Good afternoon, everyone. My name is Bo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr Fourth Quarter 2023 Earnings Conference Call. I would now like to turn the conference over to Ms. Tolu Adeofe, Grindr's Head of Investor Relations. Please go ahead, ma'am.

Thank you, moderator. Hello and welcome to the Grindr Earnings Call for the Fourth Quarter and Full Year 2023. Today's call will be led by Grindr 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 in Grindr's Investor page at investors.grindr.com. Before we begin, I'll 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 thank you, everyone, for joining us today. 2023, our first year as a public company, was a success by every measure. We made significant improvements in our product, increased monetization through our Weeklies subscription and Boost ala carte, and exceeded our financial guidance. We continue to welcome more users to Grindr with average MAU growth of 8% for the year. The engagement has remained best-in-class, with more than 121 billion chats sent between users. These strong results speak to the hard work of our team and also to Grindr's enduring relationship with the gay community as we help users all over the world to find and connect with one another. We also embrace a deep commitment to service in the global gay community, most notably through our Grindr product quality initiatives, including connecting users to more than 235,000 HIV test kits in the U.S., an effort we are striving to bring to many more countries. In 2023, we also laid a strong foundation for long-term growth, such as developing a robust product roadmap which includes some great work we are doing on AI and adding outstanding, highly accomplished leaders to our team. In November, we completed a landmark step for Grindr with the refinancing of our debt, closing a new $350 million facility with some of the world's leading financial institutions. Debt refinancing is a core theme in the business world. But when the first public company serving the LGBTQ community can execute this favorable transaction, partnering with institutions in a tough interest rate environment, it highlights not only the strength and credibility of our business, but also signals that we can help drive a more open and welcoming financial ecosystem. This is very important to our mission, and I want to thank Vanna, our team, and our banking partners for their work and support in making it happen. Further details about our performance and 2023 focus areas can be found in our shareholder letter, which I encourage you to read. Next, I'd like to outline our three key priorities for 2024. Given the robust nature of our free offering, to increase monetization over the long term, we need to provide new value-added features to our users that they're willing to pay for. To do this, we need to build features and products with a better understanding of our user's intent. We know that the vast majority of Grindr users use it for casual dating, but we also know that the same users use it for much more, as a primary place to find long-term relationships, a source for networking, for finding information about what's going on in the community, where the safe places are to go in different countries, and much more. Building features that better serve user-specific intent will allow us to cater to the needs of our customers, creating value for them and opportunities for monetization for Grindr. Our second priority focuses on our brand and ensuring that we proudly tell the story of Grindr's great legacy of serving and positively impacting millions of people in our user communities around the world. Legacy perceptions of Grindr rooted in societal, cultural, and historical prejudice, sensationalism, and inaccuracies about our products are still present and can have negative long-term effects on our business if left unaddressed. We recognize that creating value for our users and shareholders means taking these issues head-on. In 2024, we will focus on amplifying the crucial and impactful work that is at our core by telling the true story of Grindr's culture and the real relevance and success of our product both within and outside of the community. Our third priority is to build a performance-driven culture of excellence and innovation. We started out with our return to office initiative last summer. We believe strongly that the combination of an important social mission with a workforce playing to win is what creates great companies. We are focused on building out our team in key functions with high performance, and we believe that the strong performance-driven culture will help drive strong long-term growth for Grindr, starting with the 2024 guidance we are providing today. I'm excited to share more on all of these initiatives and much more about Grindr at our first Investor Day, which will be held on June 26, 2024, in New York City. The event will be a fantastic opportunity to gain deeper insight into our company and engage with leadership. The details will be shared soon. With that, I'll hand it over to Vanna to discuss our financial performance.

