pins-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

FORM 10-Q

_________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission file number 001-38872

Pinterest, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware			26-3607129
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

505 Brannan Street
San Francisco, California			94107
(Address of Principal Executive Offices, including zip code)			(Zip Code)

(415) 762-7100

Registrant’s Telephone Number, Including Area Code

_______________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.00001 par value	PINS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 29, 2021, there were 562,699,562 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 89,496,940 shares of the Registrant’s Class B common stock outstanding.

PINTEREST, INC.

TABLE OF CONTENTS


		Page
Note About Forward-Looking Statements and Summary Risk Factors		3
Limitations of Key Metrics and Other Data		7
Part I - Financial Information
Item 1.	Financial Statements (Unaudited)	8
	Condensed Consolidated Balance Sheets	8
	Condensed Consolidated Statements of Operations	9
	Condensed Consolidated Statements of Comprehensive Income (Loss)	10
	Condensed Consolidated Statements of Stockholders' Equity	11
	Condensed Consolidated Statements of Cash Flows	13
	Notes to Condensed Consolidated Financial Statements	14
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	35
Item 4.	Controls and Procedures	36
Part II - Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68

Item 6.	Exhibits	69
	Signatures	70

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans,” “targets,” “forecasts” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, statements about:

•uncertainty regarding the duration and scope of the coronavirus, including its variants, referred to as the COVID-19 pandemic;

•actions governments and businesses take in response to the COVID-19 pandemic, including actions that could affect levels of user engagement or advertising activity;

•the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity;

•general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth;

•the impact of the COVID-19 pandemic on our planned investments, operations, expenses, revenue, cash flow, liquidity, users and engagement;

•the effect of general economic and political conditions;

•our financial performance, including revenue, cost and expenses and cash flows;

•our ability to attract and retain Pinners and maintain and grow their level of engagement;

•our ability to provide content that is useful and relevant to Pinners’ personal taste and interests;

•our ability to develop successful new products or improve existing ones;

•our ability to maintain and enhance our brand and reputation;

•potential harm caused by compromises in security, including our cybersecurity protections and resources and costs required to prevent, detect and remediate potential security breaches;

•potential harm caused by changes in online application stores or internet search engines’ methodologies, particularly search engine optimization methodologies and policies;

•discontinuation, disruptions or outages in third-party single sign-on access;

•our ability to compete effectively in our industry;

•our ability to scale our business, including our monetization efforts;

•our ability to attract and retain advertisers and scale our revenue model;

•our ability to attract creators that create relevant and engaging content;

•our ability to develop effective products and tools for advertisers, including measurement tools;

•our ability to expand and monetize our platform internationally;

•our ability to effectively manage the growth of our business;

•our lack of operating history and ability to sustain profitability;

•decisions that reduce short-term revenue or profitability or do not produce the long-term benefits we expect;

•fluctuations in our operating results;

•our ability to raise additional capital;

•our ability to realize anticipated benefits from mergers and acquisitions, joint ventures, strategic partnerships and other investments;

•our ability to protect our intellectual property;

•our ability to receive, process, store, use and share data, and compliance with laws and regulations related to data privacy and content;

•current or potential litigation and regulatory actions involving us;

•our ability to comply with modified or new laws and regulations applying to our business, and potential harm to our business as a result of those laws and regulations;

•real or perceived inaccuracies in metrics related to our business;

•disruption of, degradation in or interference with our use of Amazon Web Services and our infrastructure; and

•our ability to attract and retain personnel.

These statements are based on our historical performance and on our current plans, estimates and projections in light of information currently available to us, and therefore you should not place undue reliance on them. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.

You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q. The factors identified above should not be construed as an exhaustive list of factors that could affect our future results and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. If any of these trends, risks or uncertainties actually occurs or continues, our business, revenue and financial results could be harmed, the trading price of our Class A common stock could decline and you could lose all or part of your investment.

