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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-Q
_________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                     to                     
Commission file number 001-38872
PINS-20200630_G1.JPG
Pinterest, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 26-3607129
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
505 Brannan Street
San Francisco, California
94107
(Address of Principal Executive Offices, including zip code) (Zip Code)
(415) 762-7100
Registrant’s Telephone Number, Including Area Code
_______________________
Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $0.00001 par value  PINS New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No 
As of July 24, 2020, there were 462,675,810 shares of the Registrant’s Class A common stock, $.00001 par value per share, outstanding, and 137,875,104 shares of the Registrant’s Class B common stock outstanding.




PINTEREST, INC.
TABLE OF CONTENTS
Page
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5
Item 1.
6
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8
9
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2


NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans”, “targets”, “forecasts” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, statements about:
uncertainty regarding the duration and scope of the coronavirus referred to as the COVID-19 pandemic;
actions governments and businesses take in response to the pandemic, including actions that could affect levels of user engagement or advertising activity;
the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity;
the pace of recovery when the COVID-19 pandemic subsides;
general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth;
the scope and impact of the COVID-19 pandemic on our planned investments, operations, expenses, revenue, cash flow, liquidity and users;
the effect of general economic and political conditions;
our financial performance, including revenue, cost of revenue and operating expenses and cash flows;
our ability to attract and retain Pinners and their level of engagement;
our ability to provide content that is useful and relevant to Pinners’ personal taste and interests;
our ability to develop successful new products or improve existing ones;
our ability to maintain and enhance our brand and reputation;
potential harm caused by compromises in security, including our cybersecurity protections and resources and costs required to prevent, detect and remediate potential security breaches;
potential harm caused by changes in internet search engines’ methodologies, particularly search engine optimization methodologies and policies;
discontinuation, disruptions or outages in third-party single sign-on access;
our ability to compete effectively in our industry;
our ability to scale our business, including our monetization efforts;
our ability to attract and retain advertisers and scale our revenue model;
our ability to develop effective products and tools for advertisers, including measurement tools;
our ability to expand and monetize our platform internationally;
our ability to effectively manage the growth of our business;
our lack of operating history and ability to attain and sustain profitability;
decisions that reduce short-term revenue or profitability or do not produce the long-term benefits we expect;
fluctuations in our operating results;
our ability to raise additional capital;
our ability to realize anticipated benefits from mergers and acquisitions, joint ventures, strategic partnerships and other investments;
our ability to protect our intellectual property;
3


our ability to receive, process, store, use and share data, and compliance with laws and regulations related to data privacy and content;
current or potential litigation and regulatory actions involving us;
our ability to comply with modified or new laws and regulations applying to our business, and potential harm to our business as a result of those laws and regulations;
real or perceived inaccuracies in metrics related to our business;
disruption of, degradation in or interference with our use of Amazon Web Services and our infrastructure; and
our ability to attract and retain personnel.
These statements are based on our historical performance and on our current plans, estimates and projections in light of information currently available to us, and therefore you should not place undue reliance on them. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.
You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. The factors identified above should not be construed as an exhaustive list of factors that could affect our future results and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. If any of these trends, risks or uncertainties actually occurs or continues, our business, revenue and financial results could be harmed, the trading price of our Class A common stock could decline and you could lose all or part of your investment.
Unless expressly indicated or the context requires otherwise, the terms "Pinterest," "company," "we," "us," and "our" in this document refer to Pinterest, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries. The term "Pinterest" may also refer to our products, regardless of the manner in which they are accessed. For references to accessing Pinterest on the "web" or via a "website," such terms refer to accessing Pinterest on personal computers. For references to accessing Pinterest on "mobile," such term refers to accessing Pinterest via a mobile application or via a mobile-optimized version of our website such as m.pinterest.com, whether on a mobile phone or tablet.
4


LIMITATIONS OF KEY METRICS AND OTHER DATA
The numbers for our key metrics, which include our monthly active users (MAUs) and average revenue per user (ARPU), are calculated using internal company data based on the activity of user accounts. We define a monthly active user as an authenticated Pinterest user who visits our website, opens our mobile application or interacts with Pinterest through one of our browser or site extensions, such as the Save button, at least once during the 30-day period ending on the date of measurement. We present MAUs based on the number of MAUs measured on the last day of the current period. We define ARPU as our total revenue in a given geography during a period divided by the average of the number of MAUs in that geography during the period. We calculate average MAUs based on the average between the number of MAUs measured on the last day of the current period and the last day prior to the beginning of the current period. We calculate ARPU by geography based on our estimate of the geography in which revenue-generating activities occur. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world. In addition, we are continually seeking to improve our estimates of our user base, and such estimates may change due to improvements or changes in technology or our methodology.

