Hello, everyone. Thank you for attending today's Pinterest Second Quarter 2024 Earnings Call. My name is Sierra, and I will be your moderator for today. [Operator Instructions]. I would now like to pass the conference over to our host, Andrew Somberg, Vice President of Investor Relations and Treasury. Please proceed.

Good afternoon, and thank you for joining us. Welcome to Pinterest's earnings call for the second quarter ended June 30, 2024. My name is Andrew Somberg and I am Vice President of Investor Relations and Treasury for Pinterest. Joining me today on the call are Bill Ready, Pinterest CEO; and Julia Donnelly, our CFO. This conference call is being webcast, and we are also providing a slide presentation to accompany our commentary. Please refer to our Investor Relations website at investor.pinterestinc.com to find today's presentation, webcast and earnings press release. Some of the statements that we make today regarding our performance, operations, and outlook 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, 2024 and beyond are preliminary and are not an assurance of future performance. We are making these forward-looking statements based on information available to us as of today, and we expressly disclaim any duty or obligation to update them later unless required by law. For more information about risks, uncertainties, and other factors that could affect our results, please refer to our most recent Form 10-Q or Form 10-K filed with the SEC and available on our Investor Relations website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our Investor Relations website. Lastly, all growth rates discussed in today's prepared remarks should be considered year-over-year unless otherwise specified. And now, I'll turn the call over to Bill.

Thanks, Andrew. Good afternoon, and thank you for joining our second quarter 2024 earnings call. Q2 marked another strong quarter of growth in users and revenue, driven by continued progress against our strategic initiatives. On the user side, we're leaning into what our users love most about Pinterest, the ability to find inspiration and take action seamlessly in one platform. And as we've said before, we found our best product market fit in years. Q2 global MAUs reached another record high of $522 million, growing 12% year-over-year. On the monetization side, our investments to become a true full-funnel platform, particularly our efforts to build out our lower funnel offerings, are paying off with Q2 revenue of $854 million, up 21% year-over-year. We also continue to drive significant improvements in profitability, resulting in Q2 adjusted EBITDA of $180 million or a 21% margin, up 600 basis points versus Q2 last year. Before I dive into my usual business update, I wanted to start with a few anecdotes from my time last month at Cannes Lions, one of the largest advertising industry events of the year, as it reflects the momentum building around Pinterest. Advertisers are taking note of Gen Z love for Pinterest and are increasingly understanding how they can meet this audience on our platform across their inspiration to action journey. They are also seeing firsthand how our investments in the lower funnel are driving tangible success through our increased clicks and conversions. And this momentum was evident at Cannes, as we saw a 50% increase in the number of visits to our activation this year and a 40% increase in the number of advertisers we met with at this important event. While at Cannes, we created an immersive activation experience where attendees could discover user behavior on Pinterest firsthand,…

Thanks, Bill, and good afternoon, everyone. Today I'll be discussing our second quarter 2024 financial results and provide an update on our preliminary third quarter 2024 outlook. All financial metrics, except for revenue, will be discussed in non-GAAP terms unless otherwise specified, and all comparisons will be discussed on a year-over-year basis unless otherwise noted. Let's dive into our second quarter results. We ended the quarter with 522 million global monthly active users, or MAUs, growing 12% and reaching another record high. Users continued to grow year-over-year across all of our geographic regions due to the compounding effects of the initiatives Bill mentioned earlier in his remarks, where improved personalization, curation, and actionability are driving enhanced inspiration to action journeys for users. Specifically, in Q2, in the U.S. and Canada, we had 98 million MAUs growing 3%. In Europe, we had 136 million MAUs growing 9%, and in our rest of world markets, we had 288 million MAUs growing 17%. Now on to revenue. In Q2, our global revenue was $854 million, up 21% on a reported and constant currency basis. The revenue strength this quarter, which exceeded the high end of our guidance range, highlights how we are driving value for advertisers across the full funnel with particular strength coming from our lowest funnel conversion objective. From a vertical perspective, we once again saw broad strength in retail. Our larger, more sophisticated advertisers continue to lean into the platform as they have adopted our lower funnel tools and are seeing continued success. We're also starting to see signs of value capture from the next tranche of advertisers as we have doubled clicks for the third quarter in a row and those advertisers are beginning to see that impact in their measurement sources of truth and adjusting spending accordingly. Additionally,…

Thanks Julia. I want to thank our team at Pinterest, our advertising partners, and all the people that come to Pinterest to find inspiration in the shop. And with that, we can open the call up for questions.