Unless expressly indicated or the context requires otherwise, the terms "Pinterest," "company," "we," "us," and "our" in this document refer to Pinterest, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries. The term "Pinterest" may also refer to our products, regardless of the manner in which they are accessed. For references to accessing Pinterest on the "web" or via a "website," such terms refer to accessing Pinterest on personal computers. For references to accessing Pinterest on "mobile," such term refers to accessing Pinterest via a mobile application or via a mobile-optimized version of our website such as m.pinterest.com, whether on a mobile phone or tablet.

SUMMARY RISK FACTORS

The following summarizes the principal factors that make an investment in our company speculative or risky, all of which are more fully described in the Risk Factors section below. This summary should be read in conjunction with the Risk Factors section and should not be relied upon as an exhaustive summary of the material risks facing our business. The following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts:

Business Strategy and Growth. Our strategic decisions and efforts to expand the business, including:

•our ability to scale our business for future growth, as we are in the early stages of our monetization efforts;

•our ability to attract, grow, retain, and engage our user base;

•our ability to attract creators that create relevant and engaging content;

•providing content that is useful and relevant to Pinners’ personal taste and interests;

•decisions consistent with our mission and values that may reduce our short- or medium-term operating results;

•removing objectionable content or blocking objectionable practices by advertisers or third parties;

•our ability to compete effectively for users or advertisers and to develop effective products and tools for advertisers;

•our further expansion and monetization of our platform internationally;

•effective management of our business growth; and

•our acquisition of other businesses.

Operation of Our Business. The manner in which we operate our business, including:

•the disruption and harm from the global COVID-19 pandemic, as well as potential challenges of post-pandemic recovery;

•our dependence on and ability to maintain and enhance a strong brand and reputation;

•actual or perceived compromises in our security;

•our dependence on advertising for substantially all of our revenue;

•the development of tools to accurately measure the effectiveness of advertisements on our platform and thereby attract and maintain advertisers;

•the inherent challenges of measurements related to Pinner metrics and other estimates;

•our ability to maintain and scale our technology infrastructure, including the speed and availability of our service; and

•the attraction, retention, and loss of our key personnel and other highly qualified personnel.

Third-Party Reliance. Our use and dependence on third-party businesses and products, or the impacts of third-party business and products, including:

•our dependence on online application stores and internet search engines, including their methodologies, policies, and results, to direct traffic and refer new Pinners to our service;

•users’ ability to authenticate with our service through third-party login providers;

•our dependence on Amazon Web Services for the vast majority of our compute, storage, data transfer, and other services;

•effectively operating with mobile operating systems, web browsers, networks, regulations, and standards, which we do not control, and changes in our products or to those mobile operating systems, web browsers, networks, regulations or standards; and

•our reliance on software, technologies, and related services from other parties; and

•technologies that can block the display of our ads.

Legal and Regulatory Matters. The legal and regulatory frameworks, actions, and requirements to which our business, products, services, and operations are subject, including:

•any liability as a result of content or information that is published or made available on our service;

•government action to restrict access to our service or certain of our products in their countries;

•the data, including personal information, we receive, process, store, use, and share, which subjects us to complex and evolving governmental regulation and other legal obligations related to data privacy, data protection and other matters;

•our involvement in any legal disputes or other disputes that are expensive to support and may be resolved adversely;

•an ability to protect our intellectual property and our use of “open source” software; and

•the interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations.

Financial Statements and Performance. The preparation of our financial statements and our financial and operating performance, including:

•our limited operating history and previously incurred operating losses, anticipated increases to operating costs and expenses and our ability to obtain or maintain profitability;

•fluctuations in our operating results from quarter to quarter;

•our ability to obtain additional financing, if needed, and any default on our credit obligations;

•greater than anticipated tax liabilities;

•limitations in our ability to use or benefit from our net operating loss carryforwards and certain other tax attributes; and

•the requirements of being a public company.

