GRND - NYSE

Good afternoon. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr Inc. First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Press star followed by the number one on your telephone keypad to ask a question. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the conference over to Tolu Adeofe, Grindr Inc.'s Head of Investor Relations. Tolu, please go ahead.

Hello, and welcome to the Grindr Inc. Earnings Call for the First Quarter 2025. Today's call will be led by Grindr Inc.'s CEO, George Arison, and CFO, Vanna Krantz. They will make a few brief remarks, and then we will open it up for questions. Please note Grindr Inc. released its shareholder letter this afternoon, and this is available on the SEC's website and Grindr Inc.'s investor page at investors.grindr.com. Before we begin, I will remind everyone that during this call, we may discuss our outlook, future performance, and future prospects. You should not rely on forward-looking statements as predictions of future events. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of the risks that could cause our actual results to differ from views expressed in our forward-looking statements have been set forth in our earnings release and our periodic reports filed with the SEC, including our annual report on Form 10-K for the year ended December 31, 2024. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of these non-GAAP financial measures to their most closely comparable GAAP financial measure, are included in the earnings release we issued today, which has been posted on the Investor Relations page of Grindr Inc.'s website and in Grindr Inc.'s filings with the SEC. With that, I will turn it over to George.

Thanks, Tolu. Welcome, everyone. We are kicking off 2025 with exceptional Q1 results and strong momentum in product development. Early data from several initiatives and testing give us confidence to raise our full-year outlook to 26% or greater revenue growth and at least 43% adjusted EBITDA margin. Our Q1 shareholder letter dives into why 2025 is such a pivotal year for Grindr Inc. We are building one of the world's most advanced consumer tech platforms in the BuildUp community app that integrates AI throughout the experience. At last year's Investor Day, we outlined a bold roadmap centered on three pillars. First, deepening intent-based offerings in our core connections use case. Second, creating an AI architectural layer to power the app for the long term. And third, building the digital neighborhood. Across all three, we are executing ahead of schedule. In the first connections pillar, our single biggest current effort is RightNow, which significantly expands our app's surface area for all users and has performed strongly in testing. We have now rolled it out to 17 major cities, including New York, Miami, London, Paris, and Rio. In these markets, 20 to 25% of our users engage with RightNow weekly, and we have begun monetizing it in select regions. The success is a key driver behind our updated guidance. We expect to expand RightNow to nearly 50% of our weekly active users over the next several weeks. Where it is live, all users, including free users, can take advantage of RightNow even with monetization. On AI, we are committed to making Grindr Inc. an AI-native leader among consumer apps. Leveraging our distribution, user base, and vast data, we are creating previously unimagined product experiences. In January, we announced a suite of AI-native products, including A List, now in testing with a quarter of unlimited users. A List applies our architectural layer to users' track activity over 30 billion tracks annually, or 50 per daily user, providing smarter, best-fit priority connections to each user. Coupled with possible rich insights from conversations that have already taken place, sparing users the effort to manually curate favorites or find other ways to track profiles they like, A List automatically surfaces the connections that matter most based on chat history. I encourage everyone to take a look at the demo linked in our shareholder letter posted on our website. Even in this early version, it is an amazing product, giving us an early view into the incredible age of consumer products we will experience with GenAI. I will let Vanna also detail the steps we are taking to prioritize user control and transparency. This privacy remains non-negotiable as we build AI products. For our third pillar, the capability, soft beta launch of Woodwork, a men's health subscription service designed by gay people for gay people. Partnering with a telehealth provider, Open Loop, Woodwork offers a compounded ED medication relevant to close to 30% of our users who have purchased ED medications in the last year, and 60% have considered using supplements or medicines for their sexual health. This capital-light, low-execution-risk initiative is a zero-to-one effort, a true seed-stage startup within Grindr Inc. As a startup, the Woodwork team is focused on learning, and it will be several quarters before we have meaningful updates to share. Today, due to our team's intense focus and discipline, the pace of product development at Grindr Inc. is relentless. Over our first two years as a public company, we have laid a strong foundation and proven we can deliver. Our next core phase will come from a surge in product and feature launches. To put this in perspective, in 2024, we launched eight new products and initiatives. In 2025, we are targeting over 40 across core use cases, AI, and the gateway. As these roll out, we will be focused on optimizing our portfolio, balancing user experience with how we merchandise our growing set of offerings. I am thrilled by our team's ability to execute on a synthetic strategy in such a nimble way. It is inspiring to watch. We are honored to be building these experiences for our fantastic community. Now over to Vanna.

