Q3 2024 Grindr Inc Earnings 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. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question again prestige starwood.

Colo Ed: I would now like to turn the conference over to Colo Ed you offer grinders head of Investor Relations. Please go ahead.

Speaker Change: Thank you moderator Hello, and welcome to the <unk> earnings call for the third quarter 2020 for today's call will be led by grinder, CEO, George Harrison and CFO Vanna cramp.

Colo Ed: They will make a few brief remarks, and then we'll open it up for questions.

Colo Ed: Please note grinder released its shareholder letter. This afternoon and this is available on the SEC website and grinders investor page at investors <unk> Grinder dotcom.

Colo Ed: Before we begin I will remind everyone that during this call we may discuss our outlook and future performance.

Colo Ed: These forward looking statements may be preceded by words, such as we expect we believe we anticipate or similar such statements.

Colo Ed: These statements are subject to risks and uncertainties and our actual results could differ materially from the views expressed today.

Colo Ed: Some of these risks have been set forth in our earnings release, and our periodic reports filed with the SEC.

Colo Ed: On 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 Grand as web site and in <unk> filings with the SEC.

Colo Ed: With that I'll turn it over to George.

Speaker Change: Thanks, Tony and Hello, everyone with strength across all of our findings from any of the metrics. We delivered an exceptional third quarter, enabling us to again increase our revenue growth guidance for the year to 29% operator.

Speaker Change: Outperformance reflects the success of our weekly unlimited subscription offering as well as effective merchandising and payroll optimizations.

Speaker Change: Advertising revenue also exceeded our expectations this quarter fueled by increased demand from our third party advertising partners.

Speaker Change: Then I will cover a few highlights shortly.

Speaker Change: And as always you can find a more detailed review of the quarter in our shareholder letter.

Speaker Change: I will focus the remainder of my remarks on our team's continued focus on building and launching innovative features and product focused on the user.

Speaker Change: Q3, we expanded testing of right now to the Washington, DC Metro area. We also launched right. Now is feed feature that allows users who are in the right now mode to post their intent to a group of nearby users and then chat directly with each other.

Speaker Change: We will continue expanding right now with more features and across most geographies with the goal of scaling the product by the end of 2025.

Speaker Change: Our focus is on user engagement.

Speaker Change: That's a good potential for monetization as well.

Speaker Change: We also launched the interest town centralizing inbound interest across viewed me and taps, which increased payer conversion and led to an over 150% increase in user engagement with its unique feature in the future. We will add additional inbound related features to this town.

Speaker Change: In addition room is now live globally, allowing users to move their profile to a different location before arriving.

Speaker Change: Serving that one in four greiner users who are traveling in any given week, we're making good progress in other product areas as well.

<unk> early testing of our AI powered women, which we highlighted in the shareholder letter.

Speaker Change: Additionally, I'm very proud of our team's working resolving legacy bugs and improvements to app stability that took place in Q3 and.

Speaker Change: An important part of our user experience focus.

Speaker Change: This indirectly also supports conversion is over time, we expect these is to recognize the improved quality and increased value we are delivering.

Speaker Change: Overall, we remain on track or ahead on all items on our product roadmap, we shared at Investor day, and we are bullish about our portfolio approach to product development, which is key to our plan for long term success.

Product work starts with users that need their behavior. Their preferences. We build features that drive their engagement before implementing steps that drive revenue there.

Speaker Change: It allows us to make sure that our unique connection with our community remains strong.

Speaker Change: Noting how whether that inherent to this approach is also the likelihood that some products and features will be bigger than others.

Speaker Change: With strong execution. This year, we are setting up for another great year of growth in 2025, as we continue to execute on effective monetization strategies.

Speaker Change: In the near term or bigger performance drivers will likely be our existing products as well as payroll optimization and merchandising.

Speaker Change: I expect that next year, our team will not only continue to deliver strong financial results, but also achieved good progress in both launching new initiatives as well as scaling products that are already launched for Intest all targeted at creating an exceptional user experience.

Speaker Change: As a result, we have potential upside in our results from these new products as adoption grows.

Speaker Change: Thank you all for your support and a big thanks to our team for their great work in Q3 now he is banner to discuss the results.

Speaker Change: Thank you George and Hello, everyone.

George: <unk> delivered an exceptional third quarter marked by solid performance across all of our financial and user metrics.

George: Total revenue for Q3 increased by 27% year over year to $89 million with an adjusted EBITDA margin of 45% direct revenue increased 25% year over year to $77 million driven by the continued adoption of the unlimited weekly tier as well as better merchandising and paywall optimization.

George: Which resulted in higher conversion of free to paid users.

George: To share a few key user metrics.

George: Our average monthly active users increased 8% over the prior year to $14 6 million.

George: Average paying users in the quarter increased 15% over the prior year to 111 million, bringing payer penetration to seven 6% for the quarter.

George: And our average direct revenue per paying user increased 8% over the prior year to $23 seven this quarter.

George: Indirect revenue for Q3 grew 43% year over year to $12 million with the outperformance in our advertising business being driven by strong demand growth.

George: Moving to expenses and profitability operating expenses, excluding cost of revenue were $38 million in Q3 of 2024 up 7% year over year.

George: Adjusted EBITDA for Q3, 2024 was $40 million equating to a 45% adjusted EBITDA margin versus $33 million, a year ago or 46% of revenue.

George: Turning to our balance sheet, we ended the quarter with $39 1 million in cash and cash equivalents.

George: Our gross leverage ratio was two onex based on the last 12 months of adjusted EBITDA.

George: In the third quarter, we generated positive free cash flow of $27 $9 million, a conversion rate of 69% from our adjusted EBITDA.

George: As a reminder, our quarterly free cash flow conversion is subject to timing of changes in working capital.

George: Lastly, I'll recap our revised 2024 outlook that we shared in our letter.

George: Based on our outperformance year to date, we've raised our revenue guidance for the year.

George: We now anticipate revenue growth of 29% or greater and we continue to expect adjusted EBITDA margin of 42% or greater.

George: Our updated outlook implies relatively consistent revenue on an absolute basis quarter over quarter and the timing of planned Q4 investments.

George: Overall, we are pleased with the continued strong growth in our business as we set the stage for 2025.

George: With that I'll ask the operator to open up the line for questions.

George: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand to join the queue. If you would like to withdraw your question simply press Star one again.

George: Your first question comes from the line of Nick Jones from citizens JMP. Your line is open.

Nick Jones: Great. Thank you for taking my questions.

Speaker Change: As we think about the roadmap you laid out at the analyst day.

We kind of consider the performance.

Speaker Change: Although the last couple of quarters in this quarter are there opportunities to potentially accelerate investment and maybe accelerate those timelines how should we think about kind of philosophically.

Speaker Change: Kind of.

Speaker Change: Our people are to a performs.

Speaker Change: Average.

Speaker Change: Drivers kind of increase or paying users accelerated this quarter I mean, as you kind of deliver it is maybe better than expected results are there opportunities potentially accelerate timelines.

Speaker Change: Thanks for the question Nathan good to talk to you. So obviously, we always want.

Nathan: Everyone to deliver as much as possible and our team right. We don't just accept that.

Nathan: Minimum target that we might set we want to always exceed that's generally my management philosophy, we have a plan and then we have a stretch plan and the spectrum gain is a lot more aggressive than the plan and we're really happy with where there.

Nathan: Product is today as far as the things we've laid out in this that which we're working on those as we discussed in Israel that are right. Now is now in two markets enrollment now live globally.

Nathan: We also have a bunch of other features that are they're kind of on the add ons in the works and we would expect one or two of them to launch next year.

Nathan: We are also working on a bunch of things that are not on on the public roadmap that we will be releasing in.

Nathan: In the future.

Nathan: I'm quite excited about the interest tab is an example of that where we didn't talk about prior to being launched but the impact of it has been really positive both in terms of how the users are perceiving this.

Nathan: Asia as well as the impact on cash flow conversion to paying customers. So I think what you will see from us is.

