Grindr Q2 2024 Earnings Report

Grindr EPS Results

• Actual EPS: $0.07
• Consensus EPS: $0.05
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Grindr Revenue Results

• Actual Revenue: $82.35 million
• Expected Revenue: $77.40 million
• Beat/Miss: Beat by +$4.95 million
• YoY Revenue Growth: N/A

Grindr Announcement Details

• Quarter: Q2 2024
• Date: 8/8/2024
• Time: N/A
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 5:00PM ET

Grindr (NYSE:GRND), trading on the NYSE under the ticker symbol GRND, operates a global social networking and dating platform designed primarily for gay, bisexual, transgender and queer (GBTQ) individuals. The company’s core offering is a location-based mobile application that enables users to connect, chat and share content with others in their vicinity. Through its free tier and premium subscription services—known as Grindr XTRA and Grindr Unlimited—Grindr provides enhanced features such as ad-free browsing, advanced filters and unlimited profile views, catering to a broad spectrum of user needs.

Originally launched in 2009 by entrepreneur Joel Simkhai, Grindr was one of the first mobile apps to leverage geolocation technology for social networking. Over time, the platform has expanded to include in-app news, editorial content and community initiatives focused on health, wellness and LGBTQ advocacy. Grindr’s advertising solutions also allow brands and organizations to reach a diverse and engaged audience across its digital properties.

Headquartered in West Hollywood, California, Grindr serves users in more than 190 countries and supports a variety of languages to accommodate its international membership base. The company’s mobile applications are available on both iOS and Android operating systems, and it periodically introduces new community-driven features aimed at enhancing user safety and fostering positive interactions.

Since completing its merger with a special purpose acquisition company (SPAC) in November 2022, Grindr has operated as a publicly traded entity, governed by a management team with experience in digital media, technology development and consumer marketing. The company continues to explore strategic partnerships and product enhancements to solidify its position as a leading platform for LGBTQ social networking and digital community building.

Grindr Q2 2024 Earnings Call Transcript

Key Takeaways

• Grindr reported 34% year-over-year revenue growth in Q2 to $82.3 million and a 45% adjusted EBITDA margin, prompting management to raise full-year guidance to at least 27% revenue growth and a 42% EBITDA margin.
• Key user metrics improved: average MAUs grew 7% to 14.1 million, paying users rose 14% to 1.1 million (7.5% penetration), direct revenue per paying user increased 16% to $22.08, and ad revenue jumped nearly 50% to $12 million.
• Recent product merchandising efforts—such as a more prominent Boost button, an ad-free upsell, Explore Chat tweaks and an unlimited weekly option—drove stronger-than-expected user conversion.
• The company is advancing its roadmap with a “Right Now” instant-connection suite, the Roam feature for traveling users, five planned a la carte offerings over three years, and AI-based tools like “Grindr Wingman” to boost engagement.
• Grindr launched a Spanish social channel to bolster global brand awareness (currently ~90% in the U.S. vs. ~60% in select international markets) and is exploring health, wellness and travel partnerships as long-term upside opportunities.

Presentation

[Operator]

Good afternoon. My name is Stephanie, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Grindr Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.

[Operator]

If you'd like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. And if you would like to withdraw yourself from the queue, you may press Star two. Thank you. I would like to now turn the conference over to Tolu Adeofe, Grindr's Head of Investor Relations. Please go ahead.

[Tolu Adeofe, Head of Investor Relations at Grindr]

Thank you, moderator. Hello, and welcome to Grindr's earnings call for the second quarter, 2024. Today's call will be led by Grindr's CEO, George Arison, and CFO, Vanna Krantz. They will make a few brief remarks, and then we'll open it up for questions. Please note, Grindr released its shareholder letter this afternoon, and this is available on the SEC's website and Grindr's investor page at investors.grindr.com.

[Tolu Adeofe, Head of Investor Relations at Grindr]

Before we begin, I will remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as: we expect, we believe, we anticipate, or similar such statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC.

[Tolu Adeofe, Head of Investor Relations at Grindr]

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 GAAP to non-GAAP measures, are included in the earnings release we issued today, which has been posted on the investor relations page of Grindr's website and in Grindr's filings with the SEC. With that, I'll turn it over to George.

[George Arison, CEO at Grindr]

Thanks, Tolu, and hello, everyone. Grindr delivered outstanding Q2 results, featuring 34% year-over-year revenue growth and adjusted EBITDA margin of 45%. Our Q2 growth was even better than we had expected at our Investor Day in June. Throughout Q2, we fine-tuned our conversion strategies by launching several enhancements to Grindr's paid tiers, while improving the merchandising of premium features.

