Q2 2024 Grindr Inc Earnings Call
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Thank you I would like to now turn the conference over to tow Lou Haddad Grinders head of Investor Relations. Please go ahead.
Speaker Change: Thank you moderator Hello, and welcome to Brian This earning call for the second quarter 2020 for today's call will be led by grinder, CEO, George Aronson and CFO <unk> <unk>.
I'll make a few brief remarks, and then we'll open it up for questions.
Speaker Change: Please note grinder released its shareholder letter. This afternoon and this is available on the Sec's website, and grinders investor page at Investor Doc Grinder Dot com.
Speaker Change: Before we begin I will remind everyone that during this call we may discuss our outlook and future performance.
Speaker Change: These forward looking statements may be preceded by words, such as we expect we believe we anticipate or similar such statements.
Speaker Change: These statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.
Speaker Change: These risks have been set forth in our earnings release, and our periodic reports filed with the SEC.
Speaker Change: During today's call. We will also present, both GAAP and non-GAAP financial measures additional.
Speaker Change: 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 Grinders website, and then granted filings with the SEC with that I'll turn it over to George.
George: Thanks, Tullow and Hello, everyone.
George: Coordinate delivered outstanding Q2 results between 34% year over year revenue growth and adjusted EBITDA margin of 45%.
George: Tutor growth with even better than we had expected at our Investor day in June.
George: Throughout Q2, we fine tune our conversion strategies by went through several enhancements to granite city tiers.
George: Improving the merchandising of premium features.
George: Modifying our explore chat feature and made it easier for us to utilize our boost add on and off.
George: Transitioning to our pace here.
George: The cumulative impact of these enhancements became clear exiting the quarter.
George: These factors plus the success of our unlimited weekly option combined to drive our outperformance.
George: <unk> performance in each one 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%, operator, and adjusted EBITDA margin of 42%.
George: Continued excellent adjusted EBITDA results demonstrate.
George: Highly efficient and lean team can do when it is focused on delivering value to you as shareholders.
George: It was great to see so many of you at Investor day and to share our story and our plans for the future.
George: You haven't until ready I encourage you to spend time with materials from Investor day to get a full sense of our mission vision strategy and political.
George: Quanta is unique because it was built by gay people Colgate people and our long term vision built on this uniqueness by focusing on user needs.
George: With our roadmap. We're building many features to enhance our core use case of connecting users with each other based on their intentions are.
George: Having strong monetization.
George: Making it easier for users to find fast immediate connection with you.
George: And so that's going.
George: To make this expense awesome.
George: The write down suite of features cleaning testing and Australia.
George: In addition, we are working on new features that address the desire of an increasing number of our users to find relationships.
George: Lack of density in a given geography is a key pediment teekay people finding their partners with Eni sort of stating features we can help our users breakdowns geographical spread.
George: Our goal within our roadmap is to build totally AI features that will provide us with a better understanding of how our users interact with it.
George: And in some long term integration of AI across the App.
George: For example, creating the grinder wingman and all participants to help users navigate around which we'll begin testing with select users by the end of the year.
George: Our core product roadmap also includes five hour card offerings that will rollout over the next three years.
George: <unk> caters to the quarter our weekly active users that are traveling during any given week.
George: Offerings and development will increase inbound interest by personalized recommendations and also uses insights about each other among other things.
George: In addition, our core product.
George: Also shared our plans for cable that extension opportunities, such as health and wellness as well as travel and local discovery.
George: The partnerships will help users access curated relevant services and information that will improve their lives.
George: While investments in these expansions are part of our financial plan revenue from them is not included in our protection presenting long term upside opportunity.
George: As a team we are building the global gateway market and to our success strive to make the world with the lives of our global community three equal interest with strong momentum in the rest of the year and beyond we're excited about fulfilling decision will mean for our users and our shareholders I am proud of the progress we've made so far the quality.
Anna: Execution and from a performance driven team with that I'll turn it over to Anna to review the results in more detail.
Thank you George and Hello, everyone Grinder delivered an exceptional second quarter marked by outstanding performance across all of our key financial and user metrics.
Speaker Change: Total revenue for Q2 increased by 34% year over year to $82 3 million with an adjusted EBITDA margin of 45%.
