Grindr Inc. Q3 FY2025 Earnings Call

Ladies and gentlemen, thank you for being here, and welcome to Grindr's Third Quarter 2025 Earnings Call. My name is Janine, and I will be your lead operator today. I would now like to turn the call over to Tolu Adeofe, Grindr's Head of Investor Relations. Please proceed.

Thank you, moderator. Hello, and welcome to the Grindr Earnings Call for the Third Quarter 2025. Today's call will be led by Grindr's CEO, George Arison; and CFO, John North. 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 periodic reports filed with the SEC, including our annual report on Form 10-K for the year ended December 31, 2024, or any subsequently filed quarterly reports. 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 closely 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 hello, everyone. The Grindr team delivered another awesome quarter with revenue up 30% year-over-year and adjusted EBITDA margin of 47%. The results put us in a great position as we finish the year. Today, we are increasing our expectation for full year 2025 adjusted EBITDA to a range of between $191 million and $193 million, implying a margin of greater than 43%, and we are reaffirming our revenue growth outlook of 26% or greater. Our new CFO, John North, will walk you through the results in a moment. We're thrilled to have him join Grindr. He's led high-performing finance teams at Fortune 500 and S&P 500 companies and served as a public company CEO. He's already become an invaluable partner to the team as we execute on our long-term vision. Over the past 3 years, we focused on expanding Grindr's product service area, delivering more capabilities and high-quality experiences for free and paid users alike. On Page 4 in my shareholder letter, you will see a chart showing that our product expansion has been tremendous, creating enormous value for users and driving higher conversion, more revenue capture and an increased revenue per pair. Grindr now offers a richer, more effective experience powered by strong technology and a broader feature set. Users enjoy products like Albums, Boost, Travel Boost, Viewed Me, and Right Now. Through Gen AI, we are giving users access to powerful features like chat summary, discovery, and profile recommendations. All in, we've made the Grindr app more magical, dynamic, and rewarding than it was just a few years ago, and we're only getting started. Expanding both our product surface area and the value we've created for paying users has put us in a strong position to test subscription price changes for the first time since 2018. We asked new subscribers in a large set of test markets to pay slightly more and experienced a de minimis impact on our paying user base with retention exceeding even our most optimistic projections. We're deeply grateful for our paying users' vote of confidence in our direction, demonstrated by their willingness to invest more for the new value and capabilities we've built. Over the next few months, we'll continue gathering data and prepare for a global rollout early next year. Concurrently, in one country, we've begun to offer testing a new AI-powered premium tier designed for power users, aimed at providing one of the most advanced and magical experiences. Think of it as the flagship first-class cabin of Grindr with features that simply weren't possible 2 or 3 years ago before Gen AI. This tier targets a smaller segment interested in higher-value products, offering distinctive user benefits and a meaningful revenue opportunity beginning in late 2026 and accelerating in 2027. Our rich, free experience remains central to Grindr's power, fueling the unmatched scale and vitality of our network. Capturing revenue through exceptional value-added features enables us to continue bolstering an already rich free experience and to maintain the open conversational architecture that makes Grindr unique among any gay or straight platform; that will always remain our top priority. A defining strength of Grindr is its ability to renew itself with new users. Every year, gay and bi men all over the world join as they become adults. Grindr is often the first place they learn about the engage, explore gay culture, and find all types of connections from casual dates and hookups to love, workouts, to friendships. This generational influx keeps the platform vibrant, relevant, and ever-growing, with younger cohorts driving engagement across the network and older ones driving monetization. To help illustrate this characteristic, which is very unique to our platform, we've included a one-time demographic disclosure with our shareholder letter. It highlights why Grindr's strong, consistent engagement, especially among users aged 18 to 29, who make up a majority of our global user base, positions us for durable long-term growth. We recognize that many of our investors are Grindr users and hope these insights make our user dynamics and community more tangible to you. Overall, the products and business are performing exceptionally well, and the team remains laser-focused on delivering more value and more success to our users every day. Before I wrap up, I'm sure everyone has seen the filings from two of our large shareholders, Ray Zage and James Lu proposing to take Grindr private. The Board has formed a special committee of independent disinterested directors to evaluate the proposal. The committee is working with its own independent financial and legal advisers. From the company standpoint, that process will run its course. Our team remains unwavering focused on execution. We are fortunate to work every day on things we love that bring happiness to millions of people and make a world that is more free, equal, and just. Grindr has enormous potential to create value while continuing to deliver a product of deep importance to its users, and our job is to keep driving towards that. That's all we'll say on this matter at this time, and we won't be taking any questions about it on today's call. Thank you to the Grindr team for delivering outstanding results we are reporting today. We're proud of what we've achieved, excited for a strong finish to the year, setting the stage for another standout year in 2026. Now here's John to cover the results.