Thank you. [Operator Instructions] Our first question today comes from Ross Sandler with Barclays. Your line is now open.

Great. Just maybe starting with the macro, so the 17% growth for the third quarter at the midpoint, obviously, reflects some deceleration from 2Q, but it's within your long-term high-teens range. But Julia, you just mentioned a few factors. Could you just flesh out for us how much of the deceleration you would chalk up to tougher comps versus the factors that you mentioned? And then how much might partner revenue increases or ad load increases help offset the factors that are driving deceleration? Thanks a lot.

Great. Thanks, Ross. So, we feel good about the levers to drive our business. Our initiatives are trending consistent with what we outlined at Investor Day. The products we put in market are doing exactly what we've intended for them to do. Looking to Q3, our guidance is a continuation of many of the factors that have helped drive growth in Q1, Q2, and now into Q3, including value capture from lower funnel products and third-party demand growing off the Q2 revenue base again. And we noted in the prepared remarks that we expect FX to switch to a one-point headwind for us at current spot rates. And so, the 16% to 18% guidance for Q3 would have effectively been one point higher without this FX headwind. That higher range, excluding the FX impact, is roughly consistent with the growth we've drove in Q2 and Q1 this year, particularly when accounting for some of the unique seasonal factors that benefited Q1 that we highlighted on our prior earnings call, including the Easter timing shift and leap day. So, the underlying growth rate of the business is holding effectively stable, despite the fact that our comps last year did start to become more difficult in Q3, and the fact that we're experiencing further softness in food and beverage. And if you look at it on a two-year stack basis, you'll see that strength persist as well. And then lastly, as some of you may remember, it's worth noting that we do not accept political ads, so that's a difference to account for as you compare us to other platforms as well.

Our next question today comes from Colin Sebastian with Baird. Your line is now open.

Great. Thanks for taking my question. I appreciate all the detail on the call. I was hoping to dig in a little bit more on user engagement trends, just given all the efforts you've made to improve the amount of relevancy of personalized content. And related to that, are you seeing any impact from seasonality over the summer months in engagements? And I would also just be curious as well, how much additional growth you see here from ad load as you try to balance both the organic content, as well as the increasing mix of ads. Thank you.

Great. Thanks for the question. I'd say engagement continues to be a real highlight for us overall. The general trend of not only accelerating user growth, and you saw us put up 12% user growth overall, not only is that holding, this general trend of engagement per user deepening is also continuing to hold. So Play seems to see that clearly. It’s really in the steady improvement in our WAU to MAU ratio in 2024, even as we bring in record amounts of new users. So if you pull back the covers on that, and this will get a little bit more to your question on some of the different dynamics of Play. You pull back the covers on that, there's some really exciting things happening with the way that users are engaging. As we've been driving improvements in curation and actionability, we're seeing more and more clicks and conversions from users. This is really great for users, because it means they are finding more of what they are looking for on Pinterest, and it's great for advertisers, because they see clicks and conversions as much more valuable than impressions. And to your comment around ad load, we've been talking about ads as great content for users, particularly when they are in a commercial context, and those ads are relevant to what they are looking for. So we continue to see that synergistic dynamic there, because we have more than half our users on the platform to shop. So that's been a real lever for us. We think it continues to be. And so back to engagement, we track a number of engagement metrics, and we continue to see nice growth in engagement across the platform, measured by the various signals there. But with clicks and lower funnel behavior becoming a more meaningful part of that mix, which again is really encouraging. We're also seeing deeper penetration with our mobile app users who tend to be more sticky and highly engaged users. And finally, I’ll just call out that we've added more of that highly desirable lower funnel behavior as we've seen that from our users. We're adding that more into how we're measuring success for the business, for our teams, and in how we are continuing to enhance that flywheel on synergistic effect between ads as great content for users that are in commercial context. Maybe I'll pause there. And Julie, anything you'd add to that?

Yeah. So maybe just to share a little bit more color. Previously we measured engagement as sessions longer than 60 seconds, impressions and saves. And as Bill talked about, we've evolved our platform to be more actionable, and we've updated our view of engagement to include some of these additional dimensions that are also important signals of depth of engagement, including things like measuring outbound clicks and looking at curation signals like collage creation, for example, which is a newer feature on our platform. So as Bill mentioned, overall engagement signals remain strong, and we're also seeing this exciting shift that outbound clicks are becoming a more meaningful part of user behavior, as users are able to find what they are looking for more quickly. And we believe this is a healthy evolution of the platform, and it's also kind of better aligned with the value we're providing advertisers since we sell ads across the full funnel on a views, clicks and conversions basis.

