Good afternoon, and thank you for attending today's Pinterest Second Quarter 2022 Earnings Call. My name is Daniel, and I will be your moderator for today's call. All lines will be muted during the presentation portion 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. Neil, please proceed.

Good afternoon and thank you for joining us. Welcome to Pintrest earnings call for the second quarter ended June 30, 2022. I'm Neil Doshi, Head of Investor Relations for Pinterest. Joining me today on the call are Ben Silbermann, Pinterest's Co-Founder and Executive Chairman; Bill Ready, Pinterest's 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 Q3 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.

Thanks, Neil, and hi, everyone. Appreciate you joining our call. Today is going to be a bit different. In addition to announcing results, we're also marking an exciting new chapter for Pinterest. A few weeks ago, we welcomed our new CEO, Bill Ready. Today, you're going to hear from him and see why we're all excited to have him at the helm. But before I turn it over to him and Todd, I just want to quickly touch on why we made the transition. First, I absolutely love Pinterest and cherish the journey we've been on for more than a decade. It all began in 2010 as a tool to help people collect all the things they love from across the Internet. And in the years since, Pinterest has grown into something bigger and more meaningful. Today, Pinterest is a place where 433 million people all over the world come to get inspiration, a place where content creators can share their talents and passions with an inspired global audience and a place where brands can connect with consumers trying to build their best lives. I am grateful to everyone who's made this journey possible; first, our Pinners, our extraordinarily talented team and all of the investors and businesses who've supported us along the way. I'm proud of what we've achieved together. But as far as we've come, I know Pinterest could be more. It's so clear that we have an opportunity to build an end-to-end platform, one that delights people with incredible inspiration, helps them plan their futures and then bring those plans to life with purchases and actions. It's an ambitious vision that's bigger than one person, including a founder. And so, for our next stage of growth, we sought a leader with expertise in e-commerce and shopping to…

Thank you, Ben and hello everyone. I first want to express my gratitude to Ben and the Board for their trust in me as Pinterest CEO. As a fellow entrepreneur, I have tremendous respect for Ben and what he's accomplished at Pinterest. Under Ben's leadership, Pinterest has grown into a global consumer Internet platform with hundreds of millions of users, has scaled revenue to over $2 billion, and the Pinterest brand is synonymous with positivity. It's been roughly a month since I became CEO. And after talking with some of our key stakeholders and reviewing our product roadmap, I'm even more excited today about our business opportunity ahead. I know that maintaining a healthy dialogue and relationship with the investor community is an important part of our success. That's why I'd like to spend a few minutes discussing why I joined Pinterest and outlining what you can expect in the next few months. I joined Pinterest because it offers people a digital experience that is genuinely unique and positive and because we've only just begun to tap into the possibilities that experience has to create value for users and advertisers. Pinterest is really one of the only platforms that sits at the intersection of social media, search and e-commerce. And I'm incredibly excited to help unlock the company's potential. Having spent most of my career in commerce and payments, I recognize that there are many places to buy online, but there are very few online destinations where you can actually shop, that is to browse and discover and get inspired before you buy. Pinterest is very unique, and it has inspiration, discovery, and strong user intent, all in the same place. Pinterest is one of the few places online where users can discover new products by browsing and searching in…

Thanks, Bill. I'd like to share some further details on the trends we saw in Q2 and provide a preliminary update for Q3. Before I jump into the quarter, a quick review of our principles. As Bill mentioned, Pinterest is uniquely valuable for consumers because it helps them discover new ideas and then bring those ideas to life often through purchases. But the full funnel journey that consumers take on Pinterest from demand inception through product consideration to conversion means that Pinterest offers differentiated value for a wide range of advertisers, too. And the ways in which they engage with Pinterest are quite distinct from social media companies. This is due to our users' unique mindset. They tend to be in-market consumers with high commercial intent. Initially, our service attracted mostly larger retail and consumer packaged goods or CPG advertisers who wanted to be discovered by our user base and recognize the value of the fact that well over 90% of Pinner queries were unbranded and still are today. These advertisers remain an important part of our business and make Pinterest's advertiser composition a fair bit different than many other online advertising platforms. But we've also built a significant performance advertising business over the past several years that has helped marketers leverage the organic commercial intent on Pinterest to drive conversions, often additions to a cart, checkouts or purchases. The advertisers who reliably find strong returns on Pinterest are those who value our unique offering, including our differentiated and highly attractive user demographic, the high commercial intent that I just described, a relatively brand-safe environment, insights-led media buying and longer attribution windows that reflect the value of advertising at the inception of actual demand when the value of advertising is arguably higher than later in a purchase decision. To that…