Speaker Change: Direct revenue increased 31% year over year to $70 million as we improve the merchandising of our premium features and enhanced our paid tiers.
Speaker Change: Specifically average monthly active users increased 7% over the prior year to $14 1 million.
Speaker Change: Average paying users in the quarter increased 14% over the prior year to $1 1 million, which brings payer penetration to seven 5% for the quarter.
Speaker Change: And our average direct revenue per paying user increased 16% over the prior year to $22 and <unk> this quarter.
Speaker Change: 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.
Speaker Change: Moving to expenses and profitability.
Speaker Change: 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.
Speaker Change: Adjusted EBITDA for Q2, 2024, or $36 9 million equating to a 45% adjusted EBIT margin up from $26 9 million, a year ago or 44% of revenue.
Speaker Change: Turning to our balance sheet, we paid down $17 6 million of debt, bringing our debt position to $298 million as of June 32024, and ended the quarter with $16 3 million in cash and cash equivalents.
Speaker Change: This equates to a leverage ratio of two two X based on the last 12 months of adjusted EBITDA.
Speaker Change: In the second quarter, we generated positive free cash flow of $14 2 million, which results in a 38% free cash flow conversion.
Speaker Change: As a reminder, our quarterly free cash flow conversion is subject to timing of changes in working capital.
Speaker Change: Lastly, as George mentioned, we are raising our guidance for the full year based on our strong performance in the first half of 2024.
Speaker Change: We now anticipate revenue growth of 27% or greater and an adjusted EBIT margin of 42% or greater.
Speaker Change: This revised outlook underscores the ongoing momentum across our business lines, and our ability to drive enhanced monetization and operational efficiencies.
Speaker Change: 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.
Speaker Change: With that I'll ask the operator to open up the line for questions.
Speaker Change: 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.
Speaker Change: And that is star one if you'd like to ask a question.
Nick Jones: And our first question will come from Nick Jones with citizens JMP.
Nick Jones: Great. Thanks for taking the questions I have a couple.
Speaker Change: Can you can you maybe elaborate a little bit more on the merchandising you did to improve conversion.
Speaker Change: Pro forma kind of nicely ahead of kind of what we heard from the analyst day. So just curious as to kind of what you're learning as you're launching new merchandising.
Speaker Change: Techniques do you think you could maybe speed up.
Speaker Change: Ongoing conversion or RP pool, or kind of what are your learnings and maybe put a finer point on what it was and then.
Speaker Change: The second question is on <unk>.
Speaker Change: The shareholder letter you commented on the Spanish channel.
Speaker Change: Being launched.
Speaker Change: What do you need to see to kind of invest more behind that and then what do you mean to say the playbook to deploy that in other languages.
Speaker Change: Thanks, Nick.
Speaker Change: Question, so on merchandising.
Speaker Change: We 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 part of the paid tier or.
Speaker Change: And even in the free product users actually don't know about because we don't tell them about it in an active way.
Speaker Change: And oftentimes people back.
Speaker Change: Covered xyz feature and then it kind of becomes popular because someone wrote about it in social or.
Speaker Change: And by early kind of it takes off.
Speaker Change: Because of the power of the product, but probably is not the best approach when it comes to things, where you expect to make money.
Speaker Change: So we've been experiment with product marketing for boost in various ways over the last year one of the things we did.
Speaker Change: But in the App and we call it a booth.
Speaker Change: You can access boost more easily from the main grid.
Speaker Change: Fairly helpful. I was just one of the things we did in.
Speaker Change: Some of the merchandising and that's effective.
Speaker Change: We've generally.
Speaker Change: I think have a lot of opportunity to do better in how we.
Speaker Change: How do we kind of.
Speaker Change: This is sell the product and.
Speaker Change: And presented and another thing that we did.
Speaker Change: This past quarter is what we call now adds upsell, so basically informing that.
Speaker Change: If they are a paying customer they don't see ads that will be beneficial as well and then you 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 our pay tier or so.
Speaker Change: Those are the types of things, we will be doing a lot more of and frankly, the both kind of informing people about what's available, but also finding the right places to drop that inside the app with easily accessible.
Speaker Change: That's one of the learnings we've had over time that we need to make things are pretty easily accessible to users.