Nathan: That will be either on track or ahead of schedule and everything we've publicly said and we will be launching more things beyond that which we think are important to have in general my kind of learning about our space is that once people have product market fit on a product they tend to monetize it really as aggressively as possible.

Nathan: And Andre invest in building new products and.

Nathan: That is one of the reasons why then those.

Nathan: Product.

Nathan: Trouble with users because you have less phosphate with the amount of.

Nathan: Maximization of our profitability and not new product development and so I wanted to make sure that we do things differently.

And the product try to scale the product to a lot of users and make sure you Theyre happy with.

Nathan: They are experienced and then start thinking about how to monetize it I think NASA setting going up for success not just for a year or two but over the longer term.

George: Great and then maybe just two kind of quick follow ups, one I guess, George you know what.

George: As you kind of rollout right now.

George: What are kind of the most exciting things you're learning about the product.

George: Just start using it that gets you excited about the opportunity there and then could you maybe speak to some of the new AD formats of monetization.

George: Indirect revenue and any progress update there. Thank you.

George: Sure I'll take them right now and then I will take that question.

George: So right now again is for people who are in the right now mode and want to try to be able to meet up right now and as the name implies.

George: It is a pretty broad suite of the.

George: Our suite of broad feature that we need to offer not all of them are yet built right. So some of them are already built but not all of them are built.

George: What people can do today is number one and say that they are in the right now mode. They can then sort the grid for just people who are in that right now mode. And then there's a chat feature where people can post chat messages that are available openly to everybody and from their initiate.

Speaker Change: One on one discussions.

George: One of the things, we'll be adding to the.

George: Right now experience is being able to send photos in the group chat and Thats something thats going to come in the future and we think there's going to be quite popular with users from everything we can gather right now with chat being available and photos not being available we get a lot of feedback, saying, we want photos to be added to that as well so that should be on the come.

George: The things we've seen is as we expected right now not for everybody that as a percentage of our users and I don't think I'm in a position to give a number of publicly right now, but not 100% that are using it are using it often.

George: And Thats exactly what we wanted to see like we want to see active engagement from a portion of the user base that we think will benefit from a user experience like this by speaking to their intent and then enabling them to have features that address that intent.

George: And that's been really positive.

George: The other thing we're tracking as we engagement, meaning it's one thing for people to try a product once or an experienced ones and then do they come back to it again.

George: And we're seeing really good reengagement on right now both in Australia and in the D. C Metro area, where we are running tests.

George: So I think overall the.

George: <unk> learning so far are pretty good and we do need to add more features to the suite of right now as we had planned on doing and that's in the works.

George: And then we probably will.

George: Slowly launch it in a few more markets.

George: <unk> kind of parallel test and get user feedback in those as we work on scaling this product.

George: Through the end of next year.

George: And next year is not going to be focused on monetization with right now is going to be very much focused on scaling engagement and getting as much as good of a product against as possible setup for the user.

George: And then I'll turn it over to them for the last question.

Speaker Change: <unk> and <unk>.

Speaker Change: Just to follow up on the AD. So yes, we've had a strong quarter across really all of our business lines, including indirect revenue, which grew at 43% year over year as you know as a differentiator for us because of our robust freemium offering and our ability to really monetize here. We also have a fairly nice margins on it because there's really no third party payments.

Speaker Change: TD Appstore, and Google and so when we joined I'd say the AD business had been a little underinvested, both from a tech perspective and from the sales talent perspective.

Speaker Change: Both of those have been addressed and are in the process had been being addressed we have opened up more third party AD partners that demand has been able to be filled by us.

Speaker Change: And we've also enhanced our AD formats, and what I mean by that is really native that's we're starting to think about rewarded video and we're also having more interstitial sandoz interstitial are slightly more complicated and therefore drive a little bit higher CPM.

Speaker Change: Still really early in our journey I would say for us, but we feel pretty confident that we'll be able to continue to show some real.

Speaker Change: Real returns here I mean, even little things like the ordering of what would appear in the AD. So our order had been set up where now how side would appear first and then external line would appear second which obviously does not make sense from the perspective of well.

Speaker Change: Making money on the island, so with switch that which is obviously not a major thing that actually made a very positive impact. So it's just an area where huge opportunity and not a lot of attention has been paid and so we did a lot of work last year to set up the business well for this year and a lot more work to be done this year to move us into.

Speaker Change: The successful growth year for us into 2020 months.

Speaker Change: Thanks, Charlie Thanks Paolo.

Speaker Change: Our next question comes from the line of Andrew <unk> from Raymond James Your line is open.

Speaker Change: Hi, Thanks for taking my question you.

Speaker Change: You mentioned pricing and merchandising being key contributors to direct revenue growth. This quarter, and then you could touch a little bit on it in your last response, but just want to be maybe a bit more explicit I guess, how are you kind of balancing that move forward in pricing and merchandising versus I think you've mentioned in the past that.

Speaker Change: Eric Lee given an under monetized service your user base might be a little bit more sensitive to monetization changes in the early stages as they start to take hold so I guess how are you. How are you philosophically balancing that and how much room do you think theres still has to run on pricing and merchandising optimizations and improvements.

Speaker Change: Totally.

Speaker Change: So thanks for the question, we definitely have a very robust free offering and that's something that's different about greiner versus really anybody else in this space.

Speaker Change: Can you use the grinder fully and have been few limitations and never pay for the product.

Speaker Change: That obviously it comes with significant benefit witches that people join grinder when in 2018 as the primary products and we don't have trouble attracting new users as they kind of mature and become adults.

Speaker Change: I think thats equally important and acknowledging that it is crucial and one of the things that he can learn about this space and you start working into that free uses are just as important as data users because they knew that when I meet with for users and so having a robust.

Speaker Change: Your user base is crucial that said you know there is a always a discussion here around where should the line between a free user experience and the paid user experience and some of the things that we are tightening frankly are things that.

Speaker Change: Some people call them back doors, meaning like no one has to be a plane on them being that way, but they just kind of happened and then others are aware, we actually having a discussion like is this value that is being offered.

Speaker Change: So significant that that should be part of our pages here. So one of the things. We did this year is move.

Speaker Change: Change, how many messages a user or a free user could send to our users that they found through the explore feature. So we have a feature where you can go into map put.

Speaker Change: That happened in different locations from where you are and see who is on the grid in that particular location and that can be either.

Speaker Change: Palo Alto and I can look up people in San Francisco or I'm in Palo Alto and look up people in New York.

Speaker Change: <unk>.

Speaker Change: If youre not opinion customer historically, you are allowed to send three messages per day two users to explore we've now limited that to just one and the reason is that we think that that has an incredible amount of value and we believe that that value should sit with our paid tiers.

Speaker Change: And the benefits there were pretty significant.

Speaker Change: Obviously, we did see an improvement in conversion from that change. So we believe there is a fairly long list of things. We can do that are like that.

Speaker Change: Results in the value in pay tiered increasing while maintaining a really robust free product offering at the same time, we do continue to invest in making the free user experience a lot better.

Speaker Change: Building the interest tab is not limited to a paying user if that's something that for you that happens as well and we've seen a really significant jump you had me right. That's a feature that existed but by.

Speaker Change: By changing where it's located and how you engage with it.

Speaker Change: We saw a big jump and usage, which is fantastic.

Speaker Change: Moving to a different architecture.

Speaker Change: Obviously was something that was offered to everybody and significantly improve the user experience as well.

Speaker Change: Addressing bugs in the products, obviously everyone's problems and it makes the experience a lot better and there's a lot of stuff on the roadmap on both through that we've publicly talked about and things that we are working on it there will be only come in the future that we've not discussed that is built in a way that for users can enjoy.

Speaker Change: Well, that's really important to me is really important the par team.

Speaker Change: Free experienced remained very very robust, but we do think there are ways in which we can deliver do you think about should a specific feature set or a value that exists in the product set on the paid side.

Speaker Change: Shifting those it makes sense and we think there is.

