Pinterest, Inc. (PINS) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon. Thank you for attending today’s Pinterest First Quarter 2022 Earnings Call. My name is Bethany and I’ll be moderator for today’s call. All lines will be muted during the presentation course of the call with an opportunity for questions and answers at the end. [Operator instructions] I would now like to pass the conference over to our host Neil Doshi, Head of Investor Relations of Pinterest. Please go ahead.

Thanks, Bethany. Good afternoon and thank you for joining us. Welcome to Pinterest’s earnings call for the first quarter ended March 31, 2022. I’m Neil Doshi, Head of Investor Relations for Pinterest. Joining me today on the call are Ben Silbermann, Pinterest’s President and CEO; and Todd Morgenfeld, our Chief Financial Officer and Head of Business Operations. Now, I’ll cover the safe harbor. Some of the statements we make today regarding our performance, operations and outlook, including the impact of the COVID-19 pandemic, may be considered forward-looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In addition, our results, trends and outlook for Q2 2022 and beyond are preliminary and are not an indication of future performance. We are making these forward-looking statements based on information available to us as of today and we disclaim any duty to update them later unless required by law. For more information, please refer to the risk factors discussed in our most recent forms 10-Q or 10-K filed with the SEC and available on the Investor Relations section of our website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today’s earnings press release and letter to shareholders, which are distributed and available to the public through our Investor Relations website located at investor.pinterestinc.com. And now, I’ll turn the call over to Ben.

Hi, everyone. We appreciate you joining the call. We’ll open up with some comments and then take your questions. But just before we get started, I wanted to express on behalf of our entire company, that are hard to continue to go out to all those impacted by what’s happening in Ukraine. We have members of our team who lived in the region and are now thankfully safe. And I’m proud of how our company came together to support humanitarian efforts for Ukrainians. We’ll continue to keep everyone affected in our thoughts during this unimaginable time. Turning to the business. A few minutes ago, we released our Q1 shareholder letter. Revenue was strong with 18% year-over-year growth to $575 million. This was due to strength from retail advertisers, our international business and our managed SMB advertisers, all of which offset the economic weakness we’re seeing in CPG and in Europe because of the war. Meanwhile, we continue to face engagement headwinds. We had 433 million global monthly active users, down 9% compared to Q1 last year, a quarter that was driven by pandemic-influenced growth. We also felt the impacts of lower traffic from search and time spent by people on competitive platforms. We’re doing a number of things to improve the Pinner experience and tackle engagement headwinds head on. In the near-term, we’re applying sophisticated machine learning to every aspects of our platform. As a result, we’ve seen marked improvements in the relevance of home feed recommendations, the quality of search results and engagement with notifications. All of these enhance the quality of our platform for Pinners, and are leading indicators of deeper user engagement. We also plan to launch a global brand awareness and comprehension marketing campaign starting in Q3. In the medium-term, we continue to invest in a rich content ecosystem with publishing tools that allow creators to publish rich lifestyle content on to Pinterest and we’re also allowing people to take the content they find and create on Pinterest and share that inspiration with their friends, family and followers across the Internet. To do this well, we’re also working to connect Pinners with the most inspirational creators and native content in dynamic formats like short-term video. As we’ve discussed in past calls, this investment has come at the cost of some MAUs in the short term as we get the ecosystem off the ground. But we’re committed to this strategy because we believe it will drive engagement over time and because we believe that native content in video, in particular, is fundamental to help the people get inspiration and shop in the future. In 2021, I’m especially proud of our teams that laid the foundation for a native content ecosystem. It’s gaining traction. The number of video idea Pinners is up 15x year-over-year, and this content is resonating with more and more people as we continue to see that Pinners, who follow multiple creators, visit Pinterest more often compared to those who do not. We plan to continue building new publishing tools with the help of our new acquisition, VOCHI, so creators can make even better content, content that’s not only entertaining, but help us move our user base from inspiration all the way to action, content we’re saving. We’re also expanding rewards to bring on more inspirational creators to Pinterest. Finally, we continue invest in making Pinterest a shopping destination and we’ve taken some big steps here. We launched the Pinterest API for shopping to help merchants and give Pinners a real-time information about the products they see from pricing to availability. We also started beta testing Your Shop, which uses our unique ability to understand taste and preferences, to deliver an experience for each Pinner that’s personalized to them. This work is fundamental to our vision. So users can not only come to Pinterest with the expectation of being inspired but also know that they can turn those inspirations into a reality with purchases. Across the board, we continue to make progress in helping Pinners go from the spark of inspiration through to buying, making, trying, and doing. We’re confident that our strategy will deliver great results for Pinners, creators, advertisers, merchants into our business. And we remain excited about the enormous opportunity to help people live a life they truly love. With that, I’ll turn it over to Todd to give you more color into the business.