Our next question today comes from Eric Sheridan with Goldman Sachs. Your line is now open.

Thank you so much for taking the question. Maybe a two-parter, if I could. Following up on Ross's question before about end demand, is there any differences you are seeing by geography in terms of the end demand environment you are finding yourself in with respect to digital ads? That would be part one. And part two, Bill, you gave a lot of detail, especially with going to comm [ph] intra-quarter, about the shift that Pinterest is seeing in terms of advertiser demand away from the macro environment. Can you talk a little bit about what you are seeing in terms of your competitive positioning, changing or shifting with respect to the broader digital advertising ecosystem? Go a little bit deeper there. Thanks so much.

Great. Maybe I'll start with the second one first, and then give it to Julia for the question on geography there. So I'd say generally, just a broader macro. We're seeing an ad market that we think is relatively stable versus last quarter. There are some puts and takes there. We're seeing real strength come from the retail vertical due to all the lower funnel improvements we've been building to drive performance there. And within that, sort of directly to your question on competitive positioning, we've talked about more than doubling the number of clicks to advertisers year-on-year; third straight quarter that we've done that. The value capture on that we've seen take hold first with the largest, most sophisticated advertisers. As more and more advertisers are seeing that flow through into their measurement tools and seeing that remain consistent, we're seeing that now take hold with the next grouping of advertisers. So consistent with what we shared on prior calls, we're seeing that we're actually winning more and more of those performance budgets and always-on budgets, particularly with those larger advertisers in retail, and we're seeing that continue to be a real strength for us as we're driving more and more lower funnel performance. So we think we're positioned quite well there. And again, that's why we're seeing broad-based strength across retail. And we think there's more of that to go. I talked about how Performance+, as that comes out for that next tier of advertisers, that some of the hurdles they face to adopting more and more of our lower funnel performance solutions. Performance+, that actually automates so much of that for them around campaign creation and setup, and those various factors we think can help to further accelerate that adoption. And that's the place that we've known…

Yeah, so I don't think anything else to add on the broader commentary there on the ad market overall. I think the only other kind of point I might add is in our rest of world segment. We did see a nice acceleration to 36% on a constant currency basis, up from 26% the prior quarter, albeit off a relatively small dollar base there. Revenue, the primary factor that drove this acceleration was the ramping of the Google third-party partnership that we announced in Q1, began to ramp in Q2. And as a reminder, that is allowing us to monetize what was previously unmonetized markets, and we're now also starting to expand into countries in our rest of world segment that we were under-monetized in. So we're pleased with how that's beginning to launch. Resellers are another lever to monetizing those regions. We launched these reseller partnerships in Q2, so that's still in early days, but we expect this to start to modestly contribute to the rest of world segment over the course of the next year as well.

Our next question comes from Ron Josey with Citi. Your line is now open.

Great. Thanks for the question. Bill, Julia, I wanted to maybe double-click a little bit more on the ad products that are coming out here, and specifically on the ad product that's out Direct Links. This is now, what, the third quarter in a row with clicks doubling again this quarter. So we'd love to hear just about the progress in terms of adoption amongst your advertiser base and then also how the sales process is going to discontinue the ramp over the coming quarters. And then with Performance+ coming online here, Bill, you talked about it being very well-received. We'd love to hear more about the rollout, specifically should we expect a similar timeline to Direct Links or perhaps would different modules roll out faster like Performance+, Creative coming out before Automation and things along those lines? Thanks for the help.

Yeah, thanks for the question. So, on Direct Links, yes, the third quarter in a row of doubling clicks. We saw very quickly that the largest, most sophisticated advertisers, they are the ones that are able to respond to that very quickly. They've been driving really tremendous strength for us and continue to do so. We're seeing that start to broaden into the next tranche of retailers. That's also why we feel really good about sort of the ongoing dynamics in the business, is that we know we've generated really great raw material in terms of the clicks and conversions that we're sending to advertisers and a very significant increases of those year-on-year. But we also know that we've only yet captured the value from a portion of those, and the rest of those will continue to capture value from those as other retailers adopt measurement solutions. And now with Performance+, we're going to make it easier for them on campaign creation. And you know, I mentioned this in my remarks a little bit, and so I'll get to sort of the second part of your question around Performance+. For a lot of those less sophisticated advertisers, for them it's not just about their sophistication which we've talked about that in measurement and how it takes longer for them to see that, and they need to see it over multiple quarters. It's also about the work they have to do to go create a campaign and how you optimize creative across our platform and those kinds of things. And when you look at what we're doing with Performance+, it's really getting to how do you go create the setup of a campaign? How do you optimize the performance of that campaign? How do you match the creative to the audience?…

Our next question comes from Mark Mahaney with Evercore. Your line is now open.

