Grindr Inc (GRND) 2024 Q4 法說會逐字稿

Good afternoon.

My name is Kelvin, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Grindr fourth-quarter and full-year 2024 earnings conference call.

(Operator Instructions)

Thank you.

I would now like to turn the conference over to Tolu Adeofe, Grindr's Head of Investor Relations.

Please go ahead.

Thank you, moderator.

Hello, and welcome to the Grindr Earnings Call for the Fourth Quarter and Full Year 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.

Thank you, Tolu, and hello.

I very much appreciate everyone who is joining us today. 2024 was a landmark year for Grindr.

We grew full year revenue 33% year over year to $345 million, 10 percentage points higher than the initial guidance we provided on our Q4 call last March and our adjusted EBITDA margin was 43%, 3 percentage points higher than our initial guidance.

These results were driven by our relentless focus on user experience, our commitment to delivering great products and the continued expansion of our advertising business.

Users continue to have incredible engagement with app.

In 2024, they spent more than 130 billion chats, shared more than 2 billion albums and spend more than 70 minutes on average on the app a day.

When Grindr went public in November 2022, we faced certain hurdles from prior Chinese ownership, such as significant technical debt and a need for a long-term vision and a team to deliver on ambitious goals.

Today, as discussed in greater detail in our shareholder letter, those challenges are largely behind us.

I'm especially part of our fast-moving performance-driven culture, which has enabled us to chart a clear path for long-term compelling growth as a Global Gayborhood in Your Pocket, a robust product road map of AI-first experiences are user reserved, while continuously delivering excellent financial results.

Our strong momentum in 2024 is continuing into 2025.

In January, we released our first annual product road map shared by user input, building on products we laid out last summer at Investor Day.

In February, we redeemed our warrant cleaning up our balance sheet.

And here in March, we are announcing our first share repurchase program for up to $500 million worth of shares.

The buyback program underscores the Board and management's confidence in Grindr's long-term potential and affirms our commitment to returning excess capital to shareholders.

Also today, we are laying out a strong initial guidance for 2025, which Vanna will provide, along with our focus on 4 key priorities: First, rapidly shipping products as we elevate Grindr to a world class app.

We expect our users to appreciate new products such as A-list, For You and Discover.

These and many other products we're working on will allow us to maintain strong product-led growth in the years to come; second, strengthening our global brand by actually promoting better global understanding of who we are and what we stand for, for Grindr our creative content that brings the full possibilities of the Global Gayborhood to life.

Third, executing on the Gayborhood expansion by launching our first product outside of the core app in the health and wellness space.

The test beta launch in limited markets is expected to start in the coming months.

Stay tuned; and fourth, further increasing talent density to execute on our ambitious plans.

I have great confidence in our team's ability to continue to drive strong shareholder value through outstanding execution on the needs of our users.

I'm proud of the foundation that we've built in the 30 months since I became CEO and enthusiastic for what lies ahead.

As always, we greatly appreciate the support of our shareholders and the user community.

In closing, I would encourage you to read the shareholder letter for greater detail on the points I discussed.

Now I'll turn it over to Vanna, who will speak to our financial results, warrant redemption and share buyback plan in greater detail and provide 2025 guidance.

Thank you, George, and hello, everyone. I'll walk you through our fourth quarter and full year results, provide an update on our completed warrant redemption and recently announced share repurchase program before sharing our guidance.

As George highlighted, 2024 was a phenomenal year for Grindr with revenue growing 33% to $345 million for the full year.

And we achieved 43% adjusted EBITDA margin for a total of $147 million.

Our strong performance was driven by merchandising new and existing features in our core subscription tiers.

We also optimized payrolls in our foundational products while continuing to maintain excellent engagement.

These enhancements increase our conversion rates of users from free to paid.

Grindr's advertising business had a fantastic year, growing 56% year-over-year.

Our refreshed go-forward strategy developed under the experienced new leader we brought in last spring has driven growth in both third-party advertising and the direct advertising business.

We are in the early stages of enhancing our ad tech, which offer new ad formats and increase CPMs over time.

All business KPIs grew again in 2024.

Average monthly active users increased 7% over the prior year to 14.2 million.

Average paying users increased 15% over the prior year to 1.1 million bringing payer penetration to 7.6% for the year.

And our average direct revenue per paying user increased 12% over the prior year to $22.53.

Turning to the fourth quarter.

Revenue was $98 million, up 35% year-over-year from $72 million.