Speaker Change: Plenty more opportunity there for us to continue doing that we're not going to be super aggressive with it and we're going to do it in a very thoughtful manner I guess I'll add one last thing is.

Speaker Change: This is something that people, who look at red It no we did experiment with it.

Tien Tsin: Tien Tsin, how tops worked in a product where you could only see taps.

Speaker Change: A certain number of hours and otherwise you'd have to be a paying customer.

Speaker Change: And that's an area, where we did run a test and then we decided that at this time it did not make sense to make that change and we will get back and did not go global global with it right. So there will be things that we will test.

Speaker Change: In terms of changing the line between free and paid that we might not decide to pursue for lead based on.

Speaker Change: Testing that we run.

Speaker Change: Just one last really quick Andrew and that is.

Speaker Change: Just one last thing to add Andrew and that would be a simple merchandising change, suggesting what you saw in add in if he wanted to get I know adds upsell. We saw nice conversion into extra weekly just with that simple pop up message.

Speaker Change: Thank you for all the color there really thorough and then just maybe a very very quick one.

Speaker Change: There was a competitor out today, who had noticed some changes or potential disruptions and app store rankings around.

Speaker Change: What they believe to be the iOS 18 launch is that anything that you would seen or any evidence that the new iOS may have thrown a wrench into things.

Speaker Change: I don't have anything to add to that yet and we see we do track our ratings quite closely.

Speaker Change: But with the new <unk> function, we've not noticed anything.

Speaker Change: Yes, we saw that in the transcript as well.

Speaker Change: It didn't it didn't bubble up to us, but we'll definitely take another look.

Speaker Change: Got you I appreciate it thank you.

Speaker Change: Your next question comes from the line of John Blackledge from TD Cowen Your line is open.

John Blackledge: Great. Thanks.

Speaker Change: Question first on the weekly unlimited here.

Speaker Change: You see that on driving higher payer conversion or is it more solid driving existing payers and switch to the tier or is it.

Speaker Change: A mix of both and then I have two follow ups.

Sure. Thanks for the question.

Speaker Change: We have seen conversion rates continuing to increase and we do track cannibalization very closely and so I think you're asking is how was the cannibalization.

Speaker Change: As he brought out this new duration for unlimited weekly and I would suggest that we have.

Speaker Change: We're pleasantly surprised that the cannibalization with <unk>.

Speaker Change: Very low and so is helping drive conversion rates.

Okay. That's helpful and George Oncologists touched on this a little bit but the top of the funnel user growth remained pretty strong up 8% just kind of clicking back on some of the key drivers of that sustained Mou growth and then any geos that stood out in terms of the Mou growth and then the final cost.

Speaker Change: For me as you mentioned it kind of interval.

Speaker Change: <unk> is addressing the technical debt and just if you can just talk where grinder is in terms of addressing the technical debt that occurred.

Speaker Change: From prior management teams and kind of how much has the team. The other current gene achieved in fixing the technical infrastructure.

Speaker Change: And I'll start with now and so from a MAU perspective as you noted it yes, we are at 8% growth.

Speaker Change: And that we're happy with that number.

Speaker Change: Couple of things that are working in our favor and one of them is being from the macro level. We continue to see more and more countries open at a micro level, we see more and more people and identifying as fluid and so that's helpful. As well, we're actually happy with a couple of things with respect to focusing on a great user.

Speaker Change: And so that focusing on a great user experience helps keep people in the operating people in the App and so I would suggest that the bug fixes for instance.

Speaker Change: <unk>, a great user experience and therefore, helping our MAU.

Speaker Change: Secondly, I'd like to just mention that all the feature on our product roadmap.

Speaker Change: That will help them bring people in and keep our mallet good numbers and so all those things are working in our favor for MAU growth.

Speaker Change: Yes, I think one thing I'll add on now as well.

Speaker Change: We do know that.

Speaker Change: There are users kind of mid.

Speaker Change: Mid stage of their lives and later that might have had a grinder account might still have a brand new kind of I don't use garner as much as they used to.

Speaker Change: One of the reasons is that they want to move into a stage of life. They want to settle down and find a long term partner <unk> and the fact that we don't have a lot of the features for long term relationships make them less.

Speaker Change: Less excited about using right now for that purpose, even though we also know that granular as the primary way, which people find long term partners in the gay community.

Speaker Change: Around the world.

Speaker Change: So we do believe that there is a way to better engage those users as we build the relationship and the use case and which obviously is something that we're working on and that's one of our product Roadmaps I think.

Speaker Change: While that's not being built with the idea that hey, it's going to help model, we think that inevitably it will have an impact on MAU.

Speaker Change: Well because of the ability to re engage that kind of older cohort and when I use older I do that a little bit in my my age cohort.

Speaker Change: Not necessarily very old, but older versus what you'd expect.

Speaker Change: On a product like ours.

Speaker Change: And then with regards to technical debt.

Speaker Change: No grinder is a product that's been around for a long time now it's.

Speaker Change: Turning to be turning 16 years old.

Speaker Change: In March and while that.

Speaker Change: In the totality of the year, that's not very long in the world of mobile technology and its actually a very long time right because the mobile transition only happened in the last 20 years and so at the foundations Quanta was built with technology that made a lot of sense to us when it was built but it's not necessarily how you build technology today, we have done.

Speaker Change: A lot of work over the last.

Speaker Change: It really four plus years since 2020 to address the technical debt that was inherited for example on the backend.

Speaker Change: How much of that underlying the product today is fundamentally different from what was there when.

Speaker Change: The folks who bought greiner out from Chinese ownership remained very large shareholder today.

Speaker Change: Kind of completed that purchase and.

So.

Speaker Change: That's in a really strong place.

Speaker Change: Moving to a new China architecture, where the number will be a big transition that we needed to make in the mobile code base rates. So this is the Android and iOS core base. There are still things that if you were building the app from scratch today, you would do differently.

Speaker Change: And then that causes challenges.

Speaker Change: <unk>.

Speaker Change: For example, the architecture is much more monolithic in nature, and so sometimes that you're working on a new feature in one part of the code base and you run the tests related to that part of the code base and based on that new feature and you don't find any bugs, but then you discover after you released that.

Speaker Change: The feature that is impacting something in a totally different part of the core base.

Speaker Change: And causing a buck right.

Speaker Change: Modern apps like want built recently wouldn't be built that way and so you wouldn't have that kind of a box situation.

Speaker Change: So we are working through that and the decision was made four years ago and I think the right decision was to say.

Speaker Change: To say that we will address these changes in the code base as we work towards that as we make changes and add features. We then also rewrite parts of the code base for mobile.

Speaker Change: So that will kind of come along on it on its own and it will take some time, but we did have a lot of bumps in the product.

Speaker Change: Kind of.

Speaker Change: Had been accumulated over time.

Speaker Change: <unk>.

Speaker Change: What we did is run in two weeks.

Speaker Change: Basch.

Speaker Change: As a technology builder actually don't love that because box should be bashed, all the time, but there had been an accumulation of bugs and so I felt like it made sense to start product development for two weeks and just work on box and as you can imagine that's a pretty expensive process. When you have.

Speaker Change: 80, plus people working just on a backlash.

Speaker Change: But the results were really positive we bashed more than 75% of all the bugs out there and that I think will have a very direct and positive impact on the user experience in the <unk>.

Speaker Change: And so I think it was very much worth doing.

Speaker Change: Frankly speaks to the commitment that we have in ensuring that the product is a very high quality.

Speaker Change: And also that we need to build product with an eye towards having high quality right. We should not ship things that are potentially problematic and caused more bugs and so on.

Speaker Change: Having an <unk> with a very positive thing for us and we will continue investing and ensuring that the product is of a high quality.

Speaker Change: As time goes goes on.

Speaker Change: Thank you.

Speaker Change: And we have reached the end of our question and answer session. This concludes today's conference call. We thank you for your participation you may now disconnect.

Operator: 2024 earnings conference call. Thank you. I would now like to turn the conference over to Tolu Adeofe, Grindr's Head of Investor Relations. Please go ahead.