Thanks Ben, I’ll share some further details on the trends that we saw in the first quarter and provide a preliminary outlook for Q2. Beginning this quarter, we’re providing additional disclosure around our revenue, our monthly active users or MAUs, our average revenue per user or ARPU by presenting the U.S. and Canada, Europe and rest of world separately. As our international operations become a more meaningful part of our business. We want to provide additional detail in those regions. Please refer to our earnings presentation for the new geographic breakouts. As part of this change, we re-categorize the U.S. into the U.S. and Canada. Please note that there is little difference in historical year-over-year and sequential growth rates for the U.S. alone versus the U.S. and Canada together. We’re categorizing these two regions together going forward because they’re both relatively mature and they share a similar advertiser base. Furthermore, while we’ve provided U.S. monthly active users recognized revenue and ARPU for Q1. Going forward, we plan to only report these metrics for the new combined U.S. and Canada. Turning to our financial performance. Q1 revenue grew 18% year-over-year to $575 million, in line with our guidance. Adjusted EBITDA came in at $77 million with an adjusted EBITDA margin of 13%. Most of the details on our quarterly performance can be found in our shareholder letter, but I wanted to provide you with some additional specific. As our international business has grown, we’re becoming more subject to currency fluctuations. Revenue growth from Europe was 27% year-over-year. On a constant currency basis, revenue growth in Europe would have been approximately 34% year-over-year. And as we continued the distribution and placement of Idea Pins, we believe this negatively impacted our first quarter year-over-year revenue growth in the mid single-digits on a percentage basis similar to the prior two quarters. This impact was factored into our guidance for the first quarter. Turning to expenses. We accelerated our non-GAAP operating expense growth in the first quarter to 31% year-over-year versus 27% year-over-year in the fourth quarter. However, sequentially, our non-GAAP OpEx declined 1% due to pushing off creator-related spend, slower hiring than we anticipated, particularly in the bay area and a few other favorable items. Before getting into some specific trends on user engagement in the quarter, I want to double click on our strategy to combat engagement headwinds. As Ben mentioned, we’re looking at ways to drive more sustainable user acquisition and retention. For example, we’re making Pinterest more browsable without immediately requiring users to sign up when they land on the site. While this had a modest negative impact on global new user signups initially, we believe that removing barriers for longer browsing sessions can drive more activations over time. We also believe our investments in the core Pinner experience on home feed, search and shopping can make Pinterest feel more personal and relevant in the near to medium term. And that our investments in creator-led native content and short form videos can bend the curve on engagement in the long run. With respect to our Q1 engagement trends, it’s worth noting that our global mobile app MAUs, which account for the significant majority of our impressions and revenue grew in the mid single digits year-over-year. Mobile app MAUs in the U.S. and Canada were also relatively resilient, declining around 6% year-over-year versus down 31% year-over-year for web-based MAUs. Sequentially, U.S. and Canada mobile app MAUs were flat. Our younger Gen Z users were also a source of strength growing mid single digits year-over-year. Finally, shopping engagement remained relatively resilient with the number of Pinners engaging and shopping surfaces is growing year-over-year. Turning to our preliminary outlook for Q2. While we typically don’t provide MAU