# PINTEREST, INC. (PINS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from PINTEREST, INC.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1506293/000150629325000022/pins-20241231.htm
Accession: 0001506293-25-000022
Filing date: 2025-02-06
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/PINS/
All MD&A years: /company/PINS/mda/
Previous year: /company/PINS/mda/fy2023/ (FY 2023)
Next year: /company/PINS/mda/fy2025/ (FY 2025)

Item 7. 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 consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 Annual Report on Form 10-K.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Overview of 2024 results

Our key financial and operating results as of and for the year ended December 31, 2024 are as follows:

•Revenue was $3,646.2 million, an increase of 19% on a reported and constant currency basis compared to 2023.

•Monthly active users ("MAUs") were 553 million, an increase of 11% compared to December 31, 2023.

•Share-based compensation expense was $765.8 million, an increase of $117.9 million compared to 2023.

•Income from operations was $179.8 million, an increase of $305.5 million compared to 2023.

•Net income was $1,862.1 million and Adjusted EBITDA was $1,032.3 million.

•Net cash provided by operating activities was $964.6 million and free cash flow was $940.0 million.

•Cash, cash equivalents and marketable securities were $2,512.9 million.

•Headcount was 4,666.

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Part II

Trends in user metrics

Monthly Active Users. We define an MAU 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. The number of MAUs does not include Shuffles users unless they would otherwise qualify as MAUs. 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)

Note: U.S. and Canada, Europe and Rest of World may not sum to Global due to rounding. Europe includes Russia and Turkey for our reporting of Revenue, MAUs and ARPU by geographic region.

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Part II

A portion of our MAUs visit Pinterest on a weekly basis. We define a weekly active user (“WAU”) 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 seven-day period ending on the date of measurement. As of December 31, 2024, the proportion of WAUs to MAUs, which has stayed relatively consistent over time, was 62%.

As of December 31, 2024, global MAUs increased compared to December 31, 2023, primarily due to our ongoing investments in relevance and personalization.

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Part II

Trends in monetization metrics

Revenue. We calculate revenue by user geography based on our estimate of the geographic location of our users when they perform a revenue-generating activity. 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 U.S. and Canada and, to a lesser extent, Europe is higher primarily due to the relative size and maturity of the digital advertising markets in these geographies.

Quarterly revenue

(in millions)

Note: Revenue by geography in the charts above is geographically apportioned based on our estimate of users' geographic location when they perform a revenue-generating activity. This allocation differs from our disclosure of revenue disaggregated by geography in the notes to our consolidated financial statements where revenue is geographically apportioned based on our customers’ billing addresses. U.S. and Canada, Europe and Rest of World may not sum to Global and quarterly amounts may not sum to annual due to rounding.

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Average Revenue per User. We measure monetization of our platform through our ARPU 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 Canada, Europe and Rest of World basis because we currently monetize users in different geographies at different average rates. Our ARPU in U.S. and Canada and, to a lesser extent, Europe is higher primarily due to the relative size and maturity of the digital advertising markets in these geographies.

Quarterly average revenue per user

For the year ended December 31, 2024, global ARPU was $6.94, which represents an increase of 8% compared to the year ended December 31, 2023. For the year ended December 31, 2024, U.S. and Canada ARPU was $29.15, an increase of 14%, Europe ARPU was $4.24, an increase of 14%, and Rest of World ARPU was $0.59, an increase of 18% compared to the year ended December 31, 2023.

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.

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Part II

Non-GAAP financial measures

To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we consider certain non-GAAP financial measures, as described below.

We use Adjusted EBITDA to evaluate our operating results and for financial and operational decision-making purposes. We define Adjusted EBITDA as net income (loss) adjusted to exclude depreciation and amortization expense, share-based compensation expense, payroll tax expense related to share-based compensation, interest income (expense), net, other income (expense), net, provision for (benefit from) income taxes and certain other non-recurring or non-cash items impacting net income (loss) that we do not consider indicative of our ongoing business performance. 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 use constant currency revenue to evaluate our operating and financial results. We calculate constant currency revenue by translating our current period revenue using the corresponding prior period’s monthly exchange rates for currencies other than the U.S. dollar. We believe constant currency revenue provides useful information to investors because it excludes the effects of foreign currency volatility that are not indicative of our core operating results.

