Q2 2023 Grindr Inc Earnings Call
Two decliners second quarter 2023 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star two thank you.
Patrick Flanigan: I'd now like to turn the conference over to Patrick Flanigan.
Speaker Change: Representative for greater please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone. Today's call will be led by grinders, CEO, Georgia, Ericsson and CFO banner crafts.
Speaker Change: A few brief remarks, and then we will open it up for questions.
Speaker Change: Please note grinder released our Q2 2023 shareholder letter yesterday afternoon.
Speaker Change: It's available on the Sec's website, and grinders investor page at investors 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: Some of 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 disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures are included in the earnings release, we issued yesterday, which has been posted on the Investor Relations page of <unk> website and in <unk> filings with the SEC.
Speaker Change: SEC.
Speaker Change: With that I'll turn it over to George Harrison.
George Harrison: Hello, everyone and thank you for joining us today.
Speaker Change: We appreciate your patience with us when reschedule in today's call.
Speaker Change: More time to add some additional processes before finalizing our financial was up this quarter.
Speaker Change: We're pleased that we were able to file our 10-Q and letter yesterday and look forward to sharing additional perspective on our progress today.
Speaker Change: We had an excellent quarter and continues to build momentum through the first half of the year.
Speaker Change: We're delivering a better user experience with significant feature improvements and we're continuing to improve on innovation.
Speaker Change: By a new weekly subscription plan, which is performing well.
Speaker Change: I am proud of what we have been able to achieve so far and there's a lot more to come.
Speaker Change: Our shareholder letter covers the key developments in the quarter and I encourage you to read more of that for my remarks here I will give a high level review of the results and execution message of priorities before turning it over to Dan.
Speaker Change: We delivered revenue growth of 32% year over year with an operating income margin of 8%.
Speaker Change: <unk> EBITDA margin of 44%.
Speaker Change: Given the strong momentum in the first two quarters of this year, we're pleased to be able to raise that 2020 guidance to revenue growth of 28% or greater and EBITDA margin of 41% or greater for 2023.
Speaker Change: Then I will cover the details behind the guidance raise.
Speaker Change: Let me just say that our confidence in our outlook is supported by the rapid progress, we're making on our strategic priorities.
Speaker Change: The first of these priorities is improving our user experience during Q2, we rolled out and received positive user feedback on our newly designed homes suite to help our users connect more efficiently. We also rolled out a redesigned profile that enables high quality photo sharing and features a clear and upfront about infection among many upper improvements.
Speaker Change: Priority is monetization through greater conversion and new offerings.
Our global rollout of weekly.
Speaker Change: And lower priced shorter duration subscription offering but gives us access to extra features and functionality for one week.
Speaker Change: It's an excellent adoption weeklies contributed to our growth in paying users and higher arpus with.
Speaker Change: We're continuing to test additional lower pricing options as well as develop features for a premium tier.
Speaker Change: But we do not expect to launch even though these in 2023.
Speaker Change: Our first priority is planning for future growth.
Speaker Change: In may we rolled out Glenn to web to a 100% of our paying users.
Speaker Change: Represents a long term opportunity to build nsfw features our users want.
Speaker Change: Have not previously been able to provide on a mobile form factor.
Speaker Change: We're also working on a broad set of paid features that our users have long wanted us to build which are being tested in phase II and we expect will go live next year.
Speaker Change: We are in early stages of developing products we.
Speaker Change: We believe that AI will transform the ability to match users with each other and create new use cases for engagement and we're making investments across a broad range of the AI and the amount of use cases and features that we expect to bring to market in the coming quarters.
Speaker Change: Regarding the team we are focused on accelerating our execution and we are bringing some terrific talent on board to help us in areas like product management engineering marketing advertising data science anymore.
Speaker Change: Expect to see more from us on this front via progresses.
Speaker Change: Shift to hybrid work structure has impacted 100 pace as we prioritize building a high performing public companies, we expect to meet our headcount resources Department and <unk> hundred 23 and 2021.
Speaker Change: Our fourth priority is about serving our community suddenly that continues to animate our business and team.
Speaker Change: We're pleased with the success of together taking home.
Speaker Change: From our longtime kilometers of building healthy online communities working closely with Emory University and the U S centers for disease control and prevention.
Speaker Change: So a unique public private partnership.
Speaker Change: We've made the program, which are both with a single click from our App, providing end users around the country access a free at home HIV test kits.
Speaker Change: I am proud of the strong results in the quarter and the progress we've made to improve decliner app in the first half of the year and I look forward to sharing all the great things. We are already working on in the second half with you in the coming quarters, including an update at our inaugural Investor day, but stay tuned for more information on this in the coming weeks.
Democrats: With that I'd like to turn the call over to our CFO Democrats to walk through our second quarter financial results.
