We are going to get started. All these sessions are back to back. We have 25 minutes here to talk with the CFO of Grindr. Vanna, thank you for coming. Maybe I'll just start off with a very, very basic question: What is Grindr, and how do you make money?
Ah, there we go. I got it. Thanks. So Grindr is an app that connects the LGBTQ community, and really, it was started 15 years ago, with that as being the primary premise, which is connect the community. And I would argue that that was done extremely successfully. We're now the number one LGBTQ app in 180 out of 190 countries that we operate in. We're extremely global. If you look at our investor deck that's on our website, you'll see that our monthly active users are really, really global. And so it's been around for 15 years. It was essentially bootstrapped with advertising revenue, and now we offer subscription tiers. We have three subscription tiers. The first one is free.
You can be on the app, you can see up to 100 profiles, and if you've ever opened the app, which I'm gonna suggest maybe not everyone here has, it is not a swiping, it is just a grid, and it tells you how far away users are from you. And so free, you get to see 100. The next one is called XTRA, which gives you 500 profiles, and then the Unlimited is the next one up, and it gives you unlimited profiles. It's $39.99 a month. The XTRA is $19.99 a month, and then Free is obviously free.
Fantastic. Just for the sake of the audience, recap your IPO, recap the 2023 milestones, if you will.
Yeah.
I know you recently reported Q4. I think the stock was up 10%-15% that day. Clearly, investors liked what you did, so maybe just give high-level milestones in 2023.
Sure. So we went public in November of 2022, right around Christmas time. I had joined two months earlier. From that, I previously was the CFO of Disney+, so we launched ESPN+ and Disney+, so really hired for my direct-to-consumer subscription experience. We went public. I would say the stock, you know, opened at $10, and pretty soon it was at something like $6. And so I think we were, you know, a victim of the SPAC sort of overhang, but we knew that we would just, we just needed to provide, I think, our own history and credibility of our ability to operate the business in a, what I would say, professional and lucrative manner.
We've done that. Our stock is now back at around $10, I don't know, maybe $10.15, something like that, today. So we have kind of broken through back on that threshold. We generated, in 2023, 33% revenue growth and 42% EBITDA margins. We had a very, very successful year.
Say that again. What was your revenue growth and EBITDA margins?
It was 33%-
Just, just let that sink in. Very few... Like, if you run a screen on Bloomberg, for, I think your market cap is around $1.5 billion, something like that?
17. Yeah.
17. I don't think there are very many companies that with that revenue growth and that level of profitability. So just run a screen when you get back to your Bloomberg. I don't think there are very many public companies-
Yeah, and it's not a one-time thing.
Yeah.
I mean, it happened the year before. I think someone told us about the Rule of 40 and then told us we were the rule of, I don't know, 70 or 90 or whatever it is. In any case, I'll take you through sort of some of the structural advantages I would say that this app has over any other subscription service that I'm familiar with, but yes, we had some nice numbers last year. In fairness, we hit a home run with what we put out, which is called The Weekly. The only thing The Weekly is, and I'm being a little harsh on ourselves this year, myself and George, we both joined. George is the CEO. We both joined in the fall of 2022 to take the company public.
The only thing we did was we took a $19.99 price point for a month, same product proposition, and said, "Oh, we needed a lower price point to enter into paying." We took that down to $12.99, and it's the exact same product proposition. Guess what? We grew our users by 19% and our ARPU by 16%, and so that means essentially, if you're familiar with the model, that means that you really didn't have the kind of cannibalization you would expect from anything else. These are truly new people coming in that are now at a price point that they enjoy. So yes, we had some great numbers. We have just started on the monetization journey and just started on how we think about, growing our number of paying users. That's our goal, growing our, the number of paying users.
Okay, fantastic. I, I guess, big-picture question: I know you talked about dating for LGBTQ. Maybe talk about, like, how do you differentiate yourself versus Match, Tinder, Bumble guys, from a product and value prop standpoint? Is it just dating, or is there something more that you're trying to do?
Oh, it's so much more than dating. So this, like I said, was invented 15 years ago to connect the community. It's all about connection and feeling like you belong in the community. We find people coming into our app. You can join our app once you're eighteen. You have to be 18. Once you join it, there's people chatting on the app for 60 minutes a day, so we have 60 minutes a day of average time on the app. We have global brand awareness of 85%, and really, as the Gen Z sort of comes into their own, this is where they're chatting with friends. So we had 100 billion chats in 2023, and we had 1 million album shares, and so that tells you sort of the virality of the products and how used it is by the population.