Thanks, Todd. Before we move to Q&A, I want to address recent news reports regarding a large investment from Elliott Management. We've had a very collaborative and engaged dialogue with Elliott recently. They're aligned with our vision on what Pinterest can become, are supportive of our team and our efforts and see the same tremendous potential for long-term value creation that I do. I look forward to continuing to engage with Elliott as I will with our other shareholders and view their investment as a vote of confidence in Pinterest's future. But the purpose of today's call is to discuss our second quarter results and outlook, and we ask that you please keep your questions focused on these topics. And with that, we can open it up for questions.

[Operator Instructions] The first question comes from Eric Sheridan of Goldman Sachs. Please proceed.

Thanks so much for taking the questions and Ben, I just first want to thank you for all the dialogue on these earnings calls since going public. Bill, maybe turning to you. Maybe two-parter, if I can. First, when you were approaching this role from the outside in, what are you the most excited about in terms of closing the gap from executing on the operation side against the opportunity set versus how you're thinking about allocating capital investments against that ambition? And then the second part of the question would be, when you say meaningful margin expansion in 2023, help us bridge from all the ambition you're laying out and what you want to invest in to the concept of expanding margins in 2023 past this investment year? Thanks.

Excellent. Thank you for the question. So, quite a number of things I was excited about in joining Pinterest. But I think to a specific element of your question around how we drive forward on commercial engagement and these types of opportunities. As I mentioned a bit in my comments, I think Pinterest is in this very unique place of being at the intersection between social and search and having a very high amount of intent on the platform paired with inspiration. So, I think these things of when you think about what are the places you can go to find inspiration and discovery, oftentimes, those don't necessarily have intent built in with those, places that may have high intent don't necessarily have inspiration and discovery and Pinterest has both of those things. And I think that gives us a really unique opportunity to take users from this inspiration and discovery and the intent that they have on our platform and drive that through to realization, whether that is making or doing or buying. And I think we're really at the very beginning of what the platform can deliver there. But the thing that I was really excited about and continue to be really excited about now that I'm on the inside, as I look at the way that users are naturally engaging with the platform, it's a much harder problem to try to shift the way a user behaves. To help a user do a thing they already want to do is a much easier problem to solve, and that's something that we see on Pinterest that user are coming here with a clear intent -- yes, to hear for inspiration and discovery, they have a clear intent and driving that further to action, again, whether that's shopping, buying, making or doing, we think there's huge potential there. And there's some good early signs of that as we look at what's happening with shopping ads and some of the things there. And maybe I'll turn it over to Todd to expand further on some of the shopping progress as well as touch on your question around margins.

Yes, a couple of things. I mean, obviously, we're all very excited to move forward on the vision that Bill is starting to lay out here. But on the shopping question, in particular, you might remember back over the last couple of calls that we've been very focused on making sure we have a lot of shoppable inventory and then we have the right shoppable services for people to discover those products. And so a lot of our effort has come through building an inventory of shopping products that we can map to commercial intent and our users' preferences. We're now to one billion shoppable products in the system. And on the shoppable surfaces side, we launched Your Shop, which is our first personalized shopping experience. That will be augmented by the acquisition we made with YES and help our users continue to go from intent to action on the platform. So really excited about those two things. And on top of that, we're building, as I mentioned in my script, our shopping revenue is growing twice the rate of our overall revenue. So really compelling vision financially behind what Bill was describing. The second part of your question was around the expense profile and what we meant by meaningful margin expansion, I think, if I heard your question correctly. And I think the tee up here is, number one, the business has a ton of runway. Everything Bill described suggests that we've got a big business to build here. And in the spirit of that, we laid out 2022, a couple of calls ago as an investment year after several years of significant margin expansion leading into 2022. But this isn't a new normal, or it's just a year where we designed to position the company for an improved user experience, future compelling revenue growth and margin expansion in the years to come. And so I've had questions about whether next year will be another reset or another investment year. But as you heard Bill described, while we're still spending a lot of time together to figure out what that plan is, and this is way too early to provide guidance for next year, we're looking at the macro environment, we’re getting together as a team to figure out what our product plans will be for next year. So it's not guidance. But the idea here is that we would see as much as couple hundred basis points of margin expansion going into next year, just to provide some directional input.