Our Common Stock. The rights, restrictions, and structure of, and actions that we may take that impact our common stock, including:

•the dual class structure of our common stock;

•trading price volatility of our Class A common stock;

•future offerings of debt or equity securities by us or existing stockholders that could adversely impact the market price of our Class A common stock;

•additional stock issuances, including in connection with settlement of equity awards, and any resulting dilution;

•provisions under Delaware law and our governing documents that could make a merger, tender offer, or proxy contest difficult;

•our certificate of incorporation’s designation of a state or federal court located within Delaware as the exclusive forum for substantially all disputes between us and our stockholders; and

•our intention not to pay dividends for the foreseeable future.

General. The risks common to our industry and public companies generally, including:

•our development of or investment in successful new products or improvements to our existing one;

•adverse global economic and financial conditions; and

•changes in accounting principles generally accepted in the United States.

LIMITATIONS OF KEY METRICS AND OTHER DATA

The numbers for our key metrics, which include our monthly active users (MAUs) and average revenue per user (ARPU), are calculated using internal company data based on the activity of user accounts. We define a monthly active user as an authenticated Pinterest user who visits our website, opens our mobile application or interacts with Pinterest through one of our browser or site extensions, such as the Save button, at least once during the 30-day period ending on the date of measurement. Unless otherwise indicated, we present MAUs based on the number of MAUs measured on the last day of the current period. We measure monetization of our platform through our average revenue per user metric. We define ARPU as our total revenue in a given geography during a period divided by the average of the number of MAUs in that geography during the period. We calculate average MAUs based on the average of the number of MAUs measured on the last day of the current period and the last day prior to the beginning of the current period. We calculate ARPU by geography based on our estimate of the geography in which revenue-generating activities occur. We use these metrics to assess the growth and health of the overall business and believe that MAUs and ARPU best reflect our ability to attract, retain, engage and monetize our users, and thereby drive revenue. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world. In addition, we are continually seeking to improve our estimates of our user base, and such estimates may change due to improvements or changes in technology or our methodology.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PINTEREST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)


	September 30,		December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,231,931	$	669,230
Marketable securities	1,075,465		1,091,076
Accounts receivable, net of allowances of $6,813 and $8,811 as of September 30, 2021 and December 31, 2020, respectively	505,021		563,733
Prepaid expenses and other current assets	58,705		33,502
Total current assets	2,871,122		2,357,541
Property and equipment, net	54,445		69,375
Operating lease right-of-use assets	203,055		155,916
Goodwill and intangible assets, net	13,550		13,562
Other assets	10,618		13,065

Total assets	$	3,152,790	$	2,609,459
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	57,612	$	49,491
Accrued expenses and other current liabilities	183,382		155,340
Total current liabilities	240,994		204,831
Operating lease liabilities	189,348		139,321
Other liabilities	24,081		22,936
Total liabilities	454,423		367,088

Commitments and contingencies



Stockholders’ equity:

Class A common stock, $0.00001 par value, 6,666,667 shares authorized, 560,728 and 530,140 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; Class B common stock, $0.00001 par value, 1,333,333 shares authorized, 89,435 and 96,232 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	7		6
Additional paid-in capital	4,891,043		4,574,934
Accumulated other comprehensive income	627		2,480
Accumulated deficit	(2,193,310)		(2,335,049)
Total stockholders’ equity	2,698,367		2,242,371
Total liabilities and stockholders’ equity	$	3,152,790	$	2,609,459

The accompanying notes are an integral part of these condensed consolidated financial statements.