So yes, we definitely have a subscription tier that is about matching, and it's about dating and hookups, but we also are a place to come and to feel part of a community. So there's a much bigger element, which is what's driving the engagement and which is driving the brand awareness. We haven't talked about our advertising revenue stream, but our advertising revenue stream is much different than any other dating app, which is around 3%. We're at around 13%. That is all based on the fact that there's so much time spent on the app, and that this is the place where many healthcare companies are coming to to reach their natural users, so it's our second revenue stream.
Okay. Steady state, where do you see subscriptions, advertising, and any other new revenue streams that you may be able to tack on to the business? Over the longer term, is this a business at scale which would have maybe 50% subscriptions, 30% advertising, 20% other revenue streams? Just to gauge the potential growth from here on out.
So let's start with, like, payer penetration. So in general, payer penetrations are the high teens for the other dating apps. We're at 7%, and so to me, what the 7% tells you is, yes, 93% of people get it for free, but the bigger thing is that means this is not a company operating at leverage because you can't be operating at leverage with 7% of your population paying. And so we're gonna get this thing to operating leverage, and which I would say is no different than our peers.
Yeah.
Once you get it to operating leverage, we can because we have such a lucrative financial model that requires no performance marketing or growth marketing. If you think about Bumble or Match, they spend around 20% of their revenue on marketing. We spend literally 1%, and that's on brand. And so even if we need to spend money on performance marketing, that's years away because it's so viral and there's so many, what I would say, natural macro tailwinds that are working in our favor. Even if we do, you can expect these kind of margin profiles to be here for a long time. You can also imagine that a company that is just early in its monetization journey, and what that really means in real life is we have, like, two à la cartes.
Every other dating app has 10, so that's gonna take years for us to have a drumbeat of new products, increased conversion rates. And so that will drive what we're saying is multiple years of double-digit revenue growth while EBITDA margins stay kind of where they are because there's so much cash generated from this business that you can continue to invest.
Okay, well said. I guess from a competitive landscape, maybe just lay of the land, are there offerings from these existing peers that you kind of closely track? Are there any other places that somebody leaves Grindr and goes to?
Yeah.
Is there a competitive landscape that is emerging as well?
Definitely. I mean, we are number one in 180 out of the 190 countries that we operate in, and we're number one by a massive margin. However, in the United States, there's definitely some other use cases that we don't serve. For instance, if you're on the app, anything Google and Apple-related, you can't have nude pictures as your profile picture. It's just not how it works. And so if you're a web-based product, and there is one in the States, and it's far more racy than ours, that is what I would call another business in our space.
I'm not sure I would call it a competitor per se, and the reason I say that is because, when I was part of the Disney+ launch, obviously Netflix was out there, and it just meant that you had to put out a product that was compelling, that people would be willing to pay for. And so what I would suggest is this is no different. People are on three or four different platforms for dating. They're probably already on Tinder and, and Hinge, or probably not Bumble so much, but probably some kind of portfolio companies inside the Match Group. It doesn't matter. It's fine. We have to have our own use cases, and people will pay for what they find valuable.
Okay. Okay, fair enough. In terms of some recent earnings from some of these peers, there have been kind of issues that these companies have highlighted. Some of them have been macro, some of them have been structural, which are more alarming in a way that younger people are less likely to date and hence less likely to pay, and so on and so forth. So, would love to see what you're seeing and if you're seeing something like that in your zip code?
So I, I'm definitely looking. It's really important to us, and what I would suggest is we continue to see an influx of as soon as kids turn 18, which is the age you're allowed to be able to get onto our app, as soon as they turn 18, they're on, they're coming in in droves. We have never not been, what I would say, the first app that folks come to when they start, let's say, experimenting with their identity and their sexual identity. Now, we have multiple studies that are showing up to 20% of Gen Zers are calling themselves fluid, and if they call themselves fluid, they want to get on these apps where they can talk and chat and think more about where they're falling in the spectrum.
So the macro trend that we are seeing is that Gen Z is more and more fluid, not less, and that there's more and more comfort with coming out. The second macro trend that we're seeing is there's more global acceptance for the community. Five years ago, for instance, in 2018, it was illegal to be gay in India, and now there was something that went to the Supreme Court for marriage equality. So in a five-year timeframe, they've just traveled a long way, and this is happening in many countries that you could argue are a little bit more conservative.