Thanks. I’ll just ask about the 3P partnerships. You mentioned the contribution that Google made to rest of world. I know in the past you've said you expect the contribution to be greater in the June quarter than in the March quarter, and again and again greater in the September quarter than in the June quarter. How far do you think this – talk about like how long you think this takes to ramp or how long is the runway for ramping? Is this something that could build in absolute dollars for a year or two? Is there anything you can do to accelerate the, I guess, the performance of the 3P partnerships? And do you need to expand any more 3P partnerships? You've got two very large partners now in Amazon and Google. That may be good enough, but just talk about the opportunity to fill in beyond those two. Thank you very much.

Yeah, thanks for the question, Mark. If you step back from it all, we're still relatively early days in what we're doing with 3P, right? We're a little bit more than a year in from when we first announced that, early ‘23. And we've seen Amazon ramping nicely, Google we're much earlier on with that as we announced them roughly a year after Amazon and that's starting to ramp as well. And so we continue to see each of those build as we shared in our commentary, that Q2 built off the baseline that we saw in Q1. We have similar expectations of that going forward, so we continue to see those things as a steady build. And we think there's a lot more opportunity not just with 3P, but in monetizing more of our platform. We really brought those in to round out gaps in our auction, in the markets where we were already monetized, and then to help us start monetizing in markets where we were completely unmonetized. And so we see that as something that we'll be optimizing for quarters and years to go. And with a lot more of that opportunity still in front of us, even as we still feel really good about the progress that we've made and the steady build of that on each of those partnerships.

Our next question comes from… [Multiple Speakers]

And then the other part of your question. Sorry Mark, I didn't hit the other part of your question about expanding those partnerships. While we don't have any more of those partnerships that we're talking about right now, we're going to continue to look for how we round out gaps in the auction. And maybe one final nugget I'll give is on our resellers. So as we talked about monetizing international, we talked about how that would be not just with 3P, but also with resellers. We're seeing those resellers start to ramp. We're early days in that. We're seeing them start to ramp and contribute. And we're actually seeing some synergies between the resellers and the 3P partnerships, where for some of those resellers, as they are bringing advertisers in, the fact that they can buy from us through Google Ads Manager where they already have an integration, is creating some synergy between the 3P and the resellers and the 1P business. As we think about advertisers that are still thinking about it directly, but now saying, you need your path to make that purchase through an existing integration. So again, feel really good about the progress. It continues to sort of build sequentially quarter-on-quarter, and we think there's a lot more of that ahead of us.

Our next question comes from Rich Greenfield with LightShed Partners. Your line is now open.

Hi. Thanks for taking the question, Bill and Julia. You spent a tremendous amount of time improving the product at Pinterest, making it more useful and shopable as you talked about. I guess, we get a question, sort of why is that not translating into a meaningful acceleration in U.S. users? You're up a hair from where you ended last year, but given the product improvements, I guess what's the – how do we sort of reconcile those two things? Are you seeing a meaningful increase in time spent per U.S. user per week or per month, meaning you are seeing it more in engagement rather than overall growth in users? And sort of I know this is sort of a related question, but you keep talking about how younger users, I think since you joined, how younger users are your fastest growing segment. If overall users are relatively flattish, does that mean you are losing older users, meaning younger is replacing older? I just would love to understand sort of what's happening in terms of the overall mix of users would be great. Thanks.

