Grindr Inc. (NYSE:GRND) Q2 2024 Earnings Convention Name August 8, 2024 5:00 PM ET
Firm Members
Tolu Adeofe – Head-Investor Relations
George Arison – Chief Government Officer
Vanna Krantz – Chief Monetary Officer
Convention Name Members
Nick Jones – Residents JMP
Operator
Good afternoon. My title is Stephanie, and I might be your convention operator right now. At the moment, I want to welcome everybody to the Grindr’s Second Quarter 2024 Earnings Convention Name. All strains have been positioned on mute to stop any background noise. After the audio system’ remarks, there might be a question-and-answer session. [Operator Instructions]
Thanks. I want to now flip the convention over to Tolu Adeofe, Grindr’s Head of Investor Relations. Please go forward.
Tolu Adeofe
Thanks, moderator. Hey, and welcome to Grindr’s earnings name for the second quarter 2024. At the moment’s name might be led by Grindr’s CEO, George Arison; and CFO, Vanna Krantz. They’ll make just a few transient remarks, after which we’ll open it up for questions.
Please be aware, Grindr launched its Shareholder Letter this afternoon, and that is obtainable on the SEC’s web site and Grindr’s Investor web page at buyers.grindr.com.
Earlier than we start, I’ll remind everybody that in this name, we might focus on our outlook and future efficiency. These forward-looking statements could also be preceded by phrases akin to we count on, we consider, we anticipate or comparable such statements. These statements are topic to dangers and uncertainties, and our precise outcomes might differ materially from the views expressed right now. A few of these dangers have been set forth in our earnings launch and our periodic stories filed with the SEC. Throughout right now’s name, we will even current each GAAP and non-GAAP monetary measures. Further disclosures concerning non-GAAP measures, together with a reconciliation of GAAP to non-GAAP measures are included within the earnings launch we issued right now, which has been posted on the Investor Relations web page of Grindr’s web site and in Grindr’s filings with the SEC.
With that, I’ll flip it over to George.
George Arison
Thanks, Tolu, and hey, everybody. Grindr delivered excellent Q2 outcomes, reaching 34% year-over-year income progress and adjusted EBITDA margin of 45%. Our Q2 progress was even higher than we had anticipated at our Investor Day in June. All through Q2, we fine-tuned our conversion methods by launching a number of enhancements to Grindr’s paid tiers, whereas enhancing the merchandising of premium options. We modified our Discover Chat function and made it simpler so that you can make the most of our Increase add-on and opt-out from advertisements by transitioning to a paid tier.
The cumulative affect of those enhancements turned clear exiting the quarter. These elements, plus the success of our Limitless Weekly possibility mixed to drive our efficiency. Glorious efficiency in H1, sturdy progress in MAU and the power of our promoting enterprise is permitting us to boost our full 12 months steerage to income progress of 27% or larger and adjusted EBITDA margin of 42% or larger.
Our continued wonderful adjusted EBITDA outcomes exhibit what a extremely environment friendly and lean group can do when it’s targeted on delivering worth to customers and shareholders. It was nice to see so a lot of you at Investor Day and to share our story and our plans for the longer term.
For those who haven’t finished so already, I encourage you to spend time with supplies from Investor Day to get a full sense of our mission, imaginative and prescient, technique and product roadmap. Grindr is exclusive as a result of it was constructed by homosexual individuals for homosexual individuals, and our long-term imaginative and prescient builds on this uniqueness by specializing in consumer wants. With our roadmap, we’re constructing many options to boost our core use case of connecting customers with one another based mostly on their intentions, whereas driving sturdy monetization.
Making it simpler for customers to seek out quick, fast connections will all the time be entrance and heart at Grindr. To make this expertise superior, we’re constructing the Proper Now suite of options at present testing in Australia.
As well as, we’re engaged on new options that deal with the need of an rising variety of our customers to seek out relationships. Lack of density in a given geography is a key obstacle to homosexual individuals discovering their companions, and with AI-first relationship options, we may help our customers break down these geographic constraints.