Democrats: Thank you George and Hello, everyone.
Speaker Change: We built upon our first quarter momentum to deliver an excellent second quarter financially.
Keeping 32% year over year revenue growth and the operating income margin of 23% and then adjusted EBITDA margin of 44%.
Speaker Change: As you heard from George our strong financial performance in the first two quarters and continued positive user engagement trends have led us to raise our full year outlook.
Speaker Change: We now expect full year revenue growth of 28% or greater up from 25% or greater with an adjusted EBITDA margin of 41% or greater up from 38% or greater.
Speaker Change: The improved outlook, primarily reflects increased confidence in the performance of new subscription and Ala Carte products as we continue to improve monetization as well as operational efficiencies.
Speaker Change: We expect revenue growth to outpace increases in operating expenses over the second half of the year.
Speaker Change: Yeah.
Speaker Change: Turning to our user metrics in the second quarter average monthly active users increased 8% over the prior year and 2% sequentially to $13 1 million.
Speaker Change: Average paying users in the quarter increased 22% over the prior year to 929000.
Speaker Change: As a result of the increases in average MAU and average paying users our average payer penetration grew to seven 1% for the second quarter.
Speaker Change: Improved monetization was primarily driven by the global rollout of our new weekly subscription offering, which we have been testing since late last year.
Speaker Change: Our average revenue per paying user increased 56% sequentially to $19 eight.
Speaker Change: <unk>.
Speaker Change: As we continue testing subscription option with our goal of increasing total paying users. We expect this metric may fluctuate quarter to quarter.
Speaker Change: Turning to the more detailed results beginning with revenue.
Speaker Change: Second quarter revenue of $61 5 million was up 32% year over year from $46 6 million.
Speaker Change: Direct revenue for the second quarter increased 37% year over year to $53 2 million driven by the new weekly subscription offerings and continued adoption of the boost Ala carte product.
Speaker Change: Advertising or indirect revenue for the second quarter grew 7% year over year to $8 3 million.
Speaker Change: Operating expenses decreased by $1 million year over year, we incurred higher expenses related to distribution fees driven by subscription growth and increased head count related expenses in support of product development.
Speaker Change: These costs were offset by lower stock based compensation expense and lower depreciation and amortization.
Speaker Change: Net income for the second quarter was $22 3 million up from a net loss of $4 3 million in Q2 of 2022.
Speaker Change: Basic and diluted earnings per share it was 13 sets.
Speaker Change: Adjusted EBITDA for the quarter was $26 9 million or 44% of total revenue.
Speaker Change: These results were primarily driven by revenue growth and strong operating margins inherent in the grinder business model.
Speaker Change: Approximately one percentage point of our adjusted EBITDA resulted from certain onetime adjustments, but regardless our performance was stronger than anticipated.
Speaker Change: Turning to our balance sheet grinder made principal debt repayments of $17 6 million in the quarter, resulting in reduced net debt of $342 9 million at June 32023.
Speaker Change: We ended the quarter with $22 1 million in cash and cash equivalents down from $25 5 million in the prior year and $33 8 million in the first quarter of 2023.
Speaker Change: With that I will pass it back to George who will open it up for Q&A.
George Harrison: Thank you Dana we're excited about the progress we've made so far this year and look forward to continue to delight users silver community and generate value for shareholders.
George Harrison: I'll ask the operator to open up the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
George Harrison: Do you have a question. Please press the star followed by the one on your Touchtone phone.
George Harrison: Here are three telecom technology, and Youll request questions will be taken in the order received should you wish to cast and we will request. Please press the star followed by the two.
Speaker Change: We will begin by taking a couple of questions from the Se platform.
George Harrison: Which is a platform that enables us to take questions from retail investors.
Speaker Change: First question is from Manuel fee.
Manuel fee: Will you consider making your premium subscriptions more affordable to increase sales.
Manuel fee: Or how about adding a cheaper plan only renewed.
Manuel fee: Thank you for the question.
Manuel fee: Absolutely we are focused on meeting our users with price points and features that they want.
Manuel fee: So we have launched what's called the weeklies the weeklies allow our users to take our product for a shorter period of time, perhaps when they're traveling to New York City and just use the product for that duration that gives them more flexibility and it is a cheaper option.
Manuel fee: Also we have recently launched <unk> plus and that allows you to have the product without.
Manuel fee: Without ads.
Manuel fee: So.
Manuel fee: That also is a cheaper option.
Manuel fee: Thanks.
Manuel fee: Thank you all right next.
Speaker Change: Next question is from Kelly or can you explain why you hired little.
Manuel fee: Littler mendelson, while your employees or attempting to unionize.
Manuel fee: Thanks for the question at this time, we are not enough position to comment on matters pending before the NLRB we.