Yeah. Yeah, thanks Rich. So I've been pretty consistent on this from – since I got here, that in mature markets like the U.S., really the story was much more about growing depth of engagement with users. And to my comments earlier in the Q&A, we're seeing really, really encouraging signs there around depth of engagement. We've been talking about that consistently. We see that continue to happen with as I mentioned, the WAU to MAU ratio continuing to improve. And I think it's really noteworthy if you think about that. We're bringing on new users to the platform at record levels. And so normally when you are bringing on record levels of new users, that would be dilutive to your engagement per user, because new users may be somewhat more marginally engaged or more peripheral as you got your early adopters that were sort of your power users. The fact that we're not only bringing on record numbers of new users, but also deepening engagement for users while doing that, I think is exactly to that point of like, it's really about depth of engagement with users. And particularly, as I shared earlier in my commentary, we see that that depths of engagement is really occurring in exactly the ways that we wanted it to, where the curation signal that lets us help users through their shopping, help users navigate through their shopping during when they are deciding what to buy, we see the curation behaviors deepening. And then clicks is a major place that we see deepening, which as you know, had previously been a bit of an Achilles heel to the platform. That's now becoming a real strength for us where we're doubling the number of clicks we send to advertisers year-on-year, which just means more users are finding more of what they are looking for on the platform. So, all those things I think are very positive dynamics. And then to your specific question around, okay, if Gen Z is growing, are we losing others? I've shared this last quarter. It's true again this quarter, that we are growing across every demographic that we track and across every geography that we track. So our strength of users is really broad based and really directly tied to the improvements we've made to the platform around AI driven relevancy of recommendations and then the actionability and curation on the platform. Hope that helps.

Our next question comes from Doug Anmuth of JPMorgan. Your line is now open.

Thanks for taking the question. When you think about all the ways you've improved the ad stack and your tools for advertisers, where do you see the biggest opportunity to close that gap between value creation and value capture? And it’s how much visibility do you think you have in that shift, particularly in a potentially tougher macro environment? Thanks.

I'd say on the visibility of it, like, we know it’s – we’ve been talking pretty consistently about, even if you're driving performance, it's only as good as what the advertisers are able to see and measure. So measurement has been a really big focus for us, continues to be. If you think about Pinterest, history as primarily more of an upper funnel platform. It would make sense that a lot of those advertisers hadn't implemented lower funnel measurement tools with us. It's really been – we're less than a year in with Direct Links. So less than a year into that, we've made really good progress in getting more advertisers to adopt that measurement, but we see a lot more of it ahead. And to your point of visibility, we're tracking it all the way down to the account level, and sales teams are not only looking at it account by account. Our sales reps have been trained on it, they are gold on it. So we feel like we've got pretty good visibility to what's driving that adoption, as well as responding to advertiser feedback of things that will make it easier for them to adopt, especially as you get to the smaller advertisers, where I talked about in my comments on the last couple calls, that we launched our API for conversions a little more than a year ago, and that's a really successful rollout with large advertisers. As we went to take that more broadly, we saw a need to meet advertisers where they were, integrate to the third party tools that they were using, clean rooms and the like. So you've heard us talking about more partnerships with third party measurement platforms, more partnerships with clean rooms. So as we're doing that, we're seeing that's…

Our next question comes from Dan Salmon with New Street Research. Your line is now open.

Great. Good afternoon, everybody. Julia, I just wanted to follow-up on your comment about the lower eCPMs from third parties. As you noted, these are smaller, under-monetized markets that we're starting to step into, so that's not a big surprise. But is that pricing coming in, sort of in line with your expectations so far? And then just second, do you feel I can follow-up just a little bit on Performance+? It sounds like you're starting to get into that next tranche already. Do you think that that next tranche will really have given it a solid test drive ahead of holiday season when your retail vertical will be extra important? Thank you.

Yeah, maybe I'll take the last one first. I think that we've seen that continue to be a steady build, and so we think that progress in retail, we thought it as one of our primary sources of strength, we see that continue to build. And Performance+, it's early on, it's multi-quarter, but we've seen it start with the largest, most sophisticated retailers and advertisers. Then we started to hit the next group down. We think Performance+ will start to take it further down even than that. But we think that sets us up well as we look into the future and look to continue that steady build within retail.

Yeah. I think on the first part of your question though, on eCPMs, and so yes, it is generally coming in line with sort of where we expected for those rest of world markets that just have a lower eCPM. I do think over time as we continue to ramp those partnerships and add even more option density in those markets, we can expect those eCPMs to rise. But based on where we are right now and based on the fact that they are just sort of lower TAM markets overall, we feel really pleased with sort of how those are initially ramping.

All right. I think that's our...

I think that's our last question, operator.

All right. Thanks again to all of you for joining the call and for your questions. We look forward to keeping this dialogue going. We hope you enjoy the rest of your day.

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.