Our objective inside our street map is to construct early AI options that can present us with a greater understanding of how our customers work together with AI and inform a long-term integration of AI throughout the app. For instance, we’re creating the Grindr Wingman, an all-purpose assistant to assist customers navigate our app, which might be in testing with choose customers by the top of the 12 months.
Our core product street map additionally consists of 5 a-la-carte choices that can roll out over the following three years. Roam caters to the quarter of our or weekly energetic customers which are touring throughout any given week. Future choices in growth will improve inbound curiosity, present personalised suggestions and provide consumer insights about one another, amongst different issues.
Along with our core product, we additionally shared our plans for Gayborhood enlargement alternatives, akin to well being and wellness in addition to journey and native discovery. By way of partnerships, we are going to assist customers entry curated, related companies and data that can enhance their lives. Whereas investments in these expansions are a part of our monetary plan, income from them isn’t included in our projections, presenting long-term upside alternative.
As a group, we’re constructing the International Gayborhood in Your Pocket and to our success, try to make a world the place the lives of our world group are free, equal and simply. With sturdy momentum in the remainder of the 12 months and past, we’re enthusiastic about what fulfilling determination will imply for our customers and our shareholders. I’m pleased with the progress we’ve made to this point and on the high quality of execution from our performance-driven group.
With that, I’ll flip it over to Vanna to assessment the ends in extra element.
Vanna Krantz
Thanks, George, and hey, everybody. Grindr delivered an distinctive second quarter, marked by excellent efficiency throughout all of our key monetary and consumer metrics. Whole income for Q2 elevated by 34% year-over-year to $82.3 million with an adjusted EBITDA margin of 45%. Direct income elevated 31% year-over-year to $70 million as we improved the merchandising of our premium options and enhanced our paid tiers. Particularly, common month-to-month energetic customers elevated 7% over the prior 12 months to $14.1 million.
Common paying customers within the quarter elevated 14% over the prior 12 months to $1.1 million, which brings payer penetration to 7.5% for the quarter. And our common direct income per paying consumer elevated 16% over the prior 12 months to $22.08 this quarter.
Oblique income for Q2 was up almost 50% year-over-year to $12 million, fueled by momentum in third-party advertisements as we now have expanded our community of advert companions. Transferring to bills and profitability, working bills, excluding the price of income was $36.8 million in Q2 2024, up 17% year-over-year, with the rise primarily pushed by compensation-related bills.
Adjusted EBITDA for Q2 2024 was $36.9 million, equating to a forty five% adjusted EBITDA margin, up from $26.9 million a 12 months in the past or 44% of income.
Turning to our stability sheet. We paid down $17.6 million of debt, bringing our debt place to $298 million as of June 30, 2024, and ended the quarter with $16.3 million in money and money equivalents. This equates to a leverage ratio of two.2x based mostly on the final 12 months of adjusted EBITDA.
Within the second quarter, we generated constructive free money circulate of $14.2 million, which leads to a 38% free money circulate conversion. As a reminder, our quarterly free money circulate conversion is topic to timing of adjustments in working capital.
Lastly, as George talked about, we’re elevating our steerage for the complete 12 months based mostly on our sturdy efficiency within the first half of 2024. We now anticipate income progress of 27% or larger and an adjusted EBITDA margin of 42% or larger. This revised outlook underscores the continuing momentum throughout our enterprise strains and our skill to drive enhanced monetization and operational efficiencies. We’re targeted on persevering with to execute on our marketing strategy and our product street map, and we’re excited concerning the progress we’re making.
With that, I’ll ask the operator to open up the road for questions.
Query-and-Reply Session
Operator
Thanks. At the moment, we are going to open the ground for questions. [Operator Instructions] And our first query will come from Nick Jones with Residents JMP.
Nick Jones
Nice. Thanks for taking the questions. I’ve a pair. Are you able to possibly elaborate a bit of bit extra on the merchandising you probably did to enhance conversion? You’re performing form of properly forward of form of what we heard from the Analyst Day. So simply curious as to form of what you’re studying as you’re launching new merchandising methods? And do you assume you possibly can possibly velocity up ongoing conversion or ARPPU? Or form of what are your learnings and possibly put a finer level on what it was?