5

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PINTEREST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)


June 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 863,620    $ 649,666   
Marketable securities 839,470    1,063,679   
Accounts receivable, net of allowances of $5,612 and $2,851 as of June 30, 2020 and December 31, 2019, respectively
209,933    316,367   
Prepaid expenses and other current assets 45,170    37,522   
Total current assets 1,958,193    2,067,234   
Property and equipment, net 83,006    91,992   
Operating lease right-of-use assets 165,250    188,251   
Goodwill and intangible assets, net 14,067    14,576   
Restricted cash 23,221    25,339   
Other assets 5,887    5,925   
Total assets $ 2,249,624    $ 2,393,317   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 43,705    $ 34,334   
Accrued expenses and other current liabilities 122,912    141,823   
Total current liabilities 166,617    176,157   
Operating lease liabilities 151,282    173,392   
Other liabilities 25,095    20,063   
Total liabilities 342,994    369,612   
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.00001 par value, 6,666,667 shares authorized, 451,944 and 360,850 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively; Class B common stock, $0.00001 par value, 1,333,333 shares authorized, 144,320 and 209,054 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
   
Additional paid-in capital 4,351,557    4,229,778   
Accumulated other comprehensive income 3,737    647   
Accumulated deficit (2,448,670)   (2,206,726)  
Total stockholders’ equity 1,906,630    2,023,705   
Total liabilities and stockholders’ equity $ 2,249,624    $ 2,393,317   



The accompanying notes are an integral part of these condensed consolidated financial statements.

6


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Revenue $ 272,485    $ 261,249    $ 544,425    $ 463,160   
Costs and expenses:
Cost of revenue 108,259    105,415    207,491    179,109   
Research and development 136,593    801,879    282,297    874,323   
Sales and marketing 86,483    296,919    203,510    373,313   
General and administrative 45,680    224,179    101,747    248,384   
Total costs and expenses 377,015    1,428,392    795,045    1,675,129   
Loss from operations (104,530)   (1,167,143)   (250,620)   (1,211,969)  
Interest income 4,218    8,127    11,369    12,186   
Interest expense and other income (expense), net (16)   (448)   (2,093)   (948)  
Loss before provision for income taxes (100,328)   (1,159,464)   (241,344)   (1,200,731)  
Provision for income taxes 420    37    600    190   
Net loss $ (100,748)   $ (1,159,501)   $ (241,944)   $ (1,200,921)  
Net loss per share attributable to common stockholders, basic and diluted
$ (0.17)   $ (2.62)   $ (0.42)   $ (4.20)  
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
586,737    443,340    581,518    285,955   








The accompanying notes are an integral part of these condensed consolidated financial statements.

7


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)



Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Net loss $ (100,748)   $ (1,159,501)   $ (241,944)   $ (1,200,921)  
Other comprehensive income (loss), net of taxes:
Change in unrealized gain (loss) on available-for-sale marketable securities 5,941    745    3,406    1,934   
Change in foreign currency translation adjustment     (316)   10   
Comprehensive loss $ (94,804)   $ (1,158,747)   $ (238,854)   $ (1,198,977)  








The accompanying notes are an integral part of these condensed consolidated financial statements.

8


Pinterest, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands)
(Unaudited)



Three Months Ended June 30, 2020
Redeemable Convertible Preferred Stock  
Class A and Class B Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of March 31, 2020 —    $ —    581,840    $   $ 4,288,603    $ (2,207)   $ (2,347,922)   $ 1,938,480   
Release of restricted stock units
—    —    5,230    —    —    —    —    —   
Shares repurchased for tax withholdings on release of restricted stock units —    —    —    —    (12,797)   —    —    (12,797)  
Issuance of common stock for cash upon exercise of stock options, net
—    —    6,595    —    12,402    —    —    12,402   
    Issuance of common stock related to charitable contributions
—    —    50    —    1,204    —    —    1,204   
    Issuance of restricted stock awards
—    —    2,549    —    —    —    —    —   
Share-based compensation —    —    —    —    62,145    —    —    62,145   
Other comprehensive income —    —    —    —    —    5,944    —    5,944   
Net loss —    —    —    —    —    —    (100,748)   (100,748)  
Balance as of June 30, 2020 —    $ —    596,264    $   $ 4,351,557    $ 3,737    $ (2,448,670)   $ 1,906,630   

Three Months Ended June 30, 2019
Redeemable Convertible Preferred Stock  
Class A and Class B Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of March 31, 2019 308,373    $ 1,465,399    127,371    $   $ 253,016    $ (231)   $ (886,775)   $ (633,989)  
Release of restricted stock units
—    —    20,257    —    —    —    —    —   
Shares repurchased for tax withholdings on release of restricted stock units —    —    —    —    (302,675)   —    —    (302,675)  
Conversion of redeemable convertible preferred stock and redeemable convertible preferred stock warrants to common stock in connection with initial public offering
(308,373)   (1,465,399)   308,622      1,470,074    —    —    1,470,077   
Issuance of common stock in connection with initial public offering net of underwriters' discounts and commissions and offering costs
—    —    86,250      1,563,382    —    —    1,563,383   
Issuance of common stock for cash upon exercise of stock options, net
—    —    204    —    592    —    —    592   
Share-based compensation —    —    —    —    1,134,599    —    —    1,134,599   
Other comprehensive income —    —    —    —    —    754    —    754   
Net loss —    —    —    —    —    —    (1,159,501)   (1,159,501)  
Balance as of June 30, 2019 —    $ —    542,704    $   $ 4,118,988    $ 523    $ (2,046,276)   $ 2,073,240   








The accompanying notes are an integral part of these condensed consolidated financial statements.