Thank you, George, and hello, everyone. I'll start by summing up the year and then dive into the fourth quarter. Grindr delivered outstanding results in 2023, with revenue growing 33% to $260 million for the full year. Our adjusted EBITDA margin came in at 42% of revenue for a total of $110 million. Both revenue and adjusted EBITDA margin were well ahead of our original guidance for the year, and our revenue increased further from our guidance update in November. Overall, our performance was driven by a combination of paying user growth and increased average revenue per paying user as we benefited from the success of the launch of the XTRA weekly subscription and a full year contribution from our popular Boost ala carte offering. In fact, our direct revenue grew by 38% in 2023. We continue to see strong engagement in our app throughout the year as average monthly active users increased 8% in 2023 over the prior year, and our average paying users increased 19% to a record 937,000. Our average direct revenue per paying user grew 16% year-over-year to $20.05, primarily driven by the XTRA weekly subscription. Turning now to the fourth quarter, revenue was $72 million, up 32% year-over-year from $55 million. This includes $62 million of direct revenue, which was up 39% year-over-year, and $10 million of indirect revenue, which was up 1% year-over-year. Operating expenses, excluding cost of revenue, for the fourth quarter of 2023 was $37 million, down 0.3% versus last year. An increase in people costs was largely offset by a decline in depreciation and amortization. Operating expenses, excluding cost of revenue for the full year of 2023 were $137 million, up 5% year-over-year versus 2022 of $131 million. This $6 million year-over-year increase reflects higher people costs, which includes a $9 million severance expense driven by our return to office program. This was offset by lower depreciation and amortization costs. Net loss for the fourth quarter was $45 million compared with net income of $5 million in Q4 of 2022. For the full year and fourth quarter of 2023, we incurred $61 million and $50 million, respectively, in expenses related to warrants and our debt refinancing. Adjusted EBITDA for the fourth quarter was $29 million, equating to a 40% adjusted EBITDA margin. Turning to our balance sheet, the headline for Q4 and the year was the new $350 million credit facility announced in November. The facility consists of a new $300 million Term Loan A and a $50 million revolver. This new facility was a key objective for us in our first year as a public company as we focus on replacing the much higher cost of debt we carried for almost a year. The new facility results in about $17 million in annual interest savings. Inclusive of the new term loan, our net debt position was $341 million at December 31, 2023. We ended the year with approximately $28 million in unrestricted cash and cash equivalents. Combined with our strong cash generation profile, we have ample liquidity to run the business and execute on our growth priorities. Let me now turn to our outlook for 2024. We have set guidance for this year of revenue growth greater than 23% and adjusted EBITDA margin of at least 40%. Our guidance reflects our expectation of another year of strong growth and profitability, driven by continued paying user growth, a full year contribution from our Weeklies subscription offering, which was rolled out globally in May of 2023, and contributions from existing and new offerings expected later in the year. Our adjusted EBITDA margin guide reflects investments in our strategic priorities that George highlighted, including product roadmap, talent acquisition, and modest brand spending. I also want to briefly touch on how we're thinking about international opportunities. We continue to see fairly consistent and healthy MAU growth around the world, and we have been pleasantly surprised by the pace of monetization. International markets contribute more than 40% of total revenue in 2023, responding well to the Weeklies and Boost product launches, despite us not having yet focused on our market localization and price optimization efforts. As a result, we will be prioritizing go-to-market optimizations in key countries with the goal of further accelerating paying user growth over time. This effort is in the early stages, so we have not factored any uplift into our outlook for this year.

We'll go first this afternoon to Andrew Marok at Raymond James.

Wanted to talk a little bit about younger users. So can you talk a bit about your level of satisfaction in the top of funnel with younger users? I have been hearing anecdotal reports of burnout with dating apps in some of the mass market comps. I guess how are you tuning your product in AI to position Grindr well for changing consumer taste to the extent that you see them and maybe you don't?