After which the second query is on – within the Shareholder Letter, you touch upon the Spanish channel being launched in 2Q. What do it’s good to see to form of make investments extra behind that? After which what do it’s good to see within the playbook to deploy that in different languages? Thanks.
George Arison
Thanks, Nick. That’s an awesome query. So on merchandising, we – I’ll form of begin a bit of bit traditionally. We traditionally haven’t finished an excellent job in product advertising and marketing. A number of issues which are within the app and obtainable to customers, whether or not it’s as a part of a paid tier or in simply – even within the free product customers really don’t learn about as a result of we don’t inform them about it in an energetic approach.
And oftentimes, persons are like, oh, I simply found XYZ function after which it form of turns into standard as a result of somebody both wrote about it in social or virally form of it takes off, which speaks to the ability of the product, however most likely isn’t the most effective method with regards to issues the place you count on to earn cash.
And so we’ve been experimenting with product advertising and marketing for Increase in varied methods over the past 12 months. One of many issues we did is seen within the app, and we name it a Increase fab the place you possibly can entry Increase extra simply from the primary grid. And that was pretty useful. It was simply one of many issues we did by way of merchandising, and that’s [ph] efficient.
So we usually, I believe, have loads of alternative to do higher in how we form of promote the product and current it. And one other factor that we did on this previous quarter is what we name no advertisements upsell, so mainly informing customers that if they’re a paying buyer, they don’t see advertisements. That was actually helpful as effectively. Once more, you assume that each one customers ought to know that, however as a result of we don’t do loads of product advertising and marketing, individuals really don’t know what all the advantages of a paid tier are. So these are the kinds of issues we might be doing much more of.
And albeit, it’s each form of informing individuals about what’s obtainable, but in addition discovering the suitable locations to drop that contained in the app the place it’s simply accessible. That’s one of many learnings we’ve had over time that we have to make issues fairly simply accessible to customers.
On the Spanish channels, I assume, the best way I have a tendency to consider that’s that worldwide is a big alternative for us, however we have a tendency to consider it as a possibility within the mid- and the long-term, not quite than in a right away sense. We have finished very well internationally already, having finished nearly nothing to drive consumer progress. It has been all viral and phrase of mouth.
And social for us is admittedly highly effective, each to interact with our customers and likewise to form of keep engaged with the broader group of people that could possibly be our customers or have been our customers prior to now. We view our channel as a spot the place individuals can come and see [ph] enjoyable and entertaining content material that they’ll have interaction with and like. And we do get loads of traction on social, and I believe it is fairly evident. Even after we do not attempt to create traction, it tends to create a ton of traction simply form of organically, which is superior. So on condition that Spanish is our second dominant language, we now have loads of customers in Spanish-speaking nations, and people are rising actually properly, clearly, specifically, in Latin America.
We thought that Spanish made a ton of sense as the following language to begin doing social media in. And to this point, so good, however it is a very early form of section of what we do. Might I envision that at some point we do one thing, for instance, in Portuguese? It is definitely potential, however it’s not one thing we’re actively form of interested by proper now. Spanish is a really important a part of our consumer base, and so it made sense to form of try this, and we’ll decide on one thing else in a while. However broadly talking, as we take into consideration the mid-term and the long-term, worldwide goes to turn out to be extra of a spotlight. It is simply not one thing we’re relying on and count on loads of outcomes on this 12 months or subsequent 12 months.
Nick Jones
Nice. If I might ask yet another query. How are you measuring form of the model efforts, notably the Grindr Rides America tour that you simply highlighted? Simply curious on how that is progressing within the U.S. and the way you are measuring form of these form of higher funnel model efforts? Thanks.