We present free cash flow because we believe it provides useful information to investors about the amount of cash generated from operations, after purchases of property and equipment, that can be used to strengthen our balance sheet or invest in our business among other things. We define free cash flow as net cash provided by operating activities less purchases of property and equipment. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures.

We present these non-GAAP financial measures because we believe they provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics we use for financial and operational decision-making. We present these non-GAAP financial measures to assist investors in seeing our operating results through the eyes of management and because we believe that these measures provide an additional tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry.

Adjusted EBITDA, constant currency revenue and free cash flow 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 these non-GAAP financial measures rather than net income (loss), revenue and net cash provided by operations, the nearest GAAP equivalents. 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 and related payroll tax expense, which have been and will continue to be for the foreseeable future, significant recurring expenses and an important part of our compensation strategy.

•Constant currency revenue excludes the effect of changes in foreign currency exchange rates, which have an actual effect on our operating results; and

•Free cash flow does not reflect our future contractual commitments arising from purchases of property and equipment.

In addition, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and may differ from similarly titled measures used by other companies (if used at all), which reduces their usefulness as comparative measures.

Because of these limitations, you should consider these non-GAAP financial measures alongside other financial performance measures, and our other financial results presented in accordance with GAAP.

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Part II

Adjusted EBITDA

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA (in thousands):

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","2022"],["Net income (loss)","","","","","","$","1,862,106","","","$","(35,610)","","","$","(96,047)"],["Depreciation and amortization","","","","","","21,266","","","21,509","","","46,489"],["Share-based compensation","","","","","","765,795","","","647,860","","","497,123"],["Payroll tax expense related to share-based compensation(1)","","","","","","30,787","","","24,131","","","19,488"],["Interest (income) expense, net","","","","","","(127,003)","","","(105,439)","","","(30,235)"],["Other (income) expense, net","","","","","","19,215","","","(3,799)","","","14,502"],["Provision for (benefit from) income taxes (2)","","","","","","(1,574,501)","","","19,170","","","10,103"],["Legal settlement(3)","","","","","","34,650","","","\u2014","","","\u2014"],["Restructuring charges","","","","","","\u2014","","","126,882","","","\u2014"],["Non-cash charitable contributions","","","","","","\u2014","","","12,890","","","\u2014"],["Adjusted EBITDA","","","","","","$","1,032,315","","","$","707,594","","","$","461,423"]]
[[/GREPCENT_TABLE]]

(1)Beginning in the fourth quarter of 2024, we are excluding payroll tax expense related to share-based compensation from Adjusted EBITDA because these taxes are variable due to our stock price and other factors outside our control and therefore are not reflective of our ongoing business operations or the underlying trends in our business. Accordingly, although payroll tax expense related to share-based compensation is a cash expense that we will continue to incur in the future, we believe excluding this expense provides investors with a better understanding of the performance of our core business and serves as a tool for investors to use in comparing our core business operating results over multiple periods with other companies in our industry. Prior period amounts have been restated to conform to this presentation.

(2)Provision for (benefit from) income taxes includes $1,597.0 million related to the release of our valuation allowance on our U.S. federal and state, excluding California, deferred tax assets during the fourth quarter of 2024. Refer to Note 10 to our consolidated financial statements for further information.

(3)On November 1, 2024, we reached a settlement to resolve pending litigation relating to allegations concerning the early development of Pinterest. We recorded legal settlement expense of $34.7 million, net of insurance proceeds, for the year ended December 31, 2024, which we have excluded from Adjusted EBITDA because it is non-recurring and not reflective of our ongoing business operations or the underlying trends in our business.

Constant currency revenue

The following table presents revenue and period-over-period changes on an as reported and constant currency basis (in thousands, except percentages):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","% Change"],["","","2024","","2023","","As Reported","","Constant Currency(1)"],["Revenue","","$","3,646,166","","","$","3,055,071","","","19%","","","19%"]]
[[/GREPCENT_TABLE]]

(1)On a constant currency basis, revenue for the year ended December 31, 2024 was $3,649.0 million due to a $2.8 million unfavorable impact of changes in foreign exchange rates.

