Summary
SUMMARYThe following summary highlights selected information about our company and this offering that is included elsewhere in this prospectus in greater detail. It does not contain all of the information that you should consider before investing in our Class A common stock. For a more comprehensive understanding of our company and this offering, you should read this entire prospectus carefully, including the information presented under the heading “Risk Factors” and in our consolidated financial statements and notes thereto.
In this prospectus, unless we indicate otherwise or the context requires, “Pinterest, Inc.,” “Pinterest,” “the Company,” “our company,” “the registrant,” “we,” “our,” “ours” and “us” refer to Pinterest, Inc. and its consolidated subsidiaries. Unless otherwise indicated, references to our “common stock” include our Class A common stock and Class B common stock. For additional information about the studies referenced in this prospectus, see “Market, Industry and Other Data.”
Pinterest is where more than 250 million people around the world go to get inspiration for their lives. They come to discover ideas for just about anything you can imagine: daily activities like cooking dinner or deciding what to wear, major commitments like remodeling a house or training for a marathon, ongoing passions like fly fishing or fashion and milestone events like planning a wedding or a dream vacation.
We call these people Pinners. We show them visual recommendations, which we call Pins, based on their personal taste and interests. They then save and organize these recommendations into collections, called boards. Browsing and saving visual ideas on our service helps Pinners imagine what their future could look like, which helps them go from inspiration to reality.
Pablo in Buenos Aires uses Pinterest to find new styles and looks, including his next pair of leather boots. Krissy in Atlanta cooked so many of the recipes she found on Pinterest that she gained the confidence to start teaching her own cooking classes. Mark in London says Pinterest is his “creative outlet” when renovating properties ranging from townhouses to cottages.
Pinterest is the productivity tool for planning your dreams. Dreaming and productivity may seem like polar opposites, but on Pinterest, inspiration enables action and dreams become reality. Visualizing the future helps bring it to life. In this way, Pinterest is unique. Most consumer internet companies are either tools (search, ecommerce) or media (newsfeeds, video, social networks). Pinterest is not a pure media channel, nor is it a pure utility. It’s a media-rich utility that satisfies both emotional and functional needs by solving a widespread consumer problem that is unaddressed by many other platforms. We call it discovery.
Search helps people find a discrete piece of information quickly, but it isn’t an adequate tool if you don’t know exactly what you’re looking for, you can’t describe it in words or you’re seeking something that is tailored to your taste. These common dilemmas are best solved by a visual discovery journey, rather than by a text-based search.
Discovery on Pinterest is a rich experience that combines some of the utility features of search with some of the enjoyable features of media. Fundamentally, Pinners are trying to get something done—
plan an event, buy a product, take a trip—so we surface personally relevant and visually rich possibilities for consideration and eventual action. This is useful. But the discovery journey is not linear—along the way, Pinners scroll through their home feeds, browse visual recommendations and see a wide range of inspiring content, much as they would if perusing a catalog or watching a cooking or home renovation show. Thus, discovery is both useful and fun, an exercise in productive play.
Pinners often embark on a discovery journey when they want to purchase something but have not yet decided which product or service best suits their needs and taste. More Pinners say that Pinterest helps them find new shopping ideas and inspiration than users on other consumer internet platforms, according to a survey by Comscore that we commissioned. And 68% of Pinners say they have discovered a new brand or product on Pinterest, according to a survey of weekly active users by Talk Shoppe. People actively seek relevant commercial content on our service, and advertisers are increasingly providing it. This fundamental alignment between Pinner and advertiser objectives differentiates Pinterest from other services, and we believe the continued growth of our advertising business will improve the core Pinner experience over time.
We’re proud to have empowered so many people from around the world to take the journey from inspiration to action and back again, and we’re just getting started. Our mission is to bring everyone the inspiration to create a life they love.