George Arison
Sure. I imply, the truth is that we now have unbelievable model recognition within the U.S. We even have an especially sturdy model recognition internationally, however not as sturdy as within the U.S., so its 90-plus p.c within the U.S. and 60% in choose worldwide areas the place we have measured it, which is 60%, clearly is like nice for most likely loads of corporations. It is simply not as nice as what we now have within the U.S.
With – after we did one thing within the U.S. just like the bus tour, that is simply mainly attempting to remain prime of thoughts with our customers and likewise to provide again to customers a bit of bit as effectively, proper? As a result of we’re an important a part of their lives and being engaged with us in actual life has advantages. And that is form of how we take into consideration that. It isn’t round, hey, take that 90% model recognition to 92% as a result of like, we’re not going to have the ability to successfully measure that.
However we noticed actually nice engagement each by way of individuals coming to the bus, but in addition the content material that we created from that had unbelievable engagement in social channels. And so loads of our technique is round create content material that folks like, whether or not it is for in actual life occasions or podcast or movies after which see – drive traction with that socially after which ultimately within the app as effectively. However we’ll do some issues within the app that enable us to interact with customers with that content material as effectively. So we have been actually pleased with how the bus labored out. It was frankly past any expectations that we had.
It was actually, actually constructive. I went to the launch in San Francisco and actually like – the road to get into the bus did not cease till it was very late at night time and everybody was going residence. So engagement might be constructive and I definitely would count on that we are going to do extra issues like that sooner or later. However once more, I do not assume it is like one factor accomplishes XYZ outcomes. It is a broader method of actually proudly owning our model and telling our story quite a bit higher so that folks have the constructive associations that we consider they need to with Grindr versus a number of the damaging associations that come out of [indiscernible] tales which are obtainable in Google that folks lookup, that possibly occurred 10 years in the past and possibly the article written about it was not absolutely true within the first place. So that is the objective of form of our model technique. I believe it is going very well.
Nick Jones
Thanks for taking the questions.
Operator
Thanks. Our subsequent query comes from John Blackledge with TD Cowen.
Unidentified Analyst
Hello there. It is Logan on for John. I’ve two questions.
First one, simply focus across the month-to-month energetic consumer progress, continues to develop properly. Might you speak about what’s driving the power there whereas another gamers face challenges? And in addition, simply as you look to the again half of the 12 months, what have been the largest drivers in you guys elevating that full 12 months outlook? After which I simply have one follow-up.
Vanna Krantz
So with respect to – thanks for the query. With respect to the MAU progress, it is really been actually sturdy with out us having to drag the standard levers like efficiency advertising and marketing. As George stated, our model consciousness is admittedly sturdy within the States at about 90%, however actually there’s a possibility internationally. With respect to the MAU progress by means of the again half of the 12 months, clearly, we’re at 7% year-to-date. However with the again half of the 12 months, we’re actually nonetheless interested by it from a perspective of getting extra customers coming into our platform with, frankly, the merchandise that they are taken with seeing. And so proper now we count on it to be much like what we’re seeing now.
George Arison
Sure. I imply, I believe the one factor I might add on MAU, and this isn’t form of – that is going to drive a outcome this 12 months per se, however we consider that there are loads of customers who’ve used Grindr quite a bit prior to now and may not be utilizing it as a lot now as they did prior to now. There is a bunch of causes for that, proper?
Folks as they turn out to be older, in our consumer base begin interested by being in a long-term relationship and so they attempt to search for locations the place they’ll discover the long-term partnership. We consider that by constructing options and merchandise that cater to these kinds of wants that customers might need, we will drive extra MAU progress as effectively.
And so we’re – that is one of many issues we’re doing, like on the Investor Day we talked about how the connection use case and constructing an entire suite of options for that use case. It is one thing that we’ll work on and launch. And we consider that it not solely has important alternative to drive income progress from the customers which are within the app already, but in addition to reengage customers who most likely nonetheless use Grindr, however may not be utilizing it on a month-to-month foundation and going to provide them another excuse to interact with our product.