guidance, for the last three quarters, we’ve shared a quarter to date snapshot of MAUs in our earnings. As of April 25, U.S. and Canada MAUs were at 94 million and global MAUs were 432.9 million. We’ve provided intra quarter data points on MAUs over the last few quarters because the lifting of pandemic lockdowns in 2021 disrupted our seasonal – our typical seasonal engagement patterns and limited visibility into quarterly MAU trends. Lockdowns began to lift for some geographies in mid-March 2021, which is when we began to see year-over-year engagement declines. Engagement continued to normalize toward pre-COVID levels throughout Q2 2021 as more geos lifted COVID restrictions. We believe that the pandemic unwind will no longer create a year-over-year MAU headwind in the third quarter of this year. So we don’t plan on providing an intra quarter update on MAUs going forward. As you think about MAUs for Q2, I’d like to provide you with some additional context. Q2 has historically been our seasonally weakest quarter for MAUs, given that people tend to be outside more, travel more and engage in our core use cases less often. As a reminder, at the end of the quarter we calculate MAUs based on a 30 day look back from the last month of each quarter. Since June is one of our weaker months for engagement in the U.S., a snapshot of MAUs on April 25 may not predict June MAUs. And finally, we continue to face year-over-year growth headwinds from the search algorithm change that happened in the fourth quarter of 2021, as well as potential new headwinds from future search algorithm updates the timing of which are hard to predict. On the revenue side, we expect Q2 revenue to grow around 11% on a percentage basis year-over-year. Please note that our Q2 revenue guide takes into account a few considerations. First, it’s worth noting that we had a particularly strong Q2 last year with revenue growing 125% after a week Q2 of 2020. Second, the macroenvironment remains challenging, including supply chain issues and inflation exacerbated by the conflict in Europe. It’s unclear how long these conditions will persist. Third, we continue to monitor the impact of higher CPAs. In general, we believe that higher pricing has multiple drivers, including industry-wide dynamics and recent trends in our user base. In Q1, we observed that higher pricing lower budget utilization for a subset of our U.S. small and medium sized advertisers – small and medium sized advertisers that are more price sensitive. We believe that advertisers who value what makes Pinterest unique, namely our users planning mindset, our positive platform, our insights-based media buying and our unique audience of commercial intent users will find value on our platform using our automated bidding products. Finally, our investment in building a native content ecosystem will likely remain a mid single digit headwind to revenue. However, we believe that this effort will both be engagement and revenue accretive over time. Finally, I want to touch on expenses. We expect the second quarter non-GAAP operating expenses to grow at 10% quarter-over-quarter as we push some of the spend from Q1 into Q2 and beyond. We plan to continue to scale our investments and our native content ecosystem, the core Pinner experience and headcount across research and development and sales and marketing, but timing could be lumpy quarter-to-quarter. We also plan to push our Q2 brand marketing campaign to start towards the end of Q3 and into Q4 this year. For the full year, we plan to invest in our growth initiatives. Layering in some of the benefits and under spend for Q1 and recognizing that this is a competitive hiring environment, we are expecting non-GAAP operating expenses to grow in the range of 35% to 40% year-over-year. Thanks to our teams at Pinterest, our advertising partners, our creators and all the people that come to Pinterest to find inspiration. And with that, we can open it up for questions.