Tolu Adhiafa: I would now like to turn the conference over to Tolu Adhiafa, Grindr's Head of Investor Relations. Please go ahead. Thank you, moderator.

Tolu Adeofe: Thank you, moderator. Hello, welcome to the Grindr Inc. Earnings Call for Q3 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. 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 Adhiafa: Hello and welcome to the Grindr earnings call for the third quarter 2024.

Tolu Adhiafa: Today's call will be led by Grindr CEO George Arison and CFO Vanna They will make a few brief remarks, and then we'll open it up for questions.

Tolu Adhiafa: 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. Before we begin, I will remind everyone that during this call, we may discuss our outlook and future performance. These four looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar such statements. These statements are subject to risk and uncertainties, and our actual results could differ materially from the views expressed.

Tolu Adhiafa: Some of these risks have been set forth in our earnings release and our periodic reports filed with the SBA.

Tolu Adhiafa: During today's call, we will also present both GAAP and non-GAAP financial 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 SBA.

Tolu Adeofe: 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: With that, I'll turn it over to Joy. Thanks, Tolu, and hello, everyone. With strength across all of our financial and user metrics, we delivered an exceptional third quarter, enabling us to again increase our revenue growth guidance for the year to 29% or greater. Our outperformance reflects the success of our weekly unlimited subscription offering, as well as effective merchandising and paywall optimization. Advertising revenue also exceeded our expectations this quarter, fueled by increased demand from our third-party advertising partners.

George Arison: Thanks, Tolu. Hello, everyone. With strength across all of our financial and user metrics, we delivered an exceptional Q3, enabling us to again increase our revenue growth guidance for the year to 29% or greater. Our outperformance reflects the success of our Unlimited Weekly subscription offering, as well as effective merchandising and paywall optimizations. Advertising revenue also exceeded expectations this quarter, fueled by increased demand from our third-party advertising partners. Vanna will cover a few highlights shortly. As always, you can find a more detailed review of the Q3 in our shareholder letter. I will focus the remainder of my remarks on our team's continued focus on building and launching innovative features and products focused on the user. In Q3, we expanded testing of Right Now to the Washington, DC metro area.

George Arison: Then I will cover a few highlights shortly, and as always, you can find a more detailed review of the quarter in our shareholder letter. I will focus the remainder of my remarks on our team's continued focus on building and launching innovative features and products focused on the user. In Q3, we expanded testing right now to the Washington, D.C. metro area. We also launched RightNow's Feed feature that allows users who are in the RightNow mode to post their intent to a group of nearby users and then chat directly with each other. We will continue expanding right now with more features and across more geographies with a goal of scaling the product by the end of 2025.

George Arison: We also launched Right Now's Feed feature that allows users who are in the Right Now mode to post their intent to a group of nearby users and then chat directly with each other. We will continue expanding Right Now with more features and across more geographies, with a goal of scaling the product by the end of 2025. Our focus is on user engagement, so there is significant potential for monetization as well. We also launched the Interest tab, centralizing inbound interests across Viewed Me and Taps, which increased payer conversion and led to an over 150% increase in user engagement with its Viewed Me feature. In the future, we will add additional inbound-related features to this tab.

George Arison: Our focus is on user engagement, so there is significant potential for monetization as well. We also launched the Interest tab, centralizing inbound interest across ViewedMe and TAPs, which increased pair conversion and led to an over 150% increase in user engagement with the ViewedMe feature. In the future, we will add additional inbound-related features to this tab. In addition, Roam is now live globally, allowing users to move their profile to a different location before arriving, serving the one in four Grindr users who are traveling in any given week. We are making good progress in other product areas as well, including early testing of our AI-powered WinMan, which we highlighted in the Shareholder Letter.

George Arison: In addition, Roam is now live globally, allowing users to move their profile to a different location before arriving, serving the one in four Grindr users who are traveling in any given week. We're making good progress in other product areas as well, including early testing of our AI-powered Reman, which we've highlighted in the shareholder letter. Additionally, I'm very proud of our team's work in resolving legacy bugs and improvements to app stability that took place in Q3, an important part of our user experience focus. This indirectly also supports conversion, as over time we expect users to recognize the improved quality and increased value we are delivering. Overall, we remain on track or ahead on all items on the product roadmap we shared in investor day, and we're bullish about our portfolio approach to product development, which is key to our plan for long-term success.

George Arison: Additionally, I'm very proud of our team's work in resolving legacy bugs and improvements to app stability that took place in Q3, an important part of our user experience focus. This indirectly also supports conversion, as over time we expect users to recognize the improved quality and increased value we are delivering.

George Arison: Overall, we remain on track or ahead on all items on the product roadmap we shared at Invest Today, and we're bullish about our portfolio approach to product development, which is key to our plan for long-term success. Our product work starts with users, their needs, their behaviors, their preferences. We build features that drive their engagement before implementing steps that drive revenue. This allows us to make sure that our unique connection with our community remains strong. Worth noting, however, that inherent to this approach is also the likelihood that some products and features will be bigger than others.

George Arison: Our product work starts with users, their needs, their behaviors, their preferences. We build features that drive their engagement before implementing steps that drive revenue. This allows us to make sure that our unique connection with our community remains strong. Worth noting, however, that inherent to this approach is also the likelihood that some products and features will be bigger than others. With strong execution this year, we are setting Grindr up for another great year of growth in 2025, as we continue to execute on effective monetization strategies. In the near term, our bigger performance drivers will likely be our existing products, as well as paywall optimization and merchandising.

George Arison: With strong execution this year, we are setting Grindr up for another great year of growth in 2025 as we continue to execute on effective monetization strategy. In the near term, our bigger performance drivers will likely be our existing products, as well as paywall optimization and mergers. I expect that next year our team will not only continue to deliver strong financial results, but also achieve good progress in both launching new initiatives, as well as scaling products that are already launched or in test, all targeted at creating an exceptional user experience. As a result, we have potential upside in our results from these new products as adoption grows.

George Arison: I expect that next year our team will not only continue to deliver strong financial results, but also achieve good progress in both launching new initiatives as well as scaling products that are already launched or in test, all targeted at creating an exceptional user experience. As a result, we have potential upside in our results from these new products as adoption grows. Thank you all for your support and a big thanks to our team for their great work in Q3. Now, here's Vanna to discuss the results.

George Arison: Thank you all for your support and a big thanks to our team for their great work in Q3.

Vanna: Now here's Vanna to discuss the results. Thank you, George, and hello, everyone. Grindr delivered an exceptional third quarter, marked by solid performance across all of our financial and user methods. Total revenue for Q3 increased by 27% year-over-year to $89 million, with an adjusted EBITDA margin of 45%. Direct revenue increased 25% year-over-year to $77 million, driven by the continued adoption of the unlimited weekly tier, as well as better merchandising and paywall optimizations, which resulted in higher conversion of free-to-paid units.

Tolu Adeofe: Thank you, George. Hello, everyone. Grindr delivered an exceptional Q3, marked by solid performance across all of our financial and user metrics. Total revenue for Q3 increased by 27% year over year to $89 million, with an adjusted EBITDA margin of 45%. Direct revenue increased 25% year over year to $77 million, driven by the continued adoption of the Unlimited Weekly tier, as well as better merchandising and paywall optimizations, which resulted in higher conversion of free to paid users. To share a few key user metrics, our average monthly active users increased 8% over the prior year to 14.6 million. Average paying users in the quarter increased 15% over the prior year to 1.11 million, bringing payer penetration to 7.6% for the quarter. Our average direct revenue per paying user increased 8% over the prior year to $23.07 this quarter.

Vanna: share a few key user metrics. Our average monthly active users increased 8% over the prior year to 14.6 million. Average paying users in the quarter increased 15% over the prior year to 1.11 million. bringing payer penetration to 7.6% for the quarter. And our average direct revenue per paying user increased 8% over the prior year to $23.07 this quarter.