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Part II

Free cash flow

The following table presents a reconciliation of net cash flows provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","2022"],["Reconciliation of free cash flow"],["Net cash provided by operating activities","$","964,594","","","$","612,961","","","$","469,202"],["Less:"],["Purchases of property and equipment","(24,606)","","","(8,063)","","","(28,984)"],["Free cash flow","$","939,988","","","$","604,898","","","$","440,218"]]
[[/GREPCENT_TABLE]]

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Part II

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 cost per click ("CPC") basis, views an ad contracted on a cost per thousand impressions ("CPM") basis or cost per day ("CPD") basis or views a video ad contracted on a cost per view ("CPV") basis. We recognize revenue over the service period for ads contracted on a CPD basis, which do not contain minimum impression guarantees.

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, amortization of acquired intangible assets 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, amortization of acquired intangible assets 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, charitable contributions and allocated facilities and other supporting overhead costs.

Interest and other income (expense), net. Interest and other income (expense), net consists primarily of interest earned on our cash equivalents and marketable securities and foreign currency exchange gains and losses.

Provision for (benefit from) income taxes. Provision for (benefit from) income taxes consists primarily of income taxes in foreign jurisdictions and U.S. federal and state income taxes.

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) adjusted to exclude depreciation and amortization expense, share-based compensation expense, payroll tax expense related to share-based compensation, interest income (expense), net, other income (expense), net, provision for (benefit from) income taxes and certain other non-recurring or non-cash items impacting net income (loss) that we do not consider indicative of our ongoing business performance. See “Non-GAAP Financial Measures” for more information and for a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.

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Results of operations

The following tables set forth our consolidated statements of operations data (in thousands):

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","2022"],["Revenue","","","","","","$","3,646,166","","","$","3,055,071","","","$","2,802,574"],["Costs and expenses (1):"],["Cost of revenue","","","","","","750,355","","","688,760","","","678,597"],["Research and development","","","","","","1,240,564","","","1,068,416","","","948,980"],["Sales and marketing","","","","","","1,011,772","","","911,166","","","933,133"],["General and administrative","","","","","","463,658","","","512,407","","","343,541"],["Total costs and expenses","","","","","","3,466,349","","","3,180,749","","","2,904,251"],["Income (loss) from operations","","","","","","179,817","","","(125,678)","","","(101,677)"],["Interest income (expense), net","","","","","","127,003","","","105,439","","","30,235"],["Other income (expense), net","","","","","","(19,215)","","","3,799","","","(14,502)"],["Income (loss) before provision for (benefit from) income taxes","","","","","","287,605","","","(16,440)","","","(85,944)"],["Provision for (benefit from) income taxes","","","","","","(1,574,501)","","","19,170","","","10,103"],["Net income (loss)","","","","","","$","1,862,106","","","$","(35,610)","","","$","(96,047)"],["Adjusted EBITDA (2)","","","","","","$","1,032,315","","","$","707,594","","","$","461,423"]]
[[/GREPCENT_TABLE]]

(1)Includes share-based compensation expense as follows (in thousands):    

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31,"],["","","","","","2024","","2023","","2022"],["Cost of revenue","","","","","$","14,836","","","$","11,117","","","$","7,629"],["Research and development","","","","","497,442","","","422,964","","","324,161"],["Sales and marketing","","","","","122,149","","","96,798","","","99,467"],["General and administrative","","","","","131,368","","","116,981","","","65,866"],["Total share-based compensation","","","","","$","765,795","","","$","647,860","","","$","497,123"]]
[[/GREPCENT_TABLE]]

(2)See “Non-GAAP Financial Measures” for more information and for a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.

The following table sets forth our consolidated statements of operations data (as a percentage of revenue):

[[GREPCENT_TABLE]]
[["","","","Year Ended December 31,"],["","","","","","2024","","2023","","2022"],["Revenue","","","","","100","%","","100","%","","100","%"],["Costs and expenses:"],["Cost of revenue","","","","","21","","","23","","","24"],["Research and development","","","","","34","","","35","","","34"],["Sales and marketing","","","","","28","","","30","","","33"],["General and administrative","","","","","13","","","17","","","12"],["Total costs and expenses","","","","","95","","","104","","","104"],["Income (loss) from operations","","","","","5","","","(4)","","","(4)"],["Interest income (expense), net","","","","","3","","","3","","","1"],["Other income (expense), net","","","","","(1)","","","\u2014","","","(1)"],["Income (loss) before provision for (benefit from) income taxes","","","","","8","","","(1)","","","(3)"],["Provision for (benefit from) income taxes","","","","","(43)","","","1","","","\u2014"],["Net income (loss)","","","","","51","%","","(1","%)","","(3","%)"]]
[[/GREPCENT_TABLE]]