This comprised $80 million in direct revenue, which was up 28% year-over-year and $18 million indirect revenue, which was up 85% year-over-year.

As a reminder, our advertising business benefited from a large direct brand campaign in Q4 that significantly outperformed expectations in December.

Adjusted EBITDA for the quarter was $39 million with a 40% margin, strong even when we executed on some of the planned investments late in the year.

Turning to our balance sheet.

We ended the year with $59.2 million in cash and cash equivalents and a gross leverage ratio of 2x based on our full year adjusted EBITDA, which reflects a reduction of $51 million in leverage paid down during the year.

As we've reported early in the new year, we executed a redemption of outstanding warrants associated with our go public transaction.

The redemption was completed last week and out of the 37.4 million outstanding warrants eligible for redemption, a total of 36.8 million warrants were exercised.

This includes 9.5 million warrants exercised on a cashless basis at an exchange ratio of 0.361 shares per warrant, resulting in the issuance of 3.4 million shares and 27.3 million warrants cash exercised, resulting in the issuance of 27.3 million shares and generating $314 million in cash proceeds to the company.

Our pro forma cash balance as of December 31, 2024, after giving effect to the net proceeds from warrant redemption stood at approximately $370 million.

This was a significant financial milestone for the company that simplifies our capital structure and enables Grindr to move forward with our capital allocation planning as we initially discussed at our Investor Day last June.

In keeping with that plan, you've seen today that our Board of Directors has authorized a 2-year stock repurchase program of up to $500 million of our common stock.

The program signals our confidence in the company's strong performance now and into the future.

Now let's turn to our guidance for 2025.

As a reminder, we set our annual guidance in March and update it as appropriate on a quarterly basis as we move through the year.

Our initial 2025 guidance calls for revenue growth of greater than 24% and an adjusted EBITDA margin of 41% or greater, reflecting our expectation for another strong year of growth and profitability.

As we've always said, we set our initial guidance based on what we have a clear line of sight to for the year, and we'll keep you posted.

Overall, we are excited about our momentum entering into 2025 and the opportunities that we have on tap.

And with that, operator, we'll now take questions.

(Operator Instructions)

Andrew Marok, Raymond James.

Wanted to start on products.

So obviously, very strong execution so far.

And the January road map was really encouraging.

We've seen everything either on track or ahead of expectations versus the Investor Day.

I guess my question is, what were the surprise factors in those intervening in 6 to 9 months?

Was it a little bit of conservatism embedded in the Investor Day?

Or was it maybe a little bit easier going than you thought as you started developing these products.

Andrew, good to talk to you, and hello, everybody.

We -- I think we're a company -- is a young company, still that recently went public.

And we are working on a lot of things, as everybody knows.

And we also went through a pretty significant change in the team that we have. 75% of people who work at Grindr now have joined since I joined, and we've been really focused on driving productivity levels to be signal higher.

As one example that we gave in the shareholder letter we are seeing 3x as many check-ins in GitHub on a monthly basis per engineer today -- sorry, in 2024 versus what we were seeing in 2022.

So there's no question that our productivity has gone up, which has allowed us to ship dramatically more stuff and work on a lot more things.

And I think that's something that we, as a company, are really proud of.

So a significant set of things that we added to the product road map, came from our ability to be able to build more things as a result of us being a lot more productive.

And I think that's awesome.

We also have added a team in Colombia in the last year of dedicated engineers, and they're also very helpful and additive in our ability to ship more things.

And then the other thing here is that as we learn more about how you react to certain products and how they engage with them, we come up with additional things that are more responsive to their needs concurrently with -- as we learn more about Gen AI and what Gen AI can do, being able to take advantage of that as well in product development.

So that is also helping our ability to deploy more products.

One of the things you'll see this year is that a lot of the products we're building, we'll be using our Wingman technology as a backbone.

And obviously, being able to build Wingman first and launch it quickly, way ahead of schedule is making that possible.

And so we're excited about that as well.

Very helpful color.

And maybe one more quick one, if I could, on the share repurchase program.

So that $500 million figure is not a small number.

But one piece of feedback we've heard from investors recently was kind of the challenges around liquidity and float and things like that.

So I guess how do you balance your ability to buy back shares in the context of still having an appreciable amount of your shares held in private hands?

I appreciate the question.

I do realize that for some people the float is a topic.

We also can say that from the time when we went public to today, the float has doubled and so there's a lot more float available now.

And whenever I was asking about the float in 2022, early '23, I would try to say that it would take care of itself, and I think it has been able to take care of itself in that sense.

