Good afternoon. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] And I would now like to turn the conference over to Tolu Adeofe, Grinder's Head of Investor Relations. Please go ahead.

Thank you, moderator. Hello, and welcome to the Grindr's Earnings Call for the Second Quarter 2025. Today's call will be led by Grinder's CEO, George Arison; and CFO, Vandana Mehta-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, future performance and future prospects. You should not rely on forward-looking statements as predictions of future events. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today. Some of the risks that could cause our actual results to differ from views expressed in our forward-looking statements have been set forth in our earnings release and our period of reports filed with the SEC, including our annual report on Form 10-K for the year ended December 31, 2024. 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 these non-GAAP financial measures to their most cutely comparable GAAP financial 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 hi, everyone. Grindr delivered another strong quarter, the results that keep us firmly on track for the year. I've said that 2025 is about accelerating execution towards our long-term vision, including the launch of transformative products within the app, which expands how our users engage. This quarter is another proof point that we can deliver on our road map while continuing to drive strong financial performance. For years, users have asked for maps within the Grindr app, but technical and privacy constraints made it hard to do well. This has changed, and we launched beta versions of mobile mapping in both Right Now and Explore. Engagement on Right Now continues to be strong, and we've already begun to monetize the product faster than expected. We're excited to see adoption build as we enable users to move fluidly between the grid and the map views. Explore remains one of our most valuable features, especially for power users and frequent travelers with over 25% of our MAU using it monthly. We've now launched Explore Heatmaps: dynamic, city-level views showing the most active areas across 21 markets. With those things in mind, events reflect historical not live activity to help users search smarter online and in real life. Longer term, maps unlock a powerful surface for the gayborhood, for products around events local activity and businesses. If you've been following our shareholder letters, you've seen us articulate a clear ambition: to build one of the leading AI native consumer companies, one that creates shareholder value by using Gen AI to deliver high-impact user experiences, differentiated value and long-term revenue growth. To that end, we're building a full-stack foundation called gAI or Gay I, comprised of 3 layers: a model layer using a combination of our custom models and leading third-party…

Thank you, George. I appreciate the kind words as well as the partnership from you and the entire Grindr team as we work towards a seamless transition. Now let's turn to the results. Grindr delivered another strong quarter. In Q2, total revenue grew 27% year-over-year to $104 million, and the adjusted EBITDA margin was 43% or $45 million, right in line with our raised full year guidance we provided last quarter, which we are reaffirming. Direct revenue for the quarter was $87 million, up 24% year-over-year with growth led by the continued strength of our subscription offerings as we further enhanced our recommendations feature and continue to benefit from merchandising and paywall optimizations. Highlighting our key user metrics. Average monthly active users in Q2 were $14.9 million, representing 6% growth year-over-year. Average paying users in the quarter reached $1.2 million, up 16% year-over-year. And our average direct revenue per paying user increased 7% over the prior year to $23.65 this quarter. Indirect revenue was $17 million, up 39% year-over-year driven by the ramping of our new third-party advertising partners and early traction in international markets as we continue to build out our third- party advertising platform. Moving to expenses and profitability. Operating expense in Q2, excluding $27 million in cost of revenue was $53 million, up 43% year-over-year, primarily driven by stock-based compensation. Adjusted EBITDA for the quarter was $45 million or 43% of revenue compared to $37 million or 45% of revenue a year ago. Net income was $17 million for the second quarter, representing 16% of revenue compared to a net loss of $22 million in the same period last year. In Q1, we completed the redemption of all outstanding unexercised warrants which has eliminated the quarter-to-quarter valuation impact on GAAP net income. Accordingly, we delivered GAAP EPS in Q2 of $0.08 and expect to continue to generate positive EPS going forward. Turning to cash flow and the balance sheet. In the second quarter, Grindr generated free cash flow of $37 million and ended the quarter with approximately $121 million in cash and cash equivalents. Our gross leverage was 1.7x the last 12 months adjusted EBITDA. Year-to-date, Grindr has repurchased $325 million in common stock. And as of today, we have $175 million remaining under the share repurchase program. Based on our performance through the first half of the year, we are reaffirming our full year 2025 outlook of 26% or greater revenue growth and adjusted EBITDA margin of at least 43%. And with that, operator, we'll now take questions.

[Operator Instructions] And your first question comes from the line of John Blackledge of TD Cowen.

It's Logan on for John. First question maybe, MAUs stepped up nicely in the quarter, both sequentially and on a year-over-year basis. Could you just talk about the biggest drivers of top of funnel MAU growth in 2Q? And then looking forward, could you comment on Grindr's penetration as you see it right now of the overall TAM in the U.S. and globally at this point? And then I just have one follow- up question as well.

Logan, good to talk to you, and welcome, everybody. On the MAU question, I have 3 things I want to talk about. So bear with me as I go through that. First on kind of how MAU doing overall and second on third-party data and then thirdly, on long-term opportunities, which I think we'll get to all the things you're asking about. With regards to MAU Right Now, you're correct, grew 6% quarter year- over-year in Q2. We are very happy with that, and MAU was doing very well this summer as well. We have a very, very healthy MAU situation with our users. We looked at users by country recently in terms of age. And we saw that we have a very strong presence with the younger cohorts, whether it's 18 to 22 or 23 to 29 cohorts, they're doing really well and growing in a very strong way. So and kind of challenges that people talk about in the space with regards to Gen Z, Grindr does not have, we're doing very well. I think that's probably because we are the place to go to if you want to figure out it's like to be gay and what your life is like, we are the gayborhood on your phone for people who don't live in gayborhoods in large cities, and that's what people kind of look forward to. So we're really happy with the MAU number as of right now and kind of how it's doing, and I generally don't expect that to change in the future. Number two, topic on MAU is regarding third-party data. I know that a lot of you have to rely on these data sources for your analysis in mind by you, the analysts and investors. But we also know that in Grindr's…

Okay. Thanks, George. Yes, on the mapping announcement, it's exciting. Can you just talk more about potential of mapping and what it could mean for maybe other product initiatives and use cases outside of like Right Now or Explorer looking forward?