9


Pinterest, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands)
(Unaudited)


Six Months Ended June 30, 2020
Redeemable Convertible Preferred Stock  
Class A and Class B Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Income Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of December 31, 2019 —    $ —    569,904    $   $ 4,229,778    $ 647    $ (2,206,726)   $ 2,023,705   
Release of restricted stock units
—    —    8,143    —    —    —    —    —   
Shares repurchased for tax withholdings on release of restricted stock units —    —    —    —    (56,887)   —    —    (56,887)  
Issuance of common stock for cash upon exercise of stock options, net
—    —    15,518    —    32,749    —    —    32,749   
Issuance of common stock related to charitable contributions
—    —    150    —    2,748    —    —    2,748   
Issuance of restricted stock awards
—    —    2,549    —    —    —    —    —   
Share-based compensation —    —    —    —    143,169    —    —    143,169   
Other comprehensive income —    —    —    —    —    3,090    —    3,090   
Net loss —    —    —    —    —    —    (241,944)   (241,944)  
Balance as of June 30, 2020 —    $ —    596,264    $   $ 4,351,557    $ 3,737    $ (2,448,670)   $ 1,906,630   

Six Months Ended June 30, 2019
Redeemable Convertible Preferred Stock  
Common Stock
Additional
Paid-In Capital
Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity (Deficit)
Shares Amount Shares Amount
Balance as of December 31, 2018 308,373    $ 1,465,399    127,298    $   $ 252,212    $ (1,421)   $ (845,355)   $ (594,563)  
Release of restricted stock units
—    —    20,257    —    —    —    —    —   
Shares repurchased for tax withholdings on release of restricted stock units —    —    —    —    (302,675)   —    —    (302,675)  
Conversion of redeemable convertible preferred stock and redeemable convertible preferred stock warrants to common stock in connection with initial public offering
(308,373)   (1,465,399)   308,622      1,470,074    —    —    1,470,077   
Issuance of common stock in connection with initial public offering net of underwriters' discounts and commissions and offering costs
—    —    86,250      1,563,382    —    —    1,563,383   
Issuance of common stock for cash upon exercise of stock options, net
—    —    277    —    702    —    —    702   
Share-based compensation —    —    —    —    1,135,293    —    —    1,135,293   
Other comprehensive income —    —    —    —    —    1,944    —    1,944   
Net loss —    —    —    —    —    —    (1,200,921)   (1,200,921)  
Balance as of June 30, 2019 —    $ —    542,704    $   $ 4,118,988    $ 523    $ (2,046,276)   $ 2,073,240   









The accompanying notes are an integral part of these condensed consolidated financial statements.

10


PINTEREST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)






Six Months Ended June 30,
2020 2019
Operating activities
Net loss $ (241,944)   $ (1,200,921)  
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 20,231    12,203   
Share-based compensation 143,169    1,135,293   
Other 3,811    (2,713)  
Changes in assets and liabilities:
Accounts receivable 103,544    19,615   
Prepaid expenses and other assets (7,180)   (6,174)  
Operating lease right-of-use assets 21,456    14,040   
Accounts payable 9,780    7,189   
Accrued expenses and other liabilities (7,743)   15,310   
Operating lease liabilities (24,357)   (10,217)  
Net cash provided by (used in) operating activities 20,767    (16,375)  
Investing activities
Purchases of property and equipment and intangible assets (11,325)   (11,914)  
Purchases of marketable securities (308,612)   (159,315)  
Sales of marketable securities 113,184    60,239   
Maturities of marketable securities 422,266    166,288   
Other investing activities 316    —   
Net cash provided by investing activities 215,829    55,298   
Financing activities
Proceeds from initial public offering, net of underwriters' discounts and commissions —    1,573,200   
Proceeds from exercise of stock options, net
32,749    702   
Shares repurchased for tax withholdings on release of restricted stock units (56,887)   (302,675)  
Payment of deferred offering costs and other financing activities
—    (10,103)  
Net cash provided by (used in) financing activities (24,138)   1,261,124   
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (150)   (17)  
Net increase in cash, cash equivalents, and restricted cash 212,308    1,300,030   
Cash, cash equivalents, and restricted cash, beginning of period 677,743    135,290   
Cash, cash equivalents, and restricted cash, end of period $ 890,051    $ 1,435,320   
Supplemental cash flow information
Accrued property and equipment $ 4,453    $ 4,618   
Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 4,121    $ 23,381   


Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents $ 863,620    $ 1,408,739   
Restricted cash included in prepaid expenses and other current assets 3,210    3,266   
Restricted cash 23,221    23,315   
Total cash, cash equivalents, and restricted cash $ 890,051    $ 1,435,320   








The accompanying notes are an integral part of these condensed consolidated financial statements.