Yes. Thank you, Andrew. Great question. Appreciate you joining the call. So we believe that Grindr has a lot of room to grow ahead in terms of acquiring users, both in the U.S. and abroad. We saw 8% MAU growth last year, and we expect that to continue in the future. The reason is I think threefold, and bear with me as I walk through that. One is that gay people have been connecting digitally for a very long time. That was actually true before internet dating took over. A lot of people would use phone-dating services to connect, and then they shifted on to the web. When I finished college in 2000, everybody I would meet in Washington, D.C. or in New York was already on dating products like gay.com and manhunt and others. And so this has been part of the fabric of the user base for a very long time. And all the research that we see out there suggests that this is going to continue. Secondly, the reason this is true is because our community is not as big as the straight population. We are a subset of the population. So you want to be around people who are more like you who have something in common with you. Digital channels like Grindr are a great way to connect to people who are like you, especially with the younger users who are still trying to figure themselves out. They just turned 18, they became adults, they came out potentially or just finished college, figuring out what life would be like as someone who is part of the predominant majority allows you to do that better if you're around people who are like you, and so that benefits you being in a product like Grindr that has the full subset of the people in that community. And then lastly, even in real life, people oftentimes move into large cities. They go into gayborhoods and live in gayborhoods, and every large city has a gayborhood. Grindr is a gayborhood on your digital device. It is the gayborhood on the phone. And so we are able to recreate that in the real-life experience for users already. That’s actually why our users use Grindr for so many other ways than just dating and in all the other kinds of ways in which they connect with each other. So that's kind of what we're seeing so far and what we think will continue to happen in the future. As far as products are concerned, it's very true that Grindr has a ton of room and opportunity to build new products to address the needs that users have. Our product development is done through understanding what users want and then trying to meet them with those needs through new features and new products. We've built a really robust product strategy over the last year that we're really excited about. We think a lot of it is addressing their needs. So we're pretty excited about giving a chance to kind of see more of that and hear more about it at the June Investor Day that we'll be hosting.

Great. Really appreciate the color there. Very helpful. And then maybe one more, if I could. It sounds like you're still working on scaling your team back up after the return to office mandate. How has the progress been against your goals to date? Any significant learnings there? And maybe any specific areas that have been easier or harder to add headcount in than you had thought?

Totally, yes. I mean, as you can see from our financials, we had about 100 people at the end of last year, so definitely much smaller than we had inherited when we joined, and we peaked that at about 225 or so. It's really important for us to be able to hire the right talent that is truly committed to both the mission of the business and to working the way we want to work. We are really committed to a performance-driven culture in which work matters. We're doing really big things, and the goals are audacious. We want people who want to go after those goals by working really hard. I do not expect us to be able to get back to the numbers we're at in a year. Can you hire that many people in the year? Absolutely, but you won't be able to maintain your bar as well, and you won't be able to integrate people into the company as well, and so we don't want to go that route. We are fortunate that we can supplement any need that we have in hiring contractors. We have a strong set of contractors supporting us in engineering and product and in some of the other areas. They are fully integrated with our team. So our teams in engineering, for example, combine contractors and employees together. It's a very integrated model of working, and that's been going really well. That said, we had incredible success in hiring. I won't share any specific numbers, but I was really pleasantly surprised over the last three months, for example, at the speed of being able to hire engineers and bringing folks on board. It's been really awesome. I think it speaks to the fact that we have a really amazing business. It's not common to find businesses that are growing as well as Grindr and that have as high of an EBITDA margin as we do. For a lot of people who want to be in a nimble environment where they can have a really big impact, Grindr is a great place to work. We've seen great progress in bringing onboard a great engineering talent into Grindr over the last few months.

We go next now to Rohit Kulkarni at ROTH MKM.

Congrats on a great quarter. First question to you, George. On this first priority that you outlined, you want to better understand user intent. If you could elaborate on that. Perhaps talk about how you are thinking about new products, incremental investments, and the ROI. It seems as if ROI is going to come in '25 and not in '24. So, just maybe talk about what you want to achieve when it comes to learning user intent?

Yes, absolutely. We believe that Grindr is used in a lot of different ways. That's based on data. We even shared some data publicly. 90% of people are using Grindr for casual dating. But about 50% to 60% want to use it for long-term relationships, for example. We also know that they use it for travel, to figure out what they should be doing when they travel to new places. Grindr is used frequently for health information and public health information, for social connections with each other, for friendship. So there's a broad set of use cases that people already use the product for, which is really fantastic. We love that, and that's the reason why we have as much engagement as we do, with 121 billion chats shared last year. What we want to do with the product is to extend the product functionality to support all these different use cases. Right now, much of this happens through chatting, which is great. We want to encourage that. But imagine a world where with a click of a button, you could go into a part of the product where everyone is engaged in a desire to have a long-term relationship. So it's a subset of our users, but they all want to date. Maybe your profile there is a little different, maybe it's a slightly different type of profile than you might have for your more casual dating experience. Maybe you say different things in it because people are interested in different information. Maybe your photos are different as well. That would actually be really appealing to our users because we've heard that from them. They want that. We believe that it will create better engagement with users to be able to understand their desires. The products that we are envisioning are all built around what the users need. We hear from users and how we can satisfy those needs. As for ROI, we think of our product development along a la carte and subscription. Some of the products we're testing, such as Teleport, are envisioned as ala carte products. People will pay for them on a per-use basis. Other products like dating, which is a combination of many big features, we probably envision as a new subscription tier because it's a big value add. In general, my experience in building technology is that when you create value for people, they are excited to pay for it because they see benefits. As long as we build products that create value, I am confident we'll be able to drive good financial results.