[George Arison, CEO at Grindr]

We modified our Explore chat feature and made it easier for users to utilize our Boost add-on and opt out from ads by transitioning to a paid tier. The cumulative impact of these enhancements became clear exiting the quarter. These factors, plus the success of our Unlimited weekly option, combined to drive our performance.

[George Arison, CEO at Grindr]

Excellent performance in H1, strong growth in MAU, and the strength of our advertising business is allowing us to raise our full-year guidance to revenue growth of 27% or greater and adjusted EBITDA margin of 42% or greater. Our continued excellent adjusted EBITDA results demonstrate what a highly efficient and lean team can do when it is focused on delivering value to users and shareholders.

[George Arison, CEO at Grindr]

It was great to see so many of you at Investor Day and to share our story and our plans for the future. If you haven't done so already, I encourage you to spend time with materials from Investor Day to get a full sense of our mission, vision, strategy, and product roadmap. Grindr is unique because it was built by gay people for gay people, and our long-term vision builds on this uniqueness by focusing on user needs.

[George Arison, CEO at Grindr]

With our roadmap, we're building many features to enhance our core use case of connecting users with each other based on their intentions, while driving strong monetization. Making it easier for users to find fast, immediate connections will always be front and center at Grindr. To make this experience awesome, we're building the Right Now suite of features currently in testing in Australia.

[George Arison, CEO at Grindr]

In addition, we're working on new features that address the desire of an increasing number of our users to find relationships. Lack of density in a given geography is a key impediment to gay people finding their partners, and with AI-sourced dating features, we can help our users break down these geographic constraints.

[George Arison, CEO at Grindr]

Our goal within our roadmap is to build early AI features that will provide us with a better understanding of how our users interact with AI and inform long-term integration of AI across the app. For example, we are creating the Grindr Wingman, an all-purpose assistant to help users navigate our app, which will be in testing with select users by the end of the year.

[George Arison, CEO at Grindr]

Our core product roadmap also includes five à la carte offerings that will roll out over the next three years. Roam caters to the quarter of our weekly active users that are traveling during any given week. Future offerings and development will increase inbound interest, provide personalized recommendations, and offer users insights about each other, among other things.

[George Arison, CEO at Grindr]

In addition to our core product, we also shared our plans for gayborhood expansion opportunities, such as health and wellness, as well as travel and local discovery. Via partnerships, we will help users access curated, relevant services and information that will improve their lives. While investments in these expansions are part of our financial plan, revenue from them is not included in our projections, presenting long-term upside opportunity.

[George Arison, CEO at Grindr]

As a team, we're building the Global Gayborhood in your pocket, and through our success, strive to make a world where the lives of our global community are free, equal, and just. With strong momentum in the rest of the year and beyond, we're excited about what fulfilling this vision will mean for our users and our shareholders. I'm proud of the progress we've made so far and of the quality of execution from our performance-driven team. With that, I'll turn it over to Vanna to review the results in more detail.

[Tolu Adeofe, Head of Investor Relations at Grindr]

Thank you, George, and hello, everyone. Grindr delivered an exceptional second quarter, marked by outstanding performance across all of our key financial and user metrics. Total revenue for Q2 increased by 34% year-over-year to $82.3 million, with an adjusted EBITDA margin of 45%.

[Tolu Adeofe, Head of Investor Relations at Grindr]

...Direct revenue increased 31% year-over-year to $70 million as we improved the merchandising of our premium features and enhanced our paid tiers. Specifically, average monthly active users increased 7% over the prior year to 14.1 million. Average paying users in the quarter increased 14% over the prior year to 1.1 million, which brings payer penetration to 7.5% for the quarter and our average direct revenue per paying user increased 16% over the prior year to $22.08 this quarter.

[Tolu Adeofe, Head of Investor Relations at Grindr]

Indirect revenue for Q2 was up nearly 50% year-over-year to $12 million, fueled by momentum in third-party ads as we have expanded our network of ad partners. Moving to expenses and profitability, operating expenses, excluding the cost of revenue, was $36.8 million in Q2 2024, up 17% year-over-year, with the increase primarily driven by compensation-related expenses.

[Tolu Adeofe, Head of Investor Relations at Grindr]

Adjusted EBITDA for Q2 2024 was $36.9 million, equating to a 45% adjusted EBITDA margin, up from $26.9 million a year ago, or 44% of revenue. Turning to our balance sheet, we paid down $17.6 million of debt, bringing our debt position to $298 million as of June 30, 2024, and ended the quarter with $16.3 million in cash and cash equivalents. This equates to a leverage ratio of 2.2x based on the last 12 months of adjusted EBITDA.