Thank you, George, and it's great to be here with all of you. I look forward to meeting many of you in the near future. I'm excited to be a part of Grindr and what the incredibly talented team is building. I've known and respected George for a long time, and the Grindr business model is among the most powerful I've ever seen. I see my role as further strengthening the finance organization, expanding our capital markets relationships, and ensuring the company scales efficiently and profitably as we deliver on our vision. As George highlighted, we had a phenomenal Q3. Total revenue was up 30% year-over-year to $116 million. Adjusted EBITDA of $55 million was up 37% year-over-year, resulting in 2 points of margin improvement to 47%, a record for Grindr. Our direct revenue grew 25% year-over-year, while indirect revenue was up 56%. Our ads business was the primary driver of outperformance in the quarter, as we saw strong results from international third-party advertising partners. In the core app, revenue growth was driven by our strength in our unlimited tier, which this year saw the introduction of additional duration options and feature updates alongside the ongoing success of our weeklies product across subscription tiers. Our user KPIs were strong with an average of 1.3 million paying users in the quarter, for an improved penetration rate of 8.6%. Average MAU totaled 15.1 million, and ARPU was $24.70. Our adjusted EBITDA margin performance reflected the strong flow-through of our revenue outperformance to the bottom line, as well as higher capitalized product development costs. Operating expenses, excluding cost of revenue, were up 9% year-over-year, largely related to people costs as we execute on our innovation roadmap, including our AI initiatives. Grindr's net income for Q3 was $31 million or $0.16 per diluted share compared with $25 million or $0.09 per share a year ago. We generated approximately $51 million in free cash flow in the third quarter. Year-to-date, we've repurchased 25.1 million shares of our common stock for approximately $450 million, leaving us with $50 million remaining under our current authorization as of September 30. Our Board regularly reviews capital allocation plans, including options for returning excess cash. Turning now to our guidance. Our strong Q3 results give us increased confidence in our 2025 outlook. And as George mentioned, we now expect our full year 2025 adjusted EBITDA will be between $191 million and $193 million, implying a margin greater than 43%, and we are reaffirming our revenue growth outlook of 26% or greater. As I noted in the P&L review, our 30% total revenue growth in Q3 was largely driven by outperformance in our ads business, which we do not expect to repeat in Q4. Recall that in our 2024 fourth quarter, we benefited from a large one-time brand campaign. In conclusion, Q3 was a very strong quarter that reinforces Grindr's powerful business model. We're in a great position to deliver on our annual guidance, which we increased earlier this year and are revising upward today. And with that, we'll open the call up for some questions.

Our first question comes from Andrew Marok from Raymond James.

I wanted to talk quickly on pricing first. So I think you've mentioned in the past and your payer conversion rate kind of points to this that given that Grindr had a little bit farther to go in terms of product breadth that getting users to pay at all was one of the biggest milestones that you would make as a user. So I guess in light of that, how do you balance that philosophy of raising prices versus getting people to pay at all? Like is the increased price a potential higher barrier to make that first purchase?