Operator, next question.

Certainly. Next question comes from Ross Sandler of Barclays. Please proceed.

Hey, guys. Bill, just one for you and then, Todd, maybe one for you on the quarter. But strategically, Bill, Google Shopping went through a long metamorphosis from the frugal to where you left it, which was in much better shape than those early years. So I guess what parts of the Google playbook might be applicable here that you had done in your time there? And how would you rank the plumbing that Pinterest has compared to, obviously, the really good plumbing -- that technical plumbing that Google had or has had all along? And then, Todd, maybe just on the quarter, you talked about larger online retail advertisers showing a lot of strength and big-box retail and CPG and others having more issues, which I think makes a lot of sense given what we've heard from Walmart and others here through last week. So could you just flesh out a little bit more on are you adding new online retail advertisers to the top? Are you gaining wallet share within those larger online retail advertisers? I think we understand who's weak, but I'd love to hear more about where that strength is coming from? Thanks a lot.

Thank you for the question, and I appreciate the sentiment. So I'll keep my comments focused on the opportunity here, but definitely a lot of things from time spent in the industry that drew me to Pinterest and then I think speak to the uniqueness of the opportunity here. So a couple of those that I would mention. One, when you think about what it takes to create a really great personalized and curated visual experience, you really need a lot of deep capabilities in computer vision, machine learning, AI. And those things, as you can imagine, are nontrivial to create. And even before Pinterest -- before joining Pinterest, I really had a tremendous amount of respect for what the team here had done in creating a great visual experience, leveraging a lot of computer vision and driving really good personalization through ML and AI. And I'd say now on the inside, I'm even more excited by those things. And so when I think about how we go forward on the shopping opportunities here, I think that's a really tremendous area of strength for Pinterest, is leveraging those deep capabilities in computer vision and the visual nature of how people naturally explore a shopping journey and a really good ML and AI to personalize those what's really relevant for the specific user. And then you see some things that the team here has already been working on that we can do a lot more with like partnering with other platforms in the ecosystem, making it easier to ingest inventory from those platforms and from retailers, so there's an even more rich catalog of products available for consumers to take action on. So I think there's a number of those things that I can see from the outside that I thought were quite compelling. And now on the inside, I find even more compelling. But obviously, a lot more that we can do there. And so that's quite exciting as well. But I still think that we're very early innings on that. But again, solving things that the user, I believe, expects from Pinterest, and that's a great place to be when you're solving things that a user naturally expects from your platform.

And Ross, to your -- the second part of your question on the retailer point, more larger specialty retailers and larger e-commerce versus big box, I think you're spot on in your comments about what you're seeing in real time in the news and what others reports. Our larger specialty retailers and larger e-commerce were more resilient on the platform. The diversified big-box retailers were under a bit more pressure, just probably unsurprising given the demand environment and consumer spend. But the overall message is kind of where I started my opening comments. For advertisers that value the demographic mix of our users, that value the brand safety of the platform, that value the insights-led media buying that we're providing, and we've only enhanced that. It used to be a little bit more manual, and now we have automation around how these insights to design campaigns, and the value of being earlier in a purchase decision by communicating the value of a longer attribution window, those advertisers are finding success despite the environment and are scaling their spend. So to your point on, are we adding more, or are we getting more share of wallet, I would say it's both. And with that probably have your component of share of wallet versus adding a lot of mill advertisers in those particular segments.

Great. Operator, next question.

Thank you. The next question comes from Brian Nowak of Morgan Stanley. Please proceed.