PINTEREST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	632,932	$	442,616	$	1,731,372	$	987,041
Costs and expenses:
Cost of revenue	126,783		112,844		388,072		320,335
Research and development	185,949		160,187		539,408		442,484
Sales and marketing	156,092		118,531		450,754		322,041
General and administrative	65,659		148,087		206,399		249,834
Total costs and expenses	534,483		539,649		1,584,633		1,334,694
Income (loss) from operations	98,449		(97,033)		146,739		(347,653)
Interest income	765		2,896		3,382		14,265
Interest expense and other income (expense), net	(4,765)		(51)		(5,991)		(2,144)
Income (loss) before provision for income taxes	94,449		(94,188)		144,130		(335,532)
Provision for income taxes	453		32		2,391		632
Net income (loss)	$	93,996	$	(94,220)	$	141,739	$	(336,164)
Net income (loss) per share:
Basic	$	0.15	$	(0.16)	$	0.22	$	(0.57)
Diluted	$	0.14	$	(0.16)	$	0.20	$	(0.57)
Weighted-average shares used in computing net income (loss) per share:
Basic	643,979		603,490		636,308		588,895
Diluted	691,853		603,490		692,106		588,895

The accompanying notes are an integral part of these condensed consolidated financial statements.

PINTEREST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	93,996	$	(94,220)	$	141,739	$	(336,164)
Other comprehensive income (loss), net of taxes:
Change in unrealized gain (loss) on available-for-sale marketable securities	(265)		(1,772)		(1,606)		1,634
Change in foreign currency translation adjustment	(256)		98		(247)		(218)
Comprehensive income (loss)	$	93,475	$	(95,894)	$	139,886	$	(334,748)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Pinterest, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


		Three Months Ended September 30, 2021

	Class A and Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ Equity
		Shares									Amount
Balance as of June 30, 2021		642,787	$	6	$	4,790,079	$	1,148	$	(2,287,306)		$	2,503,927
Release of restricted stock units		5,336	1		—		—		—			1






Issuance of common stock for cash upon exercise of stock options, net		1,820	—		4,702		—		—			4,702

Issuance of restricted stock awards		220	—		—		—		—			—
Share-based compensation		—	—		96,262		—		—			96,262
Other comprehensive loss		—	—		—		(521)		—			(521)
Net income		—	—		—		—		93,996			93,996
Balance as of September 30, 2021		650,163	$	7	$	4,891,043	$	627	$	(2,193,310)		$	2,698,367


		Three Months Ended September 30, 2020

	Class A and Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ Equity
		Shares									Amount
Balance as of June 30, 2020		596,264	$	6	$	4,351,557	$	3,737	$	(2,448,670)		$	1,906,630
Release of restricted stock units		5,642	—		—		—		—			—
Shares repurchased for tax withholdings on release of restricted stock units		—	—		(7)		—		—			(7)





Issuance of common stock for cash upon exercise of stock options, net		13,337	—		32,243		—		—			32,243


Share-based compensation		—	—		91,632		—		—			91,632
Other comprehensive income		—	—		—		(1,674)		—			(1,674)
Net loss		—	—		—		—		(94,220)			(94,220)
Balance as of September 30, 2020		615,243	$	6	$	4,475,425	$	2,063	$	(2,542,890)		$	1,934,604

The accompanying notes are an integral part of these condensed consolidated financial statements.

Pinterest, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


		Nine Months Ended September 30, 2021

	Class A and Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ Equity
		Shares									Amount
Balance as of December 31, 2020		626,372	$	6	$	4,574,934	$	2,480	$	(2,335,049)		$	2,242,371
Release of restricted stock units		16,658	1		—		—		—			1






Issuance of common stock for cash upon exercise of stock options, net		6,663	—		19,637		—		—			19,637
Issuance of common stock related to charitable contributions		250	—		20,490		—		—			20,490
Issuance of restricted stock awards		220	—		—		—		—			—
Share-based compensation		—	—		275,982		—		—			275,982
Other comprehensive loss		—	—		—		(1,853)		—			(1,853)
Net income		—	—		—		—		141,739			141,739
Balance as of September 30, 2021		650,163	$	7	$	4,891,043	$	627	$	(2,193,310)		$	2,698,367


