Conference Transcript - GRND 2026-05-27

John North, CFO

Thanks everyone for coming. Happy to have John North, CFO of Grindr here today. Thanks for joining. Appreciate it. Thanks.

Operator

Maybe just to start on the category, Grindr has continued to grow at a really healthy pace. Despite kind of headwinds in the online dating industry across various apps, What do you see as the kind of key structural differences for Grindr and generally the community?

John North, CFO

I think fundamentally it's more than a dating app. It's really a social network. I think it's when users turn 18 and they're able to be in Grindr or whenever it is in their journey that they're discovering who they are and figuring out what it means to be in the community. Grindr is where a lot of people, I think, go. The vast majority of our users don't pay. 92%, 93% don't pay. Having a free user experience is very important to us and something that we want the app to be very usable without people having to pay for it. And that's both to encourage early adoption of the app when people are younger and figuring things out in their 20s or whatever, and also because we do think being the social network where all these things are able to happen is important to the engagement and what makes Grindr the most popular app that's out there and really the only one that you can have a robust experience without paying. So I think that's just fundamentally different. As we think about certainly monetization, there are two ways that we do that. Users can subscribe and they can buy consumable things. and then if not they can be served ads and you know both both are important you know to our shareholders and to us as stewards of the business but at the same time you know we want to make sure that the user experiences is powerful and robust and I think is very differentiated than what you see with other apps that are trying to figure out how to convert more people to pay you know we're a lot more focused on trying to create value so that our payers want to pay more, not so that we need to turn the dials to monetize more users, which has been pretty fundamentally different, I think, than a lot of other apps.

Operator

Yeah, that makes sense. In terms of 1Q, and just to zoom out a little bit in this year, so 1Q revenue growth was better than internal and our estimates, could you just talk about some of the bigger operational drivers of that outperformance and what could be durable as we're in 2Q and just through the rest

John North, CFO

of the year? The majority of our revenue comes from subscriptions and consumables in the app store. It's about 85%. About 15% traditionally and consistent with how we talked about our investor day a couple of years ago comes from the advertising business. In the first quarter, there were two things that were in play in terms of the out performance we increased subscription pricing for the first time since 2018 at the end of last year that came into play in the first quarter and frankly the response was better than we expected you know we typically expect when pricing goes up to see higher degree of churn lower reactivation you know for price sensitive people that actually went better than we thought so we saw better performance even than we had seen in our testing as we thought about price increases and what the leakage might be from just churn and users went better than expected led to some good upside relative to our expectations on the subscription and in-app purchases kind of business the advertising business we have a pretty large exclusive deal with a pharma company we've talked about that was for the full year and is a big driver of our direct revenue growth this year historically they've spent more money with us in the back half of the year this year it's been more flat or consistent from early part of the year to the end of the year which is what what we weren't expecting we were thinking it would be more back and loaded so that led to a little more upside but didn't change the total picture for us but that was also a reason that the first quarter was better than we initially thought okay that's helpful and then

Operator

just the shape of the growth as we get through the year i think you guys have been pretty clear that revenue growth is expected to um decelerate um in the back half of the year as we as we lap pricing and so what do you view as the main kind of growth drivers in the back half and

John North, CFO

even into next year probably three things to talk about i think the first is if you look at 2025 we had really strong third and fourth quarters so just off the off the starting position the uh the comps were going to be more difficult relative to how the year shaped up last year you know on top of that the pricing increases are going to be basically done at this point those were implemented in at the end of last year you know we have probably a higher churn and reactivation rate than other apps a lot of people will subscribe and cancel and then a few weeks later decide they want to subscribe again as that happens the legacy pricing goes away so as a result the implementation of the pricing increases is faster and that'll be mostly reflected by the time we're through the second quarter where we have the full quarter of that pricing increase so we don't expect that benefit to continue in the back of the year and then i think the third thing is you know the biggest kind of new development in terms of product we're building for the app is what we call edge which is our new premium tier we've done some testing with that we've been working on that for a number of quarters now but we made the decision to plan on that implementing in the first quarter of 27 specifically because we wanted to make sure we get it right it's a very different product than one we've launched before it's much higher price we are designing it for a small subset of users we don't want it to necessarily be as broadly consumed um you know and so i think the product and the marketing fit we want to make sure we take extra time to get right and so we purposely made the decision that that would be you know introduced in 2027 that's going to set up another good growth year for us you know obviously we continue to want to see the revenue growth be kind of consistent with how we've grown in the last couple of years um and that's a that's a key driver for that but that's not going to come into play until the first part of next year which is why the back half of this year is a little slower in terms of growth but that's what we're expecting and why we talk so much about it is hopefully to make sure everybody's eyes wide

