Pinterest (PINS 4.04%) stock gained 19% on Tuesday following the image-based social media company's release of its third-quarter report Monday afternoon.
Investors' enthusiasm was primarily attributable to the fact that revenue and earnings both exceeded Wall Street's consensus estimates, and its fourth-quarter revenue guidance was slightly rosier than analysts had been expecting. Moreover, the company's key user and operational data likely at least satisfied investors.
Pinterest's key numbers
| Metric | Q3 2022 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $684.6 million | $763.2 million | 11% |
| GAAP net income | ($65.2 million) | $6.7 million | Flipped to positive from negative. |
| Adjusted net income | $76.5 million | $193.3 million | 153% |
| GAAP earnings per share | ($0.10) | $0.01 | Flipped to positive from negative. |
| Adjusted earnings per share | $0.11 | $0.28 | 155% |
Data source: Pinterest. GAAP = generally accepted accounting principles.
Wall Street was looking for adjusted earnings per share (EPS) of $0.20 on revenue of $743.4 million. So Pinterest easily surpassed both expectations, and its bottom-line beat was a particularly sizable one. It also beat its top-line guidance for growth in the high-single-digit percentages. The company doesn't provide earnings guidance.
For context, in the second quarter, revenue grew 6% year over year to $708 million. Adjusted EPS jumped 91% to $0.21.
In the first three quarters of 2023, Pinterest generated $354.7 million in cash from operations. This was down 14% year over year, but still solid. It ended the period with $1.17 billion in cash and cash equivalents on the books, down from $1.61 billion in the year-ago period. It has no long-term debt.
Key user and operational stats
| Metric | Q3 2023 | Change (YOY) |
|---|---|---|
| Monthly active users (MAUs): global | 482 million | 8% |
| MAUs: U.S. and Canada | 96 million | 1% |
| MAUs: Europe | 128 million | 7% |
| MAUs: rest of world | 258 million | 12% |
| Average revenue per user (ARPU): global | $1.61 | 3% |
| ARPU: U.S. and Canada | $6.46 | 5% |
| ARPU: Europe | $0.91 | 26% |
| ARPU: rest of world | $0.12 | 16% |
Data source: Pinterest. YOY = year over year.
The company's global count of monthly active users also rose on a sequential basis -- up 4% from 465 million at the end of the second quarter. In that quarter, global MAUs were also up 8% year over year.
The U.S. and Canada segment accounted for 81% of total revenue, which makes it the core growth driver and the segment on which to focus. That segment plus the Europe segment accounted for a whopping 96% of total revenue. The rest of the world segment contributes such a small portion of revenue because its ARPU is so low.
What the CEO had to say
Here's most of CEO Bill Ready's statement from the earnings release:
We continued to accelerate the business in Q3. We are driving strong revenue performance, robust global MAU growth, and substantial margin expansion. As we lean into Pinterest's unique differentiators as a visual search, discovery, and shopping platform, we're finding our best product market fit in years. Our users are engaging deeply and we're delivering better results for advertisers through improved measurement and innovation across the full funnel.
Fourth-quarter sales expected to grow by 11% to 13%
For Q4, management forecasts that revenue will grow by 11% to 13% year over year. At the midpoint (12%), this guidance is slightly higher than the 11% growth Wall Street had been expecting.
In short, Pinterest turned in a solid quarter. A particularly encouraging sign is the company's expanding profit margin, as evidenced by adjusted EPS growing much faster than revenue.