[Tolu Adeofe, Head of Investor Relations at Grindr]

In the second quarter, we generated positive free cash flow of $14.2 million, which results in a 38% free cash flow conversion. As a reminder, our quarterly free cash flow conversion is subject to timing of changes in working capital. Lastly, as George mentioned, we are raising our guidance for the full year based on our strong performance in the first half of 2024.

[Tolu Adeofe, Head of Investor Relations at Grindr]

We now anticipate revenue growth of 27% or greater, and an Adjusted EBITDA margin of 42% or greater. This revised outlook underscores the ongoing momentum across our business lines and our ability to drive enhanced monetization and operational efficiencies. We're focused on continuing to execute on our business plan and our product roadmap, and we are excited about the progress we are making. With that, I'll ask the operator to open up the line for questions.

[Operator]

Thank you, at this time, we will open the floor for questions. If you'd like to ask a question, you may press star one now. Again, that is star one if you'd like to ask a question. Our first question will come from Nick Jones with Citizens JMP.

[Nick Jones, Managing Director of Internet Equity Research at Citizens Financial Group]

Great. Thanks for taking the questions. I have a couple. Can you maybe elaborate a little bit more on the merchandising you did to improve conversion? You know, you're performing kind of nicely ahead of what we heard from the analyst day. So just curious as to what you're learning as you're launching new merchandising techniques, and, you know, do you think you can maybe speed up ongoing conversion or RPPU or what are your learnings and maybe put a finer point on what it was?

[Nick Jones, Managing Director of Internet Equity Research at Citizens Financial Group]

Then the second question is on, you know, in the shareholder letter, you comment on the Spanish channel being launched in Q2. What do you need to see to invest more behind that and then what do you need to see in the playbook to deploy that in other languages? Thanks.

[George Arison, CEO at Grindr]

Thanks, Nick. That's a great question. So on merchandising, we'll kind of start a little bit historically. We historically have not done a very good job in product marketing. A lot of things that are in the app and available to users, whether it's as part of a paid tier or in just the free product, users actually don't know about because we don't tell them about it in an active way. And oftentimes people will be like, "Oh, I just discovered XYZ feature," and then it kind of becomes popular because someone either wrote about it in social or virally kind of takes off, which speaks to the power of the product, but probably is not the best approach when it comes to things where you expect to make money.

[George Arison, CEO at Grindr]

And so we've been experimenting with product marketing for Boost in various ways over the last year. One of the things we did is visible in the app, and we call it a Boost FAB, where you can access Boost more easily from the main grid. And that was, you know, fairly helpful. It was just one of the things we did in terms of merchandising, and that's effective. So we've generally, you know, I think, have a lot of opportunity to do better in how we kind of sell the product and present it. And another thing that we did in this past quarter is what we call no ads upsell.

[George Arison, CEO at Grindr]

So basically informing users that if they are a paying customer, they don't see ads. That was really beneficial as well. Again, you'd think that all users should know that, but because we don't do a lot of product marketing, people actually don't know what all the benefits of a paid tier are. So those are the types of things we will be doing a lot more of, and frankly, it's both kind of informing people about what's available, but also finding the right places to drop that inside the app where it's easily accessible. You know, that's one of the learnings we've had over time, that we need to make things pretty easily accessible to users. On the Spanish channels, I guess the way I tend to think about that is this:...

[George Arison, CEO at Grindr]

International is a huge opportunity for us, but we tend to think of it as an opportunity in the mid and the long term, rather than in an immediate sense. We've done really well internationally already, having done virtually nothing to drive user growth. It's been all viral and word of mouth. And social for us is really powerful, both to engage with our users and also to kind of stay engaged with the broader community of people who could be our users or were our users in the past. We view our channels as a place where people can come and see fun and entertaining content that they can engage with and like. And we do get a lot of traction on social, as I think it's pretty evident.

[George Arison, CEO at Grindr]

Even when we don't try to create traction, it tends to create a ton of traction, just kind of organically, which is awesome. So given that Spanish is, you know, our second dominant language, we have a lot of users in Spanish-speaking countries, and those are growing really nicely, obviously, in particular in Latin America.

[George Arison, CEO at Grindr]

We thought that Spanish made a ton of sense, as the next language to start doing social media in. And, you know, so far, so good, but this is a very early kind of phase of what we do. Could I envision that one day we do something, for example, in Portuguese? It's certainly possible, but it's not something we are actively kind of thinking about right now.