Manuel fee: Have said and we will continue to say that we respect and support our team members rights to make their own decisions about union representation.
Manuel fee: Thank you very much I believe we have a question in the queue operator.
Speaker Change: Yes. Your question is from Emily <unk> from New Street Research. Please ask your question.
Emily: Hi, good afternoon, everyone and thanks for taking my question, so with the LGBTQ plus community.
Speaker Change: Atlantic has gone a little bit more competitive lately with the introduction of a new up from another major player in the space.
Speaker Change: That was really a little bit over two months ago, how do you see this impacting grinder and its user base.
Speaker Change: Yes.
Speaker Change: Our experience from looking at this space for quite some time now is that users that use more than one <unk>.
Speaker Change: So we know that some of our users are using our app that already exist.
Speaker Change: And we would expect them to continue to do that.
Speaker Change: It will be important for us is for our users to have an grinder as the primary app and then for them to log into the up frequently and use it for a long time. So that they are enjoying their experience and have a lot of engagement from that perspective, we are in a very strong position.
Speaker Change: We know the things that our users want from vendor in terms of improvements specifically uses wanted more nsfw features and they want more data and features and the cohorts of users who want those things differently. The younger users want nsfw features the older users wanted more dating features and.
Speaker Change: We are doing a lot to build the functionality for those features.
Speaker Change: I don't see anybody out there at this time.
Speaker Change: So from that perspective between where they use their need is and where we think the demand for the functionality as well.
Yeah.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: We're turning back to our say questions from Daniel D.
Daniel D.: Does the leadership team have plans for how to improve market value in the next quarter.
Daniel D.: Well, we obviously always thinking about how to create shareholder value over the long term.
Daniel D.: I don't know if I can speak to the next specific quarter, but I think nothing speaks to what we're doing over the long term in the way we think about that is by creating value for our users and we would expect some users to pay for that value, which then leads to more monetization and the products and that creates value for our shareholders as well.
Daniel D.: You can see from our quarterly results, we have been laser focused on that so far and we'll continue to do so given that we were fortunate to be able to increase guidance, both on revenue and EBITDA for the year.
Daniel D.: When we think about the long term that really four key areas, where we're focused I know they are a strategic priority. So number one we got a key improving the user experience.
Daniel D.: Done quite a bit on that already and we will continue that in the future. In Q2, we released a new home screen and also released a new profile page, which has gotten really good feedback from users and we will continue to make similar investments for our users to make me out be better number two we continue to nimble.
Daniel D.: Monetization and drive conversion to be higher.
Daniel D.: 55000, new paying subscribers in the quarter, which we are very happy about and we thought it has done very well and we expect it to be an important contributor to the year.
Daniel D.: Number three and this is something that we've spent a significant amount of time on is going to be <unk>.
Daniel D.: Planning for the future looking ahead to the things that with the users want and have been asking for for a long time that we've not had enough money into belt and really going after those on product through those products and those features we believe that we'll be able to drive monetization.
Daniel D.: To be higher and we've spoken about this in our shareholder letter, but what competing things like more Ala Carte offerings. We think uses very much want and we have an outcome and then lastly, being very engaged with our user base and our community continue to serve as the edge, which community is a focus for us as well. So those are the kind of four strategic priorities that we spoke.
Daniel D.: And about at every call and we see them by focusing on those.
Daniel D.: In a very good position to be able to create value for our users and through that create value for our shareholders.
Manuel fee: Alright next question from Manuel fee.
Speaker Change: What are you doing to make your app more responsive and less battery in Texas.
Speaker Change: So it's a really good question.
Speaker Change: Christina.
Speaker Change: I thought about that Scott, both now and in the past.
Speaker Change: The reality Unfortunately for grinder is that historically, there was a definite under investment in technology and that has been corrected in a significant way over the last three years under the ownership that took over from colon and we spend a significant amount of time on the engineering team trying to rebuild that the technology stack to make.
Speaker Change: <unk> be in a position where we could then start building new features.
Speaker Change: This year, we're launching as many features as we are speaks to the fact that a lot of that work was very valuable and has put us in a strong position to now build a better user experience.
Speaker Change: Obviously, making the ought be less better intensive as part of that user experience.
Speaker Change: We also.
Speaker Change: Maybe off much faster I think you will have noticed that in the last few months and that's quite exciting and we are also building a lot of things for the future to make Nab.
Speaker Change: AI features an open the generative side and better matching.
Speaker Change: So investing into the App and make them be a better user experience is something that we're very much focused on.
Speaker Change: Now the reality also is that greiner.
Speaker Change: Location based App and so those types of products.
Speaker Change: General on mobile are quite batteries 10, seven so some of it is just the requirements of the product and for a relocation basin, that's not something that we can comment at all.