Operator, we can open the call for questions.

[Operator Instructions] And our first question comes from the line of Ross Sandler with Barclays. Please go ahead.

Hi, guys. Two questions on the MAU trajectory. For Ben, I guess, why hasn’t search traffic recovered? And are we going to basically have to wait until you lap the negative effects from fall of 2021 for that to start to pick up? And I guess just stepping back of all these initiatives you guys are working on, what are you most excited about that can help drive engagement over the long-term? And then the second one for Todd, just kind of nitpicky, but any additional color you can provide on both global and U.S. MAUs, like why they declined from the Feb 1 intra-quarter update you provided last quarter until the end of the quarter? Any color there would be helpful. Thank you.

I’ll get started, Ross, and then turn it over to Todd. We’ve discussed in the past that search has always been an important channel for us, especially in bringing in brand-new users, and for users that engage periodically it brings them back into the service. So Google is often making changes to their algorithm. And entering Q1, we started to lower baseline than we would have absent the algorithm updates in November 2021, when we had few resurrection from research in February and March that we typically see. Now this quarter, we chose to take a different strategy than we have in times of past. So rather than playing a short game, we really invested in protecting our long-term opportunity and search. For example, when you visit Pinterest now compared to a few months ago, the experience is a lot more open, meaning you can explore the whole service, you can explore different pins without prompting you to sign up, and we allow you to dismiss that prompt. Todd mentioned that that caused some modest declines in MAUs in the short-term, but we think it’s the right long-term strategy. It’s one that we’ve been testing internationally and results in higher activation rates and more sign-ups over the medium to long term. So we’re proactively investing in better relevance. And then the other question you asked is what are the other things that we’re doing that we’re excited about to drive long-term growth and there are a few that I mentioned. The first one that I mentioned, which isn’t a brand new feature, but it’s the thing that Pinners fundamentally come to Pinterest for is we continue to invest in the quality of the recommendations and search results and I’m really proud of the team that they improved both in the last quarter. On the recommendation quality, we saw better engagement with native video content, better recommendations overall. And in search, we began to introduce new features such as structured search for things like recipes that will expand it in new verticals. And what we’re seeing from those is an increase in search query volume and a resulting increase in engagement. So it’s kind of one pillar, and think of that as improving the core. The second thing we’re doing is we continue to invest in bringing on more native content on to Pinterest. And this has been a big investment for us over the last 12 to 18 months. I’m incredibly proud of the team. They stood up this entire ecosystem, essentially from scratch. And we’re starting to see really great traction there. There are significant increases in both the number of creators that are adding Idea Pins, the amount of video Idea Pins that are being consumed. And we continue to see that Pinners, who follow more of those creators to visit more often. Now we’re building this ecosystem into a much larger population base. So we described that as a headwind in the near-term, but early signs are that we’re getting traction there. And this is also strategically important because we think video as a format is just fundamental to the way people get inspired and take action in the future. Finally, I’m sure we’ll talk about it more on the call, but we continue to invest in shopping. We talked a little bit about improving the quality of content, and we released the Pinterest API. We’ve begun beta testing, Your Shop. And then finally, we’ll be testing and expanding the test of checkout. And all of those bring more utility to the platform, which we think in turn are both revenue and engagement accretive investments. Todd?

Yes, Ross, I think the second part of your question was what happened to MAUs from the Feb 1 intra-quarter update we gave on the last earnings call through the end of the quarter. And just for – just to kind of reset from Feb 1 to March 31st, the U.S. declined from 86.6 million monthly active users to 85.2 million, and global MAUs declined from 436.8 million to 433.3 million. In the U.S., the decline was really due to three things. One was, as we’ve talked about in the past, especially on the last call, lower traffic from search. Historically, we’ve seen new user sign-ups, and resurrections typically tick up in the months of February and March. And we just didn’t see that happen in the first quarter, we think, because of the impact of the search algo change from Q4. The second was Russia’s invasion of Ukraine and we talked about this a little bit at the beginning of the COVID lockdowns that during periods where there are other large news events going on, people often turn away from inspiration and planning behavior toward real-time news updates that they find on other services. And then lastly, we’ve talked a little bit about competition. The U.S. is our most mature market, and we see a lot of social media, entertainment and news apps competing for user time spent. Globally, the decline was due to lower engagement in Russia, Ukraine, and other countries in Europe. And we think based on our estimates that, that was about a 5 million global MAU impacts. So had it not been for those events, we think our global MAUs would have been modestly up from the Feb 1 MAU number that we shared. So hopefully, that’s helpful.

Next question operator.

Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thank you so much for taking the questions. Maybe two, if I can. First, you called out some of the macro volatility that we saw in results around the war in Eastern Europe, any greater color you could give about the depth of pullback from advertising spend, or how volatile it was as the quarter came to an end, and whether you’re still seeing sustained weakness as we move into Q2. That would be a question number one. And then to the comment – and then Todd just bought it back again with respect to video-centric apps and what impact it might be having on usage. Can you talk a little bit about what you are seeing as you think of it as a direct correlation of people spending more time on video-centric maybe versus your engagement? And how do you think your product road map positions you better competitively vis-à-vis those video-centric products over the medium term? Thanks.

So Eric, I can take the first part, and I’ll probably ask Ben to step in on the second part of the video-centric apps question. But in terms of demand and volatility, it definitely wasn’t helpful to us in terms of monthly active users. As I talked about, we had probably a 5 million monthly active user impact. And it also had knock-on effects to advertising spend around the world, but in particular, in Europe. I don’t know when that conflict will resolve, but it’s definitely a period of uncertainty that’s not helpful. We’ve seen, in addition, a fair amount of weakness that we’ve called out over time in the consumer packaged goods, or CPG space, driven we think by supply chain pressures and inflation, as I called out. So the combination of those things has not been good for brand building in this environment. But we hope that once that resolves and we start to see some of the supply chain issues abate that we’ll see a recovery in some of that demand.

Yes, Eric, to your second question on competition in video, so we called out competition just because there is a tremendous amount of options for consumers on the phone at any given time. And we look at the same data that all externals do. That said, we think that what we’ve heard from Pinners and what we see is that we have a pretty differentiated use case. I mean that’s the use case of actually using Pinterest to plan, get ready for major events and then eventually to make considered purchases. And that’s quite different from an entertainment and news use case. Now, the way you characterize the question was kind of video versus not, we think video is going to be a fundamental medium for all kinds of activities like from entertainment to news to education. And that’s why we’ve made this investment in building out on a native content ecosystem. This was kind of a long bet that we started 18 months ago, but if you were just to fast forward to the future, we think the Pinterest is undoubtedly just a more engaging and richer surface. If you can shop with video, if you can get new ideas that are part of video. And a lot of our core use cases are already seeing the benefits from having more video content on board. So we’re going to continue to make that investment. We think that enhances the core value proposition of going from inspiration and all the way to realization. That’s why you’ve gone long on that investment as the company.

Great. Thank you for the color.

Thank you, Mr. Sheridan. Our next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Okay. Thank you. I just want to ask one question about shopping. That data point you provide about the number of Pinners engaging and shopping services growing year-over-year. That seems to be – things seem to be going in the right direction for you. How long is the path to getting to the kind of the shopping experience that you’ve envisioned that you’ve liked to see on Pinterest and what are the remaining things you need to do to create that experience? Thank you.

Yes. Thanks for the question, Mark. I’ve been really proud of the team for continuing to make progress in shopping. And we’ve talked about this three-pronged strategy. The first has been, we really want to improve the quality of inventory. So the journey that we’ve been on started with a verified merchant program, it expanded to letting people upload catalogs and then multi-feed. This quarter, we expanded that to include a Pinterest API for shopping as well as a partnership with WooCommerce that gives millions of merchants, the power to turn their product catalogs into shoppable product Pins. All of that is just this fundamental baseline investment that we need, but already this quarter, what you can see is if you start looking at the product pages, not only is the data up-to-date, but we’re keeping it up-to-date in real-time and that gives people confidence to purchase. The second part of that strategy is improving the discoverability of that. So we’ve talked in the past about surfacing shopping results and things like search, using computer vision technology to match products to all of the seen images. I think the next big milestone for us will be taking Your Shop, which is a personalized shopping surface out of beta, which is how it’s being tested today and into kind of the market in more mainstream way. And then finally, we continue to test seamless checkout with more and more merchants. We think that for long considered items, people are less sensitive to having one tap checkout. If it’s something you’ve been thinking about for months, but over the long run, we think this is going to be a fundamental expectation. And so that’s how we’re pursuing that strategy. I’m happy with the progress. We have a ways to go. I think that there’s a company up in Seattle, that’s been continuing to prove shopping experience for literally decades. But we think what Pinterest brings is that ability to discover products without necessarily knowing the exact name of that product and using your taste and preferences to connect you to products that help you get something done in real life.