Speaker Change: On the Spanish channels, I guess, the way I tend to think about that is that 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.
Speaker Change: And social for US is really powerful both to engage with our users and also to kind of stay.
Speaker Change: As with the broader community of people, who could be our users.
As in the past.
Speaker Change: We view our channels are the places where people can come and see a fun and entertaining content and that they can engage with and in light.
Speaker Change: And we do get a lot of traction on social.
Speaker Change: It's pretty evident even when we don't try to create traction.
Speaker Change: To create a kind of traction just kind of organically, which is awesome. So given that finishes our second dominant language.
Speaker Change: Have a lot of users in Spanish speaking countries.
Speaker Change: And those are growing really nicely obviously in particular in Latin America.
Speaker Change: We thought that Spanish made a ton of sense.
Speaker Change: The next language to start doing social media in.
Speaker Change: And so far so good but this is a very early phase of what we do could I envision that one day, we do something for example in Portuguese.
Speaker Change: Possible, but it's not something we are actively kind of thinking about right now.
Speaker Change: The 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.
Speaker Change: 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 counting on unexpected results in this year or next year.
Great if I could ask one more question.
Speaker Change: How are you measuring kind of the brand efforts, particularly the grinder rides America tour that you highlighted just curious on.
Speaker Change: How that is progressing in the U S and higher measuring kind of these kind of upper funnel brand efforts. Thanks.
Speaker Change: Yes.
Speaker Change: The reality is that we have incredible brand recognition in the U S.
Speaker Change: <unk> strong brand recognition internationally, but not as strong as in the new assets 90, plus percent in the U S and.
Speaker Change: 60% in select international regions, where we measured it.
Speaker Change: 60%, obviously is great for probably a lot of companies is just not as great as what we have in the U S.
Speaker Change: And with it when we do something in the U S light in the bus tour. That's just basically trying to stay top of mind with our user and also too to give that back to us is a little bit as well right because we are.
Speaker Change: A very important part of their lives and.
Speaker Change: <unk> engaged with us in real life has benefits and Thats 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 but we saw really great engagement. Both in terms of people coming to the months, but also the content that was created from that.
Speaker Change: Incredible engagement in social channels, and so a lot of our strategies around create content that people like whether it's in real life events or podcasts or videos and then see drive traction with that socially and then eventually in the App as well.
Speaker Change: We're going to do some things in the app that allow us to engage with users without content as well. So we're really happy with how the bus worked out it was frankly.
Speaker Change: Beyond any expectation that we had it was really really positive I went through 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 going home. So engagement was really positive and I certainly would expect that we will do more things like that in the future.
Speaker Change: But again I don't think its like one thing accomplishes Xyz result, and you say <unk>.
Speaker Change: <unk> 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 Brian there versus some of the negative associations that come out of Gotcha Gotcha.
Speaker Change: Stories that are available in the <unk>.
Speaker Change: And Google that people look up that maybe happened 10 years ago, and probably the article with Nevada was not fully true in the first place.
Speaker Change: That's the goal of kind of our brand strategy and I think it's going really well.
Speaker Change: Thanks for taking the questions.
Speaker Change: Thank you. Our next question comes from John Blackledge with TD Cowen.
Logan: Hi, there its Logan on for John.
Speaker Change: Two questions first one.
Speaker Change: Just focused around monthly active user growth continues to grow nicely could you talk about what's driving the strength there while some other players face challenges.
Speaker Change: And also just as you look to the back half of the year what were the biggest drivers.
Speaker Change: You guys raising that full year outlook, and then I just have one follow up.
Speaker Change: So with respect to thanks for the question.
Speaker Change: 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 and states at about 90%, but really as an opportunity internationally.
Speaker Change: With respect to the MAU growth through the back half of the year I can see we're at 7% year to date, but with the back half of the year, we're really still thinking about it from us.
Speaker Change: Our perspective is having.
Speaker Change: Having more users coming into our platform with which frankly the products that they're interested.
Speaker Change: And so.
Speaker Change: Right now we expect it to be similar to what we're seeing now.
Speaker Change: Yes, I mean, I think the one thing I would add on model and this is not kind of.
Speaker Change: It's going to drive our result, this year per se, but.
Speaker Change: We believe that.
Speaker Change: A lot of users who.