Thank you, George, and hello, everyone. Grindr Inc. is off to a strong start this year. In the first quarter, total revenue grew 25% year over year to $94 million, and the adjusted EBITDA margin reached 43% to $41 million. Direct revenue increased 24% year over year to $80 million, driven by the continued demand for Unlimited Weekly, which launched late in Q1 of 2024, and Extra Weekly, which benefited this quarter from the international rollout of our recommendations feature, which shows more quality profiles. This machine learning-based enhancement shows profiles to our users based on relevancy in addition to geolocation, which helps improve discovery. Summarizing our key user metrics, average monthly active users increased 7% over the prior year to 14.6 million. Average paying users in the quarter increased 16% over the prior year to 1.2 million, which brings paid penetration to 8% for the quarter. And our average direct revenue per paying user increased 8% over the prior year to $22.86 this quarter. Indirect revenue for Q1 grew 26% year over year to $14 million. In Q1, we introduced both native and rewarded ad formats, expanded our network of third-party ad partners, and further optimized our ad tech. We are encouraged by the early results and expect these initiatives to continue to ramp in 2025. Moving to expenses and profitability, our operating expenses in Q1 of 2025, excluding $25 million in cost of revenue, were $44 million, up 21% year over year, primarily driven by compensation-related expenses. Adjusted EBITDA for the quarter was $41 million, or 43% of revenue, compared to $32 million, or 42% of revenue, a year ago. Net income was $27 million for the first quarter, representing 29% of revenue, compared to a net loss of $9 million in the same period last year. As we noted in our Q4 shareholder letter, on February 24, we completed the redemption of all outstanding unexercised warrants. As a result, beginning in Q2 2025, there will no longer be a revaluation of the warrant liability. Hence, we expect to report positive GAAP EPS going forward. Turning to cash flow and the balance sheet, in the first quarter, Grindr Inc. generated free cash flow of just over $23 million and ended the quarter with approximately $256 million in cash and cash equivalents. Our gross leverage was 1.9 times the last twelve months adjusted EBITDA. During the first quarter, Grindr Inc. repurchased $141 million in common stock. At the end of Q1, we had $359 million remaining under the repurchase program. Finally, as George mentioned, we are raising our guidance for the full year. We now expect revenue growth of 26% or greater and an adjusted EBITDA margin of at least 43%. This updated outlook reflects the strength of our business model and the expectations of our ability to drive enhanced monetization and operational efficiency. We remain focused on executing against our product roadmap. And with that, operator, we will now take questions.

Thank you. We will now begin the question and answer session. Your first question comes from John Blackledge with TD Cowen. Please go ahead.

Hi. Thanks for the question. It is Logan on for John. Maybe on the higher 2025 guidance, could you tell us what changed since the initial forecast and maybe what the biggest drivers were of the higher revenue growth and EBITDA growth targets? And then longer term, should we think any differently about your 2027 revenue and EBITDA targets? And then just have one follow-up as well.