11


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Description of Business and Summary of Significant Accounting Policies
Description of Business
Pinterest was incorporated in Delaware in 2008 and is headquartered in San Francisco, California. Pinterest is a visual discovery engine that people around the globe use to find the inspiration to create a life they love. We generate revenue by delivering ads on our website and mobile application.
Basis of Presentation and Consolidation
We prepared the accompanying condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of Pinterest, Inc. and its wholly owned subsidiaries. We have eliminated all intercompany balances and transactions.
The condensed consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date. We have condensed or omitted certain information and notes normally included in complete financial statements prepared in accordance with GAAP. As such, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended December 31, 2019, which are included in our Annual Report on Form 10-K.
In our opinion, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the results for the interim periods presented, but they are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2020.
Reclassifications
We have reclassified certain amounts in prior periods to conform with current presentation.
Use of Estimates
Preparing our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect amounts reported in the condensed consolidated financial statements and accompanying notes. We base these estimates and judgments on historical experience and various other assumptions that we consider reasonable. GAAP requires us to make estimates and assumptions in several areas, including the fair values of financial instruments, assets acquired and liabilities assumed through business combinations, common stock prior to our initial public offering ("IPO"), share-based awards, and contingencies as well as the collectability of our accounts receivable, the useful lives of our intangible assets and property and equipment, the incremental borrowing rate we use to determine our operating lease liabilities, and revenue recognition, among others. Actual results could differ materially from these estimates and judgments.
Many of our estimates require increased judgment due to the significant volatility, uncertainty and economic disruption of the recent global COVID-19 pandemic. We continue to monitor the effects of the COVID-19 pandemic, and our estimates and judgments may change materially as new events occur or additional information becomes available to us.
Segments
We operate as a single operating segment. Our chief operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis, accompanied by disaggregated information about our revenue, for purposes of making operating decisions, assessing financial performance and allocating resources.
Revenue Recognition
We generate revenue by delivering ads on our website and mobile application. We recognize revenue only after transferring control of promised goods or services to customers, which occurs when a user clicks on an ad contracted on a cost per click (“CPC”) basis, views an ad contracted on a cost per thousand impressions (“CPM”) basis or views




12



PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
a video ad contracted on a cost per view ("CPV") basis. We typically bill customers on a CPC, CPM or CPV basis, and our payment terms vary by customer type and location. The term between billing and payment due dates is not significant.
We occasionally offer customers free ad inventory, and revenue is recognized only after satisfying our contractual performance obligations. When contracts with our customers contain multiple performance obligations, we allocate the overall transaction price, which is the amount of consideration to which we expect to be entitled in exchange for promised goods or services, to each of the distinct performance obligations based on their relative standalone selling prices. We generally determine standalone selling prices based on the effective price charged per contracted click, impression or view and we do not disclose the value of unsatisfied performance obligations because the original expected duration of our contracts is generally less than one year.
We record sales commissions in sales and marketing expense as incurred because we would amortize these over a period of less than one year.
Deferred revenue was not material as of June 30, 2020 and December 31, 2019.
Share-Based Compensation
Restricted stock units ("RSUs") granted under our 2009 Stock Plan (the "2009 Plan") are subject to both a service condition, which is typically satisfied over four years, and a performance condition, which was deemed satisfied upon the pricing of our IPO. We did not record any share-based compensation expense for our RSUs prior to our IPO because the performance condition had not yet been satisfied. Upon pricing our IPO, we recorded cumulative share-based compensation expense using the accelerated attribution method for those RSUs granted under our 2009 Plan for which the service condition had been satisfied at that date. We will record the remaining unrecognized share-based compensation expense over the remainder of the requisite service period.
RSUs and Restricted Stock Awards ("RSAs") granted under our 2019 Omnibus Incentive Plan (the "2019 Plan") are subject only to a service condition, which is typically satisfied over four years. We record share-based compensation expense for these RSUs and RSAs on a straight-line basis over the requisite service period.
We measure RSUs and RSAs based on the fair market value of our common stock on the grant date, and we account for forfeitures as they occur.
Leases and Operating Lease Incremental Borrowing Rate
We lease office space under operating leases with expiration dates through 2035. We determine whether an arrangement constitutes a lease and record lease liabilities and right-of-use assets on our condensed consolidated balance sheets at lease commencement. We measure lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or our incremental borrowing rate, which is the estimated rate we would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. We estimate our incremental borrowing rate based on an analysis of publicly traded debt securities of companies with credit and financial profiles similar to our own. We measure right-of-use assets based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs we incur and (iii) tenant incentives under the lease. We begin recognizing rent expense when the lessor makes the underlying asset available to us, we do not assume renewals or early terminations unless we are reasonably certain to exercise these options at commencement, and we do not allocate consideration between lease and non-lease components.
For short-term leases, we record rent expense in our condensed consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets not held at fair value. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier
13


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
recognition of credit losses. We adopted ASU 2016-13 as of January 1, 2020, using the modified retrospective method, and while the effects of adoption on our condensed consolidated financial statements were not material, we continue to monitor the effects of the COVID-19 pandemic on expected credit losses.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. We elected to early adopt ASU 2019-12 effective as of January 1, 2020, and the effects of adoption on our condensed consolidated financial statements were not material.
2. Fair Value of Financial Instruments
The fair values of the financial instruments we measure at fair value on a recurring basis are as follows (in thousands):
June 30, 2020
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 357,054    $ —    $ —    $ 357,054   
Commercial paper —    176,304    —    176,304   
Corporate bonds —    4,045    —    4,045   
U.S. treasury securities 28,893    —    —    28,893   
Marketable securities:
Corporate bonds —    356,837    —    356,837   
U.S. treasury securities 226,000    —    —    226,000   
Commercial paper —    109,889    —    109,889   
Asset-backed securities —    66,751    —    66,751   
Certificates of deposit —    79,993    —    79,993   
Prepaid expenses and other current assets:
Certificates of deposit —    3,210    —    3,210   
Restricted cash:
Certificates of deposit $ —    $ 23,221    $ —    $ 23,221   