Operator

open as to how it's going to play out right uh you mentioned one of the drivers in one q was the pricing changes were you know maybe a little bit better than expected can you talk about like what you thought um uh price sends price sensitivity of the members would be um and then versus uh and how it's performing relative to your initial expectations

John North, CFO

every time we're going to make a modification to to the revenue components and drivers of the the business, we do some pretty significant testing, do some A-B testing with users, everything from how the pricing is displayed to how many clicks it takes to buy something to the price point itself. And the simplest way to probably explain the math is just what's the anticipated revenue boost, which is the product of the subscribers taking the new price that's higher, subtracting the increased churn that comes as the price goes up and making sure that that equation results in a positive number. So we want to make sure that we generate more revenue than we lose from people choosing not to resubscribe or buy the product. And we run a bunch of testing and did that very significantly because this is the first time we've had subscription pricing materially changed since 2018, as you mentioned. So we did all that work. We had an anticipation of what was going to happen. That was baked into our forecast. And then when we put those things in place in the first quarter of this year, we saw a couple percent better retention than we expected, which led to some of the revenue upside.

Operator

Payer penetration is another area that we've kind of focused on since we've been covering the company. I think a lot of people look at the Tinder. I think at peak was 20%-ish penetration of MAU. and Grindr has done a good job the last couple of years of increasing that pair penetration. Over the long term, how should we think about it? What levers matter most? How do you guys think about it? Where is it on your guys' priority to maximize the financial model?

John North, CFO

It's probably not. And I think as I started our conversation today, I mentioned that we really want a robust experience for free users, and we want the app to feel very functional if you don't pay. And that's really foundational to what Grindr is about. I always channel my inner George, and I think what he would say is we're a lot more interested in getting our paying users to pay slightly more than to get more of our users to pay. And I think what we see is if you bifurcate our users by age cohorts, so 20 to 29, 30 to 39, et cetera, pair penetration, naturally, as one would expect, gets much higher as you get into the older age bands. Those are people that, frankly, have the means to pay and that, secondarily, probably need more of the pay features to meet people and to make the connections they want to make as they get older. And so for those reasons, we find that the take rates are a lot higher on people as they get more settled and mature and get older, frankly. Those people tend to be very much less sensitive to price changes. If you're in your 40s doing well and looking at our users, like, they tend to skew, I think, nearly double average household income, you know, much higher percentage of advanced degrees, a lot less proclivity to have children, so they have more disposable income, you know, so what we find is because of that sort of natural benefit of the demographic setups, you know, to push a couple dollar pricing change through to someone in their mid-40s that's already a paying user is not a very big deal, you know, so I think overall payer penetration has increased you know i think we're we've gone up from you know i think five or six to you know seven and then eight and all all the same you know mau has been growing as well so you know overall it would be higher as well but mau has also been growing but it's definitely never a topic for us to think about gosh how do we go from eight percent pair penetration to nine or ten it's it's much more about how do we get more mau and dau to make sure that there's is still the network effect, which is what keeps Grindr first in Wallet, because people wanna go where other people are. Nobody wants to be the first person dancing at the nightclub, like you wanna go to the place that's full, same kind of idea for us. Right, that makes sense.

Operator

Maybe just pivoting over to competition, obviously Match invested in Sniffy's, $100 million for a significant minority investment. Could you give us an update on how that may change the competitive environment broadly and specifically for Sniffies? How would you respond to someone who believes that Sniffies could actually take share from Grindr over some period of time?

John North, CFO

Well, I think, first of all, we're happy that the Sniffies team was able to create a monetization event. and I think it's good that we have another data point that there's a lot of value in this demographic within a sophisticated company like Match making such an investment obviously speaks to their view on the desirability of being in the space and potentially competing against us. I think many years ago Match tried to actually buy Grindr and i think the board couldn't get comfortable with it so we also think that's great that the board was able to validate um you know potentially even a more risque form of you know the casual dating hookup scene that's kind of quarter grinders functionality and really what sniffies is all about the reality is sniffies really came about with the decision from craigslist to get rid of their cruising and hookup components of the Craigslist website because of the concerns around sex trafficking. When that decision happened and those classifieds went away, then that was when Sniffy's really launched and became a thing. We think it's a much narrower use case than what we're trying to build. It's very anonymous. It's very focused on immediate proximity hookups. And that's certainly a core part of what users come to Grindr for, but there are many other use cases and large parts of what we're trying to build around the adjacencies of what we call the gayborhood. But what are the expansions that having a trusted access point into the community can allow us to offer, whether it's lifestyle VIP experiences or health care or travel or other things that are on the roadmap for us? So we've talked about varying degrees of specificity. I think it's fundamentally different and we have a more robust product offering to go after. And I think we're very focused on continuing to compete and we'll see what happens and wish them the best.

Operator

Right, you mentioned the edge tier a little while ago and you also mentioned, talking about the cohorts and some of the older cohorts have a higher propensity to pay and willing to pay more. And then this edge tier is going to come out next year. Just curious what gives you the confidence that there could be a nice uptake of the tier. And then how are you guys thinking about pricing that tier?

John North, CFO

We've done some pretty significant testing in Australia and New Zealand. I think we saw better than expected performance in terms of the value to the people that subscribe, meaning did they resubscribe, did they give us favorable feedback. The thing about Grindr that I probably didn't appreciate until I got into the app and started using it is it's very overwhelming. So when you log into the app, you get a grid of people that are within a distance to you. It's all proximity-based, obviously. But what ends up happening is if I have the app open for an hour, I might get 35 or 40 different messages from different people. And so you can imagine pretty quickly how if you're in the app and you're talking to people, you could end up with many, many conversations and many missed connections and threads that didn't go anywhere or whatever ends up happening. What Edge is really designed to do is to make the usage of the app more efficient. So there's the ability for us to summarize and suggest conversations that you should look at, revisit, or people are close again, if it was a misconnection, whatever it was, recommended profiles. So we give you, hey, we think you might like these people based on who you talk with in the past, what we know about you, and then importantly, insights about people that you're interested in. So this person tends to message at this time of day. You might wait until later to write them so that you're at the top of the inbox when they tend to be in the apps, things like that. So we think for people who have more time or more money than time is probably the easiest way to say it. There's a lot of value in those kind of things. We still think there is tremendous value in the network effect of having interactions in the app. And so we certainly don't want the time spent on the app to decline overall. But for a subset of users that are probably older, probably busier, dealing with the demands of an intense career or something, there's a lot of value in the things that we can do to make it basically more efficient for them to find what they're looking for. But I think we're thinking of this in terms of tens or hundreds of thousands of people globally, not millions. We don't think that this is helpful if it's broadly distributed. And so what we're trying to balance is what's the price that people who are in this category are willing to pay such that we only need to put it out to the fewest number of people possible to achieve the revenue we want. And obviously, the higher the subscription, the lower the number of users we need to get for the math. And that's the balance that we're trying to strike. So a lot of what we're doing in the back half of this year is figuring out how to market and position it to do some price testing at different price points. And we've tested into the several hundred dollars a month. There's certainly things online you can see where people have posted about it if you're curious of the specifics. I'm not going to speak to them today, but they're discoverable if one's curious, you know, but we'll figure out what that right balance is and go from there.

Operator

Maybe moving on to AI. You've been at the company since October, so you have a pretty good amount of time to at least see how, in this kind of AI moment, how you guys are deploying it. and just curious kind of how you see AI as helping. Are you deploying it in the Edge tier? Is that something that's helping you if you can just expand on AI as a potential driver for the company?

John North, CFO

Yeah, I mean, from a consumer-facing perspective, yes, Edge is predominantly focused on AI. And we've engineered the back end of the platform specifically to be enabled to integrate with AI so that we can implement some of the features I talked about a moment ago. We think more broadly there are probably AI use cases that need to exist for all of our users. That's still a journey we're trying to figure out, but very focused on how to make sure that the app feels modern and is continuing to evolve in the way that the marketplace is evolving as this tool is changing so rapidly and i think we all can agree we've not seen anything that's been so transformative so quickly in our lifetimes least i haven't um and i'm old enough to remember a bunch of these things so uh it's been pretty impressive i think the other way to think about it is just what it means for our business and our employees internally and we're seeing a pretty significant increase obviously in the the the apparent things like you know engineering uh you You know, our engineers are able to produce and ship, you know, two to three X more than they used to. But importantly, you know, 95 percent of our employees are using AI today. And it's, you know, becoming pervasive in disciplines that are, you know, farther afield like finance or legal or HR in a pretty powerful way. Now, what that means for us longer term, you know, I think is still a question. But very clearly, I think, as a leadership team, we're certainly evaluating what that means for productivity and, importantly, for org design. I think I read something, I think, the other day. I was talking about that there are builders, sellers, and measurers in a business. And what AI is really enabling is fewer measurers, because you can do more of that work with the tool. And that's where a lot of the jobs are changing, but you're still gonna need people that can build and still need people that can sell. So I think we're trying to figure out how to measure more efficiently, how to build more efficiently, and then potentially, can we sell more efficiently as well? I think the answer to all that is probably yes. To what degree, I don't know, but it's only gonna be upside. Okay.

Operator

And AI may play a role in this, at least if the productivity gains are there and you get ROI, it certainly will, probably for this next question, is just kind of long-term margin thoughts as AI could help potentially hopefully on the top line and also on the expense side. So, and you guys have said like maximizing margins is not the goal at the expense of growth. And so maybe how could you frame your view on long-term margin profile for Grindr?

John North, CFO

Probably a couple of ways to answer that question. The first is, I think what you said is right. We are more focused on revenue growth than margin contribution. And fortunate enough to be a Rule of 60, Rule of 70 company, which is pretty unique. But I think we like the fact that a lot of that is coming from our ability to continue to grow the revenue. I think you've talked about other dating apps and our quote unquote peers. I think we're slightly different for the reasons we articulated already. But very clearly, those businesses, when the growth has decelerated, has really affected the multiple. That's very obvious. And so I think what we've been very focused on from the beginning is, number one, maintaining a great free user experience so we continue to be the social network work and the destination people go to. So we're first in wallet. And then number two, really trying to think about how we get users to potentially pay more as opposed to getting more users to pay. So those are the things that we're trying to think about. But we also know there is a limit to where those things can go. And so a big part of what we've been focused on are what are the adjacencies, what are the businesses that would be a natural addition into our community. And given our role and reputation as being a trusted part of that community, we have a right to win in. So things like health care and those topics we've discussed are where we want to grow. So we're investing for that as well. That requires people and that requires investment in infrastructure that often has very little revenue associated with it. But that's what's going to set up the growth beyond the core app and allow us to continue to have a healthy balance between usability and monetization um you know i think that's that's what we're trying to make sure we set up so that as we think about 28 29 30 you know the out years and the terminal value of the business from a dcf perspective that there's still you know growth levers that are out there that we can go think about um and you know certainly if ai brings efficiency and we can augment margin and go higher happy to do that but i think ultimately you know i would take a lower margin to set up more growth and we're making investment to do that i think if you cut it the other way maybe to to juxtapose it the the the opposite if we weren't interested in growing revenue what would the margin profile the business look like i think it'd have a five on it and maybe a six but you know that's not that's not how we're optimizing the business or what we're thinking about i don't think people should underwrite that you know but i think it's good and it's an indicative way to think about what we are investing for so that the growth can continue beyond, you know, kind of the core tenants of where we make our money today.