[George Arison, CEO at Grindr]

You know, Spanish is a very significant part of our user base, and so it made sense to kind of do that, and we'll make a decision on something else, later on. But broadly speaking, as we think about the midterm and the long term, international is going to become more of a focus. It's just not something we're, you know, counting on and expect a lot of results in this year or next year.

[Nick Jones, Managing Director of Internet Equity Research at Citizens Financial Group]

Great. If I could ask one more question. How are you measuring kind of the brand efforts, you know, particularly the Grindr Rides America Tour that you highlighted? Just curious on how that's progressing in the U.S. and how you're measuring kind of these kind of upper funnel brand efforts? Thanks.

[George Arison, CEO at Grindr]

Yeah. I mean, the reality is that we have incredible brand recognition in the U.S. We also have extremely strong brand recognition internationally, but not as strong as in the U.S. So it's 90%+ in the U.S. and, you know, 60% in select international regions where we've measured it. Which is 60%, obviously, is, like, great for probably a lot of companies. It's just not as great as what we have in the U.S. When we do something in the U.S., like the bus tour, that's just basically trying to stay top of mind with our users and also to give back to users a little bit as well, right?

[George Arison, CEO at Grindr]

Because, we are, you know, a very important part of their lives, and being engaged with us in real life has benefits. And that's kind of how we think about that. It's not around, hey, take that 90% brand recognition to 92, because, like, we're not going to be able to effectively measure that. But we saw really great engagement, both in terms of people coming to the bus, but also the content that we created from that had incredible engagement in social channels. And so a lot of our strategy is around create content that people like, whether it's through in real life events or podcasts or videos, and then drive traction with that socially and then eventually in the app as well.

[George Arison, CEO at Grindr]

But we're gonna, you know, do some things in the app that allow us to engage with users with that content as well. So we were really happy with how the bus worked out. It was frankly, you know, beyond any expectations that we had. It was really, really positive. I went to the launch in San Francisco, and literally, like, the line to get into the bus didn't stop until it was very late at night and everyone was going home. So, engagement was really positive, and I certainly would expect that we will do more things like that in the future. But again, I don't think it's like one thing accomplishes XYZ result.

[George Arison, CEO at Grindr]

It's a broader approach of really owning our brand and telling our story a lot better, so that people have the positive associations that we believe they should with Grindr, versus some of the negative associations that come out of, you know, gotcha, gotcha stories that are available in Google, that people look up, that, you know, maybe happened 10 years ago and probably the article written about it was not fully true, so that's the goal of kind of our brand strategy, and I think it's going really well.

[Nick Jones, Managing Director of Internet Equity Research at Citizens Financial Group]

Thanks for taking the questions.

[Operator]

Thank you. Our next question comes from John Blackledge with TD Cowen.

[Logan Whalley, VP of Equity Research at TD Cowen]

Hey there, it's Logan on for John. I have two questions. First one, just focused around the monthly active user growth, continues to grow nicely. Could you talk about what's driving the strength there, while some other players face challenges? And also, just as you look to the back half of the year, what were the biggest drivers in you guys raising that full year outlook? And then I just have one follow-up.

[Vanna Krantz, CFO at Grindr]

So with respect to, thanks for the question. With respect to the MAU growth, it's actually been really strong without us having to pull the traditional levers, like performance marketing. As George said, our brand awareness is really strong in the States at about 90%, but really is an opportunity internationally. With respect to the MAU growth through the back half of the year, obviously, we're at 7%, year-to-date. But with the back half of the year, we're really still thinking about it from a perspective of having more users coming into our platform with, frankly, the products that they're interested in seeing. And so, right now, we expect it to be similar to what we're seeing now.

[George Arison, CEO at Grindr]

Yeah, I mean, I think the one thing I would add on, on MAU, and this is not kind of, that's gonna drive a result, you know, this year per se, but we, we believe that, there are a lot of users who have used Grindr a lot in the past and might not be using it as much now as, as they did in the past. There's a bunch of reasons for that, right? People, as they become older in, in our user base, start thinking about being in a, in a long-term relationship, and, they try to look for places where they can, you know, find the, the long-term partnership. We believe that by building features and products that cater to those types of needs that users might have, we can drive more MAU growth as well.

[George Arison, CEO at Grindr]

And so, that's one of the things we're doing, right? Like, yesterday, we talked about how the relationship use case and building a whole suite of features for that use case was something that we're going to work on and launch. We believe that not only has significant opportunity to drive revenue growth from the users that are in the app already, but also to reengage users who probably still use Grindr, but might not be using it on a monthly basis, and it's gonna give them another reason to engage with our product. So we believe that product-driven mild growth can be very effective, and it has an impact on word of mouth, it has an impact on virality, and that all really benefits us, and we are making those investments.