Andrew, good to talk to you. We are obviously excited for users to pay if they've not paid before, but we also believe it's important for users who are getting a lot more product in the paid tiers and a lot more value to pay a little bit more for that value. And the price changes are, I think, fairly minor in the large scheme of things, given the amount of value that we've added to the product. We have seen significant growth in our number of paying users. The change over the last 3 years has been pretty significant. As you know, I think we went from something like 6.5% to 8.5%. And that, I think, speaks for a lot, especially given that MAU has also grown dramatically in that time period. And secondly, we want to maintain a very robust free offering. I think one of the things you'll see in the shareholder letter in the disclosure that younger users, who constitute a vast majority of our user base worldwide and nearly a majority of our user base in the United States and the U.K., tend to pay at a much lower rate than slightly older users. So on Page 8 of the letter, you'll see that 18- to 22-year-olds have the lowest penetration and then that kind of increases dramatically as they go to 30, 39 or 40, 40, 49, et cetera. And so we kind of have a two-part strategy, right? On the one hand, we want as many young users coming into the product and having a really awesome experience through a very robust free offering where they can use all the features that we offer, including being able to talk to anybody for free with no limits. We're the only product of our kind that has that, whether gay or straight. And then from there, we want people to be able to pay for the value-added services that we offer them. And what we are learning is that as people age, they end up getting more value from the features that we offer in paid tiers, and they're willing to pay for those. What we've seen in our price testing as prices have changed is that we have had very little to de minimis change in our conversion rates when you compare new prices versus old, which is really great and it speaks to the fact that people value the products they're getting in those paid tiers. And then a couple more things on that. Number one is we do monetize our free users through ads. Obviously, we had a significant increase in our ad revenue over the last 3 years as well, and we continue to do very well there. And I think that's an important component of that equation as well. We have thought about whether we should offer a cheaper tier as well for users who might want to not have ads at all, but are not quite ready to pay for XTRA because they don't need the value that XTRA includes in terms of features and products. And that's something we're still thinking about. I don't want to promise either way that we'll do that, but that's certainly a possibility as a way to get more people to potentially be payers. But if you do that, you actually won't have that big of a revenue impact because the price point on that would be fairly low. And then lastly, I think the important thing for us is by creating a lot more product value, we are now asking people to pay a little bit more for that. This isn't just a price raise for the sake of a price raise or because we want to make more money. It's to ensure that users who are enjoying a lot more value in the experiences because the XTRA and the Unlimited tiers are way more robust today than they were 3 years ago as a result of a lot more product area that we've created in those tiers are actually paying for the value they're getting from those tiers.

Got it. Really appreciate that. And then maybe if you could just give us a quick update on how some of the newer products, especially thinking of something like Right Now is trending in terms of things like engagement metrics and to the extent that you can measure them, things like user satisfaction or outcomes.

I don't have much new to add beyond what we've previously discussed, which I'm happy to reiterate. Our approach to our products is to launch a wide array of options. Some will be free while others will be paid. We aim to provide a strong free offering, while some premium features will be exclusive to paying users. With Right Now, our goal was to significantly expand the availability of a free product. All Grindr users, whether they pay or not, can access and enjoy Right Now. Between 20% and 25% of our users engage with Right Now at least once a week, and over 75% of our users check out Right Now postings. This high level of engagement is something we are pleased with. There’s certainly more potential for Right Now. I was in New York recently, where the mapping feature in Right Now is available. Initially, I was skeptical about adding mapping to Right Now, but experiencing the product firsthand in New York changed my perspective; it’s a truly impressive and enjoyable feature. We're pleased with the product's direction. While we don't typically share many product metrics, we did provide detailed information in the shareholder letter about our user demographics. For instance, in the U.S., 15% of our users are ages 18 to 22, 31% are ages 23 to 29, and 46% of all Grindr profiles are within the age range of 18 to 29. This highlights the distinctiveness of Grindr as both a business and a product, as the younger generation appreciates what we offer. As long as our products continue to engage young people as they transition into adulthood, as has been the case for the last 15 years, we believe we are in a strong position.

Our next question comes from the line of John Blackledge from TD Cowen.

It's Logan Whalley on for John. So just looking at top of funnel, MAUs grew nicely again in 3Q. Could you discuss any trends which drove the top of funnel users higher in the quarter? And then also in 2Q, you called out some significant removal of bad actors in a certain region. Could you just update us on any similar efforts globally in 3Q and then looking forward just based on health of the platform?