At the same time, I think the fact that we do have these long-term holders who are, frankly, in some respects, doubling down on the company.

One of them exercised all of these warrants in cash, and that's a pretty significant increase in his financial stake in the company and the amount of cash that he's put into supporting Grindr, I think signals something very strong.

But our job is to ensure that we: a, invest in the business and set it up for growth; and then b, return the excess capital beyond what's necessary for that to our shareholders, and we're doing that.

So I think our shareholders that I've, at least, spoken to, have been very happy about us having a clear capital allocation strategy that we've been asked about that quite a bit, and we're now coming back with the answer for what that is and how we're going to deploy it.

So my general sense is the float take care of itself over the long term.

John Blackledge, TD Cowen.

Two questions.

First, on the '25 revenue outlook, given the 24% or greater revenue growth guide for 2025, how should we think about the mix of kind of paying user growth and ARPPU growth?

And given we're kind of a little over 2 months into the first quarter, any color on how 1Q is trending would be great.

And then I have a follow-up after that.

Sure.

Thanks for the question.

So let me just put the guidance in a bit of perspective.

As you know, we guide to what we have line of sight to and we update the guide as we learn more throughout the year.

We have a very robust product road map that we shared in June and we refreshed 1 in January.

So as that testing reaches statistical significance, we'll certainly update you.

As you know, our business model really, if we outperform that revenue tends to flow directly to the bottom line.

With respect to ARPU and a mix of new payer growth, I'd say that we have a lot of new features and those features we have been showing over the last couple of years that our conversion rates from free to paid have been going up in a steady perspective.

I think we expect that to continue.

So you should see some payer growth this year as well as ARPU, if you think about international versus domestic book levers are moving nicely.

So I would say probably more of the same, quite frankly.

And just as a reminder, we are guiding to 100 basis points higher than our original guidance last year at 24% revenue growth and 42% EBITDA margin, really at the top end of our ranges that we gave out -- sorry, 42% of EBITDA margin.

And those are really on the top ranges of what we gave out in our June Investor Day.

So we're pretty happy with what we're showing so far.

I think that addresses both of those questions.

And just to be specific on the numbers, it's 24% or higher revenue growth and 41% or higher EBITDA for the year.

The only color I would like to add just a little bit on this is we are still, again, in very early stages of monetizing this product and our approach is create a lot of new features and products for people and through that drive monetization.

I think what's going to happen this year and especially next year is a lot of our paying tier here -- that both our paying tiers are going to have a lot of new features added to them, which will be creating a lot of value to users.

And there is a real argument on kind of what -- how much of a value is that, right?

Is it a justified amount of value for $40 or is that value that we're now giving them worth more.

And that's something we're going to have to learn about over the coming, say, 24 months.

And at the same time, in the free product, we're also creating a lot of value.

Right now, it's a huge addition to the product that's going to be really benefit to people.

And we are having really great results from that in the 2 test markets. 25% of our WOW are using right now every week, which is really fantastic and frankly, higher than we would have expected.

So the intentions based methodology here is working really well.

And so as you do that over time, we believe that you can drive more people to start paying for the product because they're seeing so much value out of what you're giving that.

That's super helpful.

And just a follow-up on the margin like you said, 41% or greater margin.

Just any further color on kind of key investment areas in 2025 would be helpful.

Sure.

So with respect to investment, as you know, we have a very robust product road map and a fairly lean team.

So you'll see us to continue to add headcount in these key areas of technology AI and data science.

Really, as you can see, the product road map is getting more and more sophisticated with respect to AI.

We've been really leaning into it.

So think about it in those kinds of dimensions.

Eric Sheridan, Goldman Sachs.

Thanks for all the details in the shareholder letter.

I want a big picture question, maybe for George.

George, we get asked a lot by investors with so much product and platform innovation ahead of you as a company over the next couple of years.

How do you think about what signals you're looking for to sort of accelerate pace of innovation or prove things from beta into wider expansion across the platform?

Just philosophically lay out sort of your management view about what you'll be watching for and what we should be sort of analyzing the outside looking in, it could possibly even speed up the rate of innovation.

And based on my comments on the advertising business, I wanted to ask one quick follow-up on just how much, in terms of the ad tech stack and the positioning of the ad business in the marketplace is now behind you as opposed to ahead of you and it really is just about execution and sort of closing the sort of marketplace view on the advertising business and sort of bringing in revenue on the execution side as opposed to more of the building block side.

Yes.

So I'll take the first question, and Vanna will probably take the second.