14


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2019
Level 1 Level 2 Level 3 Total
Cash equivalents:
Money market funds $ 214,413    $ —    $ —    $ 214,413   
Commercial paper —    105,354    —    105,354   
Corporate bonds —    3,791    —    3,791   
Certificates of deposit —    2,914    —    2,914   
Marketable securities:
Corporate bonds —    450,433    —    450,433   
U.S. treasury securities 201,640    —    —    201,640   
Commercial paper —    196,328    —    196,328   
Asset-backed securities —    114,599    —    114,599   
Certificates of deposit —    100,679    —    100,679   
Prepaid expenses and other current assets:
Certificates of deposit —    2,738    —    2,738   
Restricted cash:
Certificates of deposit $ —    $ 25,339    $ —    $ 25,339   
We classify our marketable securities within Level 1 or Level 2 because we determine their fair values using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
Gross unrealized gains and losses on our marketable securities were immaterial in the aggregate as of June 30, 2020 and December 31, 2019. We evaluated all available evidence and did not recognize any allowance for credit losses for our marketable securities as of June 30, 2020 and December 31, 2019. We continue to monitor the effects of the COVID-19 pandemic on expected credit losses.
The fair value of our marketable securities by contractual maturity is as follows (in thousands):
June 30, 2020
Due in one year or less $ 637,398   
Due after one to five years 202,072   
Total $ 839,470   
Net realized gains and losses from sales of available-for-sale securities were not material for any period presented.
3. Commitments and Contingencies
Commitments
In March 2019, we entered into a lease for approximately 490,000 square feet of office space to be constructed near our current headquarters campus in San Francisco, California. Expected delivery of the premises has been delayed, and we currently estimate that commencement and expiration will occur in 2025 and 2035, respectively. We may terminate the lease prior to commencement if certain contingencies are not satisfied. We will be subject to total non-cancelable minimum lease payments of approximately $440.0 million if these contingencies are met, and if the lease commences we will record a right-of-use asset and related lease liability of no more than that amount at lease commencement using our incremental borrowing rate at that date.
Legal Matters
We are involved in various lawsuits, claims and proceedings that arise in the ordinary course of business. While the results of legal matters are inherently uncertain, we do not believe the ultimate resolution of these matters, either individually or in aggregate, will have a material adverse effect on our business, financial position, results of operations or cash flows.
15


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Letters of Credit
We had $23.8 million and $25.5 million of secured letters of credit outstanding as of June 30, 2020 and December 31, 2019. These primarily relate to our office space leases and are fully collateralized by certificates of deposit which we record in prepaid expenses and other current assets or restricted cash in our condensed consolidated balance sheets based on the term of the remaining restriction.
4. Share-Based Compensation
Equity Incentive Plan
In June 2009, our board of directors adopted and approved our 2009 Plan, which provides for the issuance of stock options, RSAs and RSUs to qualified employees, directors and consultants. Stock options granted under our 2009 Stock Plan have a maximum life of 10 years and an exercise price not less than 100% of the fair market value of our common stock on the date of grant. RSUs granted under our 2009 Plan have a maximum life of seven years. No shares of our common stock were reserved for future issuance under our 2009 Plan as of June 30, 2020.
Our 2019 Plan became effective upon closing of our IPO and succeeds our 2009 Plan. Our 2019 Plan provides for the issuance of stock options, RSAs, RSUs and other equity- or cash-based awards to qualified employees, directors and consultants. Stock options granted under our 2019 Plan have a maximum life of 10 years and an exercise price not less than 100% of the fair market value of our common stock on the date of grant. 103,492,207 shares of our Class A common stock were reserved for future issuance under our 2019 Plan as of June 30, 2020.
The number of shares of our Class A common stock available for issuance under the 2019 Plan will be increased by the number of shares of our Class B common stock subject to awards outstanding under our 2009 Plan as of the closing of our IPO that would, but for the terms of the 2019 Plan, have returned to the share reserves of the 2009 Plan pursuant to the terms of such awards, including as the result of forfeiture, repurchase, expiration or retention by us in order to satisfy an award’s exercise price or tax withholding obligations. In addition, the number of shares of our Class A common stock reserved for issuance under our 2019 Plan will automatically increase on the first day of each fiscal year, commencing on January 1, 2020 and ending on (and including) January 1, 2029, in an amount equal to 5% of the total number of shares of our Class A common stock and our Class B common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by our board of directors.
Stock Option Activity
Stock option activity during the six months ended June 30, 2020, was as follows (in thousands, except per share amounts):
Stock Options Outstanding
Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term
Aggregate Intrinsic
Value (1)
(in years)
Outstanding as of December 31, 2019 56,966 $ 2.25    3.5 $ 933,299   
Granted 1,130 22.35   
Exercised (15,518) 2.11   
Outstanding as of June 30, 2020 42,578 $ 2.84    3.2 $ 823,099   
Exercisable as of June 30, 2020 41,588 $ 2.38    3.1 $ 823,087   
(1)We calculate intrinsic value based on the difference between the exercise price of in-the-money-stock options and the fair value of our common stock as of the respective balance sheet date.
The total grant-date fair value of stock options vested during the six months ended June 30, 2020 and 2019, was $1.7 million and $1.9 million, respectively. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2020 and 2019, was $303.1 million and $5.6 million, respectively.
16