Thank you for the questions. Let's begin with what we actually report. We report monthly active devices rather than users or profiles. Many Grindr users have multiple profiles, making it challenging to determine whether they represent one person or two. This can occur for various reasons. Some individuals may have a profile focused on friendship and another for casual dating, with different information on each, and we do not discourage multiple profiles. Thus, the most effective metric for us is monthly active devices. It's crucial for people to recognize this, especially when comparing it to external data, which has consistently been inaccurate regarding Grindr due to a lack of understanding of what we report. Additionally, maintaining a healthy ecosystem is a priority for us. We actively remove bad actors, such as scammers, from our platform. Over the past few years, social networking companies have experienced increasingly sophisticated scams, particularly with the advent of generative AI, which requires us to enhance our defenses. This effort can affect our monthly active users. In the first half of the year, we saw a notable impact on MAUs, which we have previously discussed. The removal of bad actors doesn't always affect MAUs because some may have profiles without a device ID, achieved through spoofing Android devices—an issue within the Android ecosystem. Thus, removing bad actors without devices does not alter our MAU count, as they were never included. Moreover, our MAU growth is primarily organic, driven by word of mouth. Grindr serves as a rite of passage for individuals turning 18, particularly those who identify as gay, as they seek to discover their identity and meet others. Consequently, our MAU naturally increases, and we are satisfied with this growth. The figures reflect our long-term guidance shared at Investor Day a year and a half ago. Lastly, I want to highlight our user demographics. The demographic data we present indicates that attracting new users is vital. For instance, having 50% of our user base aged 18 to 22 in the U.S. is significant when only 9% of the U.S. adult male population falls into this age group, suggesting we are continually bringing in younger users. This trend is especially evident internationally in regions like India and the Philippines, where older users may face stigma, while younger individuals are generally more open. Therefore, our user base is even younger in these regions, and we focus on product initiatives to serve this younger male cohort effectively.

Great. Maybe one other question just on the premium tier. You mentioned that would be designed for power users. Like could you give us any kind of an idea of what how many power users are on the Grindr platform? Like what percentage of overall users might kind of fall into the bucket that you're designing the subscription for?

The premium tier is a key part of our long-term strategy outlined at Investor Day. We anticipated that many of our investments would focus on AI features that are innovative and previously unattainable. We are developing these features and making them available, and we believe the value generated from these offerings will warrant a willingness to pay. This tier is aimed at power users and a select group of individuals, so we don’t expect a large influx of subscribers, but the pricing will reflect its value. Currently, we have about 350,000 Unlimited subscribers, and if 20% of them transitioned to the premium tier, it would result in significant revenue growth. If more than that—30%, 40%, or 50%—switch, it would be an exceptional outcome. However, we need several quarters to test and learn what might happen. The premium features we provide are remarkable, and I anticipate many users will appreciate them. Nonetheless, we do not foresee a significant portion of our overall user base utilizing this tier, as it is specifically designed for power users seeking unique features. I believe I am one of only a handful of people in the U.S. currently in the beta program, and using Grindr with these new features offers a completely different experience. I recently introduced a senior product candidate to it, and he was very impressed. I hope others will feel similarly as we broaden access to this tier. However, I don't expect a global rollout until the second half of next year at the soonest.

Yes. And maybe, George, if I can just jump in and add on to that. The one thing I want to triangulate back to is that we are looking at continued investment in these enhancements that are going to bring new and exciting features and differentiation as we move forward. And that's been contemplated in the 3-year plan that we put out in the summer of 2024. We're going to finish the year at better than a 43% EBITDA margin, but I want to make sure we remind everyone that in that plan, we anticipated many of these investments. And so we still think triangulating to the EBITDA margin range we gave at the time of 39% to 42% as you think about years '26 and 2027 is an important point to keep in mind and that you can't just roll forward what we may finish this year at as you think about next year and beyond.

Our question will come from the line of Andrew Boone from Citizens Bank.

Three for me, if I could. I would love to get an update in terms of international. Just how did that trend in the quarter? And then any new initiatives you guys may have in terms of localization or anything else we should think about there? gAI, George, can you just talk about the bigger opportunity with that product in the quarter? And kind of what's your vision in terms of bringing more AI tools in terms of incorporating AI into the Gayborhood? And then lastly, just on advertising. Can you guys just help us understand, it sounds like it was very strong in the quarter. What was the driver of that growth? Is there anything to call out? And then how do we think about that going forward?

