Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr's Third Quarter 2024 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. [Operator Instructions] Thank you. I would like to now turn the conference over to Tolu Adeofe, Grindr's Head of Investor Relations. Please go ahead.

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

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 optimizations. Advertising revenue also exceeded our expectations this quarter, fueled by increased demand from our third-party advertising partners. Vanna 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 of Right Now to the Washington, D.C. metro area. 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 the goal of scaling the product by the end of 2025. Our focus is on user engagement but there is significant potential for monetization as well. We also launched the Interest tab, centralizing inbound interest across Viewed Me and Taps which increased payer conversion and led to an over 150% increase in user engagement with the Viewed Me 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're making good progress in other product areas as well including early…

Thank you, George and hello everyone. Grindr delivered an exceptional third quarter 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 and our average direct revenue per paying user increased 8% over the prior year to $23.07 this quarter. 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 the third quarter, we generated positive 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. 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. [Operator Instructions] Your first question comes from the line of Nick Jones from Citizens JMP. Your line is open.

Great. Thank you for taking the questions. As we think about the road map you laid out at the Analyst Day, and we kind of consider the performance over the last couple of quarters and in this quarter are there opportunities to potentially accelerate investment and maybe accelerate those time lines? How should we think about kind of philosophically as kind of ARPPU performs, average subscribers kind of increase or paying users accelerated this quarter? I mean, as you kind of deliver these maybe better-than-expected results, are there opportunities to potentially accelerate time lines?

Thanks for the question, Nick and good to talk to you. So 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 are really happy with where the product map is today as far as the things we've laid out and by which 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 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 road map 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. So I think what you will see from us is that we'll be either on track or ahead of schedule on everything we publicly said, and we'll 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 the product, they tend to monetize it really as aggressively as possible and under invest in building new products. 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. 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 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.

Great. And then maybe just two kind of quick follow-ups. One, I guess, George, what -- as you kind of roll out Right Now, what are kind of the most exciting things you're learning about the product as users start using it that get 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 Vanna will take the ads 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 as the name implies. It is a pretty broad suite of -- it's a suite of broad features 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. 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 the 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 it'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. 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 are using it often. And that's exactly, what we want to see right? We want to see active engagement from a portion of the user base that we think, will benefit from a…

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 freemium 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. And so when we joined, I'd say, the ad business had been a little underinvested 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. 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 switched that, which is obviously not a major thing, but actually had 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 is being done this year to move us into a successful growth year for ads into 2025. Q – Nick Jones: Thanks, George. Thanks, Vanna.

Your next question comes from the line of Andrew Marok from Raymond James. Your line is open. Q – Andrew Marok: 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 I 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 undermonetized 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 philosophically balancing that? And how much room do you think there still is to run on pricing and merchandising optimizations and improvements? Thanks.

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 the primary product and we don't have trouble attracting new users as they kind of mature and become adults. And I think that's going to be important and acknowledging that is crucial. One of the things I think you'll learn about this space as you start working in 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, 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 were -- some people call them back doors meaning like no one actually planned on them being that way, but they just kind of happened. And then others are where we're 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.…

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 if you saw an ad and if you wanted to get a no ads upsell. We saw nice conversion into XTRA weekly just with that simple pop-up message.

Thank you for all the color there. They are 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. 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, but with the new iOS launching we've not noticed anything.

Yes, we saw that in a transcript as well and it didn't bubble up to us but we'll definitely take another look.

Got you. Appreciate. Thank you.

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

Okay. Thanks. A couple of 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. 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 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 from prior management teams and kind of how much has the team -- the current team achieved in fixing the technical infrastructure.

I'll start with MAU. And so from a MAU 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 the -- 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 well. 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. And so I would suggest that the bug fixes for instance are a great user experience and therefore helping our MAU. Secondly, I'd like to just mention that all the features on our product road map also help bring people in and keep our MAU at good numbers. And so all those things are working in our favor for MAU growth.

Yes. I think one thing I'll add on MAU is 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. One of the reasons is that they want to -- they move into a stage of 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 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 are working on and that's on our product road map. So 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 kind of older cohort. And when I use older I do that a little bit in like my age cohort. So, it's not necessarily very old, but older versus what you'd expect on a product like us. 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 16 years old in March and 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…

Thank you.

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.