Thanks for taking my question. Bill, one for you. You’ve said, you've been around the industry over a long time. You have a very unique perspective. You've obviously studied Pinterest inside the competitive landscape. A lot of what you described as the opportunity isn't that new probably to a lot of people on this call. I would be curious to hear about sort of two or three low-hanging areas of executional improvement you see in the company where you say, here is why the company has not executed on these opportunities the last couple of years the way that they could have and here's how I'm going to fix those, maybe lay a couple of those out for us? Thanks.

Sure. Thanks, Brian. A couple of thoughts there. First of all, I'd say some of these things is a natural sequence of how these things evolve. I talked about a really good base of visual exploration, the computer vision and machine learning is required to support that. I think those have always been a strength of the platform and I think underpin the opportunity. And so, I think there's a natural sequencing of these things that, of course, you need that first. And then as you look at how you go capitalize on that, I think there -- I'd say context and timing matters as well. I think we're at a moment in time where users are engaging in much more of their e-commerce journey, excuse me, much more of their broader commerce journey in a digital environment. And so, I think -- as you think about sort of where digital commerce has been, I think the first 20-plus years of e-commerce were really solving for buying more than shopping. It was – I know what I want, how do I get the cheapest and fastest? And as you've seen consumers shift their behavior through the course of the pandemic, I think you're now seeing that the majority of shopping sessions now start in a digital environment, regardless of whether they complete online or in a store. So in that world, where the consumer is looking to engage in a digital manner across not just their e-commerce purchases, but a broader set of purchases, I think the way that they have engaged in shopping in the natural world, which involve much more discovery and inspiration and is much more visual, I think, just naturally plays to the strengths of Pinterest as a product and a platform. So, I think that…

On the -- sorry. What was that -- Brian, sorry, can you repeat the second part of your question?

Let's move on.

Operator, let's go to the next question.

Next comes from Mark Mahaney of Evercore. Please proceed.

Hi. Thanks, guys. This is Jan Lee [ph] for Mark Mahaney. Maybe just a follow-up on just the opportunity in the shopping ads growth. What would you think are the kind of -- if you were to rank order the key drivers of that growth in this category, is it just like any more inventory on to the platform? Is it better recommendation or kind of leaning more into creators content? And the second question is, we really haven't talked about the creator content investment. So just given the current environment, how you're thinking about investing in the kind of creator content? And also, you kind of mentioned the time spent on competition from the other video platforms. When do you think about kind of creator or content acquisition, how much do you have to compete with like TikTok, YouTube, shorts, reels, et cetera, or are you kind of -- are you finding yourself acquiring from like a different type of creators than the other platforms? Thank you.

So I can start on the shopping discussion. The way I think about shopping on our platform is either a pure shopping ads, so promoted product or our conversion optimization product, particularly checkouts and additions to a card. So very shopping-oriented performance ads. The success that we're seeing in general is the focus on building a great user experience. So how do we get enough inventory that if you're looking for something that we have the product and the system to serve to you, it's mapped to your aesthetic taste, your price point, a retailer that you trust and is delivered in a natural part of your shopping journey. So getting 1 billion products into the system, which came on the back of high-performing partnerships with Shopify and WooCommerce and with our merchants who are increasingly using our API to get real-time inventory with real-time pricing into the system, that's been really powerful in building the inventory we need to serve against a user's interest or intent. The second thing is, we're building out more personalized shopping experiences into the core of the product. So your shop is an example that I referenced earlier. That's our first real effort in a personalized shopping experience. We bought THE YES or acquired THE YES a couple of months ago to help augment that effort. And I think that piece, coupled with the inventory that we've built into the system, will continue to build more organic shopping experiences for our users. What that means is that we can then deliver ads products against that. And our investments in automation have made that more successful. We've talked over the last couple of years about automated bidding that extended to some of our lower-funnel conversion products. We're looking forward to launching in the back half…