		Nine Months Ended September 30, 2020

	Class A and Class B Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Stockholders’ Equity
		Shares									Amount
Balance as of December 31, 2019		569,904	$	6	$	4,229,778	$	647	$	(2,206,726)		$	2,023,705
Release of restricted stock units		13,785	—		—		—		—			—
Shares repurchased for tax withholdings on release of restricted stock units		—	—		(56,894)		—		—			(56,894)





Issuance of common stock for cash upon exercise of stock options, net		28,855	—		64,992		—		—			64,992
Issuance of common stock related to charitable contributions		150	—		2,748		—		—			2,748
Issuance of restricted stock awards		2,549	—		—		—		—			—
Share-based compensation		—	—		234,801		—		—			234,801
Other comprehensive income		—	—		—		1,416		—			1,416
Net loss		—	—		—		—		(336,164)			(336,164)
Balance as of September 30, 2020		615,243	$	6	$	4,475,425	$	2,063	$	(2,542,890)		$	1,934,604

The accompanying notes are an integral part of these condensed consolidated financial statements.

PINTEREST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021		2020
Operating activities
Net income (loss)	$	141,739	$	(336,164)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	20,299		29,174
Share-based compensation	275,982		234,801
Non-cash charitable contributions	20,490		2,748
Other	9,495		4,520
Changes in assets and liabilities:
Accounts receivable	61,033		(25,667)
Prepaid expenses and other assets	(21,141)		(6,184)
Operating lease right-of-use assets	32,014		31,835

Accounts payable	7,862		7,689
Accrued expenses and other liabilities	30,670		20,391
Operating lease liabilities	(37,308)		(35,013)
Net cash provided by (used in) operating activities	541,135		(71,870)
Investing activities
Purchases of property and equipment and intangible assets	(5,337)		(14,032)
Purchases of marketable securities	(878,465)		(808,180)
Sales of marketable securities	213,651		174,042
Maturities of marketable securities	673,952		699,133
Other investing activities	—		316
Net cash provided by investing activities	3,801		51,279
Financing activities


Proceeds from exercise of stock options, net	19,637		64,992
Shares repurchased for tax withholdings on release of restricted stock units	—		(56,894)

Other financing activities	(1,750)		(1,750)
Net cash provided by financing activities	17,887		6,348
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(693)		(86)
Net increase (decrease) in cash, cash equivalents and restricted cash	562,130		(14,329)
Cash, cash equivalents and restricted cash, beginning of period	678,911		677,743
Cash, cash equivalents and restricted cash, end of period	$	1,241,041	$	663,414
Supplemental cash flow information




Accrued property and equipment	$	915	$	3,952




Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	81,869	$	14,030


Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents	$	1,231,931	$	652,723
Restricted cash included in prepaid expenses and other current assets	2,813		1,470
Restricted cash included in other assets	6,297		9,221
Total cash, cash equivalents and restricted cash	$	1,241,041	$	663,414

The accompanying notes are an integral part of these condensed consolidated financial statements.

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Description of Business and Summary of Significant Accounting Policies

Description of Business

Pinterest was incorporated in Delaware in 2008 and is headquartered in San Francisco, California. Pinterest is a visual discovery engine that people around the globe use to find the inspiration to create a life they love. We generate revenue by delivering ads on our website and mobile application.

Basis of Presentation and Consolidation

We prepared the accompanying condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of Pinterest, Inc. and its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.

The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. We have condensed or omitted certain information and notes normally included in complete financial statements prepared in accordance with GAAP. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K.

In our opinion, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the results for the interim periods presented, but they are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2021.

Reclassifications

We have reclassified certain amounts in prior periods to conform with current presentation.