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The total grant-date fair value of stock options granted during the six months ended June 30, 2020 was not material. No stock options were granted during the six months ended June 30, 2019.
Restricted Stock Unit and Restricted Stock Award Activity
RSU and RSA activity during the six months ended June 30, 2020, was as follows (in thousands, except per share amounts):
Restricted Stock Units and Restricted Stock Awards Outstanding
Shares Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2019 56,791 $ 20.19   
Granted 24,365 16.46   
Released (11,360) 19.33   
Forfeited (7,465) 18.95   
Outstanding as of June 30, 2020 62,331 $ 19.03   
Share-Based Compensation
Share-based compensation expense during the three and six months ended June 30, 2020 and 2019, was as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Cost of revenue $ 2,325    $ 28,157    $ 3,751    $ 28,172   
Research and development 46,358    709,996    95,264    710,622   
Sales and marketing (1)
(2,074)   202,128    11,845    202,157   
General and administrative 15,536    194,318    32,309    194,342   
Total share-based compensation $ 62,145    $ 1,134,599    $ 143,169    $ 1,135,293   
(1)Share-based compensation expense was negative for the three months ended June 30, 2020 due to the reversal of previously recognized share-based compensation expense related to unvested RSUs forfeited by our former Chief Operating Officer.
As of June 30, 2020, we had $764.3 million of unrecognized share-based compensation expense, which we expect to recognize over a weighted-average period of 3.2 years.
5. Net Loss Per Share Attributable to Common Stockholders
We present net loss per share attributable to common stockholders using the two-class method required for multiple classes of common stock and participating securities. Holders of our Class A and Class B common stock have identical rights except with respect to voting, conversion and transfer rights and therefore share equally in our net losses. Prior to our IPO, we considered all series of our redeemable convertible preferred stock participating securities. We have not allocated net loss attributable to common stockholders to our redeemable convertible preferred stock because the holders of our redeemable convertible preferred stock are not contractually obligated to share in our losses.
We calculate basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share attributable to common stockholders gives effect to all potential shares of common stock, including common stock issuable upon conversion of our redeemable convertible preferred stock and redeemable convertible preferred stock warrants, stock options, RSAs, RSUs and common stock warrants to the extent these are dilutive.
17


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We calculated basic and diluted net loss per share attributable to common stockholders as follows (in thousands, except per share amounts):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Class A Class B Class A Class B Class A Class B Class A Class B
Numerator:
Net loss attributable to common stockholders $ (70,961)   $ (29,787)   $ (189,368)   $ (970,133)   $ (165,255)   $ (76,689)   $ (151,947)   $ (1,048,974)  
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 413,262    173,475    72,406    370,934    397,194    184,324    36,180    249,775   
Net loss per share attributable to common stockholders, basic and diluted $ (0.17)   $ (0.17)   $ (2.62)   $ (2.62)   $ (0.42)   $ (0.42)   $ (4.20)   $ (4.20)  
Basic net loss per share is the same as diluted net loss per share because we reported net losses for all periods presented. We excluded the following weighted-average potential shares of common stock from our calculation of diluted net loss per share attributable to common stockholders because these would be anti-dilutive (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Redeemable convertible preferred stock —    74,552    —    190,816   
Outstanding stock options 46,274    76,424    49,427    76,505   
Unvested restricted stock units and restricted stock awards 65,873    73,555    61,083    77,708   
Redeemable convertible preferred stock warrants —    60    —    154   
Total 112,147    224,591    110,510    345,183   

6. Income Taxes
We determine our income tax provision for interim periods using an estimate of our annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between our effective tax rate and the federal statutory rate is the full valuation allowance we have established on our federal, state and foreign net operating losses and credits. Income taxes from international operations are not material for the three and six months ended June 30, 2020 and 2019.
On June 7, 2019, a three-judge panel from the U.S. Court of Appeals for the Ninth Circuit overturned the U.S. Tax Court's decision in Altera Corp. v. Commissioner and upheld the portion of the Treasury regulations under Section 482 of the Internal Revenue Code that requires related parties in a cost-sharing arrangement to share expenses related to share-based compensation. As a result of this decision, our gross unrecognized tax benefits increased to reflect the impact of including share-based compensation in cost-sharing arrangements. Recognizing our gross unrecognized tax benefits would not affect our effective tax rate as their recognition would be offset by the reversal of the related deferred tax assets, which are subject to a full valuation allowance. On July 22, 2019, the taxpayer filed a petition for a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019. On February 10, 2020, the
18