Yes, exactly right. The only other thing I'd add to it is that as we think about the way we're engaging with content creators, we see they appreciate the uniqueness of our platform as well, both it's a positive place to engage as well as the strong think that's something that both our advertisers see from us and are excited about from us. But we see the content creators really appreciate that about the platform as well. I think it leads to different types of opportunities for how creators can engage on our platform and the kinds of content and user engagement that can come from that. And it also means that we can play our own game on how we work with content creators. Of course, we don't expect that we're going to match dollar for dollar with larger platforms, but we can create unique ways to engage. We believe we can attract content creators that are here for the specific users and environment that we have as well as the intent that they have, which is very different from other platforms where that intent may not be there or the intent is one of looking for the next entertaining video that can sometimes be harder for creators to keep up versus a platform where people are coming with an intent to either shop or make or do and that being be more enduring for those reasons and so I think that's an important part of our platform, both for advertisers, but that also creators are really noticing and allows us to play our own game there.

Operator. Next question.

Next question comes from Colin Sebastian of Baird. Please proceed.

Thanks and good afternoon Bill, congrats again. It's been fun following your journey over the years. A couple of questions for either you or Todd. I guess, first off, there were some interesting comments in the letter related to Idea Pins relevance. And I guess I'm curious if there's a direct connection between how you're measuring relevance there and engagement you're seeing with users? And then secondly, I think you touched on this a little bit before regarding near-term trends. But given that the guidance for revenues in Q3 is a bit more positive than what we've seen from other -- most other digital platforms at this point. Just curious what you're hearing from advertisers in terms of feedback related to factors that are making Pinterest more resilient than some of the other platforms? Thank you.

Thanks, Colin. Appreciate the sentiment there. I'll give some brief remarks, and then Todd can add to it. I think, yes, we've seen really nice engagement with Idea Pins and video generally. And I think Todd mentioned this earlier, 10% of engagement being over video from a couple of years ago, that would have been near zero, I think, is really fantastic progress. I think Idea Pins are a really great example of that and Todd can expand on that a little further in terms of what the teams are seeing there. On the advertiser feedback, again, again, Todd will have more color commentary here. But I think there's -- I've talked about the uniqueness of what's on the platform. I think as we go forward into an environment where users are thinking -- or excuse me, advertisers are thinking about where they place their dollars, I think a relatively brand-safe environment on the platform, high-user intent, and we uniquely have first-party signal on our platform. So when you think about Pinterest relative to other platforms and shifts that are happening with regard to cookies and these kinds of things, the fact that we have really great first-party signal. Todd mentioned 80% plus of our users and our engagement being on our mobile app. These are things that give us really good first-party signal and really good understanding of user intent. We don't need to understand user intent from outside our platform. We have it on our platform. And I think that's something that advertisers really appreciate and that we're able to drive through into our ad. I'll give it to Todd to expand on those.

Yes. Look, I think that's a great summary. I would say that we're really excited about the investments we're making in relevance and the impact that's having on -- bringing our Idea Pin format into closer -- something closer to parity with our static pins. That's a precursor for success in terms of engagement. So when it flows through our top line numbers, and we start to see that curve the trajectory of engagement band, we'll know it's having a bigger picture impact, but it's foundational for us to get to that point. On the advertiser side, I think Bill summarized it well. And one thing that we don't have on this platform, I kind of walk through the history of how we built our advertiser base and the legacy of being exposed more to larger CPG and larger retailers during moments like this can be more beneficial. We don't have a lot of gaming app download, crypto ads, for example, on the platform. A lot of it's around home, food, fashion and beauty with our larger, more resilient advertisers. I had mentioned the joint business partnership point in my opening comments because I thought it was an important indicator for us as being an alternative to the larger incumbents for advertising dollars, but still on the list given the issues that Bill had mentioned in the way I had opened demographics, brand safety, leading indicators of consumer intent and commercial mindset on the platform and being early in a purchase journey are all differentiators. So I wouldn't want you to take away from this that we're in a different economic environment, though, than many of our -- others in our space. We started the quarter particularly strong. And a lot of our leading indicators, as I had mentioned, are softening as we see this demand picture become a little more uncertain with the quarter unfolding. And so I wouldn't want to tell you we're in a totally different market environment than others. We just started off stronger than the -- slightly stronger than the range that I described. And our best signals are that we're going to see some deceleration as the quarter unfolds.