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Years Ended December 31, 2024 and 2023

Revenue

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["Revenue","","","","","","","$","3,646,166","","","$","3,055,071","","","19%"]]
[[/GREPCENT_TABLE]]

Revenue for the year ended December 31, 2024 increased by $591.1 million compared to the year ended December 31, 2023, primarily due to growth in demand from our consideration and conversion objectives. Revenue on a constant currency basis increased by 19% compared to 2023. Revenue growth was primarily driven by an 8% increase in ARPU supported by an 11% increase in average MAUs for the year ended December 31, 2024 compared to the year ended December 31, 2023. The number of advertisements served increased by 39% while the price of advertisements decreased by 14% compared to the year ended December 31, 2023.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, revenue based on our estimate of the geographic location of our users increased by 18% in the U.S. and Canada to $2,884.0 million, Europe revenue increased by 23% to $593.2 million and Rest of World revenue increased by 36% to $168.9 million.

Cost of revenue

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["Cost of revenue","","","","","","","$","750,355","","","$","688,760","","","9%"],["Percentage of revenue","","","","","","","21","%","","23","%"]]
[[/GREPCENT_TABLE]]

Cost of revenue for the year ended December 31, 2024 increased by $61.6 million compared to the year ended December 31, 2023. The increase was primarily due to increased users and engagement offset by infrastructure efficiency initiatives.

Research and development

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["Research and development","","","","","","","$","1,240,564","","","$","1,068,416","","","16%"],["Percentage of revenue","","","","","","","34","%","","35","%"]]
[[/GREPCENT_TABLE]]

Research and development for the year ended December 31, 2024 increased by $172.1 million compared to the year ended December 31, 2023. The increase was primarily due to a 19% increase in personnel expenses due to higher headcount and a $74.5 million increase in share-based compensation expense.

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Sales and marketing

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["Sales and marketing","","","","","","","$","1,011,772","","","$","911,166","","","11%"],["Percentage of revenue","","","","","","","28","%","","30","%"]]
[[/GREPCENT_TABLE]]

Sales and marketing for the year ended December 31, 2024 increased by $100.6 million compared to the year ended December 31, 2023. The increase was primarily due to an 8% increase in personnel expenses due to higher headcount, a $28.4 million increase in marketing expenses, a $25.4 million increase in share-based compensation expense and a $16.8 million increase in outsourced services costs.

General and Administrative

[[GREPCENT_TABLE]]
[["","","","","","Year Ended December 31,"],["","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["General and administrative","","","","","","","$","463,658","","","$","512,407","","","(10%)"],["Percentage of revenue","","","","","","","13","%","","17","%"]]
[[/GREPCENT_TABLE]]

General and administrative for the year ended December 31, 2024 decreased by $48.7 million compared to the year ended December 31, 2023. The decrease was primarily due to $119.4 million of restructuring charges in 2023, offset by a $34.7 million legal settlement, net of insurance proceeds, a $14.9 million increase in non income-based taxes and a $14.4 million increase in share-based compensation.

Other income (expense), net

[[GREPCENT_TABLE]]
[["","","","","","","Year Ended December 31,"],["","","","","","","","","2024","","2023","","% change"],["","","","","","","","(in thousands)"],["Interest income (expense), net","","","","","","","","$","127,003","","","$","105,439","","","20%"],["Other income (expense), net","","","","","","","","(19,215)","","","3,799","","","606%"],["Interest and other income (expense), net","","","","","","","","$","107,788","","","$","109,238","","","(1%)"]]
[[/GREPCENT_TABLE]]

Interest and other income (expense), net for the year ended December 31, 2024 decreased by $1.5 million compared to the year ended December 31, 2023. The decrease was primarily due to higher foreign currency exchange losses offset by returns on our cash equivalents and marketable securities as a result of higher interest rates and higher invested balances.