Vanna: Indirect revenue for Q3 grew 43% year-over-year to $12 million, with the outperformance in our advertising business being driven by strong demand. Moving to expenses and profitability, operating expenses excluding cost of revenue were $38 million in Q3 of 2024, up 7% year-over-year. adjusted EBITDA for Q3 2024 was $40 million equating to a 45% adjusted EBITDA margin, versus $33 million a year ago, or 46% of revenue.

Tolu Adeofe: Indirect revenue for Q3 grew 43% year over year to $12 million, with the outperformance in our advertising business being driven by strong demand growth. Moving to expenses and profitability. Operating expenses excluding cost of revenue were $38 million in Q3 of 2024, up 7% year over year. Adjusted EBITDA for Q3 2024 was $40 million, equating to a 45% adjusted EBITDA margin versus $33 million a year ago or 46% of revenue. Turning to our balance sheet, we ended the quarter with $39.1 million in cash and cash equivalents. Our gross leverage ratio was 2.1x based on the last 12 months of adjusted EBITDA. In Q3, we generated free cash flow of +$27.9 million, a conversion rate of 69% from our adjusted EBITDA. As a reminder, our quarterly free cash flow conversion is subject to timing of changes in working capital.

Vanna: Turning to our balance sheet, we ended the quarter with $39.1 million in cash and cash equivalent. Our gross leverage ratio was 2.1x based on the last 12 months of adjusted earnings. In the third quarter, we generated positive free cash flow of $27.9 million, a conversion rate of 69% from our adjusted EBIT. As a reminder, our quarterly free cash flow conversion is subject to timing of changes in working cash flows.

Vanna: Lastly, I'll recap our revised 2024 outlook that we shared in our letter. Based on our outperformance year-to-date, we've raised our revenue guidance for the year. We now anticipate revenue growth of 29% or greater, and we continue to expect adjusted EBITDA margin of 42% or greater. Our updated outlook implies relatively consistent revenue on an absolute basis, quarter over quarter, and the timing of planned Q4. Overall, we are pleased with the continued strong growth in our business as we set the stage for 2025.

Tolu Adeofe: Lastly, I'll recap our revised 2024 outlook that we shared in our letter. Based on our outperformance year to date, we've raised our revenue guidance for the year. We now anticipate revenue growth of 29% or greater, and we continue to expect adjusted EBITDA margin of 42% or greater. Our updated outlook implies relatively consistent revenue on an absolute basis quarter over quarter and the timing of planned Q4 investments. Overall, we are pleased with the continued strong growth in our business as we set the stage for 2025. With that, I'll ask the operator to open up the line for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star one again.

Tolu Adhiafa: With that, I'll ask the operator to open up the line for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Nick Jones: Your first question comes from the line of Nick Jones from Citizens JMP. Your line is open. Great, thank you for taking the questions.

Operator: Your first question comes from the line of Nicholas Jones from Citizens JMP. Your line is open.

Nicholas Jones: Great. Thank you for taking the questions. As we think about the roadmap you laid out at the analyst day, we consider the performance over the last couple of quarters and in this quarter, are there opportunities to potentially accelerate investment and maybe accelerate those timelines? How should we think about philosophically as our people, ARPU performs, the average subscribers increase, or paying users accelerate this quarter? As you deliver these maybe better-than-expected results, are there opportunities to potentially accelerate timelines?

George Arison: You know, as we think about the roadmap you laid out at the Analyst Day, and, you know, we kind of consider the performance over the last couple of quarters and this quarter, are there opportunities to potentially accelerate investment and maybe accelerate those timelines? How should we think about kind of philosophically, as kind of the next step? I think, you know, I think that's a really good question. Are there opportunities to potentially accelerate timelines? Thanks for the question again. Good to talk to you. So, obviously, we always want everyone to deliver as much as possible on our team, right?

George Arison: Thanks for that question, Nick, and good to talk to you. Obviously, we always want everyone to deliver as much as possible on our team, right? We don't just accept the minimum or the target that we might set. We want to always exceed. That's generally my management philosophy. We have a plan, and then we have a stretch plan, and the stretch plan is a lot more aggressive than the plan. We're really happy with where the product roadmap is today as far as the things we've laid out and the stuff that we're working on those. As we discussed in the shareholder letter, Right Now is now in two markets. Roam is now live globally. We also have a bunch of the features that are there, behind our add-ons in the works, and we would expect one to two of them to launch next year.

George Arison: We don't just accept the minimum or a target that we might set. We want to always exceed. That's generally my management philosophy. As we discussed in the shareholder letter, right now it's now in two markets. Rome is now live globally. We also have a bunch of the features that are there kind of under add-ons in the works, and we would expect one to two of them to launch next year. And then we're also working on a bunch of things that are not on the public roadmap that we'll be releasing in the future, which I'm quite excited about.

George Arison: We're also working on a bunch of things that are not on the public roadmap that we'll be releasing in the future, which I'm quite excited about. The Interest tab is an example of that, where we didn't talk about it prior to it being launched, but the impact of it has been really positive, both in terms of how the users are perceiving the feature as well as the impact on actual conversion to paying customers. I think what you will see from us is that we'll be either on track or ahead of schedule on everything we've publicly said, and we'll be launching more things beyond that which we think are important to have.

George Arison: The interest tab is an example of that where we didn't talk about it prior to it being launched, but the impact of it has been really positive both in terms of how the users are perceiving the feature as well as the impact on actual conversion to paying customers. And that is one of the reasons why then those products have trouble with users, because users get frustrated with the amount of maximization of profitability and not new product development.

George Arison: In general, my learning about our space is that once people have product market fit on a product, they tend to monetize it really as aggressively as possible and under-invest in building new products. That is one of the reasons why then those products have trouble with users, because users get frustrated with the amount of maximization of profitability and not new product development. I want to make sure that we do things differently and invest in the product, try to scale the product to a lot of users, make sure users are happy with their experience, and then start thinking about how to monetize it. That's setting Grindr up for success not just for a year or two, but over the longer term.

George Arison: And so I want to make sure that we do things differently and invest in the product, try to scale the product to a lot of users, make sure users are happy with the product. their experience and then start thinking about how to monetize it. I think that's setting Grindr up for success, not just for a year or two, but over the longer term.

George Arison: Great, and then maybe just two kind of quick follow-ups. One, I guess, George, as you kind of roll out right now, and what are kind of the most exciting things you're learning about the product as users start using it that gets you excited about the opportunity there? And then, Vanna, could you maybe speak to some of the new ad formats and monetization within indirect revenue and any progress updates there? Thank you. Sure, I'll take the right now and then I will take the ask question. So, right now, again, it's for people who are in the right now mode and want to try to be able to meet up right now and as the name implies, it is a pretty broad suite of the suite of broad features that we need to offer.

Nicholas Jones: Great. Maybe just two quick follow-ups. One, I guess to George, as you roll out Right Now, what are the most exciting things you're learning about the product as users start using it that gets you excited about the opportunity there? Vandana, could you maybe speak to some of the new ad formats and monetization within indirect revenue and any progress updates there? Thank you.

George Arison: Sure. I'll take the Right Now, and then Vandana will take the Ads question. Right Now, again, it's for people who are in the Right Now mode and want to try to be able to meet up right now, as the name implies. It's a suite of broad features that we need to offer. Not all of them are yet built. Some of them are already built, but not all of them are built. What people can do today is, number one, say that they're in the Right Now mode. They can then sort the grid for just people who are in the Right Now mode. There's a chat feature where people can post chat messages that are available openly to everybody, and from there, initiate one-on-one discussions.

George Arison: Not all of them are yet built, right? So some of them are already built, but not all of them are built. What people can do today is number one, say that they're in the right now mode. They can then sort the grid for just people who are in the right now mode. And then there's a chat feature where people can post chat messages that are available openly to everybody. And from there, initiate one-on-one discussions. One of the things we'll be adding to right now experience is being able to send photos in the group chat. That's something that's going to come in the future and we think is going to be quite popular with users from everything we can gather.