And operator, we’ll take our last question.

The final question will come from Rich Greenland – Greenfield. My apologies from LightShed. Please proceed.

I've never been to Greenland, but I'm sure I could find it on Pinterest. On -- sorry. In the letter, Bill, you talked about Google Search. Obviously, Google Search has been a pressure on the business for -- over the last several quarters. And you talked about relying on sort of new ways of demand generation or driving traffic or sourcing traffic. And I was wondering if you could just sort of give us some more examples. When you talk about sharing Idea Pins on third-party platforms and even when you're talking about notifications, I assume that's AI for push notifications. But I was hoping -- could you give us some examples of sort of on both of those things tangible, what you're seeing, how it's impacting the business and what we should expect going forward? And then sort of just a big picture housekeeping point because you both brought it up. If the mobile users are driving 80-plus percent of your revenue, why not just report mobile users? It seems like that's the most relevant indicator of what's tied to revenue growth? And why not just forget about this or even deemphasize this overall MAU metric if the mobile MAU is really the one that matters? Thanks.

All right. Thank you, Rich. I'll let Todd hit the last question on how we report the users. But on your question of how we're driving engagement, there's a number of factors. You touched on one of those that we did as well, which is we're getting a lot of direct engagement through our mobile app. So that's always a great place to be, to have 80% plus of your engagement through the mobile app where people are coming to you directly. So that as a base is fantastic. We're using a lot of ML and AI to improve our personalization across all of our services. That drives up further engagement. And I think the team has been -- as I mentioned earlier, I've been really impressed coming inside and seeing the progress the team has been making there. And I think there's a lot more of that to come in terms of advances in the machine learning and AI front to improve personalization. It's the strength of the platform. So a lot more we can do there. Native content creators, I think that engagements will be more accretive over time, and we're seeing good progress there as noted with 10% of engagement being on video now. And I think we've talked about taking people from inspiration and intent to action, but there's a lot of the inspiration intent -- inspiration and intent on our platform that people historically had to go to other platforms that take action. And as we make more of that actionable on our platform, that will naturally drive up further engagement as well. And we see early signs of that with things like the progress in shopping ads. And with respect to SEO, I think teams are making good progress, leveraging our machine learning and AI capabilities for multiple channels of engagement, including things like notification, e-mail and seeing good returns on those things as well as things like social sharing. There are number of factors there. There's no one silver bullet. It's broad-based, but I actually find that to be quite encouraging that there's no one silver bullet, but actually a broad base of activities that's driving really good progress and engagement. And I'll give it to Todd to address the user reporting part of the question.

Yes. Thanks for the question, Rich. We're always open to evaluating disclosure and so, I will keep an open mind about it and consider it. The reason we've been bringing it up for the last few quarters is, we thought there was a bit of a deviation in the trend that we've seen historically. And so, I thought it would be important context for this community and for investors to understand what's going on with our web-based traffic versus those that are coming direct or using the mobile app. I thought it was also important to call out that impression and revenue contribution, just so folks would understand how we could be seeing these MAU declines, but continue our financial performance right through it, which is one of the factors that play here, in addition to all the investments we're making in our ad stack and efficiency there, plus our demand generation. To your point specifically, the reason I kept it and have kept it is that, it's a pretty inclusive way of thinking about the people that come and discover Pinterest content, number one. Number two, we have often viewed these web-based users who come to us through search traffic as our upper funnel user acquisition. These are people that are discovering Pinterest content through search, they're existing users that are resurrected, and they rediscover reasons to come back to Pinterest. And so, from a broader aperture perspective, it's a pretty useful way of thinking about those that are finding Pinterest content and are potential future mobile app users because they found this content through search. But of course, we'll always consider what's most useful for this community to understand the business and its prospects.

Now I'll turn it over to Bill for final comments.

Yes. Thank you again to everyone for joining the call and for your questions. We look forward to continuing the dialogue with you as we execute on the many exciting opportunities ahead and we hope you all enjoy the rest of your day.

That concludes the conference call. Thank you for your participation. You may now disconnect your line.