Very interesting. I guess, looking forward, I think for people in the audience who are new to the story, you recently talked about several strategic priorities. In that, one of them, you talked about user intent, understanding user intent, and you hope to invest in learning around that and create new products and experiences. Maybe just peel that back a little bit. What is it that you hope to achieve when you can understand user intent, and what types of revenue streams, if there are new ones, that can get unlocked?
Sure. So we've been doing work around not only our customer journey, but really the different segments inside what I would call our large cohort of LGBTQ. And so inside there, we found that there's seven segments, and each segment is looking for something different. And what I said was earlier was, we're early in our monetization journey, and I gave the example of à la cartes two versus 10 in the industry. The other example I could provide is that we only have these two subscription tiers that essentially do the exact same thing, just offer more profiles, but they're really for the hookup case. With intent, which is what George talked about in the shareholder letter, you can identify if you're looking for a long-term relationship or just a hookup. Truth is, what we've also found is that isn't binary. There's folks that are looking for both.
There's folks that are looking for one on one day and one on the other day, and so you can actually filter in on what you're feeling that time you use it. And so how that translates into making more money is there can be a dating use case. And so there's lots of folks out here, if they follow Match, they know that they put out this, an app called Archer, and so Match isn't wrong. What we've also seen in real studies is that the average age of a man getting married who's heterosexual is 28, and 38 for homosexuals, and that's actually coming down. So that's actually kind of, there's probably, I bet you the 28's getting higher and the 38's getting lower. But in any case, that means that there is a use case for dating, and we're gonna build that use case.
We're gonna charge more for that use case, so we'll have another subscription tier. That seems natural. You know, we talked a little bit about Teleport and other things inside of our shareholder letter, so that's how we think about it.
Okay.
Intent- use cases, more money.
Okay, sounds good. Another thing you mentioned was controlling your brand narrative. Maybe talk about that. Is that your marketing spend is very low? Does that mean that you need to spend more money to control what the perception of your company is-
Yeah
in the public markets?
For sure. Right now we spend, I think, last year was 1% of our total revenue, which is arguably too low, quite frankly. I think we hadn't prioritized taking control of our brand narrative. What we've noticed is that brands that advertise on our platform, we do a lot of our advertising revenue through third-party ads, and then we do a second component, which is brand advertising. That's really focused on men's health. And what we wanna do is increase that to not only men's health, but like, I don't know, car brands, hotel brands, all kinds of things. And the way to do that is to start owning our narrative, owning our brand. And so you're gonna see an investment, but honestly, still very low single digits on our marketing spend just to start that process.
What we found is we've done a few podcasts. It's just gone viral for us. We've only done five, and we were late on one by a day, and we got so many complaints about it not coming out on time. And so what we find is once we put out something that is important to the community, they latch right onto it.
Okay. I guess, in terms of the financial model, and KPIs in particular, where do you see, like, the greatest upside? Is there one or the other in terms of... You talked about revenue per user growth that you saw with the weeklies, then you saw more users coming in as well. So maybe just talk through over the next year or so, where, where do you see greater growth, or is there a specific, catalyst or milestone that you are working towards?
So, so that's a great question because, you know, there's, there's a couple of levers, right, on how this model works. Essentially, it's monthly active users coming in the top of the funnel, it's conversion rate, and that gives you revenue. The other way that you can think about it is more like, let's call it bottoms up. And so if you think about it from a bottoms-up perspective, I'd say that, again, it sort of goes back to our use cases, how we think about them, and how we wanna monetize it. And we don't think about ARPU as an input; we think about it as an output. And so we could put in, we put in a cheaper tier this time, right? I just told you $12.99.
You would've expected ARPU to come down because we had so much success with more and more paying users. You should have seen ARPU come down. Turns out they renewed it, so $12.99 times two is more than $19.99, so ARPU went up. If we put in a lower-priced tier, I would imagine that ARPU could come down. If we talk about dating, which is the other thing that we're working on, I would expect that to be a higher-priced tier. To me, think about ARPU as an output. Think about the inputs as being from a top-down level, MAU conversion rate from a bottom-up level. What kinds of services do people want? And so we haven't spent that much time yet talking about Teleport, which is in our shareholder letter. Teleport is an à la carte. We haven't defined the price yet.