Okay. Thanks Ben.

Thank you, Mr. Mahaney. Our next question comes from the line of Rich Greenfield with LightShed. Please go ahead.

Hi, thanks for taking the questions. I got two. One, just sort of macro, obviously inflation, fears growing sort of recession Europe even U.S. sort of certainly growing concerns and e-com slowing and just – I guess, just what are you seeing on the ground in terms of as you sort of push much more aggressively into shopping and make that experience better, how does the sort of kind of retail spending outlook, you think impact you as you look out, especially as you move into Q2 and even into, back to school in Q3. And then sort of just a big picture question on the creator side, you’re obviously doing a lot to sort of create on-platform content that’s unique and you’ve obviously hired Malik and pushing into the creator economy. When you talk about competition because I think you’ve mentioned it a couple times already, is that mostly TikTok? Is that Instagram like where are you seeing most of that competition? Is there any way to sort of isolate where you’re losing time spent mostly to in that sort of work for time?

So Rich, I can take the first part of your question on market dynamics, inflation, recession supply chain, all of that stuff, as it relates to the retail outlook, and then maybe Ben can weigh in on the creator side. So, first of all, we saw particular strength last quarter in the retail advertising market, we saw more pressure on CPG advertisers due to supply chain pressures, inflation, et cetera. And we were – we benefited significantly from strength in retail. And I would imagine that based on what we’re seeing, that that will continue. The reason I have confidence that it will continue is that our progress in signing joint business partnerships, which I think we’ve described in the past that we call them JBPs but they’re not contracts to spend, but their indications of intent to spend, the number of those large deals that we signed in particular with retailers grew 35% in terms of raw number year-over-year in the first quarter. And the dollar amounts indicated by those agreements grew 55% year-over-year in the first quarter. So that suggests not only strength last quarter in the retail segment, which showed up in the results, but also an indication of willingness to continue to spend. Ben, would you like to weigh in on the creator side?

Yes, Rich. I mean, I think the way that I interpreted your question is, if you’re losing time spent, where is it going to, and we don’t have exact fidelity into where people are spending their time, but obviously the story of the last couple years in terms of time shift has been the rise of TikTok is a major place that people are spending their time. Now on Pinterest end, what we’re really trying to establish the creators is a place where they can publish content and they’re rewarded for that content’s ability to inspire action rather than the raw entertainment value of that. And that’s going to have to be reflected in the way that we provide incentives for creators, but also the way that we rank content on Pinterest. So the reason that a feed on Pinterest feels different than a feed on a social network or a feed on a pure entertainment network is that the content is ranked, taking into account, how useful that idea will be to getting something done in the future. As we think about things like creator rewards and roll out new ad formats, like Idea Pins that are sponsored that’s the sort of central thesis behind it. And it’s in line with the central thesis of Pinterest overall, where this isn’t a platform to talk to your friends. It’s not a platform to keep up with the news. It’s a platform for you to articulate things that you want to do in your life for us to help you visualize what that end state looks like. And then for us to give us the planning tools and the shopping tools to turn that vision into reality. We think creators can play a positive role all the way across that inspiration to realization journey.

Thanks very much.

Thank you, Mr. Greenfield. The next question comes from the line of Justin Post with Bank of America. Please go ahead.

Great. Thank you. A couple, Todd, you’ve given a lot of metrics suggesting users are somewhat stabilizing especially on mobile. When does that mobile crossover happen or are you trying to kind of signal that we’re nearing the bottom, maybe this summer. And then second, just on the onsite shopping test, are you seeing better conversion or better monetization of usage when people do onsite shopping? Thank you.