George Arison: One of the things we'll be adding to Right Now experience is being able to send photos in the group chat. That's something that's going to come in the future, and we think is going to be quite popular with users from everything we can gather. Right now, with chat being available and photos not being available, we get a lot of feedback saying we want photos to be added to that as well. That should be on the come. The things we've seen is as kind of we expected. Right Now is not for everybody. There's a percentage of our users, and I don't think I'm in a position to give a number publicly right now, but not 100%, that are using it and are using it often, and that's exactly what we want to see.

George Arison: We want to see active engagement from a portion of the user base that we think will benefit from an user experience like this by speaking to their intent and then enabling them to have features that address that intent. That's been really positive. The other thing we're tracking is re-engagement, meaning it's one thing for people to try a product once or an experience once, then do they come back to it again? We're seeing really good re-engagement on Right Now, both in Australia and in the DC metro area, where we are running the tests. I think overall, the learnings so far are pretty good. We do need to add more features to the suite of Right Now, as we had planned on doing, and that's in the works.

George Arison: The other thing we're tracking is re-engagement, meaning it's one thing for people to try a product once or an experience once, and then do they come back to it again? And we're seeing really good re-engagement on right now, both in Australia and in the DC metro area where we are running tests. So I think overall the learnings so far are pretty good. We do need to add more features to the suite right now, as we had planned on doing, and that's in the works. And then we probably will slowly launch it in a few more markets to kind of parallel test and get user feedback in those as we work on scaling this product through the end of next year.

George Arison: Then we probably will slowly launch it in a few more markets to kind of parallel test and get user feedback in those as we work on scaling this product through the end of next year. Next year is not going to be focused on monetization with Right Now. It's going to be very much focused on scaling engagement and getting as good of a product experience as possible set up for the user. Then I'll turn over to Vandana for the Ads question.

George Arison: And next year is not going to be focused on monetization right now. It's going to be very much focused on scaling engagement and getting as good of a product experience as possible set up for the user.

Vanna: And then I'll turn it over to Vanna for the last question. Hi Nick, just to follow up on the ads. So yes, we've had a strong quarter across really all of our business lines, including indirect revenue, which grew at 43%. Year over year, as you know, ads are a differentiator for us because of our robust premium offering and our ability to really monetize here. We also have fairly nice margins on this because there's really no third-party payments to the App Store or Google.

Vanna Krantz: Hi, Nick. Just to follow up on the Ads. Yes, we've had a strong quarter across really all of our business lines, including indirect revenue, which grew at 43% year over year. As you know, Ads are a differentiator for us because of our robust freemium offering and our ability to really monetize here. We also have really nice margins on this because there's really no third-party payments to the App Store or Google. When we joined, I'd say the Ad business had been a little under-invested, both from a tech perspective and from a sales talent perspective. Both of those have been addressed and are in the process of being addressed. We've opened up more third-party Ad partners. That demand has been able to be filled by us. We've also enhanced our Ad formats. What I mean by that is really native Ads.

Vanna: And so when we joined, I'd say the ad business had been a little under-invested both from a tech perspective and from a sales talent perspective. Both of those have been addressed and are in the process of being addressed. We've opened up more third-party ad partners. That demand has been able to be filled by us. And we've also enhanced our ad formats. And what I mean by that is really native ads. We're starting to think about rewarded video and we're also having more interstitials. And those interstitials are slightly more complicated and therefore drive a little bit higher CPM.

Vanna Krantz: We're starting to think about rewarded video, and we're also having more interstitials. Those interstitials are slightly more complicated and therefore drive a little bit higher CPM. We're still really early in our journey, I'd say, for Ads, but we feel pretty confident that we'll be able to continue to show some real returns here.

Vanna: So we're still really early in our journey, I'd say, for ads, but we feel pretty confident that we'll be able to continue to show some real returns here. I mean, even little things like the ordering of what would appear in the ad. So our order had been set up where a house ad would appear first and then an external ad would appear second, which obviously does not make sense from the perspective of making money on the ad. And so we've switched that, which is obviously not a major thing, but actually had a very positive impact.

George Arison: Even little things like the ordering of what would appear in the ad. Our order had been set up where a house ad would appear first and then an external ad would appear second, which obviously does not make sense from the perspective of making money on the ad. We've switched that, which is obviously not a major thing, but actually had a very positive impact. It's just an area where huge opportunity and not a lot of attention has been paid. We did a lot of work last year to set up the business well for this year, and a lot more work has been done this year to move us into a successful full year for Ads into 2025.

Vanna: So it's just an area where huge opportunity and not a lot of attention has been paid. And so we did a lot of work last year to set up the business well for this year and a lot more work is being done this year to move us into the successful growth year for ads into 2025. Thanks, George.

Nicholas Jones: Thanks, George. Thanks, Vandana.

Andrew Merrick: Your next question comes from the line of Andrew Merrick from Raymond James. Your line is open. Thanks for taking my question. You mentioned pricing and merchandising being key contributors to direct revenue growth this quarter, and I think you touched a little bit on it in your last response, but just want to be maybe a bit more explicit, I guess. How are you kind of balancing that move forward in pricing and merchandising versus, I think you've mentioned in the past, that historically, given an under-monetized service, your user base might be a little bit more sensitive to monetization changes in the early stages as they start to take hold.

Operator: Your next question comes from the line of Andrew Marok from Raymond James. Your line is open.

Andrew Marok: Hi, thanks for taking my question. You mentioned pricing and merchandising being key contributors to direct revenue growth this quarter, and I think you touched a little bit on it in your last response, but just want to be maybe a bit more explicit, I guess. How are you kind of balancing that move forward in pricing and merchandising versus, I think you've mentioned in the past that historically, given an under-monetized service, your user base might be a little bit more sensitive to monetization changes in the early stages as they start to take hold. I guess how are you philosophically balancing that, and how much room do you think there still is to run on pricing and merchandising optimizations and improvements? Thanks.

George Arison: So I guess, how are you philosophically balancing that, and how much room do you think there still is to run on pricing and merchandising optimizations and improvements? Totally. So thanks for the question. We definitely have a very robust free offering, and that's something that's different about Grindr versus really anybody else in the space. You can use Grindr fully and have very few limitations and never pay for the product. That obviously comes with a significant benefit, which is that people join Grindr when they turn 18 as their primary product. And we don't have trouble attracting new users as they kind of mature and become adults.

George Arison: Totally. Thanks for the question. We definitely have a very robust free offering. That's something that's different about Grindr versus really anybody else in the space. You can use Grindr fully and have very few limitations and never pay for the product. That obviously comes with a significant benefit, which is that people join Grindr when they turn 18 as their primary product. We don't have trouble attracting new users as they kind of mature and become adults. I think that's really important. Acknowledging that is crucial. One of the things I think you'll learn about this space as you start working in it is that free users are just as important as paid users, because paid users want to meet with free users. Having a very robust free user base is crucial.

George Arison: And I think that's really important and acknowledging that is crucial. One of the things I think you'll learn about this space as you start working is that free users are just as important as paid users because paid users want to meet with free users. And so having a very robust free user base is crucial. That said, you know, there is always a discussion here around where should the line be between a free user experience and a paid user experience. And some of the things that we are tightening, frankly, are things that some people call them backdoors, meaning like no one has to be playing on them being that way, but they just kind of happened.

George Arison: That said, there is always a discussion here around where should the line be between a free user experience and a paid user experience. Some of the things that we are tightening, frankly, are things where some people call them backdoors, meaning no one has to be planned on them being that way, but they just kind of happened. Others are where we're actually having a discussion like, is this value that is being offered so significant that it should be part of our paid tier? One of the things we did this year is change how many messages a free user could send to other users that they found through the Explore feature.

George Arison: And then others are where we actually having a discussion like, is this value that is being offered? so significant that that should be part of our paid tier. So one of the things we did this year is move, change how many messages a user, a free user, could send to other users that they found through the explore feature. So we have a feature where you can go on a map, put that map in a different location from where you are, and see who is on the grid in that particular location. And that can be either, you know, I'm in Palo Alto and I can look up people in San Francisco, or I'm in Palo Alto and I can look up people in New York.

