Pinterest (PINS) Beats on Q4 Earnings, Falters on Revenues
Pinterest, Inc. PINS reported mixed fourth-quarter 2022 results, with the top line missing the Zacks Consensus Estimate and the bottom line beating the same. The San Francisco-based Internet content provider recorded year-over-year higher revenues led by an increase in monthly active users and strong results in core and emerging verticals. However, sluggish demand trends in the advertising business and the adverse macroeconomic climate hurt the company's top-line performance.
On a GAAP basis, the company reported a net income of $17.5 million or 3 cents per share compared to a net income of $174.7 million or 25 cents per share in the year-ago quarter. The significant fall in GAAP earnings, despite a top-line increase, was primarily caused by higher total costs and expenses induced by higher costs in the sales and marketing division.
Non-GAAP net income in the reported quarter was $203.1 million or 29 cents per share compared with $339.4 million or 49 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
For full year 2022, Pinterest incurred a net loss of $96 million or a loss of 14 cents against net income of $316.4 million or 46 cents per share. Net income declined by 45% on a non-GAAP basis from $778.5 million in 2021 ($1.13 per share) to $426 million (62 cents per share) in 2022.
Pinterest, Inc. Price, Consensus and EPS Surprise
Pinterest, Inc. price-consensus-eps-surprise-chart | Pinterest, Inc. Quote
Revenues in fourth-quarter 2022 rose 4% year over year to $877.2 million but missed the consensus estimate of $885 million. The top-line growth was affected by lower revenues in Europe (down 7%) on a reported basis to $123 million driven by foreign exchange headwinds. However, net sales witnessed 5% growth in the United States and Canada, rising to $722 million from $689 million in the prior-year quarter. Revenues from the rest of the world were $32 million, up 26% from the year-ago quarter.
For full year 2022, Pinterest experienced a 9% top-line expansion with net sales increasing to $2,803 million from $2,578 million in 2021.
Pinterest witnessed growth in monthly active users (MAUS) during the quarter. The figure stands at 450 million globally, up 4% year over year. The uptick can be attributed to the company’s continued effort and investment in relevance and personalization of contents. The company witnessed a 14% increase in MAUs of mobile applications worldwide and monetized mobile application users contributed 80% to the company's revenues.
Along with the primary verticals, new verticals like travel, automotive, financial services and men's fashion performed strongly. However, the increase in net revenues, which is primarily driven by major U.S. retail advertisers and foreign markets, is partly mitigated by CPG advertisers and small and mid-market advertisers in the United States as they continue to confront challenges from the unfavorable macroeconomic environment.
In the fourth quarter, the global average revenue per user (ARPU) increased by 1% to $1.96 from the year-ago quarter’s figure of $1.93. The sluggish growth indicates the persistence of demand softness in the advertisement market. While ARPU in the United States and Canada increased 6% to $7.6, Europe witnessed a decline of 9% to $1.01 from $1.10 in the prior-year quarter.
In the December quarter, total costs and expenses amounted to $871.3 million, up around 31% from the prior-year’s figure of $667.2 million. Cost in Sales and marketing surged 66% to $317.3 million. In the reported quarter, research and development expenses rose to $265.2 million from $240.8 million in the year-ago quarter. This quarter's spending increased year over year due to the company's ongoing investments in innovation, including mobile deep linking, entire page optimization, and improved measurement tools and its stronger brand marketing campaign. Also, higher taxes and bad debt expenses impacted the bottom line.
Adjusted EBITDA was $195.8 million in fourth-quarter 2022, down from $350.9 million in the year-ago quarter, as the company decided to reallocate its resources, cut back on hiring workers and close some of its underused offices.
Cash Flow & Liquidity
As of Dec 31, 2022, Pinterest had cash and cash equivalents of $1,611.1 million, with $178.7 million of operating lease liabilities compared with $1,419.7 million of cash and cash equivalents with $209.2 million of operating lease liabilities in the prior year. The company generated $469.2 million of cash from operating activities in 2022 compared to $752.9 million in the previous year.
Pinterest expects first-quarter 2023 revenues to grow in the low single digits on a year-over-year basis considering slightly lower foreign exchange headwinds compared with fourth-quarter levels. The company anticipates that non-GAAP operating expenses are likely to decline in low double digits percent sequentially as it does not intend to invest in a brand marketing campaign in the first quarter like it did in fourth quarter. The company also anticipates that the macroeconomic instability will continue to have an impact on its small, medium-sized business and mid-market advertisers, which will cause a weakening of demand from this market segment.
Zacks Rank & Other Stocks to Consider
Pinterest currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Jabil Inc. JBL, sporting a Zacks Rank #1, delivered an earnings surprise of 8.7%, on average, in the trailing four quarters. Earnings estimates for JBL for the current year have remained unchanged in the past 30 days at $8.37 per share.
Jabil is one of the largest global suppliers of electronic manufacturing services. The company offers electronics design, production, product management and after-market services to customers catering to aerospace, automotive, computing, consumer, defense, industrial, instrumentation, medical, networking, peripherals, storage and telecommunications industries.
T-Mobile US, Inc. TMUS carrying a Zacks Rank #2, delivered an earnings surprise of 67.64%, on average, in the trailing four quarters. Earnings estimates for the current year stand at $6.66 per share.
T-Mobile US, Inc. is a national wireless service provider. The company offers its services under the T-Mobile, Metro by T-Mobile and Sprint brands. T-Mobile, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers.
Motorola Solutions, Inc. MSI, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 6.6%, on average, in the trailing four quarters. Earnings estimates for MSI for the current year have remained unchanged in the past 60 days at $10.20 per share.
Motorola is a leading communications equipment manufacturer with strong market positions in barcode scanning, wireless infrastructure gear, and government communications.
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