Use of Estimates

Preparing our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect amounts reported in the condensed consolidated financial statements and accompanying notes. We base these estimates and judgments on historical experience and various other assumptions that we consider reasonable. GAAP requires us to make estimates and assumptions in several areas, including the fair values of financial instruments, assets acquired and liabilities assumed through business combinations, share-based awards, and contingencies as well as the collectability of our accounts receivable, the useful lives of our intangible assets and property and equipment, the incremental borrowing rate we use to determine our operating lease liabilities, and revenue recognition, among others. Actual results could differ materially from these estimates and judgments.

Significant Accounting Policies

There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2020.

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Fair Value of Financial Instruments

The fair values of the financial instruments we measure at fair value on a recurring basis are as follows (in thousands):


	September 30, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	737,045	$	—	$	—	$	737,045
Commercial paper	—		66,591		—		66,591



Municipal securities	—		7,501		—		7,501
Marketable securities:
Corporate bonds	—		425,188		—		425,188
U.S. treasury securities	229,059		—		—		229,059
Commercial paper	—		237,964		—		237,964
Certificates of deposit	—		109,757		—		109,757
Municipal securities	—		39,009		—		39,009
Non-U.S. government and supranational bonds	—		32,996		—		32,996
Asset-backed securities	—		492		—		492
U.S. agency bonds	—		1,000		—		1,000
Prepaid expenses and other current assets:
Certificates of deposit	—		2,813		—		2,813
Other assets:
Certificates of deposit	$	—	$	6,297	$	—	$	6,297


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	225,643	$	—	$	—	$	225,643
Commercial paper	—		48,532		—		48,532
U.S. treasury securities	39,998		—		—		39,998
Certificates of deposit	—		2,996		—		2,996

Marketable securities:
Corporate bonds	—		454,487		—		454,487
Commercial paper	—		234,253		—		234,253
U.S. treasury securities	203,054		—		—		203,054
Certificates of deposit	—		134,882		—		134,882
Municipal securities	—		17,619		—		17,619
U.S. agency bonds	—		16,018		—		16,018
Non-U.S. government and supranational bonds	—		15,950		—		15,950
Asset-backed securities	—		14,813		—		14,813
Prepaid expenses and other current assets:
Certificates of deposit	—		571		—		571
Other assets:
Certificates of deposit	$	—	$	9,110	$	—	$	9,110

We classify our marketable securities within Level 1 or Level 2 because we determine their fair values using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Gross unrealized gains and losses on our marketable securities were immaterial in the aggregate as of September 30, 2021 and December 31, 2020. We evaluated all available evidence and did not recognize any allowance for credit losses for our marketable securities as of September 30, 2021 and December 31, 2020.

The fair value of our marketable securities by contractual maturity is as follows (in thousands):


	September 30, 2021
Due in one year or less	$	665,474
Due after one to five years	409,991
Total	$	1,075,465

Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.

3. Commitments and Contingencies

Purchase Commitments

In April 2021, we entered into a new private pricing addendum with Amazon Web Services (“AWS”), which governs our use of cloud computing infrastructure provided by AWS. Under the new pricing addendum, we are required to purchase at least $3,250.0 million of cloud services from AWS through April 2029. If we fail to do so, we are required to pay the difference between the amount we spend and the required commitment amount. As of September 30, 2021, our remaining contractual commitment is $3,071.2 million. We expect to meet our remaining commitment.

Legal Matters

We are involved in various lawsuits, claims and proceedings that arise in the ordinary course of business, including those described below. While the results of legal matters are inherently uncertain, we do not believe there is a reasonable possibility that the ultimate resolution of these matters, either individually or in aggregate, will have a material adverse effect on our business, financial position, results of operations or cash flows.

On November 23, 2020, Pinterest and our Chief Executive Officer and Chief Financial Officer were named as defendants in a putative securities class action filed in the U.S. District Court for the Northern District of California. The lawsuit alleged claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and alleged that defendants made material false and misleading public statements about our revenue and user growth in 2019. The complaint sought damages, litigation costs, and interest. On September 23, 2021, the court granted Pinterest’s motion to dismiss plaintiff’s complaint with leave to amend and plaintiff notified the court on October 12, 2021 that they do not intend to file an amended complaint. The court entered judgment on behalf of Pinterest and other defendants. This matter is no longer pending.

