My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr Second Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Patrick Lenihan, a representative for Grindr. Please go ahead.

Thank you, operator, and good afternoon, everyone. 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 Q2 2023 shareholder letter yesterday 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. 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 Grindr's website and in Grindr's filings with the SEC. With that, I'll turn it over to George Arison.

Hello, everyone, and thank you for joining us today. We appreciate your patience with us on rescheduling today's call. We needed more time to add some additional processes before finalizing our financial results this quarter. We are pleased that we were able to file our 10-Q and letter yesterday and look forward to sharing additional perspectives on our progress today. We had an excellent quarter and continued to build momentum through the first half of the year. We're delivering a better user experience with significant feature improvements, and we continue to improve monetization, highlighted by our new Weeklies subscription plan, which is performing well. I'm proud of what we have been able to achieve so far and there's a lot more to come. Our shareholder letter covers the key developments in the quarter, and I encourage you to read more there. For my remarks here, I will give a high-level review of the results and execution of our future priorities before turning it over to Vanna. We delivered revenue growth of 32% year-over-year with an operating income margin of 23% and an adjusted EBITDA margin of 44%. Given strong momentum in the first 2 quarters of this year, we are pleased to be able to raise our 2023 guidance to revenue growth of 28% or greater and an EBITDA margin of 41% or greater for 2023. Vanna will cover the details behind the guidance range, but let me just say that our confidence in our outlook is supported by the rapid progress we're making on our strategic priorities. The first of these priorities is improving our user experience. During Q2, we rolled out and received positive user feedback on a newly redesigned home screen to help our users connect more efficiently. We also rolled out a redesigned profile that enables…

Thank you, George, and hello, everyone. We built upon our first quarter momentum to deliver an excellent second quarter financially, achieving 32% year-over-year revenue growth and operating income margin of 23% and an adjusted EBITDA margin of 44%. As you heard from George, our strong financial performance in the first 2 quarters and continued positive user engagement trends have led us to raise our full year outlook. 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. The improved outlook primarily reflects increased confidence in the performance of new subscription and a la carte products as we continue to improve monetization as well as operational efficiencies. We expect revenue growth to outpace increases in operating expenses over the second half of the year. 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. Average paying users in the quarter increased 22% over the prior year to 929,000. As a result of the increases in average MAU and average paying users, our average payer penetration grew to 7.1% for the second quarter. Improved monetization was primarily driven by the global rollout of our new Weeklies subscription offering, which we've been testing since late last year. Our average revenue per paying user increased $0.56 sequentially to $19.08 this quarter. As we continue testing subscription options with our goal of increasing total paying users, we expect this metric may fluctuate quarter-to-quarter. Turning to the more detailed results, beginning with revenue. Second quarter revenue of $61.5 million was up 32% year-over-year from $46.6 million. Direct revenue for the second quarter increased 37% year-over-year to $53.2 million, driven by the…

Thank you, Vanna. We're excited about the progress we made so far this year and look forward to continuing to delight our users, to serve our community and generate value for our shareholders. At this time, I'll ask the operator to open up the line for questions.

[Operator Instructions]

We'll begin by taking a couple of questions from the Say platform, which is a platform that enables us to take questions from retail investors. First question is from Manuel C. Will you consider making your premium subscriptions more affordable to increased sales? Or how about adding a cheaper plan that only removes ads?

Thank you for the question. Absolutely, we are focused on meeting our users with price points and features that they want. So we have launched what's called, the Weeklies. The Weeklies allow our users to take our products for a shorter period of time, perhaps when they're traveling to a new city and just use the product for that duration. That gives them more flexibility and it is a cheaper option. Also, we have recently launched Grindr Plus, and that allows you to have the product without ads. So that also is a cheaper option.

All right, next question is from Kelly R. Can you explain why you hired little Littler Mendelson, while your employees are attempting to unionize?

Thanks for the question. At this time, we are not in a position to comment on a matter pending before the NLRB. We have said and we'll continue to say that we respect and support our team members rights to make their own decisions about union representation.

Thank you very much. I believe we have a question in the queue, operator?

Your question is from Emily Stykes from New Street Research.

So the LGBTQ+ community's dating app landscape has gone a little bit more competitively with the introduction of a new app from another major player in the space that was released a little bit over 2 months ago. How do you see this impacting Grindr and its future base?

Our experience from looking at the space for quite some time now is that users generally use more than 1 app for dating. So we know that some of our users are using other apps that already exist, and we would expect them to continue to do that. What's really important for us is for our users to have Grindr as the primary app and then for them to log into the app frequently and use it for a long time so that they're enjoying their experience and have a lot of engagement. I think from that perspective, we are in a very strong position. We know the things that our users want from Grindr in terms of improvements. Specifically, users want more NSFW features, and they want more dating features. And the cohort of users that want those things differ, right? The younger users want NSFW features, the older users want more dating features, and we are doing a lot to build the functionality for those features. I don't see anybody out there at this time who is really thinking about it from that perspective between where the user need is and where we think kind of demand for the functionality is as well.

Great, we're turning back to our Say questions. From Daniel D, does the leadership team have plans for how to improve market value in the next quarter?