Brian: This is Brian are aligned in the past and might not be using as much now as they did in the past there is a bunch of reasons for that right people.
Brian: They become older and our user base is that thinking about being in a long term relationship and they try to look for places where they can.
Brian: Find the long term partnerships.
Brian: We believe that by building features and products that cater to those types of needs that you might have we can drive more mile growth as well and so we are one of the things we're doing that at Investor day, we talked about how the relationship use case and building a whole suite of features for that use case, that's something that we're going to work on and launch.
Brian: And we believe that not only has a significant opportunity to drive revenue growth from the users that are in the app already but also to re engage users who probably still use the blender, but might not be using it on a monthly basis.
Brian: And going to give them another reason to engage with our products. So we believe that product driven my growth can be very effective in it.
Brian: And it has an impact on word of mouth. It has an impact on warehousing and that all really benefits us and we are making those investments. Additionally, as I mentioned a minute ago, we do have.
Brian: 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.
Brian: So we believe that by driving that.
Brian: Brand awareness to be higher.
Brian: Kind of getting closer to where we are in the U S. Over obviously many years, that's not going to be accomplished in one or two years, we will drive more user growth.
Brian: Those countries as well and that's a significant opportunity for us over the mid and long term. That's why we think this is such an opportunity.
Brian: Hopefully that's helpful.
Brian: We.
And for that.
Brian: Yes.
Brian: Helpful. Thank you.
Brian: And then just one more question as you test.
Brian: The right now feature and as you kind of gradually roll out their own feature could you talk about any early learnings there or are you seeing uptake more from current subscribers may be or are you seeing new payers come onboard through those features really really just any kind of <unk>.
Brian: Reception from users of the App would be helpful.
Brian: So right now in the room are very different product and how we think about them is they're very different right. Now is a fairly significant user journey enhancement in our product is creating a.
Solution for a use case that Brian there is really good at but as we became bigger and have more and more users that have different intentions.
Brian: The ease of that immediate connection.
Brian: He is not there anymore on grinder as it was say a decade ago and so by creating the right now to.
Brian: Do you use case and features that we are solving that need for users. We had heard about this very loudly and clearly from our users the focus right now and all the work we're doing on right now.
Brian: To be explicit again only some of the features that will be in the suite of features have been launched and tested so far but there's more to come.
Brian: User engagement right, we're taking the same approach to right now as we did two albums.
Brian: The album went viral and became very very popular very very quickly. That's why so many hundreds of millions of albums gets shared on a regular basis in Sidewinder and then over time, we were able to drive better monetization format as well by seeing more people convert to paying customer.
Brian: Customers because just send many albums onto how many albums IMMU Minneapolis do you need to be a paying customer. So we think of right now in the same way right now, it's about user engagement and creating virality.
Brian: And users because it is a marketplace and so you need people.
Brian: To be engaged with that and only after we were successful at that and when we think about monetization. So I would not expect significant monetization from right now in 2024 or in 2025 and frankly, that's not the objective the objective is user engagement.
Brian: With the room, that's a different for enrollment in Ala carte similar to boost.
Brian: We said in Investor day that a quarter of our users slightly more 27%.
Brian: From the weekly active users are traveling any given week, so raw materials at that user base that is traveling right because it's about showing a profile in a different market from where you live.
Brian: So if you think about what success for Ron looks like it if it achieves one fourth of what we generate from boost that would be like the exceptional outcome and we believe that so far we are well on track to do that over the next year and a half to two years.
Brian: We've released from only to a limited amount of users in top countries, but thats a significant expansion of where that is now available and our goal is to have it available.
Brian: 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 and we expect that in 2025, we will see monetization benefits from Rome, but again when you think about the magnitude of it quarterly is traveling in a given week and if they're traveling product right.
Brian: So if boosted our best our car and the most successful one not just for Brian but actually for every other product like grinder.
Brian: The very successful outcome for them would be one fourth of August.
Brian: Yeah.
Brian: Great that's awesome. Thank you George.
Speaker Change: Thank you and as a quick reminder, you May press Star one now to ask a question.
Speaker Change: It looks like Theres no additional questions at this time, we'd like to thank you for joining the <unk> second quarter 2024 earnings call.
Speaker Change: That concludes today's presentation you may now disconnect.