Provision for (benefit from) income taxes

[[GREPCENT_TABLE]]
[["","","","","","","Year Ended December 31,"],["","","","","","","","","2024","","2023","","% change"],["","","","","","","","","(in thousands)"],["Provision for (benefit from) income taxes","","","","","","","$","(1,574,501)","","","$","19,170","","","NM"]]
[[/GREPCENT_TABLE]]

NM = Not meaningful

The benefit from income taxes for the year ended December 31, 2024 was $1,574.5 million, as compared to a provision for income taxes of $19.2 million for the year ended December 31, 2023. The increase in tax benefit during the year ended December 31, 2024 was primarily due to the release of our valuation allowance on our U.S. federal and state, excluding California, deferred tax assets. Refer to Note 10 to our consolidated financial statements for further information.

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Net income (loss) and adjusted EBITDA

[[GREPCENT_TABLE]]
[["","","","","","","","Year Ended December 31,"],["","","","","","","","","","2024","","2023","","% change"],["","","","","","","","","(in thousands)"],["Net income (loss)","","","","","","","","$","1,862,106","","","$","(35,610)","","","NM"],["Adjusted EBITDA","","","","","","","","$","1,032,315","","","$","707,594","","","46%"]]
[[/GREPCENT_TABLE]]

NM = Not meaningful

Net income for the year ended December 31, 2024 was $1,862.1 million, compared to a net loss of $35.6 million for the year ended December 31, 2023. Adjusted EBITDA was $1,032.3 million for the year ended December 31, 2024, compared to $707.6 million for the year ended December 31, 2023, due to the factors described above. See “Non-GAAP Financial Measures” for more information and for a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.

Liquidity and capital resources

We finance our operations primarily through payments received from our customers. Our primary uses of cash are personnel-related costs and the cost of hosting our website and mobile application. As of December 31, 2024, we had $2,512.9 million in cash, cash equivalents and marketable securities. Our cash equivalents and marketable securities are primarily invested in short-duration fixed income securities, including government and investment-grade corporate debt securities and money market funds. As of December 31, 2024, $156.6 million of our cash and cash equivalents was held by our foreign subsidiaries.

In October 2022, we replaced the $500.0 million revolving credit facility entered into in November 2018 with an amended and restated five-year $400.0 million revolving credit facility (the “2022 revolving credit facility”) that contained an accordion option which, if exercised, would allow us to increase the aggregate commitments by up to $405.0 million provided we are able to secure additional lender commitments and satisfy certain other conditions.

In October 2023, we amended the 2022 revolving credit facility to increase our aggregate commitment to $500.0 million and reduce our accordion option from $405.0 million to $305.0 million. Interest on any borrowings under the 2022 revolving credit facility accrues at either an adjusted term SOFR plus 0.10% and a margin of 1.50% or at an alternative base rate plus a margin of 0.50%, at our election, and we are required to pay an annual commitment fee that accrues at 0.15% per annum on the unused portion of the aggregate commitments under the 2022 revolving credit facility.

The 2022 revolving credit facility also allows us to issue letters of credit, which reduce the amount we can borrow. We are required to pay a fee that accrues at 0.125% per annum on the average aggregate daily maximum amount available to be drawn under any outstanding letters of credit.

The 2022 revolving credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to incur indebtedness, grant liens, make distributions to holders of our stock or the stock of our subsidiaries, make investments or engage in transactions with our affiliates. The 2022 revolving credit facility also contains a financial maintenance covenant: a maximum net leverage ratio of consolidated debt to consolidated EBITDA no greater than 3.50 to 1.00, subject to an increase up to 4.00 to 1.00 for a certain period following an acquisition. The obligations under the 2022 revolving credit facility are secured by liens on substantially all of our domestic assets, including certain domestic intellectual property assets.

Our total borrowing capacity under the revolving credit facility is $500.0 million as of December 31, 2024. We have not issued any letters of credit and are in compliance with all covenants under the 2022 revolving credit facility as of December 31, 2024.

We believe our existing cash, cash equivalents and marketable securities and amounts available under the 2022 revolving credit facility will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months, though we may require additional capital resources in the future. We may elect to raise additional capital through the sale of additional equity to fund our future needs beyond the next 12 months.

Our material cash requirements include our $1,110.2 million commitment with Amazon Web Services, for which we are not subject to annual purchase commitments, and our $225.8 million of operating lease obligations, of which $41.3 million is due within the next 12 months.

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On February 2, 2023, our board of directors authorized a stock repurchase program of up to $500.0 million of our Class A common stock, which we completed in the second quarter of 2023. Under the program, we repurchased and retired 21,215,663 shares of our Class A common stock for an aggregate purchase price of $500.0 million at an average price per share of $23.57.