And Rohit, just to add a little bit to that. I mean, when you think about ROI, we're really thinking about just increasing the number of paying users. As you saw, we increased it by 19% in 2023. As we put out more use cases that we've already researched, we recognize that users are looking for Teleport, they are looking for things like dating. There's a lot of research that we put into play before we design the product to make sure it's successful. That being said, usually our products take a V1 or V2 to hit perfection. That's what you saw with Boost this year. Boost performed nicely for us. We tweaked it at the beginning of 2023 to really develop that incremental gain. So yes, we think about ROI, but we know it could be a V1 or a V2. Before we do it, we certainly do user research to ensure we prioritize the products they want.

Okay. And one on '24 guidance. To the extent you can provide more color on the drivers behind the revenue growth, both on paying users and ARPU directionally. And also, obviously, margins—you're guiding to a slight step down in margins, although they may still be about '23 levels. Could you double-click on that as well? What's your hiring outlook and how should we think about the cadence of margins as the year progresses?

Certainly! We're really excited about another strong year in 2024. Our guidance is still extremely excellent. Certainly, with respect to 2024, we're really thinking about the Weeklies in the first half of the year. It fully launched midyear in 2023, so we'll get the full year benefit of that. We also have a few new products that we'll be rolling out, which are already in tests. Again, it could be a V1 version. Right now, our guidance shows 23% for revenue growth. Remember, last year, we said 25% and we actually ended the year with 33%. There will be more to come as the year progresses. You probably recognize that our philosophy is to be more prudent at the beginning of the year as we test before the full rollout. Regarding our investments, like George said, we have three main investments: product, brand, and headcount. From an EBITDA perspective, you're not going to see much movement there because a lot of our consultants will transition into FTEs. So I don't expect any big bumps regarding headcount spend. Again, we are prudent with our guidance at this time to ensure that we will absolutely hit our numbers. Did I address all those questions, Rohit?

We go next now to John Blackledge at TD Cowen.

Great, two questions. First, you mentioned that you plan to amplify the brand story as part of your 2024 priorities. Do you plan to adjust marketing efforts or launch a branded campaign to help with the story? Just kind of curious around color there. The second question would be around payer conversion. It took a step up in 2023. Just curious about the drivers of the improvement there. Can we expect further conversion uptick as part of the '24 outlook?

Great. Thank you very much for those questions. I'll take the first one, and then Vanna will take the second one. So on marketing, just from a spend perspective, any increase in marketing spend is fairly limited, so its impact on margin is very small. But we do think that the work that we will be doing in marketing is very important and critical for the future. Grindr has done amazing things historically in the community and, frankly, for the world and for people who need our product. We are in 190 countries and, in about 60 of those, it's illegal to be gay. Grindr is the only way that we can connect in many of those places. At the same time, there are a lot of assumptions about the product in people's minds that are not true or were once true and have long since been addressed. We approach this very differently now. Our objective with marketing is to correct these assumptions and to amplify the amazing things that Grindr does. For example, last year, 235,000 people in the U.S. ordered an HIV test through Grindr, were able to get that at home, and about a third of those had never had an HIV test before. These are the kind of stories we don't talk about a lot but need to so that people have a better appreciation of what Grindr does and the role it plays in society. Secondly, with our users themselves, they come to our social media channels to enjoy engaging content. That can significantly create engagement with users outside of the product, as well as keeping us top of mind with new users in the future. We have strong social channels out there, and investing in content at these channels is valuable for us. We recently brought on a new leader for brand marketing, who was moved from the U.K. because he is uniquely qualified to be effective for us. We're already seeing positive impacts from the work he does. For example, they recently launched a new podcast, and it's taken off considerably with hundreds of thousands of people engaging with that podcast across different social media channels. We think that's powerful, and continuing to do that will be valuable. Nothing regarding user acquisition focus from a cost perspective as that's not something we need to or want to do. But telling our story better across broader channels can be extremely valuable. Vanna, for the second question, I'll defer to you.