So, Justin, I think the question you’re trying to get at is really around guidance, then I want to be careful that we’re not providing guidance and there are a few things to note around that. In my opening remarks, I called out the second quarter as our weakest quarter, typically as people head to summer, a lot of times you’re spending more time outside and less time on Pinterest because you’re doing instead of planning. It was interesting to note in Google’s a call yesterday that travel searches in the first quarter were above Q1 2019 pre-pandemic levels, which suggests that we may see that even more so in the month of June going into the summer this year. And so I also want to make sure that we reminded folks of the way we calculate our MAUs. It’s on a 30 day look back from the last day of the quarter. And so our Q2 MAUs will be calculated based on June data, which is seasonally weaker month for us, as people start heading out probably on vacations and we’ve seen that trend historically. Haven’t really gotten into a lot of seasonality with in-quarters because it’s a little noisy, but we wanted to give people these intra-quarter updates over the last couple of years to just give you a sense of what we’re seeing in real-time. And then the last point was that we’re still facing this year-over-year growth headwind from the search algorithm change that happened in the fourth quarter and the threat of potential new headwinds from future algo changes, which is hard for us to predict in terms of timing. And the competition for time spent on competing video centric platforms is something we pay close attention to.

Yes. Justin, I think your second question was how are we seeing shopping? We’ve known for a long time that Pinners have a lot of commercial intent and they bring that intent to Pinterest. And what we’ve seen is that as we remove barriers to people executing that intent by linking them to products, by ensuring those products are in stock, that the prices are accurate, their purchasing behavior increases. And so our core strategy has been around increasing that inventory, making the matching more efficient and then eventually streamlining that conversion event at the end. But those first two are really fundamental. And then we think creators in social shopping, they can be a bonus on top of that by giving people more confidence in their ability to buy. And we’ve seen some great early signs both with Pinterest TV as well as with partnerships. We had one this quarter with Victor and Rolf, which was a new fragrance, we paired them up with a creator. Showing really good business results because at the end of the day, they’re giving Pinners with commercial intent the confidence they need to eventually make that purchase.

Great. Thank you, Ben. Thanks, Todd.

Thank you, Mr. Post. Our next question comes from the line of Mark Shmulik with Bernstein. Please go ahead.

Hi. This is Simone for Mark. We wanted to ask, I guess, two questions. The first one on like quarter to date trends, like revenue haven’t necessarily seemed reflective over the overall quarter for everyone. And we wanted to know are there any ebbs and flows like beyond Ukraine for how to think about the rest of the second quarter for revenue? And if we’re giving – how much room maybe we’re giving for uncertainty around macro there? And then the second question, if you could elaborate more on, you’ve talked about how you’ve pushed up your creator spend, but any expectations around that and what you’re looking for there?

Sure. I can take the first question on the quarter to date revenue piece, and then maybe Ben can weigh in on the creator side. I know others have called out intra quarter trends on revenue. What I would say is that our guidance for the quarter, we said, we anticipate growing about 11% year-over-year. That reflects our best judgment of where we’ll land this quarter. And so we look at a number of factors internally to gauge that. But we’re not calling out any other – I think others have called for deceleration or have other factors kind of weighed in. Our best judgment is we’re going to land at roughly 11% growth. And that’s kind of everything that we see about business to date and our outlook.

And Simone, I wanted to make sure that I understood the intent of your question. You mentioned kind of our trend on creator spending. Was that – is that right?

Yes.

Yes. I think we might have mentioned earlier, we did have some creator marketing spend that we pushed out from the beginning of the year to the back half of the year as we continue to learn kind of really what works with creators and how do we create incentives that give them kind of the motivation to create content that’s really useful. And often content that’s a lot more evergreen than the kind of ephemeral content you see on a lot of other platforms. That’s a pretty different mindset for a lot of the creators that are on competing platforms that are essentially rewarded on a combination of volume and entertainment value versus the ability to inspire action. So a tutorial that might help you teach something and is just as relevant as it searched a year from now, as it was on the day it’s posted. So we’re still in early experiments with exactly how to do that that’s part of the reason that we pushed out some of that spend. But that doesn’t reflect a lack of conviction in our investment around initiative.

Okay. Thank you.