On September 16, 2023, our board of directors authorized a stock repurchase program of up to $1.0 billion of our Class A common stock (the "September 2023 program"). In November 2024, our board of directors authorized a new stock repurchase program of up to $2.0 billion of our Class A common stock (the "November 2024 program") and canceled the September 2023 program under which $500.0 million had remained available for repurchase. Under the November 2024 program, we are authorized to repurchase, from time-to-time, shares of our Class A common stock through open market purchases, in privately negotiated transactions or in such other manner as permitted by securities law and as determined by management at such time and in such amounts as management may decide. The November 2024 program does not obligate us to repurchase any specific number of shares and may be modified, suspended or discontinued at any time. The timing, manner, price and amount of any repurchases are determined by management in its discretion and depend on a variety of factors, including legal requirements, price and economic and market conditions. During the year ended December 31, 2024, we repurchased and retired 19,125,363 shares of our Class A common stock for an aggregate purchase price of $600.2 million at an average price per share of $31.38 under the September 2023 and November 2024 programs. As of December 31, 2024, $1,899.8 million remained available for repurchases under the November 2024 program.

For the years ended December 31, 2024 and 2023, our net cash flows and free cash flow were as follows (in thousands):

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Operating activities

Cash flows from operating activities consist of our net income (loss) adjusted for certain non-cash reconciling items, such as share-based compensation expense, depreciation and amortization, deferred income taxes, non-cash charitable contributions, net amortization of investment premium and discount, non-cash restructuring charges and changes in our operating assets and liabilities. Net cash provided by operating activities increased by $351.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in our net income as adjusted for certain non-cash items, including the release of our valuation allowance on our U.S. federal and state, excluding California, deferred tax assets; and an increase in our accrued expenses and other liabilities due to timing of payments to vendors; offset by an increase in accounts receivable.

Investing activities

Cash flows from investing activities consist of capital expenditures for improvements to new and existing office spaces. We also actively manage our operating cash and cash equivalent balances and invest excess cash in short-duration marketable securities, the sales and maturities of which we use to fund our ongoing cash requirements. Net cash used in investing activities decreased by $184.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net purchases of marketable securities.

Financing activities

Cash flows from financing activities consist of tax remittances on release of RSUs and RSAs, repurchases of our Class A common stock and proceeds from the exercise of stock options. Net cash used in financing activities increased by $141.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an

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Part II

increase in cash paid for repurchases of our Class A common stock and an increase in tax remittances on release of RSUs and RSAs due to an increase in our stock price.

Free cash flow

Free cash flow increased $335.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 and consists of net cash provided by operating activities and purchases of property and equipment. See “Non-GAAP Financial Measures” for more information and for a reconciliation of net cash flows provided by operating activities, the most directly comparable financial measure calculated and presented in accordance with GAAP, to free cash flow.

Critical accounting policies and estimates

We prepare our consolidated financial statements in accordance with GAAP. Preparing our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses as well as related disclosures. Because these estimates and judgments may change from period to period, actual results could differ materially, which may negatively affect our financial condition or results of operations. We base our estimates and judgments on historical experience and various other assumptions that we consider reasonable, and we evaluate these estimates and judgments on an ongoing basis. We refer to such estimates and judgments, discussed further below, as critical accounting policies and estimates.

Refer to Note 1 to our consolidated financial statements for further information on our other significant accounting policies.

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") or cost per day ("CPD") basis or views a video ad contracted on a cost per view ("CPV") basis. We recognize revenue over the service period for ads contracted on a CPD basis, which do not contain minimum impression guarantees. We typically bill customers on a CPC, CPM, CPV, or CPD basis, and our payment terms vary by customer type and location. The term between billing and payment due dates is not significant.

We recognize revenue only after satisfying our contractual performance obligations.

Income Taxes

We account for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of assets and liabilities using the enacted statutory tax rates in effect for the years in which we expect the differences to reverse. We establish valuation allowances to reduce the total deferred tax assets to the amount we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consider all available evidence, both positive and negative, including past operating results and estimates of future taxable income. In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for (benefit from) income taxes in the period in which such determination is made.

We recognize tax benefits from uncertain tax positions when we believe it is more likely than not that the tax position is sustainable on examination by tax authorities based on its technical merits. We recognize taxes on Global Intangible Low-Taxed Income as incurred.

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