Sure. Thanks, Logan. Thanks for the question. As we said in March, in the first half of the year, we have a few ongoing tests of initiatives, which, if successful, could have a positive impact on 2025 revenue and on EBITDA. And some of those tests have come in positive over the last few weeks. That, coupled with RightNow's early monetization, is really impacting our guidance in a positive way. We move pretty fast at Grindr Inc., so nine weeks is a pretty long time since March earnings. And as we said often, we guide to what we have line of sight to. And our raise today is a reflection of our increased confidence. We also saw the FX tailwind benefit us in the back of March. And this really dovetails into our EBITDA guide, and now that we are midway through Q2, we anticipate Q2 looking a lot like Q1 with respect to EBITDA. Just to add a couple of thoughts on this, in the letter, we talked significantly about the product work that we have underway. Forty new initiatives this year, and several of those are AI-related. We are investing in becoming an AI-first company, and with that can come some elevated costs with respect to cloud. So in the past, we have also talked about managing discretionary spend in the second half based on how we see the year coming together. That is still the case. George, do you want to add a little bit about the Apple Store policy?

Yeah. I am happy to talk about that. So, obviously, we know that a lot of users want to have a direct pay. And assuming that the court ruling stays in place, that will be a big benefit for users of Grindr Inc. and our products. For us to be able to enable the direct payment, we have to integrate with a provider, and we also need to build some capabilities internally to handle that process both from a charge-offs point of view, customer service, etcetera. But it is something that is on our roadmap, and we will probably do it to enable our users to be able to have a direct pay with this.

Great. Thanks. Does that answer your question?

Yes. Definitely. Thank you. And then the Woodwork announcement is super exciting. Could you maybe just I am just curious as to how you maybe plan to integrate it into the Grindr Inc. ecosystem over time. And then how it might open up Grindr Inc. to other healthcare-related offerings potentially in the future? Thanks.

Totally. And I just want to make sure on the Apple question, that is not in any way represented in our guidance, and so it would be completely additive to that if that happened. But since we have not done it, we cannot really speak to what will happen with it since we tend to only guide to what we have a very clear line of sight to. With regards to Woodwork, yeah, we are really excited about Woodwork. I think it is a really great brand that the team has created. I think it really speaks to the Grindr Inc. user base. It was built by gay men for gay men, and I think it is really good from that point of view. I want to really emphasize that Woodwork is in the earliest stages of a startup, getting going. Right? It is very much a series seed, maybe even an angel stage company inside Grindr Inc. with a tiny team working on this full time and a very limited amount of resources being allocated to it at this stage. That is done on purpose. I want the team to be very much operating in a startup learning mode, like a very early-stage startup would, where literally every day is critical for their survival, and they want to work as hard as possible to achieve success. I think grit is really critical to new things being started, and that is what we are trying to have here. Obviously, we can definitely see opportunities to integrate with what Grindr Inc. does as well. Simple things like subscribe to Woodwork, and then you also get a discount on the Grindr Inc. subscription could be one opportunity. Integration of payments between Woodwork's subscription and Grindr Inc. is another possibility. And there are other things like that that we can do. And then more broadly, Woodwork is our healthcare and wellness brand. It is not just an erectile dysfunction medication brand. We will be adding other treatments to Woodwork, and so we will be bringing a broad spectrum of things. We know that a fairly large number of users have already used ED medication in the past. That is detailed in the shareholder letter. Another very large portion has thought about or considered using it in the future. And so that is a strong kind of advantage to us. But, again, Woodwork is a very early-stage business for us, very much a kind of zero-to-one proposition. And we would not expect any updates on Woodwork for the next several quarters. Nor is it in any way assumed in our guidance for this year.

Great. That is super helpful. Thank you.

Your next question comes from the line of Andrew Marok with Raymond James. Please go ahead.

Hi. Raj calling in here for Andrew Marok at Raymond James. Congrats on the quarter. Just wanted to ask a couple of questions. First, so one of your competitors this morning talked about increasing initiatives and features addressed at the gay male community. How do you see Grindr Inc.'s defensibility of its position? And to the extent that Grindr Inc. may have not served a specific need, how is your product lineup addressing that?

