Pinterest: Stabilizing users, alignment with top investor are priorities

Pinterest's (NYSE:PINS) $Pinterest, Inc.(PINS)$investors enjoyed a post-market relief rally, Monday, as the company's shares climbed more than 21% in after-hours trading following an earnings report where revenue was in line with expectations, the company forecast modest third-quarter growth, and top investor Elliott Management expressed support for Bill Ready, the company's new chief executive.

Ready took Pinterest's (PINS) top executive job over a month ago, and on his first quarterly conference call, he said he joined the company because it "offers people a digital experience that is genuinely unique and positive, because we've only just begun to tap into the possibility that experience has to create value for users and advertisers."

E-commerce is in Ready's background, and hen said it was the key to his interest in Pinterest.

"Having spent most of my career in commerce and payments, I recognize that there are many places to buy online, but there are very few online destinations where you can actually shop," Ready said.

"That is, to browse and discover and get inspired before you buy. Pinterest is very unique and it has inspiration, discovery, and strong user intent, all in the same place."

Activist investor Elliott Management was quick to speak up after Pinterest's (PINS) results, as it confirmed it was the company's top stakeholder, and also offered a vote of confidence in the CEO change from co-founder Ben Silbermann to ex-Googler Ready.

Ready said the call would be focused on results, rather than Elliott, but did offer up one comment in reaction.

"We've had a very collaborative and engaged dialogue with Elliott recently; they're aligned with our vision and what Pinterest can become; are supportive of our team and our efforts; and see the same tremendous potential for long-term value creation that I do," Ready said. "I look forward to continuing to engage with Elliott as they will with our other shareholders, and view their investment as a vote of confidence in Pinterest's future."

Revenue came in as expected, but Pinterest (PINS) noted it lost users in all regions on a year-over-year basis. The company said earlier this year that it wouldn't offer an outlook on user growth, but did offer some context on engagement for the second half.

"With a pandemic unwind largely behind us, we believe that global monthly active users will return to more typical seasonal engagement patterns in the second half of the year," said Todd Morgenfeld, Pinterest's (PINS) chief financial officer and head of business operations.

Morgenfeld said those seasonal patterns "typically show modest sequential growth" as the company moves into the third and fourth quarters of the year. However, Morgenfeld said these trends "may be a bit more muted than they have been historically. And for the U.S., Canada and Europe, specifically, we hope to stabilize our user base in the back half of the year."

Morgenfeld also said that Ready is evaluating the company's capital position, and that Pinterest (PINS) has accelerated many desired investments into 2022 - and they expect to see the benefits of those investments next year, so "as such we plan to return to meaningful margin expansion in 2023."

The company has about $2.7B in cash on the balance sheet, and it's discussing how to allocate that, including being "thoughtful and strategic" with respect to future mergers and acquisitions. In its second quarter, Pinterest (PINS) the Yes, a move to shore up commercial intent on the platform.