Hejsan Etorians,

Last week our holdings $PINS (Pinterest Inc); $TDOC (Teladoc Health Inc), $SHOP (Shopify Inc.) and $TWTR (Twitter) announced financial results for the quarter ended March 31, 2021.

Happy to post my summary and perception.

$PINS has again presented very good quarterly figures. Revenues increased by 78% to $484 million in Q1 2021. International sales even increased by 170%. Net loss came in significantly lower at $21 million. Adjusted EBITDA improved from -53 million to 84 million.

Stock is down over 14% after reporting

Pinterest shareholders have been delighted with amazing figures in the past few quarters. Those who expected spectacular again were disappointed this time. The increase in turnover was significantly lower than in the previous quarter. But most importantly, the number of monthly active users (MAU) was slightly below expectations at 478 million.

30% growth YoY in MAU is obviously not enough for investors after 37% growth YoY in the previous two quarters. Additionally, Pinterest informed investors that global MAU growth was expected to be only 15% in Q2 and that no MAU growth was expected in the US in the coming months.

The slowdown in user growth is no surprise at all. Since Covid-19 regulations are slowly being eased again, normality is returning to user behaviour. However, based on traffic and app engagement figures I cannot see any worrying trend. The company seems to communicate pretty conservative here.

ARPU more relevant than MAU

The trend in user numbers in 2021 tends to be overestimated by many investors for another reason. MAU is the wrong KPI in a rather saturated market like the US.

The key factor here is the development of revenue per user (ARPU). Facebook has only been able to increase MAU in the US by 9 per cent since 2017. In the same period, Facebook has more than doubled ARPU.

Facebook earned an average of $48 from its 259 million customers in North America in Q1 2021. Pinterest earned just $4 from its 98 million monthly active customers in Q1. Facebook will be hard to match for many reasons, but ARPU growth remains remarkably high. Q2 guidance forecasts revenue growth of more than 100%.

Three highlights of the first quarter 2021

1. Pinterest is growing more profitably and with increasing efficiency. Operating cash flow increased year-over-year from $57 million to $271 million. Free cash flow came in at an eye-popping $244 million resulting in a free cash flow margin of over 50%. The efficiency ratio (Rule of 40) reached 128% in Q1! On such terms a forward EV/Sales of 18 seems reasonable again.

2. Pinterest is making good progress with the monetisation of international customers. Pinterest is making good progress with the monetisation of international customers. International sales increased by 170 per cent in the past quarter. Now 20 per cent of revenue comes from abroad. There are now advertising offers from Pinterest in 29 countries. In the first quarter, Brazil has been added, currently the second largest Pinterest country in terms of user numbers. In the fourth largest Pinterest country, Mexico, advertisers will finally be able to spend money on Pinterest from Q2 onwards.

3. Pinterest is evolving from a platform for inspiration to a place for consumption. 20 percent of all sales now come from retail customers who actively offer shopping deals on Pinterest. More catalogues, more relevant product listings, more collaboration with Shopify and a better and seamless shopping experience should further push this development.

Conclusion on $PINS

My view on Pinterest has therefore not changed: It is a focussed company, largely free of scandal and politically uncontaminated. It does not have to moderate billions of user comments, employ an army of compliance and legal staff, engage in lobbying or set up large PR campaigns for image promotion. In terms of brand safety, Pinterest has always been interesting for advertisers, but now the platform is becoming more and more commercially attractive. Existing advertisers are increasing their budgets and many new ones are joining. Pinterest is a big and, above all, lasting winner of the push towards e-commerce. We will continue to hold Pinterest for a long time in The Hartmutson Portfolio and have no intention to sell anytime soon.

In my next posts I will report about $TDOC, $SHOP and $TWTR .

In the meantime, keep growing your wealth!

Start copying ‘The Hartmutson Portfolio’.

Cheers, Attila

The Hartmutson Portfolio is very long: $SE (Sea Ltd) $FVRR (Fiverr International) $TDOC $NET (Cloudflare) $SQ (Square, Inc.) $ROKU (Roku Inc) $SHOP $DOCU (DocuSign Inc) $TWTR $CRWD (Crowdstrike Holdings) $TTD (Trade Desk Inc A) $MELI (MercadoLibre) $NTNX (Nutanix Inc A) $OKTA (Okta Inc) $PINS