Thank you. Our next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Hi. This is Neeraj on for Doug. So just a couple of questions. One is, if you could help us frame the performance of brand versus DR spending during 1Q? And how it’s trending quarter to date and anything else on verticals? Also, you guys lowered expense outlook from 40% – to 35% to 40%. Where is that coming from?

Sure. So in terms of brand versus performance, we’ve talked historically about being a majority performance based advertising in terms of our mix versus brand. And there’s no change in that. I would say that the one read through on the weakness we’ve been experiencing, especially in CPG, which is I think an industry-wide kind of supply chain inflation driven phenomenon that disproportionately impacts brand. But we’re still seeing growth across objectives. So that’s part one. And then on the lowered expense side, our ambition is to invest in the long-term. We set out a bunch of priorities earlier in the year that we communicated on the last call and for a number of reasons that we talked about earlier slower than desired growth in hiring, some delays in our creator spend, as Ben mentioned a moment ago and then lower in office spend in the first quarter among a few other items. We just got off to a little bit of a slower start in ramping our spend, even though our OpEx grew 31% year-over-year up 4 points on a year-over basis – year-over-year basis from the fourth quarter. We also grew our head count 27% year-over-year, which is at the same rate that we grew head count on a year-over-year basis in the fourth quarter. So we’re hiring aggressively. We’re spending against our strategic priorities and we set the bar really high for the year and got off to a little bit slower start than we anticipated. We will catch up on some of that spend as the year unfolds, but not all the way to the full amount that we had intended to spend in the first quarter, which is why we brought the guidance down to 35% to 40% for the year.

And operator, we’ll take one last question.

Certainly. The last question comes from the line of Brian Fitzgerald with Wells Fargo. Please go ahead. I do apologize, one moment. Brian, your line is now open.

Thank you. Two quick ones, maybe follow-up on the shopping API, I’m sorry if we missed it. But did you give us any color on kind of the penetration dynamics there? Is it accelerating? What kind of portion of people are testing there? What kind of size tests are they doing? Maybe even any color on verticals that are using it more so than others. And then on the headcount hiring and kind of the – I don’t think it was a pause. It was just – it was lighter than expected in Q1. Can you give us any color on the dynamics there? Is it competitive and candidates are kind of pricing themselves out of your threshold or anything on the headcount color.

Yes. Brian, why don’t I start with the second part and we’ll come back to the first question in a second. So we had a pretty aggressive desired ramp in head count leading into the year. And we have done a great job in hiring. I think we’re still very competitive for talent, but we set the bar really high to scale our team. And as you know, in the industry right now, it’s very competitive for talent, especially in the Bay Area, which is why we started to build hubs for talent in other geographies, Toronto, Mexico city and Poland, which we think will be an opportunity for us to diversify the sources of talent and bring on a broader group of people to build a great product. So we’re doing I think the right things there. But what you shouldn’t expect from us is to be in disciplined around hiring and uneconomic or unfair terms. So we want to balance our ambition to staff the team as aggressively as we need to deliver the product that we want to build over the next few years. But we don’t want to do that in a reckless way.

And on shopping, you can think of the shopping API as kind of the next generation of our catalog uploader. So it’s very much in line with our desire to get as much up to date and accurate information. And then we apply machine learning to rationalize all of those products and then computer vision to match them up against the scenes. So, we’re seeing really good early uptake. It’s been a learning process as we’ve gone from single feed upload to multi-feed upload, now to a proper API. And we continue to see – we plan to see continued improvement in the quality of inventory, which in turn kind of enables people to go from that inspiration to purchasing experience, which is fundamental to our mission as a company.

Excellent. Thank you. Thank you very much.

There are no other questions. Thank you. I would now pass it back to Ben Silbermann for any closing remarks.

Well, I just wanted to thank everyone for the thoughtful questions. We look forward to keeping the dialogue open. I know it’s a busy afternoon for a lot of industries, so enjoy the rest of your day.

That concludes the Pinterest first quarter 2022 earnings call. I hope you all enjoy the rest of your day. You may now disconnect your lines.