For mapping, I just want to make sure I heard it right. Yes, so we released -- in the Shareholder Letter, we talked about that we released map features in the app. This is something that users have asked for years. And we show, obviously, Grindr is very location based, and so immediate around you is very important and people were always like, can you actually show us on a map, how far somebody is. And so we started to do that both in the Explore feature as well as in Right Now. So Right Now, you can, today in the places where it's out, look at users, not just based on when they posted something, but also how close they are to you. And then in the Explore function, we show you heat maps in 21 cities where it's really busy. We use historical data, not live data, to protect users' privacy. And that allows us to basically help you to understand, hey, these are the areas where usually, people are present. And if I want to search for people or if I want to figure out where to stay, et cetera, I can use that data to do that. So over the long term, we believe mapping can be really helpful in building out what we call local discovery, which is one of our long-term gayborhood growth verticals, things like identifying where to stay, where to eat, what kind of activities might be happening around you to go to that can be used by people locally, right? Like if you're in San Francisco and you live in San Francisco, you still could use that. or by people who want to travel to a given city before that. So those are the kinds of things that we envision long term, mapping to help with, and we think it will be very valuable. It was in the past, historically, was a compensated technology to enable in the out because of the mobile nature of our app and now technology is in a place where we think we can do it really well. And so we expect that it's out.

Your next question comes from the line of Andrew Boone, Citizens.

This is [ Briana ] on for Andrew. Can you just unpack what drove the acceleration in indirect revenue in the quarter? And then on operating expenses set up this quarter, can you walk us through the key drivers behind that increase? Is this reflective of ongoing investment in product, marketing or headcount? And how should we think about investments going forward? And then I have one more question to that.

Sure. I'll take the first question on indirect revenue, and then I'll hand over to Vanna to speak about expenses and then happy to do your next question as well. So I think if we talk about indirect revenue, it's worth it to talk about it conceptually since from where we were to where we are. When I joined Grindr in 2022, that was an area that was significantly underinvested in for a very long time and was not getting the attention that we believe it needed to kind of take advantage of the full opportunity. We'll have a very desirable user base people that are very much trendsetters for the world in general, not just for our community and their income is higher, they're education is higher as well overall. And so a ton of opportunity with them both for advertising, and we were not really taking any advantage of that at all. The growth that we've seen in advertising over the last 3 years has been primarily driven by third-party advertising. And that part of the business has done exceptionally well. I mean I frankly don't think you could ask about anything more than what they've delivered. The growth numbers have been stunning we've significantly increased the number of ads that we show users because Grindr was showing very few as to users before, while maintaining the CPM where it was in the past, and that's something that we didn't think was possible. We thought that CPM would inevitably go down. That was accomplished in part by adding more third-party providers that Grindr was not working with before, who could serve ads in our platform. So it's been really successful. We've also added new formats for the types of ads that we show, for example, rewarded video, which…

So yes, you are correct. Our operating expenses are reflecting our investment in our products. As you know, we have a very exhaustive product road map, and we're really excited about everything that we have that we're building for our users. So that is bringing along a little higher cost. We also have some accruals that we put -- that were put into place in Q2. And additionally, I think last year, what you might have seen is that we back-ended some of our expenses as we are now more mature and we have more predictability in our overall financial profile by quarter. I would say that you're just seeing a more flattish expense base in every quarter, and the margins are reflecting that at 43%, which is right on where we thought we would be.

Got it. And then just you mentioned in the letter that you're experimenting with pricing in existing peers and testing subscriptions as you guys add more value. Understood that changes are expected to materially impact 2025 but are there any early learnings that you guys can share on the test so far and how you're evaluating these changes?

So I do want to reemphasize that none of the pricing changes or experiments that we might do will be material to this year. And so no one should kind of count on those for 2025. And I think it's really important. Most of our focus for the rest of the year as a product team and an engineering team is around driving revenue growth next year. I think it's really important to go into the year with a very clear plan of what you're going to be doing, and there's a lot of technical and product work to be done on enabling that, and so one of those pieces has to do with experiment with pricing. Grindr has not raised prices since 2018 for either its XTRA or Unlimited offerings, which today are $19.99 and $39.99. If you just look at inflation from that period of time from 2018 to today, that would push our XTRA price to something like $25.50 and our Unlimited price to $49. In no ways am I suggesting that, that's the level we're going to reach that right away or right now, so please don't assume that. but that would imply that there is a lot of room, just purely on inflation for us to increase prices. And when you couple that with the fact that we've added a ton of new products over the last 4 years, and added a lot of value to the premium tiers, and we think there is some level of opportunity there. And when I say we've added new products, like we've added a ton of free products or freemium products to the experience like Right Now, but then you get a lot more Right Now if you're a paying user. We've got albums, which are available to…

[Operator Instructions] And there are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you, everyone, for joining. You may now disconnect.