Yahoo Finance Grindr Inc. (NYSE:GRND) Q1 2024 Earnings Call Transcript
Grindr Inc. (NYSE:GRND) Q1 2024 Earnings Call Transcript May 10, 2024
Grindr Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon. My name is Clouie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grindr Q1 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Tolu Adeofe, Grindr's Head of Investor Relations. Please go ahead.
Tolu Adeofe: Thank you, moderator. Hello, and welcome to the Grindr Earnings Call for the first quarter 2024. Today's call will be led by Grindr's CEO, George Arison and CFO, Vanna Krantz. They will make a few brief remarks, and then we'll open it up for questions. Please note, Grindr released its shareholder letter this afternoon, and this is available on the SEC's website in Grindr's Investor page at investors.grindr.com. Before we begin, I will remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as we expect, we believe, we anticipate, or similar such statements. These statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today.
Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures are included in the earnings release we issued today, which has been posted on the Investor Relations page of Grindr's website and then Grindr's filings with the SEC. With that, I'll turn it over to George.
George Arison: Thanks, Tolu, and hello, everyone. We reported outstanding revenue growth and strong adjusted EBITDA in the first quarter. User metrics and engagement were all healthy. Our overall Q1 performance reinforces our confidence in our full year outlook. I'm grateful to our team for their hard work in the significant product launches and to our users for engaging with the launches and providing us important feedback quickly to allow us to make improvements. In addition to the terrific results, we have hit the ground running on our 2024 strategic priorities. Those priorities are focused not only on driving continued growth this year, but also positioning Grindr for the long-term success of the Global Gayborhood in Your Pocket.
We are pursuing that vision by focusing on: one, a robust set of products and features to focus on serving users bearing intent; two, a lean and nimble team with an exceptional performance-driven culture; and three, at brand narrative that is true to the important role we play in the community. Looking further product development, we currently have two usages in test Right Now and Roam, both which are built with user intent in mind. Right Now is a multi-phased product we're building in response to strong user demand that makes it faster and easier for users to connect. Phase 1 features our crowning tests with more expected to be launched later this and next year. Right Now will ultimately have additional robust features facility in better user engagement and capabilities for more seamless, easy communication if we use both one-on-one and in groups.
Roam referred to as Teleport in the past, targets to travel intention. This feature enable users to transport their profile into a different location that they will be traveling to making the proof of discoverable by users and application. We are currently planning to start rolling it out more broadly in the second half of the year. During Q1, we also rolled out our new chat system built with an entirely architecture, which encompasses step change improvements in its critical user feature. This was a complex testing we're taking and when you're in the finish line in addressing bugs that have popped up in the initial launch period. The new chat storage of chat server side eliminating loss chat as a result of device changes. Fixing this was a top request we uses for years.
We are very excited to offer the significant US upgrade to all users. New chat architecture will be a foundational to several new intentionality focused based features we plan to roll out in the coming quarters. Turning to our team. We continue to build out our talent base, and we increased the number of engineers on board by more than 50% in Q1. As we think about long-term growth, we are centering on a vision of trying to find the Global Gayborhood in Your Pocket. Physical Gayborhoods are hubs for the gay community long established in large cities where we look to interact safely and comfortably with businesses, resources, bars, restaurants and shops specifically catered to us. Over our 15-year history, Grindr has come to represent this concept in a digital way.
We see this today and how the app is used for things like travel accommodation, health information, and making professional connections. We know our users want other types of actions, information and services that will enhance their lives. Our vision of Grindr as a Global Gayborhood is about tapping into these designs. It will be a multiyear journey to achieve this vision, and we're excited about the potential of Grindr to find an even more internal part of the community and to build an even greater business in the process. I'm excited about sharing the long-term product road map that underlines the Gayborhood vision with you at our Investor Day in June. Thank you again for joining. And now, I'll turn it over to Vanna to discuss the quarterly results in greater details.
Vanna Krantz: Thank you, George, and hello, everyone. Grindr is firing on all cylinders as we start-off the year. Q1 revenue grew 35% year-over-year to $75.3 million and adjusted EBITDA margin came in at 42%. Q1 revenue was driven by strong sales across all products including the XTRA Weekly subscription which launched in mid-2023. Direct revenue increased 34% year-over-year to $64.4 million and indirect revenue was up 43% year-over-year to $11 million, as we benefit from reinstated banner advertising from Q2 of 2023. To share a few key user metrics. Average monthly active users increased 7% over the prior year to $13.7 million. Average paying users in the quarter increased 17% over the prior year to $1 million which brings payer penetration to 7.4% for the quarter.
And our Average Direct Revenue per paying user increased 15% over the prior year to $21.25 this quarter. Moving to expenses and profitability. Operating expenses excluding the cost of revenue were $36.5 million in Q1 of 2024, up 13% year-over-year. This reflects higher people costs driven by stock-based compensation and contractors, which was offset by lower depreciation. Adjusted EBITDA for Q1 of 2024 was $31.6 million, equating to a 42% adjusted EBITDA margin, up from $22 million a year ago or 39% of revenue. Turning to our balance sheet. We paid down $25.8 million of debt, bringing our debt position to $315 million as of March 31, 2024 and ended the quarter with $21.5 million in cash and cash equivalents. Lastly, I'll touch on how we're thinking about our 2024 outlook.
We are pleased with the strong start to the year which increases our confidence in the outlook for revenue growth of at least 23% and adjusted EBITDA margin of at least 40% for the year. We set and update our annual guidance based on our most current views of the business and what we know to be achievable. Q1 year-over-year revenue growth was largely driven by user adoption of the XTRA Weekly subscription, which was introduced in mid-2023. We are currently testing new products and are encouraged by their potential and are still accumulating data that will inform the timing of global launch and revenue forecasting. With that, I'll ask the operator to open up the line for questions.
Operator: [Operator Instructions] And we'll take our first question from Nick Jones with Citizens JMP. Your line is open.
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