Pinterest's Sales Jump, Earnings Fall Short in First Earnings Report After IPO

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Pinterest (NYSE: PINS), the visual discovery company that allows people to find inspirational images for everything from do-it-yourself projects to recipes, saw strong revenue growth in its first-quarter 2019 and improved its net losses.

The company's sales jumped 54% year over year to $201.9 million, which was slightly ahead of analysts' consensus estimate of $200.6 million. Its non-GAAP net loss of $40.4 million was better than the loss of $47.8 million in the year-ago quarter. But those losses equated to a non-GAAP net loss of $0.32 per share, which was far more than the loss of $0.11 per share Wall Street expected.

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The earnings miss was a blow considering that it recently went public, and investors reacted negatively to the news, pushing Pinterest's share price down 15%. But despite the steep price drop, its stock, as of this writing, is still trading higher than its IPO price.

Management was pleased with the quarterly results overall, though, and CFO Todd Morgenfeld said in a press release that the company "executed well" in the first quarter.

"We were particularly encouraged by the strength we saw in U.S. revenue and international user growth," Morgenfeld said. "Our strong revenue performance allowed us to expand net margin by 20 percentage points year-over-year, reflecting our continued prioritization and disciplined execution across our strategic priorities."

Pinterest's U.S. sales jumped 51% in the first quarter to $187 million, while international sales popped 107% to $15 million. Management has said before that the company may have a hard time monetizing its international users, so investors should be pleased to see sales in the segment improving. International sales represented 7% of total revenue in the first quarter, up from 5% of sales in the year-ago quarter.

Another key metric, user growth, is moving in the right direction. Pinterest's monthly active users (MAUs) grew 22% year over year to 291 million. About 206 million of those users are outside of the United States, and international user growth is up 29% from the year-ago quarter. User growth in the U.S. was up 6%. The average revenue per user (ARPU) is growing as well, up 26% year over year to $0.73.

Management shared its outlook for 2019, saying that total revenue would be between $1.05 billion and $1.08 billion. That's notable considering it would be the first time Pinterest's annual sales would surpass the $1 billion mark. Meanwhile, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) will be a loss of $70 million to $45 million.

Even with its strong sales growth in the first quarter and the company's losses narrowing, management highlighted one area it needs to work on to continue growing. Morgenfeld said on the earnings call that even when Pinterest's users have a great experience on the platform, they may never revisit.

"You may have had a great experience planning your wedding or remodeling your house, but you need to be invited back to be shown the value of being on Pinterest for new use cases," Morgenfeld said, "And we think we have a pathway of doing that that will bring some of our churned users back to the platform."

Pinterest's first-quarter results may have disappointed investors because the company's losses were more significant than what Wall Street was expecting. But it's worth remembering that basing any investing decision on one quarter isn't the wisest move.

Investors should continue to watch the company's sales and user growth (particularly in international markets) to see if Pinterest can continue improving those metrics. If it does, then the earnings losses may likely narrow even more.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.