George Arison: We have a feature where you can go on a map, put that map in a different location from where you are, and see who is on the grid in that particular location. That can be either, I'm in Palo Alto and I can look up people in San Francisco, or I'm in Palo Alto and I can look up people in New York. If you're not a paying customer, historically, you were allowed to send three messages per day to users through Explore. We've now limited that to just one. The reason is that we think that has an incredible amount of value, and we believe that value should sit with our paid tiers, and the benefits there were pretty significant. Obviously we did see an improvement in conversion from that change.

George Arison: You can, you know, if you're not a paying customer, historically you're allowed to send three messages per day to users through explore. We've now limited that to just one. And the reason is that we think that that has an incredible amount of value, and we believe that that value should sit with our paid tiers, and the benefits there were pretty significant. And obviously we did see an improvement in conversion from that change. So we believe there is a fairly long list of things we can do that are like that, that result in the value in paid tiers increasing, while maintaining a really robust free product offering.

George Arison: We believe there's a fairly long list of things we can do that are like that result in the value in paid tiers increasing while maintaining a really robust free product offering. At the same time, we do continuously invest in making the free user experience a lot better. Building the Interests tab is not limited to paying users. That's something that free users have as well, and we've seen a really significant jump in Views. That's a feature that existed, but by changing where it's located and how users engage with it, we saw a big jump in usage, which is fantastic. Us moving to a different chat architecture obviously was something that was offered to everybody, and that significantly improved the user experience as well. Us addressing bugs in the product obviously solves everyone's problems and makes the free user experience a lot better.

George Arison: At the same time, we do continuously invest in making the free user experience a lot better. Building the interest tab is not limited to paying users. That's something that free users have as well. And we've seen a really significant jump in viewed me, right, as a feature that existed, but by changing where it's located and how users engage with it, we saw a big jump in usage, which is fantastic. Us moving to a different chat architecture, obviously was something that was offered to everybody, and that significantly improved the user experience as well. Us addressing bugs in the product, which obviously solves everyone's problems and makes the free user experience a lot better.

George Arison: And there's a lot of stuff on the roadmap, both things that we publicly talked about and things that we are working on that will be gonna come in the future that we've not discussed, that is built in a way that free users can enjoy as well. That's really important, I think to me, it's really important to the product team that the free experience remain very, very robust. But we do think there are ways in which we can deliberately think about should a specific feature set or a value that exists in the product sit on the paid side, and shifting those makes sense.

George Arison: There's a lot of stuff on the roadmap, both things that we've publicly talked about and things that we are working on that will be going to come in the future that we've not discussed, that is built in a way that free users can enjoy as well. That's really important. To me, it's really important to the product team that the free experience remains very, very robust. We do think there are ways in which we can deliberately think about should a specific feature set or a value that exists in the product sit on the paid side, and shifting those makes sense. We think there's plenty more opportunity there for us to kind of continue doing that. We're not going to be super aggressive with it. We're going to do it in a very thoughtful manner.

George Arison: And we think there's plenty more opportunity there for us to continue doing that. We're not gonna be so progressive with it. We're gonna do it in a very thoughtful manner. I guess I'll add one last thing is, this is something that people who look at Reddit know, we did experiment with changing how tabs worked in the product where you could only see tabs from a certain number of hours and otherwise you'd have to be a paying customer. And that's an area where we did run a test. And then we decided that at this time, it did not make sense to make that change.

George Arison: I guess I'll add one last thing is, this is something that people who look at Reddit know. We did experiment with changing how Taps worked in the product, where you could only see Taps from a certain number of hours, and otherwise you'd have to be a paying customer. That's an area where we did run a test, and then we decided that at this time it did not make sense to make that change, and we rolled it back and did not go global with it. There will be things that we will test in terms of changing the line between free and paid that we might not decide to pursue fully based on testing that we find.

George Arison: And we rolled it back and did not go global with it, right? So there will be things that we will test in terms of changing the line between free and paid that we might not decide to pursue fully based on testing that we've done.

Andrew Merrick: Just one last thing to add, Andrew, and that is, oh, just one last thing to add, Andrew, and that would be a simple merchandising change of suggesting what you saw on ad. And if you wanted to get a no ads upsell, we found nice conversion into extra weekly, just with that simple pop up message. Thank you for all the color. They're really thorough. And then just maybe a very, very quick one. There was a competitor out today who had noticed some changes or potential disruptions in App Store rankings around what they believe to be the iOS 18 launch.

Andrew Marok: Just one last thing to add, Andrew, that would be a simple merchandising change of suggesting if you saw an ad and if you wanted to get a no ads upsell, we saw nice conversion into Unlimited Weekly just with that simple pop-up message. Thank you for all the color there. Really thorough. Just maybe a very, very quick one. There was a competitor out today who had noticed some changes or potential disruptions in App Store rankings around what they believe to be the iOS 18 launch. Is that anything that you had seen or any evidence that the new iOS may have thrown a wrench into things? I don't have anything to add to that yet. Obviously, we do track our ratings quite closely. With the new iOS launch, we've not noticed anything.

George Arison: Is that anything that you had seen or any evidence that the new iOS may have thrown a wrench into things? Um, I, I don't have anything to add to that yet. Obviously, we do track our ratings quite closely, but with a new iOS function, we've not noticed anything. Yeah, we saw that in a transcript as well, and it didn't it didn't bubble up to us, but we'll definitely take another look. Gotcha. Appreciate it. Thank you.

George Arison: Yeah, we saw that in a transcript as well, and it didn't bubble up to us, but we'll definitely take another look. Gotcha. Appreciate it. Thank you.

John Blackledge: Your next question comes from a line of John Blackledge from TD Cowan. Your line is open. Great, thanks. A couple questions. First on the Weekly Unlimited tier, do you see that driving higher payer conversion or is it more so driving existing payers to switch to the tier or is it a mix of both? And then I have two follow-ups. Sure, thanks for the question. We have seen conversion rates continuing to increase, and we do track cannibalization very closely. And so what I think you're asking is, how was the cannibalization as you brought out this new duration for unlimited weekly?

Operator: Your next question comes from the line of John Blackledge from TD Cowen. Your line is open.

John Blackledge: Great. Thanks. A couple questions. First, on the Unlimited Weekly tier, do you see that driving higher payer conversion, or is it more so driving existing payers to switch to the tier, or is it a mix of both? I have two follow-ups.

George Arison: Sure. Thanks for the question. We have seen conversion rates continuing to increase, and we do track cannibalization very closely. What I think you're asking is, how was the cannibalization as you brought out this new duration for Unlimited Weekly? I would suggest that we were pleasantly surprised that the cannibalization was very low, and so it is helping drive conversion rates.

George Arison: And I would suggest that we were pleasantly surprised that the cannibalization was very low. And so it is helping drive conversion rates. Okay, that's helpful. And George kind of just touched on this a little bit, but the top of the funnel, user growth remained pretty strong up 8%, just kind of clicking back on some of the key drivers of that sustained MAU growth and then any geos that stood out in terms of the MAU growth. And then the final question for me is, and you mentioned it, you know, kind of in the release is addressing the technical debt.

John Blackledge: Okay, that's helpful. George kind of just touched on this a little bit, but the top of the funnel user growth remained pretty strong, up 8%. Just kind of clicking back on some of the key drivers of that sustained MAU growth and then any geos that stood out in terms of the MAU growth? The final question from me is, and you mentioned it kind of in the release, is addressing the technical debt, and just if you can just talk where Grindr is in terms of addressing that technical debt that accrued?

George Arison: And just if you can just talk where Grindr is in terms of that technical debt that accrued from prior management teams and, you know, kind of how much has the team, the current team achieved in fixing the technical infrastructure?

George Arison: from prior management teams and how much has the current team achieved in fixing the technical infrastructure?