In November and December 2020, certain of our executives and members of our board of directors were named as defendants in derivative lawsuits filed in the U.S. District Court for the Northern District of California. Pinterest was also named as a nominal defendant. The lawsuits purport to assert claims for breach of fiduciary duty in connection with allegations of gender and racial discrimination at Pinterest. In addition, the lawsuits purport to assert claims for waste, abuse of control, aiding and abetting breaches of fiduciary duties, unjust enrichment, and violations of Section 14(a) of the Exchange Act. The complaints seek declaratory and injunctive relief, corporate governance changes, monetary damages, interest, disgorgement, and fees and costs. On April 22, 2021, the defendants moved to dismiss this complaint. On June 1, 2021, the court referred the lawsuit to a magistrate judge for mediation and vacated other pending deadlines. On July 14, 2021, another derivative complaint with similar allegations was filed in the same court and was subsequently related to the earlier action. The cases were referred to a magistrate judge for mediation, and the proceedings were stayed during the pendency of that mediation. We continue to evaluate these claims but do not believe this litigation will have a material impact on our financial position or results of operations.

In March 2021, certain of our executives and members of our board of directors were named as defendants in a derivative lawsuit filed in the Delaware Chancery Court. Pinterest was also named as a nominal defendant. The complaint alleges that executives and members of the board breached their fiduciary duties to the company in connection with allegations of gender and racial discrimination at Pinterest. On May 10, 2021, the court stayed this lawsuit in light of the related pending case in the Northern District of California. The complaint seeks damages,

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

litigation costs, and interest. We continue to evaluate these claims but do not believe this litigation will have a material impact on our financial position or results of operations.

4. Share-Based Compensation

Equity Incentive Plan

In June 2009, our board of directors adopted and approved our 2009 Stock Plan (the "2009 Plan"), which provides for the issuance of stock options, Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs") to qualified employees, directors and consultants. Stock options granted under our 2009 Plan have a maximum life of 10 years and an exercise price not less than 100% of the fair market value of our common stock on the date of grant. RSUs granted under our 2009 Plan have a maximum life of seven years. No shares of our common stock were reserved for future issuance under our 2009 Plan as of September 30, 2021.

Our 2019 Plan became effective upon closing of our initial public offering and succeeds our 2009 Plan. Our 2019 Omnibus Incentive Plan (the "2019 Plan") provides for the issuance of stock options, RSAs, RSUs and other equity- or cash-based awards to qualified employees, directors and consultants. Stock options granted under our 2019 Plan have a maximum life of 10 years and an exercise price not less than 100% of the fair market value of our common stock on the date of grant. 127,290,417 shares of our Class A common stock were reserved for future issuance under our 2019 Plan as of September 30, 2021.

The number of shares of our Class A common stock available for issuance under the 2019 Plan will be increased by the number of shares of our Class B common stock subject to awards outstanding under our 2009 Plan that would, but for the terms of the 2019 Plan, have returned to the share reserves of the 2009 Plan pursuant to the terms of such awards, including as the result of forfeiture, repurchase, expiration or retention by us in order to satisfy an award’s exercise price or tax withholding obligations. In addition, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan will automatically increase on the first day of each fiscal year through and including January 1, 2029, in an amount equal to 5% of the total number of shares of our Class A common stock and our Class B common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by our board of directors.

Stock Option Activity

Stock option activity during the nine months ended September 30, 2021, was as follows (in thousands, except per share amounts):


	Stock Options Outstanding
	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (1)
				(in years)
Outstanding as of December 31, 2020	23,947	$	3.15	2.9	$	1,502,604

Exercised	(6,663)	2.95

Outstanding as of September 30, 2021	17,284	$	3.23	2.2	$	824,775
Exercisable as of September 30, 2021	16,649	$	2.50	2.0	$	806,588

(1)We calculate intrinsic value based on the difference between the exercise price of in-the-money-stock options and the fair value of our common stock as of the respective balance sheet date.

