Pinterest Inc. shares dropped more than 15% in after-hours trading Thursday, after the company reported larger losses than expected in its first quarterly earnings report since its initial public offering.
Pinterest reported a net loss of $41.4 million, or 33 cents a share, on revenue of $201.9 million, up from $131 million a year ago that the company reported in filings for its IPO. After adjusting for stock-based compensation and other effects, the company claimed losses of 32 cents a share. Analysts on average expected adjusted losses of 11 cents a share on sales of $200.7 million, according to FactSet.
Pinterest PINS, +7.79% went public in April at $19 a share, and has experienced volatility amid a solid rise since. Shares closed Thursday with a 7.8% gain at $30.86, and have now increased or declined more than 4% in half of Pinterest’s 20 trading sessions thus far.
Net losses can be very large in the first report after an IPO, as fellow social-media company Snap Inc. SNAP, +7.13% proved in a memorable way, but that wasn’t a problem for Pinterest because the quarter ended before the actual IPO took place. If the IPO had taken place in the quarter, it would have realized $975 million in those expenses, Pinterest said in a letter to shareholders, with another $925 million spread out over the next 3.7 years. Instead, it only claimed $1 million in stock-based compensation.
Pinterest also said in its letter that a jump in costs was mostly related to adding employees.
“Our total costs and expenses grew 32% year-over-year and our non-GAAP costs and expenses grew 35% year-over-year, in each case, reflecting head-count growth to improve our user experience and core technology while also increasing our sales coverage in the U.S. and internationally,” the letter states.
See also: Five things investors should know from Pinterest’s IPO filing
Pinterest reported monthly active users — an important metric for social-media companies that make their money from advertising — of 291 million, giving it average revenue per user of 73 cents. It had 239 million monthly active users last year at this time and ended 2018 with 265 million users accessing the service monthly, according to IPO filings. Analysts on average projected 288.7 million monthly active users, according to FactSet.
The vast majority of Pinterest’s revenue comes from the U.S., and increasing the amount of money it makes overseas is a key goal as the company seeks to continue growing sales. Pinterest reported domestic revenue per user of $2.25 and international revenue per user of just 8 cents, after recording U.S. sales per user of about $1.59 and foreign sales per user of about 5 cents last year.
International revenue per user “is so low that you have to scratch your head over it and wonder what’s going to change that,” said independent tech analyst and investor Beth Kindig, who bought a put on Pinterest shares ahead of the earnings report after researching the company’s international issues.
“You really gotta get your international ARPU around $1 a person to run a business,” she added. “Eventually, the United States is not going to be able to carry that growth.”
In a conference call Thursday afternoon, Chief Executive Ben Silbermann reiterated a statement in the letter that Pinterest had nearly doubled the number of international markets in which it was serving ads since the end of last year, to 13 from seven. However, he said he did not expect Pinterest’s international hiring and expansion efforts to start paying off until next year.
“I wouldn’t expect material financial results [from international efforts] to accrue to the company’s benefit until 2020, and through the course of the year, I would expect that to accelerate,” he said.
The company said it expects full-year revenue of $1.055 billion to $1.08 billion. Analysts on average expect $1.07 billion, according to FactSet.
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