So we consider that product-driven MAU progress will be very efficient, and it has an affect on word-of-mouth. It has an affect on virality, and that each one actually advantages us, and we’re making these investments. Moreover, as I discussed a minute in the past, we do have greater model recognition within the U.S. than we do internationally. And we all know from the work we have finished on a number of the worldwide nations by way of studying about them that when individuals know us in a given nation, they use us quite a bit and so they actually just like the product.
And so we consider that by driving that model consciousness to be greater, form of getting it nearer to the place we’re within the U.S. over, clearly, a few years, that is not going to be achieved in a single or two years, we are going to drive extra consumer progress in these nations as effectively. And that is a major alternative for us over the mid- and long-term. That is why we predict worldwide is such a possibility. So hopefully, that is useful form of as we enter that.
Unidentified Analyst
Sure. Tremendous useful. Thanks. After which only one extra query. As you check the Proper Now function and as you form of step by step roll out the Roam function, might you speak about any early studying’s there? Are you seeing uptake extra from present subscribers possibly? Or are you seeing new payers come on board by means of these options? Actually simply any form of reception from customers of the app can be useful.
George Arison
Sure. So Proper Now and Roam are very completely different merchandise and the way we take into consideration them may be very, very completely different. Proper Now is a reasonably important consumer journey enhancement in our product. It is creating an answer for a use case that Grindr is admittedly good at. However as we turned greater and have increasingly customers which have completely different intentions, the benefit of that fast connection isn’t there anymore on Grindr because it was, say, 1 decade in the past. And so by creating the Proper Now use case and have set, we’re fixing that want for customers. We had heard about this very loudly and clearly from our customers.
The main target Proper Now, and all of the work we’re doing on Proper Now and to be specific once more, solely a number of the options that might be in that suite of options have been launched and examined to this point, however there’s extra to come back, is consumer engagement, proper? We’re taking the identical method to Proper Now as we did to Albums. It is – Albums went viral and have become very, extremely popular, very, in a short time. That is why so many lots of of hundreds of thousands of albums get shared frequently inside Grindr.
After which over time, we have been capable of drive higher monetization from that as effectively by seeing extra individuals convert to paying clients, as a result of to ship many albums or to have many albums and examine many albums, it’s good to be a paying buyer. So we consider Proper Now in the identical approach. Proper Now, it is about consumer engagement and making a virality in customers as a result of it’s a market, and so that you want individuals to be engaged with that. And solely after we’re profitable at that can we take into consideration monetization. So I might not count on important monetization from Proper Now in 2024 or in 2025, frankly, and that is not the target, the target is consumer engagement.
With Roam, that is a distinction, proper? Rome is an a-la-carte much like Increase. We stated at Investor Day {that a} quarter of our customers, barely extra, 27%, from the weekly energetic customers are touring any given week. So Roam is focused on the consumer base that’s touring, proper, as a result of it’s about displaying your profile in a special market from the place you reside. So if you concentrate on what profitable Roam seems to be like, it is – if it achieves one-fourth of what we generate from Increase, that might be like an distinctive consequence. And we consider that to this point, we’re effectively on observe to do this over the following year-and-a-half to 2 years.
We have launched Roam solely to a restricted quantity of customers in prime nations, however that is a major enlargement of the place that’s now obtainable. And our objective is to have it obtainable in a a lot bigger sense, not – possibly not in every single place, however in most locations by the top of the 12 months, and we’re very a lot on observe to do this. And we count on that in 2025 we are going to see monetization advantages from Roam. However once more, when you concentrate on the magnitude of it, 1 / 4 of our customers are touring any given week, and it is a touring product, proper? So if Increase is our greatest a-la-carte and essentially the most profitable one, not only for Grindr however really for each different product like Grindr, the very profitable consequence for Roam can be one-fourth of Increase.
Unidentified Analyst
Nice. That is superior. Thanks, George.
Operator
Thanks. [Operator Instructions] It seems to be like there is no extra questions presently. We might prefer to thanks for becoming a member of the Grindr’s Second Quarter 2024 Earnings Name. This does conclude right now’s presentation. It’s possible you’ll now disconnect.