Machine learning and computer vision help us find patterns in the data. We then understand each individual Pin’s relationship not just to the Pinner who saved it, but also to the ideas and aesthetics reflected by the names and content of the boards where it’s been pinned. We believe we can better predict what content will be helpful and relevant because Pinners tell us how they organize ideas. The Pinterest taste graph is the first-party data asset we use to power our visual recommendations.
When we scale human curation across hundreds of millions of Pinners saving over 175 billion Pins, we believe our taste graph and recommendations get exponentially better. Eighty-two percent of Pinners say Pinterest feels personalized to them, according to a survey of weekly active users by Talk Shoppe.
build a project. We have built features that encourage Pinners to take action on ideas they see on Pinterest, with a special focus on making it easy for people to purchase products they discover on our service.
The value of Pinterest’s audience to advertisers is driven not merely by the number of Pinners on our platform or their demographics, but also by the reason they come to Pinterest in the first place. Getting inspiration for your home, your style or your travel often means that you are actively looking for products and services to buy. Billions of searches happen on Pinterest every month. In the United States, more people use Pinterest to find or shop for products than on social networks, according to a survey by Cowen and Company. An analysis by Oracle of retail transactions from 2016 to 2017 showed that on average Pinterest households were 39% more likely to buy retail products, and they spent 29% more than the average household. Commercial content from brands, retailers and advertisers is central to Pinterest; the majority of Pins saved on our service are from businesses. Ads do not compete with the content Pinners want to see—they are native content. The mutually beneficial alignment between advertisers and Pinners differentiates us from other platforms where ads can be distracting or annoying. We are still in the early stages of building an advertising product suite that fully taps the value of this alignment between Pinners and advertisers, but we believe it will be a competitive advantage over the long term.
On Pinterest, businesses of all sizes and from many industries can achieve a diverse set of goals, from building brand awareness, to increasing online traffic, to driving sales. Our platform isn’t limited to just advertisers with “top-of-funnel” goals or to those just seeking conversions. The natural progression of Pinners’ discovery journey—from inspiration, to planning, to action—takes them down the full purchasing funnel, and advertisers can provide value to them every step of the way.
The global advertising market is projected to grow to $826 billion in 2022 from $693 billion in 2018, representing a 5% compound annual growth rate (“CAGR”), according to IDC. The digital advertising market alone is projected to grow to $423 billion in 2022 from $272 billion in 2018, representing a 12% CAGR, according to IDC. In 2018, the consumer packaged goods (“CPG”) and retail industries accounted for $64 billion of this digital advertising spend, and the travel, technology (includes computing, consumer electronics and telecom), automotive, media & entertainment and financial services industries accounted for an additional $144 billion. The United States continues to represent the largest digital advertising market in the world. The U.S. digital advertising market is projected to grow to $166 billion in 2022 from $104 billion in 2018, representing a 12% CAGR, according to IDC.
Our addressable market opportunity includes brand advertising and performance-based advertising across various formats.
We believe new and improved products for Pinners and advertisers will drive future user and revenue growth for Pinterest.
Pinner Products. Although there are a number of ways users come to Pinterest, historically we’ve attracted a large number of new Pinners organically because people who love our product have a natural desire to refer others. We expect future product improvements will make Pinterest more useful for current Pinners and attract new users to our service, especially in international markets. Specifically, we plan to:
Advertising Products and Capabilities. We’re still in the early stages of our monetization efforts. Today, our advertising products help businesses reach Pinners across their decision-making journey. We address various advertiser objectives through our Promoted Pin ad format, which contains either a single image, a carousel of images or video. Our ability to develop new and improve existing advertising products will be an important driver of our future growth. Specifically, we are:
Advertiser Relationships. Our strategy to deepen our relationships with advertisers focuses on two priorities:
We have experienced significant growth over the last several years. For the year ended December 31, 2018, we generated revenue of $755.9 million, as compared to $472.9 million for the same period in 2017, representing year-over-year growth of 60%. For the year ended December 31, 2018, we generated a net loss of $63.0 million and Adjusted EBITDA of $(39.0) million, as compared to a net loss of $130.0 million and Adjusted EBITDA of $(93.0) million, respectively, in the same period in 2017. See “—Summary Consolidated Financial Information and Other Data—Non-GAAP Financial Measure” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”), to Adjusted EBITDA.