Thank you for the question. You saw that we grew our paying users by 19% in 2023, which we can attribute to our new product offerings. We launched the Weeklies subscriptions, which was similar to XTRA but at a lower price point. We were pleased with the limited cannibalization we had and how we converted more users. We also experienced a double benefit because often the Weeklies ended up renewing and had a positive impact on our ARPU. In terms of conversion, we had a nice lift in 2023, and I suggest that we see continued MAU growth. Our conversion rates—there's no real expectation in our guidance so far of changes in conversion. We had a nice uplift in 2023.

That's great. If I could just do one quick follow-up. George, just curious about your view of the competitive environment. Match launched Archer last year, so I’m curious about the general competitive environment in the U.S. and outside for Grindr.

Absolutely. Our users will be using more than one app. That's common in the dating space for people who have more than one app, which is perfectly okay. What we want to ensure is that our users see Grindr as a first choice product. If you think of it through the lens of credit card analysis, users want to come to us often for all the things they need to accomplish within the product. It’s essential to serve them correctly through the right features and services to meet their needs. Our engagement numbers speak for themselves in terms of how active users are with the product. That's going well, and we haven't seen any concerns on that front in the last year and don't expect to see any in the future. We welcome competition; it keeps us on our toes, but it’s not a concern. As for Archer specifically, there hasn’t been much conversation about that in the community, so we aren't worried about it. We are always looking at the competition and are focused on the right things for our product. For a business like ours, the best thing you can do is understand the user and follow what they want.

We'll go next now to Emily Stykes at New Street Research.

So a theme across many dating apps right now is that they seem to struggle to provide the Gen Z audience specifically with an experience that meets their expectations. Do you feel like Grindr faces a similar challenge? If so, what is the plan to help cater to this specific audience?

So actually, we are not finding that at all. We continue to enjoy an influx of users beginning at age 18. It really is a place where they discover themselves and become part of the community and chat with others in the community. We are not seeing any of those trends. You can see from our results that the paying users continue to go up, and our MAU continues to grow by 8%. This is a very healthy environment. Grindr was launched 15 years ago with the primary goal of connecting the community, and it has done so in 190 countries. We're #1 in over 180 of those. Our metrics in terms of chat—remember, time spent is 60 minutes on the app—has not dropped at all, which suggests we remain a vital part of the community.

It appears we have no further questions this afternoon, Mr. Arison. I'd like to turn things back to you, sir, for any closing comments.

Great. Thank you very much to everyone who joined the call and for taking the time. It has been great to do this earnings call. It's our first year as a public company, and it's done really well. We're excited to share these results. I'd like to close out by amplifying a few points. We are obviously very proud of the performance that Grindr team delivered in 2023. It was, in some respects, a challenging year from the perspective of some departures. Given that environment, the team performed as well as it did, and that is really exciting. We're also really excited about what we can do in 2024 as we have discussed through our guidance. We have great momentum in the business, with users and the products we have today, as well as momentum both domestically and internationally with plans over the near and medium term. There's a lot of potential to offer new offerings to users, some of which are already in test for us and some are on track to be tested later this year or next year. This will have a fantastic impact on the business, both from user engagement and a financial perspective. We are early in our journey as a company focused on financial growth in addition to user engagement, and that positions us well for great growth in the future. Grindr has built an incredible asset over the last 15 years, and we are coming up on our 15-year anniversary, which is exciting. Our team realizes how important it is to nurture this asset in the future and to grow as a durable, profitable, and highly cash-generating business. We recognize that we have work to do to help investors understand our storyline better and appreciate the great business and product that Grindr is. We are excited for investors to come on this journey with us. We look forward to sharing a lot more about our story and our intentions for the future at our Investor Day in June and look forward to seeing you there and introducing you to more members of our team. Thank you for joining us today, and I hope everyone has a great day.

Thank you, Mr. Arison. Again, ladies and gentlemen, that will conclude the Grindr Fourth Quarter 2023 Earnings Conference Call. We'd like to thank you all for joining us, and wish you all a great day. Goodbye.