George Arison: I'll start with Mao. And so from a Mao perspective, as you noted, yes, we are at 8% growth. And that we're happy with that number. A couple of things that are working in our favor, and one of them is from the macro level, we continue to see more and more countries being more open. At a micro level, we see more and more people identifying as fluid. And so that's helpful as we're actually happy with a couple of things with respect to focusing on a great user experience. And so that focusing on a great user experience helps keep people in the app, bring people in the app.

Vanna Krantz: I will start with MAU. From a MAU perspective, as you noted, yes, we are at 8% growth, and we are happy with that number. A couple of things that are working in our favor, and one of them is from the macro level, we continue to see more and more countries being more open. At a micro level, we see more and more people identifying as fluid, and so that is helpful. As well, we are actually happy with a couple of things with respect to focusing on a great user experience. That focusing on a great user experience helps keep people in the app, bring people in the app. I would suggest that the bug fixes, for instance, are a great user experience and therefore helping our MAU.

George Arison: And so I would suggest that the bug fixes, for instance, are a great user experience and therefore helping our Mao. Secondly, I'd like to just mention that all the features on our product roadmap also help bring people in and keep our Mao at good numbers. And so all those things are working in our favor for Mao growth. Yeah, I think one thing I'll add on Mao is, you know, we do know that there are users kind of on a mid stage of their lives and later that might have had a Grindr account, might still have a Grindr account, but don't use Grindr as much as they used to.

Vanna Krantz: Secondly, I’d like to just mention that all the features on our product roadmap also help bring people in and keep our MAU at good numbers. All those things are working in our favor for MAU growth.

George Arison: Yeah, I think one thing I like on MAU is we do know that there are users on a mid-stage of their lives and later that might have had a Grindr account, might still have a Grindr account, but don't use Grindr as much as they used to. One of the reasons is that they move into a stage of life they want to settle down and find a long-term partner. The fact that we don't have a lot of the features for long-term relationships make them less excited about using Grindr for that purpose, even though we also know that Grindr is the primary way in which people find long-term partners in the gay community around the world.

George Arison: One of the reasons is that they want to, they move into a stage of their lives, they want to settle down and find a long term partner. And the fact that we don't have a lot of the features for long term relationships make them, you know, less excited by using Grindr for that purpose, even though we also know that Grindr is the primary way in which people find long term partners in the gay community around the world. And so we do believe that there is a way to better engage those users as we build the relationship use case, which obviously is something that we're working on and that's on our product roadmaps.

George Arison: We do believe that there is a way to better engage those users as we build the relationship use case, which obviously is something that we're working on and that's on our product roadmap. I think, while that's not being built with the idea that, hey, it's going to help MAU, we think that inevitably it will have an impact on MAU as well because of the ability to reengage that older cohort. When I use older, I do that a little bit in my age cohort. It's not necessarily very old, but older versus what you'd expect on a product like us. With regards to technical debt, Grindr is a product that's been around for a long time now. It's going to be turning 16 years old in March.

George Arison: I think, you know, while that's not being built with the idea that, hey, it's going to help Mao, we think that inevitably it will have an impact on Mao as well because of the ability to re-engage that kind of older cohort. And when I use older, I do that a little bit in my age cohort, so it's not necessarily very old, but older versus what you'd expect on a product like that.

George Arison: And then with regards to technical debt. Grindr is a product that's been around for a long time now. It's going to be turning 60 years old in March. And, you know, while that in the totality of years, that's not very long in the world of mobile technology, that's actually a very long time, right? Because the mobile transition only happened in the last 20 years. And so as a foundation, Grindr was built with technology that made a lot of sense to use when it was built, but it's not necessarily how you build technology today. We have done a lot of work over the last, really four plus years, right, since 2020, to address the technical debt that was inherited.

George Arison: While in the totality of years, that's not very long, in the world of mobile technology, that's actually a very long time. The mobile transition only happened in the last 20 years. At the foundation, Grindr was built with technology that made a lot of sense to use when it was built, but is not necessarily how you build technology today. We have done a lot of work over the last really 4 plus years, right, since 2020 to address the technical debt that was inherited. For example, on the back end, the technology that underlies the product today is fundamentally different from what was there when the folks who bought Grindr out from Chinese ownership and remain very large shareholders today completed that purchase. That's in a really strong place.

George Arison: For example, on the back end, the technology that underlines the product today is fundamentally different from what was there when the folks who bought Grindr out from Chinese ownership and remain very large shareholders today kind of completed that purchase. And so that's in a really strong place. Moving to a new architecture with an app would be a big transition that we needed to make. In the mobile code base, right, so this is the Android and iOS code base, there are still things that if you were building the app from scratch today, you would do differently.

George Arison: Moving to a new architecture was an inevitably big transition that we needed to make. In the mobile code base, so this is the Android and iOS code base, there are still things that if you were building the app from scratch today, you would do differently. That causes challenges because, for example, the architecture is much more monolithic in nature. Sometimes you're working on a new feature in one part of the code base, and you run tests related to that part of the code base based on that new feature, and you don't find any bugs. You discover after you release the feature that it's impacting something in a totally different part of the code base and causing a bug. Modern apps, like ones built recently, wouldn't be built that way, and so you wouldn't have that kind of a bug situation.

George Arison: And that causes challenges because, for example, the architecture is much more monolithic in nature. And so sometimes you're working on a new feature in one part of the code base, and you run tests related to that part of the code base based on that new feature, and you don't find any bugs. But then you discover after you release the feature that it's impacting something in a totally different part of the code base and causing a bug, right? And modern apps like ones built recently wouldn't be built that way, and so you wouldn't have that kind of a bug.

George Arison: So, we are working through that and the decision that was made four years ago, I think the right decision was to say that we will address these changes in the code base as we work through them, meaning as we make changes and add features, we then also rewrite parts of the code base for mobile. And so, that'll kind of come along on its own and it will take some time. We did have a lot of bugs in the product that, you know, kind of had been accumulated over time and what we did is run a two-week bug bash.

George Arison: We are working through that, the decision that was made 4 years ago, I think the right decision, was to say that we will address these changes in the code base as we work through them, meaning as we make changes and add features, we then also rewrite parts of the code base for mobile. That'll come along on its own and will take some time. We did have a lot of bugs in the product that had been accumulated over time. What we did is run a 2-week bug bash. As a technology builder, I actually don't love that because bugs should be bashed all the time. There had been this accumulation of bugs, I felt like it made sense to just stop product development for 2 weeks and just work on bugs.

George Arison: You know, as a technology builder, I actually don't love that because bugs should be bashed all the time. But there had been this accumulation of bugs and so I felt like it made sense to just stop product development for two weeks and just work on bugs. As you can imagine, it's a pretty expensive process when you have, you know, 80-plus people working just on a bug bash. But the results were really positive. We bashed more than 75% of all the bugs out there and that, I think, will have a very direct and positive impact on the user experience in the product.

George Arison: As you can imagine, it's a pretty expensive process when you have 80-plus people working just on a bug bash. The results were really positive. We bashed more than 75% of all the bugs out there. That, I think, will have a very direct and positive impact on the user experience in the product. I think it was very much worth doing and frankly speaks to the commitment that we have in ensuring that the product is of very high quality and also that we need to build product with an eye towards having high quality, right? We should not ship things that are potentially problematic and cause more bugs. I think having the bug bash was a very positive thing for us, and we'll continue investing in ensuring that the product is of a high quality as time goes on.

George Arison: And so, I think it was very much worth doing and, frankly, speaks to the commitment that we have in ensuring that the product is of very high quality and also that we need to build product with an eye towards having high quality, right? We should not ship things that are potentially problematic and cause more bugs. And so, I think having a bug bash was a very positive thing for us. And we'll continue investing in ensuring that the product is of a high quality as time goes on.

Tolu Adhiafa: Thank you.

Vanna Krantz: Thank you.

Tolu Adhiafa: And we have reached the end of our question and answer session. This concludes today's conference call. We thank you for your participation. You may now disconnect.

Operator: We have reached the end of our question and answer session. This concludes today's conference call. We thank you for your participation. You may now disconnect.