PINTEREST, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
taxpayer filed a petition to appeal the decision to the Supreme Court and on June 22, 2020, the Supreme Court denied the petition. As a result of the Supreme Court’s action, our U.S. deferred tax asset related to net operating losses was reduced by $24.4 million and we no longer consider this to be an uncertain tax position. There is no impact on our effective tax rate for the three and six months ended June 30, 2020, due to our full valuation allowance against our deferred tax assets.
7. Geographical Information
Revenue disaggregated by geography based on our customers’ billing addresses is as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
United States $ 224,272    $ 231,770    $ 459,222    $ 413,532   
International(1)
$ 48,213    29,479    85,203    49,628   
Total revenue $ 272,485    $ 261,249    $ 544,425    $ 463,160   
(1)No individual country other than the United States exceeded 10% of our total revenue for any period presented.
Property and equipment, net and operating lease right-of-use assets by geography is as follows (in thousands):
June 30, December 31,
2020 2019
United States $ 236,644    $ 266,763   
International(1)
11,612    13,480   
Total property and equipment, net and operating lease right-of-use assets $ 248,256    $ 280,243   
(1)No individual country other than the United States exceeded 10% of our total property and equipment, net and operating lease right-of-use assets for any period presented.
19



ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions, including uncertainty regarding the duration and scope of the impact of the COVID-19 pandemic. Our actual results could differ materially from these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” and “Note About Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q.
Overview of Second Quarter Results
Our key financial and operating results as of and for the three months ended June 30, 2019 are as follows:
Revenue was $272.5 million, an increase of 4% compared to the three months ended June 30, 2019.
Monthly active users ("MAUs") were 416 million, an increase of 39% compared to June 30, 2019.
Share-based compensation expense was $62.1 million, a decrease of $1,072.5 million compared to the three months ended June 30, 2019.
Total costs and expenses were $377.0 million.
Loss from operations was $(104.5) million.
Net loss was $(100.7) million.
Adjusted EBITDA was $(33.9) million.
Cash, cash equivalents and marketable securities were $1,703.1 million.
Headcount was 2,432.
Update on the COVID-19 Pandemic
The COVID-19 pandemic has resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines and shelter-in-place orders. These measures have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas, both regionally and worldwide, which has impacted our business and results of operations. After a sharp deceleration in growth in mid-March as advertisers responded to the COVID-19 pandemic, our revenue growth stabilized in April, improved in each month of the quarter and continued to accelerate in early July as shelter-in-place restrictions eased. An increase in the number of advertisements supported our revenue growth. In addition, as people began spending more time at home due to the pandemic, over the same time period, we have seen an increase in user engagement, driving higher levels of board creation and visitation, saves, searches, conversions and MAUs. We are unable to predict the extent and duration of the impact of the COVID-19 pandemic on our business, operations and financial results. See "Risk Factors" and "Note About Forward-Looking Statements” for additional details. While we plan to continue to invest in our strategic priorities in the coming year as we pursue and prioritize long-term growth, we are also making adjustments to our expenses where appropriate to be prudent in the current environment.
Since the full impact of the COVID-19 pandemic on our results of operations and overall financial performance remains uncertain and highly unpredictable, our past results may not be indicative of our future performance. To the extent the pandemic continues to disrupt economic activity globally we, like other businesses, would not be immune as it could adversely affect our business, operations and financial results through prolonged decreases in advertising spend, depressed economic activity or declines in capital markets. We continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, advertisers, Pinners, partners and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our employees, advertisers, Pinners, suppliers, vendors or other partners, or on our financial results.

20


Trends in User Metrics
Monthly Active Users. We define a monthly active user as an authenticated Pinterest user who visits our website, opens our mobile application or interacts with Pinterest through one of our browser or site extensions, such as the Save button, at least once during the 30-day period ending on the date of measurement. We present MAUs based on the number of MAUs measured on the last day of the current period. We calculate average MAUs based on the average of the number of MAUs measured on the last day of the current period and the last day prior to the beginning of the current period. MAUs are the primary metric by which we measure the scale of our active user base.
Quarterly Monthly Active Users
(in millions)
PINS-20200630_G2.JPG
PINS-20200630_G3.JPG PINS-20200630_G4.JPG
Note: United States and International may not sum to Global due to rounding.

21


As of June 30, 2020, global MAUs were 416 million, an increase of 39% compared to June 30, 2019. While we have historically had lower engagement in the second calendar quarter, we experienced an increase in active user growth with the recent shelter-in-place order related to the COVID-19 pandemic. We do not expect to experience similar user growth rates in the future, but as the impact of the COVID-19 pandemic on user growth is hard to measure and predict, we do not know the extent to which new or existing users will maintain their engagement once the pandemic has subsided.
We have experienced significant growth in our global MAUs over the last several years. In particular, our international MAUs have grown significantly as a result of our focus on localizing content in international markets. We expect our international user growth to continue to outpace U.S. user growth in the near term.
Trends in Monetization Metrics
Revenue. We calculate revenue by user geography based on our estimate of the geography in which ad impressions are delivered. The geography of our users affects our revenue and financial results because we currently only monetize certain countries and currencies and because we monetize different geographies at different average rates. Our revenue in the United States is higher primarily due to our decision to focus our earliest monetization efforts there and also due to the relative size and maturity of the U.S. digital advertising market.
Quarterly Revenue
(in millions)
PINS-20200630_G5.JPG
22