Well, we're obviously always thinking about how to create shareholder value over the long term. So I don't know if I can speak to the next specific quarter, but I can definitely speak to what we're doing over the long term. And the way we think about that is by creating value for our users, and we would expect then users to pay for that value, which then leads to more monetization in the product, and that creates value for our shareholders as well. As you can see from our quarterly results, we've 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. When we think about the long term, there are really 4 key areas where we are focused, and those are our strategic priorities. So number one, we've got to continue improving the user experience. We've done quite a bit on that already, and we'll continue that in the future. In Q2, we released a new home screen. We also released a new profile page, which has gotten really good feedback from users, and we'll continue to make similar investments for our users to make the app feel better. Number two, we continue to invest in monetization and drive conversions to be higher. We had 35,000 new paying subscribers in the quarter, which we are very happy about. The Weeklies product has done very well, and we expect it to be an important contributor to the year. Number three, and this is something that we've spent a significant amount of time on is we'll be planning for the future. Looking ahead to the things that the users want and have been asking for a long time that we've not had an opportunity to build and really going after those products. Through those products and those features, we believe that we'll be able to drive monetization to be higher. We've spoken about this in our shareholder letter, but worth repeating, things like more a la carte offerings, we think users very much want and we have on the come. And then lastly, being very engaged with our user base and our community, continue to service the LGBTQ community is a focus for us as well. So those are the kind of 4 strategic priorities that we've spoken about at every call. And we think that by focusing on those, we are in a very good position to be able to create value for our users and through that, create value for our shareholders.

Next question from Manuel C. What are you doing to make your app more responsive and less battery intensive?

So it's a really good question because I personally have thought about that both now and in the past, the reality unfortunately for Grindr is that historically, there was a definite underinvestment in technology. That's been corrected in a significant way over the last 3 years under the ownership that took over from Kunlun, and we spent a significant amount of time on the engineering team trying to rebuild the technology stack to make the app be in a position where we could then start building new features. And the fact that 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 and obviously, making the app be less battery intensive as part of that user expense. We also have maybe up much faster. I think people have noticed that in the last few months, and that's quite exciting. And we're also building a lot of things for the future to make have AI features in it, both on the generative side and better matching. So investing into the app and making the better user experience is something that we are very much focused on. Now the reality although is that Grindr is a location-based app. And so those types of products, in general, on mobile are quite battery intensive. And so some of it is just the requirements of the product for a delocation base, and that's not something that we can solve.

We had a couple of questions about safety and spams, 2 in particular, from Christian B, how do you plan to mitigate the proliferation of AI and bot scammers and identity theft? And from Lannett G, are you aware of sextortion scams on Grindr? How do you plan to combat this common scam? And do you have plans for raising awareness with users?

I say in almost every public remarks that I make, that privacy and safety for our users is extremely important and something that we take very, very seriously. One of the ways that we track that is through flags that we receive from our users themselves. I think the more flags that we get, the worse it is, obviously. And flags can be on a number of things like spams, [indiscernible] solicitation, harassment, et cetera. What we are very proud of is that since January 2021, we have seen an over 50% reduction in user flags that I think 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. There's several ways in which we've done that. Number one, we've grown the customer service team to manage claims and reports that come in from users in a pretty significant way and that's an important and significant investment that we're making in a product. We've also developed a machine learning capability that allows us to detect spam and unsafe activity and proactively remove it. And then we've also built a fairly detailed set of policy guidelines that educate users about what is allowed and what's not allowed to do. Obviously, we are a social product and getting spam and unsafe activity down to 0 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 good of an experience as our users can have and expect. Concurrently with that, obviously, we need to be focused on privacy as well. How the users demand protection of their identity and they frankly require it in a lot of places as well because of the situations that they live in, whether it's because it's illegal to be gay in those countries or because it's difficult to be gay in those countries or location. And so we do have to always be [ thoughtful ] for -- about the safety of our users and the privacy of users.

Next question comes from Matthew P. Grindr is in a unique position as the most recognizable LGBT app on the market. How do you plan on leveraging that in the long term to grow the brand beyond its reputation as a gay man's hookup app?

So we are very fortunate to have a very powerful brand with nearly universal brand recognition in our user base and beyond, which puts us in a very positive position. We -- the way we think about it and the opportunities to expand the product is through the use cases -- starting first with the use cases that already happen in the product. We know that Grindr is used in a lot of other ways besides hookups, which was the primary use case for which it was built. Obviously, dating is the second biggest use case, but social connections and friendships is another significant component. We also know that our users use Grindr a lot for travel. And frankly, a lot of them also use it for health information. We are a source of health information in a lot of countries, maybe the only source of health information for LGBTQ users and people. And we also know what happened last summer where during the monkeypox epidemic, Grindr played a really critical role in educating our users about what they needed to do and how they could protect themselves. And so the set of use cases that we service is very broad. The functionality that we have in the app is not as broad. And so a lot of what we're doing today is to ensure that we can build the functionality to support the use cases that already happen within the product. By doing that, we believe that our users will have a better experience, they will 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.

We'll take one more question from Jiban T. Are you planning any influencer collaborations in the near term?

It's a great question. So first of all, I hope everyone stay tuned for some announcements on the leadership on our brand marketing side that will be coming out in a few weeks as well, which we're excited about. Historically, Grindr has collaborated a lot with artists and influences in our community. For example, our in-house creative team development launched the gays influencers, which since have garnered 11 million followers across social platforms with their prime-time television appearances and international media coverage as well. So it's something that we've done and we'll continue to do. Obviously, people come to our social platforms. We have over 1.8 million followers across Twitter, TikTok, Facebook, YouTube, et cetera, in order to see really fun and sexy content and enjoy themselves. And so that is the objective of our social presence, and that's what we want to continue doing. And we want to make sure that it ties back to our brand and what we want the story behind Grindr to be. And so I think that is what we've been aiming to do so far and we'll continue to do in the future.

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.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.