Thank you. Thanks for the question. I have spoken many times in the past that we know people are going to use many different products, and we are totally fine with them doing it. And if someone wants to challenge Grindr Inc., you should challenge Grindr Inc. from a position of weakness rather than a position of strength. Any web provider is very strong. I have not really seen any one of our larger competitors do that. And so I think you really need to understand what gay men want and understand gay culture in an intimate way to be able to do that, and that is not something we have been seeing from our peers. What we do know is that our users very much want, and gay men around the world really want, features in Grindr Inc. that address their specific needs and intentions. And that is why our entire product strategy for the core of Grindr Inc. has been built around intent. RightNow is the first major launch of ours that is very intent-focused, which is for people who want an immediate connection with somebody, whether it is today or tomorrow or in the very near term. RightNow is a way to get that more easily than previously was possible. The response from users to that has been amazing. We know that 20 to 25% of our users are using RightNow on a weekly basis, at least once a week. Shares of location are about twice what they are in normal conversations, which indicates the likelihood of meeting between people is much higher. And that is really positive. And so we are really happy with that launch and how that has gone. But that is just one piece of our intention-based roadmap. Helping people do a better job identifying people who would be good partners for them for the long term from the relationship perspective is the other one that we need to launch as well, and that is something we are working on. It is also on our roadmap from what we spoke about at Investor Day. Again, we know that among gay men 35 and under, half of them want to be in a long-term monogamous relationship. That is a really big change from how gay men thought about things even ten years ago and certainly twenty years ago when I was younger. And we need to serve them really well in that regard. Grindr Inc. is by far the primary place where gay relationships today in America are formed. About between three to four gay relationships in the US are formed on Grindr Inc. Like, right now, there is a whole BHH percentage. I think we can do a better job at that than we do, and that is part of what we are trying to do. So I think our product roadmap is really robust from both the intentions perspective and a bunch of other pieces. Happy to talk about those. And so I think our users will be quite happy with what they are seeing coming down the path.

Awesome. Really appreciate the color. For a follow-up, if I may, so heard a bit from some of your peers that there is a little bit of macro weakness in certain segments of the audiences. How is that picture from your seat, and how are you thinking about potential impacts from a broader economic slowdown? Thank you.

Yeah. Thanks for the question. You know, we are very fortunate that we have not seen any consumer ecosystem weakness that peers have discussed. Obviously, we are tracking that to make sure that it is not impactful. But so far, we have not seen anything, and we feel really good about things. That is probably why we feel confident raising guidance on revenue and on EBITDA as much as we have. You know, we have talked before that gay men tend to have higher education levels than their straight counterparts by about two times in the number of JDs, PhDs, MBAs, MDs, in the population. They also have much higher disposable income, both because they earn a lot more and then a lot of them do not have children, which gives them more disposable income. And so I think even if we were to have, you know, negative economic trends, for our user base, they are going to be able to withstand that a lot better than an average set of the population. And so I think that is really important to remember. And then lastly, you know, we are not a place for politics and economics. We are a place where people come to escape that. They come to Grindr Inc. for fun, adventurous, sexy experiences, and that is going to be why, in part, they spend as much time as they do every day on Grindr Inc. And so in a situation of economic weakness, if there is a lot of commotion going on, you could very well envision a world where users are spending more time on Grindr Inc. because they are dealing with all those things off Grindr Inc., and they come here to escape that and be dealing with something else. So so far, we feel really good about what is happening with Grindr Inc. while whatever might be happening in the economy, and I do not really anticipate any impact from that to us this year.

Love to hear it. Thanks again, and congrats on the quarter.

Thank you.

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the question and hope that all is well with the team. As you look at the business right now, how would you characterize the scope for growth on users, engagement, and monetization if you were to break the business down geographically between the international opportunity and what you are seeing in the US as you look out over the next twelve to eighteen months?