[George Arison, CEO at Grindr]

Additionally, as I mentioned a minute ago, we do have, you know, higher brand recognition in the U.S. than we do internationally. And we know from the work we've done on some of the international countries in terms of learning about them, that when people know us in a given country, they use us a lot, and they really like the product.

[George Arison, CEO at Grindr]

And so we believe that by driving that brand awareness to be higher, kind of getting closer to where we are in the U.S. over obviously many years, that's not gonna be accomplished in one or two years, we will drive more user growth in those countries as well. And that's a significant opportunity for us over the mid and long term. That's why we think international is such an opportunity. So, hopefully that's helpful, kind of, as we answer that.

[Logan Whalley, VP of Equity Research at TD Cowen]

Yeah, super helpful. Thank you. And then just one more question: as you test the Right Now feature, and as you kind of gradually roll out the Roam feature, could you talk about any early learnings there? Are you seeing uptake more from current subscribers maybe, or are you seeing new payers come on board through those features? Really, really just any kind of reception from users of the app would be helpful.

[George Arison, CEO at Grindr]

Yeah. So Right Now and Roam are very different products, and how we think about them is very, very different. Right Now is a fairly significant user journey enhancement in our product. It's creating a solution for a use case that Grindr is really good at. But as we became bigger and have more and more users that have different intentions, the ease of that immediate connection is not there anymore on Grindr as it was, say, a decade ago. And so by creating the Right Now use case and feature set, we are solving that need for users. We had heard about this very loudly and clearly from our users.

[George Arison, CEO at Grindr]

The focus right now in all the work we're doing on Right Now, and to be explicit, again, only some of the features that will be in that suite of features have been launched in the test so far, but there's more to come, is user engagement, right? We're taking the same approach to Right Now as we did to Albums.

[George Arison, CEO at Grindr]

Albums went viral and became very, very popular, very, very quickly. That's why so many hundreds of millions of albums get shared on a regular basis inside Grindr. And then over time, we were able to drive better monetization from that as well by seeing more people convert to paying customers, because to send many albums or to have many albums and view many albums, you need to be a paying customer.

[George Arison, CEO at Grindr]

So we think of Right Now in the same way. Right now, it's about user engagement and creating a virality, in users because it is a marketplace, and so you need people to be engaged with that. And only after we're successful at that, will we think about monetization. So I would not expect significant monetization from Right Now in 2024 or in 2025, frankly. And that's not the objective.

[George Arison, CEO at Grindr]

The objective is user engagement. With Roam, that's a different story, right? Roam is an à la carte, similar to Boost. We said in Investor Day that a quarter of our users, slightly more, 27%, from the weekly active users are traveling any given week. So Roam is targeted at that user base that is traveling, right?

[George Arison, CEO at Grindr]

Because it is about showing your profile in a different market from where you live. So if you think about what success for Roam looks like, it's if it achieves, you know, 1/4 of what we generate from Boost, that would be like an exceptional outcome. And we believe that so far, we are well on track to do that, over the next, you know, year and a half to two years.

[George Arison, CEO at Grindr]

We've released Roam only to a limited amount of users in top countries, but that's, you know, a significant expansion of where that is now available. And our goal is to have it available, you know, in a much larger sense, not maybe not everywhere, but in most places, by the end of the year. And we're very much on track to do that.

[George Arison, CEO at Grindr]

We expect that in 2025, we will see monetization benefits from Roam. But again, when you think about the magnitude of it, a quarter of our users are traveling any given week, and this is a traveling product, right? So if Boost is our best à la carte and the most successful one, not just for Grindr, but actually for every other product like Grindr, you know, the very successful outcome for Roam would be 1/4 of Boost.

[Logan Whalley, VP of Equity Research at TD Cowen]

Great. That's awesome. Thank you, George.

[Operator]

Thank you. As a quick reminder, you may press star one now to ask a question. It looks like there's no additional questions at this time. We'd like to thank you for joining the Grindr second quarter 2024 earnings call. This does conclude today's presentation. You may now disconnect.

Participants

Executives

• George Arison, CEO
• Tolu Adeofe, Head of Investor Relations
• Vanna Krantz, CFO

Analysts

• Logan Whalley, VP of Equity Research at TD Cowen
• Nick Jones, Managing Director of Internet Equity Research at Citizens Financial Group