PINS-20200630_G6.JPG PINS-20200630_G7.JPG
Note: Revenue by geography in the charts above is geographically apportioned based on our estimate of the geographic location of our users when they perform a revenue-generating activity. This allocation differs from our disclosure of revenue disaggregated by geography in the notes to our condensed consolidated financial statements where revenue is geographically apportioned based on our customers’ billing addresses. United States and International may not sum to Global and quarterly amounts may not sum to annual due to rounding.
Average Revenue per User (“ARPU”). We measure monetization of our platform through our average revenue per user metric. We define ARPU as our total revenue in a given geography during a period divided by average MAUs in that geography during the period. We calculate ARPU by geography based on our estimate of the geography in which revenue-generating activities occur. We present ARPU on a U.S. and international basis because we currently monetize users in different geographies at different average rates. U.S. ARPU is higher primarily due to our decision to focus our earliest monetization efforts there and also due to the relative size and maturity of the U.S. digital advertising market.
Quarterly Average Revenue per User
PINS-20200630_G8.JPG
23


PINS-20200630_G9.JPG PINS-20200630_G10.JPG
For the three months ended June 30, 2020, global ARPU was $0.70, which represents a decrease of 21% compared to the three months ended June 30, 2019. For the three months ended June 30, 2020, U.S. ARPU was $2.50, a decrease of 11%, and international ARPU was $0.14, an increase of 21% compared to the three months ended June 30, 2019.
We use MAUs and ARPU to assess the growth and health of the overall business and believe that these metrics best reflect our ability to attract, retain, engage and monetize our users, and thereby drive revenue.
24


Non-GAAP Financial Measure
To supplement our condensed consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, a financial measure which is not based on any standardized methodology prescribed by GAAP.
We define Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest income, interest expense and other income (expense), net and provision for income taxes.
We use Adjusted EBITDA to evaluate our operating results and for financial and operational decision-making purposes. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the income and expenses that it excludes. We also believe Adjusted EBITDA provides useful information about our operating results, enhances the overall understanding of our past performance and future prospects, and allows for greater transparency with respect to key metrics we use for financial and operational decision-making. We are presenting Adjusted EBITDA to assist investors in seeing our operating results through the eyes of management, and because we believe that this measure provides an additional tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry. However, our definition of Adjusted EBITDA may not be the same as similarly titled measures used by other companies.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, the nearest GAAP equivalent. For example, Adjusted EBITDA excludes:
certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets, although these assets may have to be replaced in the future; and
share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other financial results presented in accordance with GAAP. The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Net Loss $ (100,748)   $ (1,159,501)   $ (241,944)   $ (1,200,921)  
Depreciation and amortization 8,485    6,507    20,231    12,203   
Share-based compensation 62,145    1,134,599    143,169    1,135,293   
Interest income (4,218)   (8,127)   (11,369)   (12,186)  
Interest expense and other (income) expense, net 16    448    2,093    948   
Provision for income taxes 420    37    600    190   
Adjusted EBITDA $ (33,900)   $ (26,037)   $ (87,220)   $ (64,473)  


25


Components of Results of Operations
Revenue. We generate revenue by delivering ads on our website and mobile application. Advertisers purchase ads directly with us or through their relationships with advertising agencies. We recognize revenue only after transferring control of promised goods or services to customers, which occurs when a user clicks on an ad contracted on a CPC basis, views an ad contracted on a CPM basis or views a video ad contracted on a CPV basis.
Cost of Revenue. Cost of revenue consists primarily of expenses associated with the delivery of our service, including the cost of hosting our website and mobile application. Cost of revenue also includes personnel-related expense, including salaries, benefits and share-based compensation for employees on our operations teams, payments associated with partner arrangements, credit card and other transaction processing fees, and allocated facilities and other supporting overhead costs.
Research and Development. Research and development consists primarily of personnel-related expense, including salaries, benefits and share-based compensation for our engineers and other employees engaged in the research and development of our products, and allocated facilities and other supporting overhead costs.
Sales and Marketing. Sales and marketing consists primarily of personnel-related expense, including salaries, commissions, benefits and share-based compensation for our employees engaged in sales, sales support, marketing and customer service functions, advertising and promotional expenditures, professional services and allocated facilities and other supporting overhead costs. Our marketing efforts also include user- and advertiser-focused marketing expenditures.
General and Administrative. General and administrative consists primarily of personnel-related expense, including salaries, benefits and share-based compensation for our employees engaged in finance, legal, human resources and other administrative functions, professional services, including outside legal and accounting services, and allocated facilities and other supporting overhead costs.
Other Income. Other income consists primarily of interest earned on our cash equivalents and marketable securities.
Provision for Income Taxes. Provision for income taxes consists primarily of income taxes in foreign jurisdictions, U.S. federal and state income taxes adjusted for discrete items.
Adjusted EBITDA. We define Adjusted EBITDA as net loss adjusted to exclude depreciation and amortization expense, share-based compensation expense, interest and other income (expense), net and provision for income taxes. See “Non-GAAP Financial Measure” for more information and for a reconciliation of net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
26


Results of Operations
The following tables set forth our condensed consolidated statements of operations data (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2020 2019 2020 2019
Revenue $ 272,485    $ 261,249    $ 544,425    $ 463,160   
Costs and expenses (1):
Cost of revenue 108,259    105,415    207,491    179,109   
Research and development 136,593    801,879    282,297    874,323   
Sales and marketing 86,483    296,919    203,510    373,313   
General and administrative 45,680