just.
Speaker Change: Core to how our platform is unique in the industry with truly now having that full funnel, but again I think that commentary speaks to where we still have perception to shift, but those that have been astute and.
Speaker Change: And on a more sophisticated and have gobbled up quickly, but we've got to make it easy for everybody else access to and so we're doing that work to make sure. We meet them meet them, where they are and we're well down that path, but again a lot more of that runway ahead of us hopefully that helps.
Speaker Change: Thank you.
Speaker Change: The next question is from Doug Anmuth with Jpmorgan. Your line is now open.
Doug Anmuth: Thanks for taking the question I just want to ask about capital allocation, you repurchased about $175 million of stock in <unk> and I think have $1 $7 billion authorized can you just talk about how you're thinking about capital allocation strategy currently in light of valuation, but then also the current macro.
Speaker Change: Backdrop as well thanks.
Doug Anmuth: Thanks, Doug Yeah. So we we noted them in.
Doug Anmuth: In Q1, we did buyback 175 million of shares as you called out. In addition, we also utilized $994 million and net share settlement of equity awards. So these two actions together combined led to a two 2% decline in year over year fully diluted share count. So we're clearly more than offsetting.
Doug Anmuth: Dilution in a meaningful way here.
Doug Anmuth: We do have $1 $7 billion remaining under our share repurchase authorization and we have the discretion to determine the timing and amounts of any buybacks under that program and we will use that discretion thoughtfully over a multiyear period, particularly when the stock is trading at an attractive valuation level or.
Doug Anmuth: Our overall capital allocation framework hasn't changed from what we laid out at our Investor day in late 2023, and we have lots of potential uses for our cash and our stock buyback certainly being one of them that you've seen us use here multiple times to mitigate dilution, we're always looking at ways to optimize our balance sheet preserving flexibility for opportunistic and disciplined.
Doug Anmuth: M&A, and obviously first and foremost investing in our product and technology innovation as you've seen us do for many quarters now so that overall capital allocation philosophy remains consistent with what we laid out at Investor day.
Doug Anmuth: Thank you.
Doug Anmuth: A final question on today's call will be from Justin Patterson with Keycorp. Your line is now open.
Justin Patterson: Great. Thank you very much bill you've had great engagement gained over the past two years, but we're also now in a world where there's more uncertainty on how AI is impacting search.
Speaker Change: Business sits at the intersection of search and social.
Speaker Change: Spend a little bit a little bit more on how visual search and other product initiatives can keep that engagement going thank you.
Speaker Change: Yeah. Thanks for the question, we think we have a really unique space in this because yes. We're at this intersection between not only social and search, but also commerce as well and I shared on the call.
Speaker Change: And I've talked about this extensively since I joined the company that the curation signal with Penn trusts, just gives us really really unique signal to do something very different with the AI.
Speaker Change: I've long held the view that AI, just like cloud computing become basic building blocks to be able to everyone. But then AI thrives on feedback loops, and so who has unique feedback loops in their business to do something special with it the really really unique feedback loop that pinterest has that again I don't believe exists anyplace else in the Western World is users curating their purchases.
Speaker Change: Before they make the purchase and doing that in a purely visual format.
Speaker Change: Gives us really really rich signal. So you know when I shared on the call that our our multimodal model the powers, our visual search is 30% more likely to identify and recommend relevant content from our Corpus then leading off the shelf models.
Speaker Change: That is both a great credit to the fact that AI as a core competency and we've got some amazing AI engineers at Pinterest, but it's also about that curation signal that we get so.
Speaker Change: There's also I think a broader discussion of.
Speaker Change: A group of sort of a very large and general purpose models, but then also youre seeing now more fit for purpose models that can be smaller focused and sold individually use cases better than the general purpose model I think this again is an example of that but at the core of your question of how do we compete.
Speaker Change: If you look at search generally search has been fragmenting for quite some time and Federated for quite some time and while you still have some amazing players are thriving and doing well in the sort of general purpose.
Speaker Change: Search arena.
Speaker Change: There has also been great growth and those that are going after specific areas of that and so I think with pinterest or focus on purely visual or commercial intent. The unique curation again, I think as a user experience that doesn't exist elsewhere, and we talked about 85%.
Speaker Change: <unk> of our users come to our mobile App directly Theyre all signed at all of our mouths are signed in users. So we have history and intent and curation and rich signal that again, I think as a durable advantage for us in terms of what experiences we're able to deliver versus other experiences that don't have that or more focused on.
Speaker Change: On general purpose and again I think theres so much growth here that many can thrive we're not in the game of general purpose search.
Speaker Change: But I think in our use case, which I think applies across many categories shopping has been our first category. We've talked about other emerging verticals that are very visual as well where this can be highly applicable also so I think that is allowing us to bring more and more adjacencies in and again.
Speaker Change: Even as <unk> seen great innovation across the industry I think the best the best comfort I could offer you around this is even though you've had amazing general purpose.
Speaker Change: No.
Speaker Change: <unk> great advances in search writ large we are putting up all time highs in users all time highs in depth of engagement as reported in our 10-K and again I think that is reflective of that really unique curation behavior of our users and what that allows us to uniquely do with AI based on that signal that we just couldn't.
Speaker Change: Due with the very best off the shelf models.
Speaker Change: Thank you.
Speaker Change: That concludes our Q&A session I'll hand, the call back over to Bill ready CEO for closing remarks.
Speaker Change: Thanks again to all of you for joining the call and for your questions. We look forward to keeping this dialogue going and we hope you enjoy the rest of your day.
Speaker Change: That concludes today's call. Thank you for your participation you may now disconnect your lines.
Speaker Change: Okay.