Speaker Change: We had a couple of questions about safety and scams two in particular from Christian B, how do you plan to mitigate the proliferation of AI and bot, scammers and identity theft and from Lynette G.
Speaker Change: Are you aware of <unk> scans on grinder, how do you plan to combat this common scam and do you have plans for raising awareness with users.
Speaker Change: I would say in almost every public amongst that I make that privacy and safety point of view that is extremely important and something that we take very very seriously.
Speaker Change: One of the ways that we track that is through flags that we receive from our user themselves.
Speaker Change: That would get the worse it is obviously.
Speaker Change: In fact can be on a number of things expand.
Speaker Change: Hunting account solicitation harassment, etc.
Speaker Change: But we are very proud of is that since January 2021, we have seen over 50% reduction.
Speaker Change: Their labs.
Speaker Change: That.
Speaker Change: I think that is really significant and speaks to the investment that the business has made in improving the quality of the product from the trust and safety perspective.
Speaker Change: There is several ways in which we have done that and number one way to grow in the customer service team.
Speaker Change: To manage.
Speaker Change:
Speaker Change: Claims and reported coming from users in a pretty significant way and that's an important and significant investment that we're making.
Speaker Change: And we've also developed a machine learning capability that allows us to detect spamming and legal activity and proactively remove it.
Speaker Change: And then we've also build.
Speaker Change: The detailed set.
Speaker Change: Is that a policy guidelines that educate users about what is allowed and what's not allowed to do.
Speaker Change: We are a social product and getting.
Speaker Change: Sam and unsafe activity down to zero is next to impossible for any social product, but it is something that we are laser focused on trying to ensure that we have as great of an experience as the users can have an exact concurrently with that obviously, we need to be focused on privacy as well.
Speaker Change: User demand protection of their identity and they frankly required in a lot of places as well because.
Speaker Change: Of the.
Speaker Change: The situations that they live in whether it.
Speaker Change: Because it's illegal to be gay in those countries or because it's difficult to begin those countries a location and so we do have to always be thoughtful both about the safety of our users and the privacy of our users.
Matthew P: Next question comes from Matthew P <unk>.
Matthew P: Greider is in a unique position as the most recognizable LGBT app on the market.
Matthew P: Do you plan on leveraging that in the long term to grow the brand beyond its reputation as a game and hook up app.
Matthew P: So we are very fortunate to have a very powerful brand.
Matthew P: Yeah, you know what the unit.
Matthew P: So on brand recognition.
Matthew P: The base and beyond.
Matthew P: Which puts us in a very positive position.
We the way, we think about it and the opportunity to expand the product is sort of the use cases, starting first with the use cases that already happened in the cloud.
Matthew P: Now that <unk> is using it and a lot of other ways. Besides hookup, which was the primary use case for which was built obviously dating is the second biggest use case, but social connections and friendships is another significant component. We also know that I use it use grinder allot for travel and frankly, a lot of the multi use it for health information.
Matthew P: We are source of health information in a lot of countries.
Matthew P: The only source of help English LGBTQ users.
Matthew P: And and people and we also know what happened last summer where during the multi part.
Matthew P: Mike Greiner played a really critical role in educating us about what they need to do and how they could protect themselves and so the set of use cases that we service is very broad functionality that we'd have in the app is not as broad and so a lot of what we're doing today is.
Matthew P: To ensure that we can build the functionality to support the use cases that already happened within the product by doing that we believe that our users will have a better experience and we'll see more value in the app and through that we will be in a position to create more shareholder value for a better monetization as well.
Speaker Change: We will take one more question from Jeff J T.
Speaker Change: Are you planning any influencer collaborations in the near term.
Speaker Change: It's a great question.
Speaker Change: So first of all I hope everyone stays safe tuned for some announcements on the leadership on our brand marketing side that won't be coming out in a few weeks as well, which we're excited about.
Speaker Change: Historically went to collaborate a lot.
Speaker Change: And influencers in our community.
Speaker Change: For example, our in house creative team and develop and launch the old days Influencers, which since have garnered 11 million followers across social platforms.
Speaker Change: Primetime television appearances and international media coverage as well and so it's something that we've done and we'll continue to do.
Speaker Change: Obviously.
Speaker Change: People come to our social platforms, which we have over $1 8 million followers across Twitter Tictoc Facebook Youtube etcetera.
Speaker Change: Where do you see really fun and sexy content and enjoy themselves and so that is the objective of our.
Speaker Change: Social presence and that's why we went to when are continuing and we want to make sure that it ties back to our brand and what we want the story behind <unk>.
Speaker Change: So I think that is what we've been aiming to do so far and we'll continue to do in the future.
George Harrison: Thank you George Thank you very much everyone, who dialed in to listen I'll turn it back over now to the operator to close out the call.
George Harrison: Great. Thanks, so much thanks.
George Harrison: Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect your lines.