We can play with that for a little bit longer. But essentially, it's like pre-gaming. If you're going to Vegas or if you're going to Palm Springs for the weekend, you can actually put your profile there early and set up your hookups for the weekend if you want. Same thing with other things. So to me, bottoms up, think about it as use cases. ARPU is an output.
Okay, okay. Fair enough. I guess would love to understand the team as well. You are a one-year-old public company. I know you went through a big churn last year. Maybe just talk about that.
Sure.
In terms of the exec team, are there any big holes that you want to fill out?
So in terms of our employee base, I think that's what you're referring to with our churn. So we came into the job, I think, at 222 people, George and I, and, I think naturally, when any new management team comes in, they assess all their leaders, bring in new... I brought in, you know, new folks to report to me, so did George. Those leaders had the ability to decide if they had the right team and structure the team. That definitely caused some departures. Then we decided that we weren't getting the level of productivity that we necessarily wanted. I didn't feel personally that the folks were as experienced in direct-to-consumer subscription models. They were much more experienced on other things. I think we needed a mix of both things.
We decided to have five centers of excellence for technology, so product tech, finance, marketing, and like, kind of like the catch-all for what I would call trust and safety and legal. And so we now have five centers. I think that allows people to have more productivity, learn from each other, and, like, just make this thing sing a little harder, and that was really the reason for this incredible churn. We offered six months' severance to anyone who didn't want to move to one of the five centers. Turned out that we actually had a good percentage of people that took the severance. Truth is, they were living in 80 different cities, millions of different—like, every time zone was different, everything was different. So this really brought everyone together.
So I consider that a pretty big win in the sense of having centers of excellence, getting back to productivity, and getting back to real experience in a direct-to-consumer model. And then number two, sort of on George's leadership team, I think there are two searches maybe going on, maybe one. I'm not sure. We are looking to really also uptake our advertising business line. I think I challenge the team and say, "You got to keep up with our subscription growth." I'm a subscription person.
I know a little less about advertising, and so I like challenge the team that they're gonna have to keep up with us, and the truth is, it's pretty hard to keep up with 33% revenue growth on the advertising side. We're giving them a little money on brand reputation, but we're gonna have to upgrade the team and make it a little bit more fulsome as well.
Awesome, awesome. We have less than two minutes here. If anybody has any questions, I have my favorite AI questions here as well, at the back.
Yes, specifically on the decision-making issues that we had in the third quarter, and it took us down 5.5 times, under 4 times a day.
So we-
Maybe talk about, like, just for people on webcast, question was about-
Oh
... debt that you issued-
Yeah
- as well as, what are you going to plan to do with that?
So the debt was all part of the going public, so that was Kunlun. We refinanced the debt in November of 2023. We brought the interest rate down by 500 basis points, took down our interest rate by about... well, took down our total interest payment by something like, you know, $17 million-$20 million. So now we generate a lot of free cash flow. We can pay down the debt. We're already at. I think we. I sat in the seat, we were at 4x leverage ratio. I think we're at 3x now. We can certainly get to 2x by the end of the year. We'll decide in our, for our investor day, our capital allocation strategy. We'll provide more guidance on that.
When is your investor day?
Wednesday, June 26th, in New York City.
Okay, awesome. Quick, quick question on AI. I know I've talked to George a lot about it. It becomes a 30-minute answer that he gives me, but would love to get your take on where are you investing with AI, and what kind of priorities and products that are top of a CFO's mind with AI?
So there's no doubt George loves AI. That's awesome. That means I have to, you know, I, I can sort of follow him as opposed to take the lead, so I love that. He loves AI. He's gonna use it for dating. I think it's a super powerful tool because we have all these anonymized chats, and we can take that data and try to understand the better, I would say, a better matching algorithm, just like how things work. We can also think about, like, a wingman, meaning, like, what lines work with what types of dudes better. So, like, he's so excited about it. It's wonderful. I think we, we have a, a team that's being built up with some nice experts, so I, I, I'm pretty, I'm pretty bullish on AI. I just don't think I'm bullish on it in 2024.
Okay, that's a lovely answer. And again, remind people on your Investor Day, when is it again?
I think Wednesday, June 26th.
Okay, thank you so much. Thank you, Vanna.
Thank you.
We are over time. Thank you, everyone, for joining.