We are building a lot of things, no question, and we'll be proud of the team's ability to do that.

Just the speed at which we're shipping now is not comparable to what we were doing before.

Some days early this year, we would sit down to have product updates and I have like 3 or 4 of the day.

And then my head would be a little bit spinning because I'm like, wow, I mean we are working on so many really cool things.

And a lot of these things are like way ahead of even most much larger companies in terms of how they deploy the tech and what kind of tech they're deploying, which is really awesome.

So for right now, I don't think we want to add many more things to the list of things we're working on in shipping.

And a really big thing for us will be getting it out into the market, getting user feedback for them and then making changes as needed, if those changes are necessary, and then putting them back out of the market with those changes in place.

No matter how much do you ask users as a survey, hey, do you want to X or do you want Y?

Frankly, people oftentimes respond one way into a survey in another way when the product is live.

And so I think having a real product out in a minimum viable product way is really critical, and that's generally our approach, and then we can add more features to it over time.

Those kinds of things we track when we do that is obviously, usage, right, for example, for right now with 1/4 of our weekly active users in Washington, D.C. using it.

That's a really positive signal for getting it deployed to many more users.

It's also just the quality of the product.

Initially, when you have a minimal viable product, everything that the users want is in the product.

And so understanding then, hey, like if you had XYZ feature, that would be really helpful is something that we are always looking for as a data point.

And then thirdly, I think with so many new things happening at the same time, you don't want to release those things all at once, you want to release things for them to settle in for people trying to engaging and using them and then release more.

And so some of this stuff will simply be driven by the fact that we don't want to put out everything all at once out into the market.

My general view is the core things inside Grindr today that are working really, really well, we don't want to touch.

So the grid, for example, that is the kind of core of Grindr.

We don't want to touch that.

We don't want to make that different.

We did add to it ability to recommend some additional users to a person below the first 100 that I see.

That's been a really popular feature.

And so that is one change that we need to the grid, but beyond that, we are not going to be starting with -- let's change a lot of stuff on the grid.

We will actually first launch a Discover tab, which will be a separate new space in the app where you will have people presented to you not by geography but rather by likelihood of you finding them not interesting and potentially later on them finding you interesting.

And in that space, we will have an opportunity to do a lot more experimentation around how do we help you with Discovery and what kind of people we show you based on either inference or other things that you tell us about yourself.

And so that will give us another opportunity to have much better experimentation in the platform.

We're not really creating any risk for the core product and how we experiment with it.

I hope that answer the question, and I'll let Vanna talk about advertising, and I'm happy to come back and more to this, if you have a follow-up.

Eric, yes, 2024 was a great year for advertising, both on the third-party advertising side.

And on the brand side, you saw a nice little bump in Q4, which was really part of the outperformance.

We bought in a new experienced leader.

He's really doubled down on advancing the ad tech to allow us to generate these higher CPMs as we introduce native ads and rewarded video.

We believe there continues to be significant room in addressing both volume domestically and internationally as well as higher CPMs with this elevated ad tech specifically on your question of how much is behind us versus ahead of us, I would say that -- we still have a long way to go on advancing our ad tech, so still a long way ahead of us, but we're really pleased with our performance to date and continue to be comfortable in achieving the target of 15% of our total revenue coming from advertising revenue, where we are right now in ad tech.

[Samuel Lawrence], [BH] Capital.

Some pretty fantastic results there.

Firstly, you've got some exciting features on the road map around the core dating product.

So it'd be great to hear some examples of how users are using the app in different ways and how you're thinking about the long-term potential to build some features and functionality around these edge cases as you drive towards the vision of becoming a sort of lifestyle and community platform for gay men.

Thanks, Sam.

It's a great question.

So we do have a lot of ideas for how to kind of service the users in the way that they want.

And also in the way that the culture and society is moving forward.

On the second point, we recently did a survey last year and one of the really interesting data points we found was 50% of people, 35 and under and people being gay by men with a survey of 1,400 gay and by men in the United States want to be in a long-term relationship at some point in their lives, which is a much higher number than I think you would have gotten from gay men, say, 20 or 25 years ago, especially kind of the younger cohort.

And then secondly, 25% of those same 35 or under respondents said that they wanted to have children, which is an exponential high number.

Like order in the magnitude of high number than I think you would have seen previously.

And so as we know what users want and as we think to what users will want in the future based on what they're telling us, it is imperative for us to be building features that respond to that.

And so dating actually is a good example of how we are thinking of introducing features into the product without really fundamentally changing the product.