Sure. Happy to do that. So from the perspective of user growth, everywhere, obviously, it is a big focus for us all the time. Grindr Inc. is by far the best-known gay brand in the world, and we have a lot of users in lots and lots of places, but there is a lot of opportunity to drive more people to use Grindr Inc. The way we tend to think about that is product-led growth. Right? So we create new products, and then those products are what bring people to want to use Grindr Inc. That is probably why we launched RightNow, where that is a significant user growth expansion opportunity for people who previously might have been using Grindr Inc. more for those immediate connections and over time have started to use it less because there are too many other things going on in Grindr Inc. at the same time. This intention-based solution with RightNow gives them a chance to be on Grindr Inc. just for RightNow and nothing else, which we think is great. Same thing with relationships. That is a user growth opportunity that we think is significant because we do know from our users that, yes, they know Grindr Inc. has the critical mass of users, but we do not have features for relationships. So they consider oftentimes going to a different product, but then frequently come back to Grindr Inc. because we have the critical mass. And so we do not want them going through that. We want them to actually stay with us in our ecosystem, looking for whatever relationship they might be looking for. So I think that is all kind of, a lot of things that we are doing in product are very much driven with the idea towards creating more user growth. And then with regards to international and domestic, we think there is plenty of opportunity to grow our domestic user base. Obviously, we have an incredible brand in the US, you know, 95% brand awareness unaided, but not everybody who is in the community is using Grindr Inc. And so we do believe that there are opportunities to grow MAU here. But, obviously, there is a lot more opportunity internationally. For one, we are less known abroad. Right? We only have, based on the countries we have tested, we have not tested everywhere, roughly about 60% awareness in a lot of those countries. Now people who know us use it all the time. But people who do not know us cannot use us because they do not know us. And so we need to do more work on that front. There is also an opportunity to localize the app a lot better, starting with what we do in the App Store and localizing that for given locations, as well as what we do with the product itself. There has been very little localization of the product ever in any way. That is not something that we are necessarily working on in 2025, but those are the kinds of things that we are thinking about for the future. At Investor Day, we said that international growth is a long-term opportunity for us, and we still very much believe that. And it is something that we are going to invest in over time because we do think it is a big opportunity.

Just to add, our conversion rates have been having a steady cadence up in every region. So the product roadmap is definitely resonating with our users, and you are seeing that in our payer growth.

Really appreciate it. Thanks.

Next question comes from the line of Nick Jones with Citizens. Please go ahead.

Hi. This is Luke on for Nick. Thanks for taking the question. Can you just expand a bit on the AI-native product suite powered by A List? And, you know, the early progress you are seeing there and, you know, maybe what you are most excited about? Thank you.

Yeah. I mean, I am super excited about A List. I tell everybody that I have not yet seen another consumer product launch something like A List where they are identifying a very clear user need and then using the most innovative Gen AI that is out there to create a previously unimaginable solution. Like, this was not possible before. I frankly use numerous products where I wish there was an A List. Like, for example, I would love an A List in my personal Gmail. It would be really fantastic because, you know, the contact kind of information in Gmail is nowhere near as helpful as it could be and should be. And so I think there is a ton of opportunity with that. So we are really, really proud of what we have built and how quickly we built it and how we believe useful it will be for users. Really, I would strongly encourage everybody to go and check it out at grindrproduct.com/alist. It is about a one-minute video, but really gives you a kind of good deep dive into how A List works. There are a bunch of other AI-based products that are coming out this year, and we have already put Discover into test. I think of Discover as a new page inside Grindr Inc. where you can see people based on your interests and their interests, whether it is congruent from all over the world. Right? So it breaks down the geographic barriers that usually exist inside dating products, including on Grindr Inc., which our main grid is very local-based, and that is very beneficial. But we also do know that people want to find people everywhere, and this way, it kind of gives them heavy into people all over the world that might be appealing to them. And there are many other things that are with AI kind of coming along as well. We believe that these AI products are turning Grindr Inc. into an AI-native product overall. So the same way that we basically invented location-based products in 2009, we are now doing the same thing with AI, and we are very much at the forefront of what is possible. And I believe that is going to be really, really valuable to users. The value that we are creating for them through A List, through Discover, through Insights, and other things that are on the come are going to be pretty significant. And whenever you create a large amount of value for users, there is always an opportunity to significantly monetize that. We have some plans for how we will do that, but not ready to speak about that yet. That will be something we will discuss probably, you know, a few quarters down the road.

Great, pal. Thank you.