Our business is subject to numerous risks and uncertainties, including those highlighted in “Risk Factors” beginning on page 16. These risks include, but are not limited to, the following:
Investors, the media and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission (“SEC”), the investor relations page on our website, press releases, public conference calls and webcasts.
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
We were incorporated in Delaware in October 2008 as Cold Brew Labs Inc. In April 2012, we changed our name to Pinterest, Inc.
Our principal executive offices are located at 505 Brannan Street, San Francisco, California 94107, and our telephone number is (415) 762-7100. Our corporate website address is . We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it part of this prospectus. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
The Pinterest name, our logo and other trademarks mentioned in this prospectus are the property of their respective owners.
We qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may choose to take advantage of specified reduced disclosure and other requirements otherwise applicable generally to public companies that are not emerging growth companies.
We may take advantage of these exemptions until such time that we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the date on which we are deemed to be a large accelerated filer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30 and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide to stockholders may be different than you might get from other public companies in which you hold stock.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this accommodation allowing for delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
The number of shares of our Class A common stock and Class B common stock that will be outstanding after this offering is based on no shares of our Class A common stock and shares of our Class B common stock outstanding as of December 31, 2018, and shares of Class A common stock to be sold in the offering, and excludes:
Of the shares described above, up to shares of our Class B common stock will be issuable after this offering upon the exercise of outstanding stock options and up to shares of our Class B common stock will be issuable after this offering upon the settlement of RSUs for which all vesting conditions will be met upon the completion of this offering. We refer to the RSUs for which all vesting conditions will be met upon the completion of this offering as the “IPO-Vesting RSUs.” We expect to settle the IPO-Vesting RSUs within the seven-month period following the completion of this offering. See “Executive Compensation—2009 Stock Plan.”
Our board of directors has approved an amendment to our certificate of incorporation to effect a 1-for-3 reverse stock split of our capital stock prior to this offering, subject to the approval of our stockholders. The share and per share amounts in this prospectus do not reflect the impact of the 1-for-3 reverse stock split and will be adjusted to give effect to the 1-for-3 reverse stock split prior to this offering.
Except as otherwise noted, all information in this prospectus assumes:
The following tables present our summary historical financial data. The summary historical consolidated statements of operations data for the years ended December 31, 2017 and 2018, and the summary historical consolidated balance sheet data as of December 31, 2018, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated statements of operations data for the year ended December 31, 2016 has been derived from our audited consolidated financial statements that are not included in this prospectus. Our historical operating data may not be indicative of our future performance. The summary consolidated financial data in this section are not intended to replace the consolidated financial statements and related notes thereto included elsewhere in this prospectus and are qualified in their entirety by the consolidated financial statements and related notes thereto included elsewhere in this prospectus.
This information should be read in conjunction with the information contained in “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this prospectus.
Following this offering, our future operating expenses, particularly in the quarter in which this offering is completed, will include substantial share-based compensation expense with respect to outstanding RSUs as well as any other share-based awards we may grant in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Performance—Share-Based Compensation.”
To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, a financial measure which is not based on any standardized methodology prescribed by GAAP.
We define Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest income, interest expense and other income (expense), net and provision for income taxes.
We use Adjusted EBITDA to evaluate our operating results and for financial and operational decision-making purposes. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that it excludes. We also believe Adjusted EBITDA provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key metrics we use for financial and operational decision-making. We are presenting Adjusted EBITDA to assist potential investors in seeing our operating results through the eyes of management, and because we believe that this measure provides an additional tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry. However, our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, the nearest GAAP equivalent. For example, Adjusted EBITDA excludes:
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other financial results presented in accordance with GAAP. The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA, for each of the periods indicated: