Grindr Inc. (GRND) Earnings Call Transcript & Summary

Moving. It's my pleasure to have the team from Grindr here at the conference this year, George Arison, CEO. George, thanks so much.

Thanks for having me.

I feel like this is the third year you're at the conference.

The third year I've done this as a Grindr CEO but I've done this conference actually in my last company.

That's correct. Right. [indiscernible] Alexandra before me -- before she went on to SAP. So thank you so much for always being part of it and always making yourself available. Really appreciate it. So for those in the audience less familiar with the company and the platform and what you're trying to build, why don't you take the opportunity to talk about a little bit of the evolution you've been on and the journey for the company.

So Grindr has been around for 16.5 years. We really invented the idea of using mobile device for local discovery, and we're one of the very first geolocated products on mobile, on iOS, launched in March 2009. And it really took off like instantaneously through word of mouth among gay people in the United States initially. To the point where like I've seen estimates from investors like 0.5 million iPhones were sold in 2010 because Grindr was iOS only at that time. So it's been a fundamental part of gay life ever since then. And it's an open architecture platform. So you can talk to anybody you want, anyone can talk to you, and you can maintain messages going as long as you want. There's no like double opt-in kind of on Grindr, the way there is on straight product. So we don't really think of Grindr as a dating product. We think of Grindr as a social network that's used by gay people to connect to each other for any number of reasons. We just monetize the hookup, casual dating, relationships, et cetera, component of the experience, but people are doing a ton of other stuff on Grindr, and they don't leave the product necessarily when they're in a relationship. You can still see a lot of people who are using the product in -- when they're in a relationship because so much more is happening on Grindr. We are in 190 countries around the world. We went public in 2022. And I joined about 2 months before we went public. And there's been a lot of company building that has to happen along the way. So we've been flying the plane while building it at the same time. And so far, like I think it's gone really well. We've been very focused on driving growth in our revenue while building a lot of product. So it's product-led growth rather than anything else, and we're very happy with the results so far. Yes.

So I think there's a lot to mine in there from what you said. But if you take a step back and you try to draw the distinction between dating and social connectivity and the intersection between the 2, how do you think about the addressable market opportunity for the company? When you think about what the user base might be or what the payer conversion might be? And how do you characterize how different that might look in different geographies?

So we did a survey last year right prior to the election in the U.S. asking -- we did a very targeted gay and [ bi man ] survey run by one of Kamala Harris' primary posters and co-run by a poster for John McCain. So it was a very high-quality, fairly expensive poll. And we actually -- one of the questions you asked, do you have a Grindr account or not? And 50% of people in that poll said they had a Grindr account. But when you look at our U.S. MAU, it's less than 50% of U.S. gay bi people in the country. And so there's about 1 million people in there that claim to have a Grindr account, but don't appear in our MAU. So that's all, I think, like reactivation opportunity for us from a MAU point of view in the U.S., where people are -- kind of have used Grindr a lot before, but don't appear on our MAU because they don't use Grindr on a regular basis anymore. Obviously, we are way less penetrated in every other country in the world because we started out in the United States and then go everywhere else. And in a lot of places in the world, it was very uncomfortable people to be gay 10 or 15 years ago, which is a lot easier today. India is an example. And so in those countries, you're seeing much faster MAU growth. And so MAU for us is growing very well in there. On the payer side, people oftentimes assume that having high payer penetration is a good thing. I actually don't think it's necessarily true because you want the free users in a product like Grindr to be as big as possible because people who are paying want to be able to connect with people both who are paying, but also people who are not paying. And the more options of core connections that you offer, the better off the users will be who are paying. So it's like one way to satisfy your not paying users is by having a lot more -- sorry, paying users by having a lot more nonpaying users on them and necessarily driving the product to be one way it's not usable if you're not a paying customer, is not a good thing at all, and we are trying to avoid that from happening. We are increasing the surface area of the product by creating new product experiences that people could go and pay for if they wanted to. Some of the things we're building are premium. Some of them are only premium only, but you can still continue to use the core Grindr product without being a payer, and we want to kind of facilitate that very much. So free users matter to Grindr a lot. We also have a pretty big advertising business. It's about 15%, 16% of our total revenue. And that business obviously monetizes free users because we don't show ads to paying customers, and that's another way in which we make money as well.

Okay. Understood. Maybe sticking with the theme of engagement first. When you think about how the product has evolved with the goal of sort of incenting engagement across a wide array of users, how has the product evolved? And what are you most excited about in terms of engagement mechanisms that have launched most recently?

So Grindr's evolution was you see a certain number of people on the grid that you can talk to. Then Grindr added XTRA, which was our first paying subscription offering, and we showed you more people than we were showing you before. And then we added Unlimited, which shows you basically unlimited number of people. You can see anybody on the grid anywhere and you can talk to any of those people. That's kind of how engagement was driven initially, plus in that the chatting system is open to everyone, and you can talk to anyone you want. And whether you're paying or not paying, you can engage in as many conversations you want. Grindr users sent 130 billion messages last year, which kind of tells you how, like, active they are in chatting. That's more messages per day per user in DAU than WhatsApp has in their product. And WhatsApp is just a chatting product, we're a lot more than just a chatting product. What we have been thinking about a lot now is creating intention-based experiences for people. Like they're there for a specific intent, how do you create a really good experience for them in that regard. So we built what we call -- right now, which is for people who want to have a connection happen immediately, they can use that experience for that. We are now building a lot of dating experiences, a lot of dating features where if you're looking for a long-term partner, we'll offer you products for that to make it easier. And then concurrently with that, we're building a ton of features that are AI first, AI native features that are making the app a lot more targeted for the kinds of people you want to be talking to, which is something we never offered before. But now we can offer you a grid that is different from what it was prior in that it's targeted for your interests. And we call that Discover. And then within that, on the profile, we will show you not just what the user says about themselves in the profile, but insights that we, Grindr are able to glean about them and you see those as insights. And those are all AI-generated insights. That is going to be all combined into a separate tier on Grindr, right? Like now we have 2 tiers for payment, XTRA and Unlimited. We're going to create a new tier on top, which is going to take all these AI features into that because they are very, very high-value features, and we believe they are worth a lot more than $40. And so figuring out what the price is something that needs to be still being done, but the idea of putting all that together into a tier is very much kind of the intention, which will then allow us to monetize a lot of the features that we're creating that add so much new value to the product in a different way.

Okay. Understood. Probably the biggest debate coming out of the most recent set of results was a bit of noise around the MAU growth. We spoke about this at night of earnings, and I'm sure you've been getting this question a fair bit. Why don't you talk a little bit about what you were trying to accomplish with a bit of a cleanup dynamic around MAUs because I think the inclination I heard from investors was this, they've overreached on monetization and they're harming the user growth dynamics. So maybe give your take on where this sits right now.

Totally. This is something that we have spent some time talking to people about. So let's kind of go through that. Bear with me as I do it, there's like 6 points I want to make. I want to have each of the points written down. So first, let's define what Grindr reports is now versus what other people do. We do not report users, we report device. So monthly active devices. And the reason for that is that a lot of our users have more than 1 Grindr account, and they might have like a travel account and a local account and a more discrete account. And they'll be using all 3 of them in any given month. And so if you report it at a user level or account level, it would come off like we're reporting 3 people when in reality, it's only 1. And so we report device. And for you to get into our monthly active device reporting, your device needs to have a device ID. Not every legitimate Grindr user gets reported in that because their login does not have a device ID associated with that. You can go ask Apple and Android, mostly Android, why that's the case. But the reality is that there are people who we don't actually report out at all in our monthly active devices because their device does not have an ID that we can look to, but they are legitimate users that are using Grindr. Secondly, we have been in a very active process of removing what we would classify as unwanted MAU or users that should not be in the product, meaning removing their profiles. There are 2 categories of people that we -- not people, profiles that we remove. Category 1 is when there is a device ID, and those get reported in our MAU. And when they're there and they get removed, they're no longer in our MAU, obviously. And then there are profiles that don't have a device ID associated with them at all. These are spammers who spoof accounts on Android using a computer and create accounts on Grindr, and we aim to remove those as well. Obviously, you need to do that for the health of the platform. What we have seen in the last year is, one, increase in spam because technology allows you to create spam more now than it did before, meaning AI in particular, as well as a significant increase in our removals. So the increase in removals is in far excess of the spam increases that we've seen because our ability to identify unwanted users, meaning users who are engaged in illegal activity or in spam, a lot better than it used to be before. So we're removing a lot more people. Roughly 2x the number of accounts that are being removed -- were being removed in Q2 that had been removed in Q2 of last year. So it's been like a significantly larger number. That does not mean that our spend went up 2x. It did not. It's just that we were able to identify bad actors and remove them from the ecosystem a lot better. The total amount of MAU impact that happened as a result of the removals that we have undertaken in Q1 and Q2 of this year and a little bit in Q4 of last year is in the hundreds of thousands, not in the tens of thousands, right? So we were sharing with you an adjusted MAU number that accounted for that change. The MAU number would actually be significantly higher than the number that we reported in Q2. Even with that, though, the MAU increase was very significant, right? Like we grew MAU 6% year-over-year in Q2, even while we were doing all these removals. Now these removals are continuing because it's not a onetime thing that you need to do, and we'll do more of that. We think that ultimately having a cleaner ecosystem that does not have spammers in it is a good thing, and we want to continue kind of doing that. And then lastly, I think it's worth discussing demographics of Grindr. A lot of other products have said that, hey, they're having trouble with MAU because their demographics are not looking very good, meaning young people do not want to use dating products for dating. We have not seen anything like that. Grindr is significantly over-indexed in the 18 and 22 category versus U.S. male population and in the 23 to 29 category. And on the overall product, nearly half of our users fall into those 2 categories. So if we had any trouble in driving more MAU for things like monetization, that will be most impactful on young users because our payer penetration among young users is by far lower than it is for older users, which obviously makes total sense because they have less money and they are more successful in the product, even just using the free product because they're able to get what they want out of it versus if you're older, you might need to get -- pay because you're less successful in the product. And so we don't think there's like any issue with Grindr MAU. Grindr good MAU, meaning wanted MAU is actually growing really well. It's just that as we removed more accounts, that kind of impacts the actual MAU growth number that we show. And as far as younger demographics, which are the demographics that matter the most for a product like ours, we are seeing nothing but growth and new people coming into the product all the time. And last point on that is internationally, that's even more over-indexed on younger people. Like if you look at India, like 2/3 of the app is under 35, which is not surprising because it was illegal to be gay in India until 10, 12 years ago. So older men are less likely to be using the product versus younger men.

Okay. Understood. Last year, you laid out sort of a multiyear product road map. And as we sit here now, coming up on the last 1/3 of 2025, where does that product road map sit in terms of what's been deployed, what's soon to come? And how should investors think about executing against that road map on a 2-, 3-, 4-year view?

Yes. So we -- I think what you're referring to is our Investor Day, which was in June of last year, and we shared a 3-year plan for the product. We gave some examples. We didn't give all examples, obviously, in terms of what we're going to build. And then we had a Product Day last January, we shared, hey, these are the things we're going to launch this year. A lot of the products we're building are these intention-based products for specific unique intentions that people might have in the app, such as right now or relationships. Another one that we're going to work on in the future more is around travel as well as creating AI native product experiences. So this is not latching on AI to an existing product and declaring that that's AI, that's silly, in my opinion. It's literally products that you could not create before until Gen AI existed. And so these are like AI-native AI-first experiences. And we are building all of those. And I think we're like either on schedule or ahead of schedule on virtually everything that we had intended to build. Some of those things are either live to everybody. So right now, it's live to all our users. Others are in testing with a portion of our users. And others, we're actually holding back until we make certain pricing and tiering changes because we don't want to go live with them in our existing tiers. We want to only go live with them with higher-priced tier. So for example, Discover is an AI product that lets you discover people more closely aligned with your interests. But we don't want to release that to the overall user base. We're going to reserve that only for the premium tier, and so it's going to go live when the premium tier goes live. Insights is also something that we will not release to a broader user base. It will only go to the premium paying users. And so we're holding those back until we get the premium tier out and ready to go because those are so valuable, the kind of information that you're getting from that is so powerful that I don't think it'd be fair to put that into a tier even at $40 a month because the value that you're getting from it is way more than that, and the company should benefit from that as well.

Okay. Understood. That dovetails with my next question will be when you think about user monetization, I know we've focused a lot of this on user growth and engagement so far. But when you focus on monetization, we'll talk about the ad tier, but away from the ad tier, how do you think about tiering? How do you think about the platform's overall approach to monetization evolving in the years ahead?

So in the last 3 years, we did the following 2 things. In 2023 and 2024, we launched weekly payment plans for people. That was based on user demand. We did not come up with on our own. I know it's counterintuitive, but a lot of people, especially younger users, prefer to pay for things on a weekly basis versus monthly basis. And so we launched weeklies. Those have been really successful and they drove a lot of our revenue growth and our payer conversion growth in 2022 and 2023 -- sorry, in 2023 and 2024. In 2025, a lot of the focus was on driving more people to become payers rather than on things like weeklies, which drove ARPU up, even though that was not what we were aiming towards. We knew that as a result of weeklies, ARPU would go up. This year, there's not really much that we're doing to drive ARPU up, but there are things that we're doing to drive conversions up and those have been very active. We did not feel comfortable launching some of those conversion drivers until after we launched a lot more free product so that as we potentially took some things away from our free users, we wanted them to be experiencing a lot of new things. So there was a little bit of give and take in kind of how that happened. Next year is going to be a lot around driving a price increase in our existing tiers because so much new things were launched in our XTRA and our Unlimited tiers. The value of those tiers went up. And now it is fair to ask users to pay a couple of bucks more for that than they were paying before as well as starting to launch this premium tier, which will be a driver of revenue growth in a significant way in 2027, though it will have some level of impact in '26 as well because at that point, the tier and the offerings in that tier are going to be fully mature, and we'll be able to kind of expect to have a large number of people go into it. Now the premium tier is a very unique thing that we've never done before, which is we actually do not want too many people to sign up for that. So the price that we'll pick for it might be one that's very high for an average user. But the amount of experience that you're getting in that tier, you need to really kind of offer in a measured way. So think of it a little bit as like Disney, they have a new like Lightning Pass where you basically get to skip a line in every ride only once. So our, like, premium tier is something similar to that. And they don't offer that to everybody. Like you have to get in line and get it in a specific day and you might not get it. And so we think of premium tier the same way. We don't want to have everyone to have it because if too many people have it, that might actually degrade our users' experience, and we don't want that to happen.

Okay. Understood. You referenced earlier the size of your advertising business today. Against that size today, when you think about the base of users you have, how do you think about drivers of advertising going forward, whether it be ad load, different types of ad offerings, U.S. market versus international markets? What's the scope for opportunity there?

Totally. So when I joined Grindr, my hypothesis was that we were not leaning into advertising anywhere near enough. And frankly, if we didn't do that, then we might be pushed towards having to monetize more of the free users, i.e., doing more things to drive more free users to become payers that would degrade their experience and that was necessarily not the ideal thing. Why not lean more into the advertising. And we kind of saw a 3-part process for what needed to happen there. Number one was just increase the total number of ads that we have in the product. We were showing people like 2 ads an hour, which is like very, very low. I think we were very successful at driving the ad load up in the United States. We're now closer to like 8 ads an hour, which is still less than a comparable social media product, but it's a lot better than it used to be. And we did that without seeing a decrease in our CPM per ad by adding a lot more third-party advertising partners, we're able to fill the supply that we're creating from these additional ads. So I think in the U.S., we've like reached the max of how many ads we want to show per hour, per day. In Europe and Asia and Latin America, we're not yet at the same level, probably because the third-party ad ecosystem in these parts of the world is not as developed as in the United States. So there's still some opportunity for more ads there, but not in the U.S. The next step for us is to replace the kinds of ads people are seeing with the types of ads that are both more valuable to us and have higher quality to the user. That includes video ads and rewarded video ads as well as native ads that are more targeted and allow you to like exit the ad when you're looking at it and replace with a different ad. So we are -- and that will also have high CPM, right? Both of those ad formats actually have a higher CPM. So next year, we expect a lot of the revenue growth in ad business to be focused around this transition from current type of ads to these higher quality and more premium ads. So that's kind of the second leg of this stool that we're working on in terms of our ad revenue growth. And then the third one is around the direct advertising business. So these are when we actually partner with an advertiser to have ads in Grindr directly rather than through a third party. For me, probably the single biggest change in my opinion since I got here was around this third-party business. I was a lot more bullish in being able to get more advertisers to sign up to work with us sooner than I -- than it has happened. But unfortunately, the Anheuser-Busch incident took place along the way 2 years ago, and that really made it a lot harder to get advertisers to work with us at the pace that we actually wanted. I'm a founder, and so I don't give up when things going to stop happening is that we're going to continue pushing on this, and we believe there is a huge opportunity. We just need to cast the conversation here in the right way where for Grindr, Grindr is full of high income, lots of disposable income of gay men who are not only wealthy and are able to spend things on experiences and luxury products, they also set trends, right? They start buying something, then they tell their girlfriends about that because girl friends go and get their husbands and/or partners or boyfriends to buy those things as well. And so you can, like, really use Grindr as a trendsetter for luxury brands and luxury experiences. And that's the way to kind of, I think, lean into the advertising story. This is going to take us, I think, longer than I had anticipated. But fortunately, we've been able to drive a lot of growth in our ad business without the direct advertising business having to do things. We feel really good about how that's going so far and what will happen in '26, '27 on the ad side as well.

Understood. You've alluded a lot so far to AI and elements of machine learning and what can be built for the company. Talk a little bit about how the platform products, certain initiatives are increasingly being driven by AI and ML and how you plan on bringing some of those to the market in the years ahead.

So I had built an AI company in 2018, 2019, 2020. And so coming into Grindr, like one of the things I was most excited about was the data that Grindr possesses because unlike previous platform shifts in technology, AI is best when there's a lot of data. And so -- where like mobile, for example, was massively beneficial to start-ups. The AI shift actually is really beneficial to incumbents if the incumbents make the transition quickly enough. Now most won't, but those that do will be able to create competitive advantage in their user experiences that no one else will be able to have, and that will be long-term competitive advantage. So we've been really thinking through AI and how to drive that from the very beginning of me getting here. And that's kind of what we're working towards. The infrastructure that we've built for our AI products and experiences is no different than what most advanced AI companies out there are doing for themselves. Like when I meet AI founders of these super successful AI products, I'm not talking about foundation models, but like products that are built on these foundational models, their architecture, their infrastructure is no different than the infrastructure and architecture that we're creating, which makes me very proud because here, we are like a 16-year-old company doing the same thing and really transitioning the product to be much more AI first and AI native. So now we're in a place where we can actually start utilizing this infrastructure to build actual product experiences. So the product that is most AI forward on Grindr right now is called A-List. It goes through all your chats that you've ever had and creates a subset of those chats that the AI, which we call [ GayAI ] believes are most relevant to you for the long term. And it kind of creates a summary of the conversation that you've had, whether -- whatever information you share, whatever information that person shared with you and creates a different list of people that we call the A-List that you can go to. All the images and media that were shared between people is also going to be there, which is really valuable because obviously, people really care about that video. And you kind of see this like short list of people you should be engaging with. That's going to form the cornerstone of our premium tier, and we think it's going to be a really kind of game-changing offering into Grindr. And then secondly, we have 2 other big AI features coming out. One is called Discover, which takes all the information we have about users and slowly start utilizing it to offer you a set of profiles to look at that are more targeted to you. And then the third one is Insights, like, for example, showing a person that, hey, you are interested in this our user, this our user really tends to respond heavily to people in the 35 to 45 age category, even though they are only 25. And so if you are a 40-year-old person who is seeing that, that will give you the confidence to go and e-mail that person, whereas otherwise, you might not have that confidence, right? And so that Insights piece is going to be really critical as well. These are all very new. Usually, when we launch things, the first iterations are not perfect. That's totally fine. That's how products -- you launch an alpha, then you launch a beta and then you kind of innovate on that. 0 to 1 is always way harder than 1 to 2 and 2 to 3. And so we are really psyched about where we are in this development now, but it is very much in the 0 to 1 stage. Like we're launching V1s of these products, not V2s and V3s and over time, they'll get a lot better. So I would not have people expect financials necessarily like right away because we are going to give these things to -- time to mature and develop. But ultimately, I think they'll be very, very successful.

Okay. I know we only have a few minutes left. But when you bring all of this together, what do you see as the key strategic priorities to deploy growth investments into the company over the next 12 to 18 months?

Yes. So the way we think about Grindr growth is along kind of 3 vectors. One is core app. We want the app to continue to monetize really well, and I talked a lot about today how we're doing that. Second one is AI and all these AI features and kind of monetizing those. And then the third bucket of growth for us is building new products that are not necessarily directly tied to Grindr, the core connections app, but are offerings that make a lot of sense for gay men and where we can use Grindr, the core app, as a distribution engine for these new products and services that we are starting to offer people. We call these Gayborhood expansion opportunities because we're building the global Gayborhood on the phone. The first thing we've launched so far is Woodwork, which is a telehealth platform. But its first offering is ED medications, but it's going to extend into many other offerings over time. We purposely don't talk about that in earnings calls. I think I got some rumors that people like, oh, you talked a lot about it in May, but then you can talk about it in August. Well, in May I also did say like do not expect updates on Woodwork for a while on purpose because we want to give this very small nimble team that is working on Woodwork the time to be able to build basically a new company inside Grindr. But it's using Grindr as a distribution engine, which means that its CAC for customer acquisition is really, really low or 0 and building a new brand. And that's all going really, really well, and we're really happy with how that's going. So that's one business we're launching. We have a second business around luxury experiences that we're launching that is not live yet, but it will go live kind of next year. Similar thing, like we're not going to talk about that very much because we want to give the team time to get it right. And then the third one is already in the works that's going to be stuff for now, but it's actually probably the single biggest business opportunity that we are pursuing. And the goal is to have like 6 or 7 of these new business initiatives that are using Grindr as a distribution engine live over the next 3 years, knowing full well that not all of them are going to work. But if 3 of them work, that would be like a huge win for us over the long term because then we can drive this kind of growth, not just for the next 5 years, but for the next 10 and 15 years.

Last question for you before we lose you, just in terms of capital allocation. So those are the areas of investment and growth. You've laid out the growth narrative. How should investors broadly think about $1 of capital either going back into the business or coming back in forms of return you have been opportunistic with your stock on the buyback front?

So one thing to say is all these business things that I mentioned, the new businesses. The cost of launching these is all accounted for in our 3-year plan as far as EBITDA guidance that we gave, but none of the revenue is. So all the revenue is kind of incremental to what we guided towards. I run a pretty lean ship. So we kind of peaked in at 225 U.S. employees and 15 people in Asia. And 3 years in of me being there, we are at 150 U.S. employees, maybe 155 now and 30 people in Colombia. So we are not even back yet at the stage of where we were at our peak. That's because we did a return to office. A bunch of people said they didn't want to come back to office. I said, great, you don't have to come back to office. Self-selection is a good thing. But the people we did keep and people we've hired are being way more productive, and we are very, very lean. I believe in really lean organizations because I think those are way more effective at getting stuff done. So we run a very high revenue per employee number, probably a little bit too high, honestly, right now in as much as like everyone is telling me, George, we need a lot more -- a little bit more people. But even at the end of the year, we will not be close to the number of people that we had in 2023 January, right, even though the business has doubled in size since then. So I think we will definitely continue to hire, but we'll still generate a ton of cash, and our EBITDA margins will remain very, very high. Our 3-year guidance is 39% to 42% EBITDA margin. We've done a little bit better than that because we've been so lean on people, but like that either one is a great number. And otherwise, we'll return capital to shareholders. Our focus has been through the buyback. We've actually been, I think, using the buyback pretty aggressively this year, and people should expect us to continue doing that into the future. We think our stock is very cheap right now, quite honestly, given what we are delivering and what we can deliver into the future. Again, Grindr is not a dating product. Grindr is a social network, and I want investors to think of it as a social network and value it as such. And we are one of the very first existing technology companies to be actively moving towards creating our products that are AI-driven, not bolt-ons on top. And I think we'll be very successful at that. So that's how we think of value in Grindr. And obviously, in that sense, our share price is not reflected in that, and we'll be as aggressive as we can be in returning money back to shareholders.

All right. Well, all super clear. I think we're just inside of a minute. So we're going to leave it there. George, thanks so much for being part of the conference. Please join me in thanking Grindr for being part of the conference this year.