The total grant-date fair value of stock options vested during the nine months ended September 30, 2021 and 2020, was $2.4 million and $2.5 million, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2021 and 2020, was $463.1 million and $719.0 million, respectively.

No stock options were granted during the nine months ended September 30, 2021. The total grant-date fair value of stock options granted during the nine months ended September 30, 2020 was not material.

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock Unit and Restricted Stock Award Activity

RSU and RSA activity during the nine months ended September 30, 2021, was as follows (in thousands, except per share amounts):


	Restricted Stock Units and Restricted Stock Awards Outstanding
	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2020	54,079	$	20.45
Granted	6,837	74.79
Released	(16,867)	22.54
Forfeited	(3,008)	25.26
Outstanding as of September 30, 2021	41,041	$	28.30

Share-Based Compensation

Share-based compensation expense during the three and nine months ended September 30, 2021 and 2020, was as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	2,015	$	2,298	$	5,507	$	6,049
Research and development	67,463		61,357		194,667		156,621
Sales and marketing	13,404		11,958		39,291		23,803
General and administrative	13,380		16,019		36,517		48,328
Total share-based compensation	$	96,262	$	91,632	$	275,982	$	234,801

As of September 30, 2021, we had $902.0 million of unrecognized share-based compensation expense, which we expect to recognize over a weighted-average period of 2.9 years.

5. Net Income (Loss) Per Share

We present net income (loss) per share using the two-class method required for multiple classes of common stock. Holders of our Class A and Class B common stock have identical rights except with respect to voting, conversion and transfer rights and therefore share equally in our net income or losses.

We calculate basic net income (loss) per share by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share gives effect to all potential shares of common stock, including stock options, RSAs and RSUs to the extent these are dilutive. The calculation of diluted net income (loss) of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income (loss) of Class B common stock does not assume the conversion of those shares to Class A common stock.

We calculated basic and diluted net income (loss) per share as follows (in thousands, except per share amounts):

PINTEREST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Basic net income (loss) per share:
Numerator:
Net income (loss)	$	80,945	$	13,051	$	(75,035)	$	(19,185)	$	121,476	$	20,263	$	(242,731)	$	(93,433)
Denominator:
Weighted-average shares used in computing net income (loss) per share, basic	554,568		89,411		480,606		122,885		545,340		90,968		425,218		163,677
Basic net income (loss) per share	$	0.15	$	0.15	$	(0.16)	$	(0.16)	$	0.22	$	0.22	$	(0.57)	$	(0.57)
Diluted net income (loss) per share:
Numerator:
Net income (loss)	$	80,945	$	13,051	$	(75,035)	$	(19,185)	$	121,476	$	20,263	$	(242,731)	$	(93,433)
Reallocation of net income as a result of conversion of Class B to Class A common stock	13,051		—		—		—		20,263		—		—		—
Reallocation of net income to Class B common stock	—		(903)		—		—		—		(1,634)		—		—
Diluted net income (loss)	$	93,996	$	12,148	$	(75,035)	$	(19,185)	$	141,739	$	18,629	$	(242,731)	$	(93,433)
Denominator
Weighted-average shares used in computing net income (loss) per share	554,568		89,411		480,606		122,885		545,340		90,968		425,218		163,677
Conversion of Class B to Class A common stock	89,411		—		—		—		90,968		—		—		—
Weighted average effect of dilutive potential common stock	47,874		—		—		—		55,798		—		—		—
Weighted-average shares used in computing net income (loss) per share, diluted	691,853		89,411		480,606		122,885		692,106		90,968		425,218		163,677
Diluted net income (loss) per share	$