Thank you for your insights. I took notes, but if I happen to miss anything, please feel free to remind me, as I’m interested in all the questions being asked. Regarding international markets, we see it as a significant opportunity for Grindr. One of my primary responsibilities as CEO is to drive things forward rapidly while ensuring we focus on the right priorities. When we started three years ago, there was much to tackle, and we have been prioritizing initiatives based on what is most essential. Although pursuing international growth hasn't been our top priority thus far, we recognize it as a major upside potential in our long-term plans. We categorize international opportunities into three main segments. First, we focus on countries where we have a solid presence and where the economy is developed. Our goal here is to convert more users into paying customers, especially in Europe, where our payer penetration is currently lower than in the U.S. We aim to elevate our European payer penetration to be more in line with the U.S. and U.K. The second category includes countries with large user bases where we have seen some success with payers but where brand recognition remains low. Countries like Brazil, the Philippines, and several in Latin America and Asia present substantial growth opportunities as we enhance awareness of Grindr. Finally, India deserves special attention due to its unique size and social landscape. With the evolving acceptance of LGBTQ identities, we want to be a prominent resource for individuals in India as perceptions change. Localization is key for our success in international markets, whether that means adapting our messaging for cultural relevance or developing features tailored to local needs. Additionally, we’re enhancing our marketing efforts by establishing Spanish-speaking social media channels and creating content in various languages, including for markets like India. In terms of AI, we believe that companies with extensive data can harness AI effectively if they adopt it early. Our goal is to transform our product into an AI-centric platform, which we are progressing towards by refining our models to better serve our community. We plan to introduce premium-tier features that utilize AI to offer users insights into their interactions, sharing information with their consent. We've developed a feature called A-list that organizes user messages and interactions, making it easier to engage with others. Our vision is to innovate in the consumer experience through AI in the same way Grindr pioneered mobile usage. Lastly, I'll pass it on to John to discuss the advertising space.

Yes. Thanks, George. We had a strong quarter regarding our advertising growth, which has been a focal point through both the TPA and the direct segment. It also provides a good contribution margin since it lacks the costs associated with sales from subscriptions received through app stores. This generally enhances our EBITDA, and we did see some advantages from that in the third quarter, as you noted. However, it's important to remember that last year we experienced a significant boost in direct advertising in the fourth quarter, which we don't anticipate will continue this year. This expectation is factored into the guidance range we provided. We believe there are still many opportunities for growth in this area, and we have achieved good results with Brian and the advertising team. We will keep exploring ways to expand this further in 2026 and beyond.

There are no further questions at this time. I will now turn the call over to John Blackledge from TD Cowen, who has a question.

It's Logan speaking on behalf of John again. I'm curious about the user base breakdown. Could you discuss any trends you've observed regarding usage across different age groups since you joined, George? Have you noticed any changes in engagement levels among older or younger users over time? Additionally, do you have any plans for initiatives aimed at increasing engagement with specific age demographics, such as older individuals?

Yes, that's a great question. Thank you for asking. We discussed whether to share more details, but for competitive reasons, we decided to keep it somewhat limited. However, I can provide some directional insights. Our data shows that young adults, specifically those aged 18 to 35, communicate frequently with each other and are also messaged by older users, to whom they tend to respond. In contrast, younger adults, particularly those aged 18 to 30, do not typically initiate conversations with older users. They seem hesitant to reach out, possibly because they believe older users may want to engage in conversation. However, they are responsive when older individuals reach out to them, which suggests that we can improve product features to facilitate these interactions. Additionally, our older users, particularly those over 50, sometimes feel less welcome on the app as their priorities change with age, even though they have accounts. To enhance their experience, we can implement product improvements. For instance, our premium tier and AI features can help by providing insights that indicate which users are likely to engage positively, which could be particularly beneficial for older users feeling uncertain about the app. Older users also tend to have more disposable income, which makes it interesting to enhance functionality tailored for them, using AI to add value that justifies a higher price. I hope that answers your question. Before we wrap up, I want to emphasize that Grindr is strictly for users 18 and older. We do not permit anyone under 18 to use the product, and all accounts must be created through app stores. When I mention younger users, I refer to those who are 18 and older, with no one below that age included.

Thank you. This ends the conference call for today. You may now disconnect.