Operator

Maybe pivoting back to more top line oriented, you mentioned the advertising business about 15% of total revenue and you have the one large pharmaceutical company. Is that a one year deal

John North, CFO

or is that, okay. Yeah, it's a one year deal. So we did an exclusive with them last year for this year you know i think we're certainly trying to be strategic around how to position our marketing effort with that vertical in 2027. i think part of the reason we've called this one out is we want to be careful that you know people don't expect and frankly we don't expect that that just repeats every year you know it was obviously a a wonderful win but i think we want to make sure we're we're careful um you know because we have to repeat it we don't have you know 10 years of history where we know it's it's going to happen or not those are the things we're trying to balance

Operator

on the international side could you talk about localization efforts um and are there you know kind of markets that you would call out that are that could you know be drivers of MAU growth or payer penetration?

John North, CFO

Yes. I think there's a few different ways to think about it. One is, international is gigantic. So we tend to talk about, like, there's the US, and then there's sort of a very American-focused way to think of the world, which is like, there's the US, and then there's the rest of the world. Pretty different rest of the world. I think we're in 160 countries or something, 170. I don't remember the exact number, but it's a lot. Some of those countries are very important monetization places for us. Obvious ones would be Western Europe, the UK, Australia, New Zealand, those are obvious. But I think almost 10% of our users are in Brazil, which is obviously a big country. But Brazil is a massive market. And so I think AI is helpful in the sense that we can localize more things. So, you know, figuring out how to translate chats, figuring out how to make sure you've got the slang right for what things are called in different languages, you know, in terms of the community and how they talk about things makes things more authentic, makes things more real. Even, you know, images and, you know, if you're in an Asian country, you know, showing a bunch of Caucasians probably doesn't work. You know, so those are some of the things we're doing. I think it's still pretty early days. We have a lot of work to do. You know, there are even issues with payment. I mean, a lot of people in Brazil and Mexico can't buy stuff through the App Store because the card networks aren't compatible. So there are many different nuanced efforts there. There's a lot of opportunity given that it's only about 20-ish percent of our users are in the U.S. in terms of our monthly active users, which means 80% are obviously somewhere else. And we certainly don't think about 80% of our users 80% of the time. We probably think about 80% of our users 20% of the time, and that's the opportunity set that we're after, but there's lots of nuance there.

Operator

Yeah. You obviously referenced a strong margin profile and strong free cashflow generation as a result of that. You have a pretty sizable buyback authorization. How should we think about capital allocation? Like what's your view for capital allocation over the next couple of years?

John North, CFO

I think there's the typical answer, which is, you know, what most CFOs are going to tell you. We're going to focus on internal investment first and then inorganic stuff after that, and then, you know, allocation to shareholders through buybacks or dividends, if that's what remains. I think that's true for us generally as well. I mean, certainly we want to invest in the business. You know, inorganic growth could be interesting, and we look at things often. So those are there. To your point, the free cash conversion is very, very high. There's no assets. There's not a bunch of inventory here. We don't have tons of physical infrastructure that you'd find in other businesses. We have less than 200 employees. So given the margin profile and the revenue growth, the cash flow is going to be great. I think in terms of how we've thought about the share repurchases, I'd probably call it two different ways. last year we had a pretty significant dilution event when the warrants associated with us going public were exercised which was good i think to get the warrants out of the way and clean up the cap table but we also then intentionally went out and aggressively bought back stock to offset that dilution and ended up basically the same leverage we were at before which is a function of the free cash flow conversion i think this year you know the board wanted to make sure we had a significant authorization if we saw a dislocation in the share price we bought back eight and a half million shares so far this year i think at basically 12 bucks so i think the execution on that was good makes me happy as a finance person i think the share price sitting at 13 makes me unhappy as a finance person uh but you know c'est la vie you know i i think going forward you'll see us be more measured you know i don't think you'll see us expend the whole authorization this year but i think you know it's also a function of where the price is and the only thing i know about sherry purchases is the lower the price is the more conviction i have it's where you should be deploying capital so i'm delighted when i don't get to use it because the share price isn't low but at the same time if the share price continues to languish it's a tool in the belt that we'll take advantage of we're happy to do so that make that makes sense uh all right i think

Operator

I think we're a little bit over, so thanks so much for joining.

John North, CFO

Yeah, thanks, John. Appreciate it. Yeah, thank you.