We are going to, as I described earlier, launch a Discover tab and that will be a place where you will see people from all over the world based on things that we infer about you or we infer about them, obviously, all with user consent.

We just went through a lengthy process of getting user consent to use AI through the product and the rates of response were very, very high in the positive, which is fantastic.

And within that, then you could easily see a world where we build an additional feature that shows you people not just based on pure interest, but actually who are interested in dating.

So is that happy to create a totally new space for dating.

We can use something that we are already building to allow a person to see a set of people that are interesting for them from the dating perspective.

And then step beyond that would be okay, not just that they're interesting to you from a dating perspective, but actually based on what we know about them, it's more like that they were also like you.

So then the quality of people that we're showing you is very, very high, right, because these are like highly qualified people for a dating perspective that are really interesting both for from your perspective and from their perspective of you.

And we think that is a great user experience and a lot of value without having to create like a totally new space where that happens.

And then at the same time, it's also something that probably ultimately should be something we charge a significant amount of money for because the value that we're creating in that is so significant, right?

Because ultimately, our job is to facilitate as good of a connection as possible.

So that's just an example of how we think through that.

I think that's why building Wingman is so important because that technology can allow us to do a lot more of these shortcuts around how we build product without really disrupting the app, and that's something that is very useful, I think, for us.

I do want to -- as I'm assuming you want to go back to the previous question on what can we accelerate?

So one thing I did not talk about is the Gayborhood initiatives.

We obviously talked about that and invested in.

We think those are huge opportunities for Grindr to build businesses on top of the core brand of business that are very appealing to our users.

We are going to be launching the first one this year in beta and really excited about that.

So if there is an area where we might see acceleration beyond all the things that we're already building would be in the Gayborhoo initiatives because those we definitely could speed up.

There's a limit to how many we can do at once.

But certainly, we do think that with more right resources and right as the really imperative term there, we could accelerate some of those things faster.

And we're definitely working on that.

Maybe 1 more for me, please.

So you're, clearly very early in this journey and have a ton of opportunities to invest in.

But on the other side, you remain pretty laser-focused on maintaining high efficiency within the company.

Could you maybe just discuss how you're thinking and looking to manage this.

Yes.

Look, we've gone through a lot of change as an organization.

As I mentioned earlier, 75% of the team has been hired since I became CEO.

So in some ways, that's really helpful because they've been hired with a clear understanding of the culture that we have.

And we do have a very high performance driven, hard charging, clear and accountability culture and one that we want people to obviously join, but they need to be on board with what they're joining.

Our culture is not for everybody, but for people who want to be in a culture that excels and costly strives to ask more people by unleashing their potential and allowing them to grow and improve as employees and as professionals, and this is a really great culture to be.

And additionally, it's also how we comp, right?

Our compensation is very much performance focused, and I think people really appreciate that.

So we're in a really good place in that regard where we are, but we're going to continue improving our talent density and that's why talent at that is one of our key priorities for next year.

Where I believe we have a really big opportunity is actually at the middle layer below kind of my immediate executive team, the next layer of managers, we definitely needed additional ones on the team.

My team has been feeling that pretty strongly because they've oftentimes had to do both their day-to-day role and also the role of somebody below them that they would normally be playing.

We are going to be adding a few folks like that to the team across many different departments in product, finance, engineering and others, that's coming soon.

We're not going to probably do a press release about it, but I think people will only then see as some of these folks come on board and that will be a really good addition.

And once we have those people, then we can more easily think about adding additional people to the team because there'll be more kind of folks who could provide the right management oversight and this performance-driven culture to the rest of the team.

So I would expect us to continue to invest in the team.

We added a significant number of employees last year, we're going to add a significant number of employees this year as well, while maintaining a very lean organization and one that is burning a lot of revenue per employee, which I think is something we are very proud of.

All right.

So I think that's the question for today.

We really appreciate everyone's time.

This week already, we spent 2 days at the Morgan Stanley and the JMP conferences and had 2 fireside chats and really appreciated the incredible level of investor engagement that we got.

I did not realize you could fit that many people into some of these small hotel rooms that the meetings are usually in as we had in a few of our meetings, it was really a lot of fun.

And so it's great to be out there talking to folks and telling you the story about awesome what we are doing is and all the potential that we have.

So it is a really beautiful day in the Gayborhood and look forward to speaking to everybody soon.

Thank you.

Ladies and gentlemen, that concludes your conference call.

We thank you for participating and ask that you please disconnect your lines.