Grindr Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. In addition to the unaudited condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Special Note Regarding Forward-Looking Statements.”

Overview

Grindr Inc.’s (“Grindr”, “we”, “us”, “our” or the “Company”) mission is to build the Global Gayborhood in Your Pocket™, and, through our success, to make a world where the lives of our global LGBTQ community are free, equal, and just. We manage and operate the Grindr platform, a global social networking platform primarily serving and addressing the needs of gay, bisexual, and sexually explorative adults around the world. We had 14.9 million Average MAUs and 1.2 million Average Paying Users for the three months ended June 30, 2025, as compared to 14.1 million Average MAUs and 1.1 million Average Paying Users for the three months ended June 30, 2024. We had 14.7 million Average MAUs and 1.2 million Average Paying Users for the six months ended June 30, 2025, as compared to 13.9 million Average MAUs and 1.0 million Average Paying Users for the six months ended June 30, 2024. Through gayborhood expansion initiatives, we are developing new products for users to engage with the Grindr platform, which include new partnership-based digital versions of services typically found in physical gayborhoods. Our social impact division, Grindr for Equality, advances human rights, health, and safety for millions of lesbian, gay, bisexual, transgender, and queer (“LGBTQ”) people in partnership with organizations in every region of the world.

The Grindr mobile application is free to download and provides certain services and features to Grindr’s users at no cost. We also offer a variety of additional controls and features for users who enroll in our paid subscriptions and add-on products. A substantial portion of our revenue is from direct revenue, representing 83.4% and 84.9% of total revenue for the three months ended June 30, 2025 and 2024, respectively, and 84.3% and 85.2% of total revenue for the six months ended June 30, 2025 and 2024, respectively. Direct revenue is derived from users in the form of subscription fees, providing our users access to a variety of features for the period of their subscription. Our current subscription offerings are Grindr XTRA and Grindr Unlimited. We utilize a freemium model to drive increased user acquisition, subscriber conversions, and monetization on the Grindr platform. We also offer premium add-ons on a pay-per-use, or a-la-carte, basis. Leveraging strong brand awareness and our significant user network stemming from our first mover advantage in the gay, bisexual, transgender, and queer (“GBTQ”) social networking industry, our historical growth in number of users has been driven primarily by word-of-mouth referrals and other organic means.

In addition to our revenue generated from subscription fees and premium add-ons, we also generate indirect revenue, representing 16.6% and 15.1% of total revenue for the three months ended June 30, 2025 and 2024, respectively, and 15.7% and 14.8% of total revenue for the six months ended June 30, 2025 and 2024, respectively. Indirect revenue includes both first-party and third-party advertising. We provide advertisers with the opportunity to directly reach the GBTQ community, a group with significant global purchasing power and economic potential. We have attracted advertisers from a diverse array of industries, including healthcare, entertainment, gaming, travel, and consumer goods. We offer our partners a diverse range of advertising opportunities to advertisers, including in-app banners, full-screen interstitials, and other customized units, typically sold on a cost per mille (“CPM”) basis. Additionally, we contract with a variety of third-party advertising platforms to market and sell digital advertising inventory available on the Grindr platform. We will continue to evaluate opportunities to increase advertising inventory by both enhancing and differentiating our advertising offerings in addition to scaling our advertising volume.

We generated $104.2 million and $82.3 million of revenue for the three months ended June 30, 2025 and 2024, respectively, and we generated $198.2 million and $157.7 million of revenue for the six months ended June 30, 2025 and 2024, respectively, representing a period-over-period growth of 26.6% and 25.7% as compared to the three-month and six-month periods in 2024, respectively.

We had 1.2 million and 1.1 million Average Paying Users, for the three months ended June 30, 2025 and 2024, respectively, and we had 1.2 million and 1.0 million Average Paying Users, for the six months ended June 30, 2025 and 2024, respectively, representing a period-over-period growth of 16.0% and 15.9% as compared to the three-month and six-month periods in 2024, respectively.

While we have users in over 190 countries and territories, our core markets are currently North America and Europe, from which we derived 84.0% and 84.6% of our total revenues for the six months ended June 30, 2025 and 2024, respectively. We intend to grow our user base and revenues by continuing to introduce new and innovative products and services to all of our users across the globe.

Recent Developments

Redemption of Warrants and Related Warrant Exercises

On January 23, 2025, we provided notice to the registered holders of our outstanding warrants that we would redeem the warrants at a redemption price of $0.10 per warrant at 5:00 p.m. New York City time on February 24, 2025 (the “Redemption Date”). In connection with the redemption, warrant holders were entitled to exercise their warrants until 5:00 p.m. New York City time on the Redemption Date, either (i) for cash, at an exercise price of $11.50 per share of common stock; or (ii) on a “cashless basis” in which case, the holder would receive 0.361 shares of common stock per warrant, which number was determined in accordance with the terms of the warrant agreement governing the terms of the warrants and based on the Redemption Date and the volume-weighted average price of the common stock for the ten trading days immediately following the date on which the notice of redemption was sent to registered holders of outstanding warrants.

After our announcement that we would redeem all of our outstanding warrants, and prior to the conclusion of the redemption notice period at 5:00 p.m. New York City time on the Redemption Date, an aggregate of: (i) 9,469,634 warrants were exercised on a cashless basis in exchange for the issuance of 3,418,518 shares of common stock; and (ii) 27,315,105 warrants were exercised for cash for an aggregate of 27,315,105 shares of common stock at an exercise price of $11.50 per share, for aggregate cash proceeds to us of $314.1 million. At the conclusion of the redemption notice period on the Redemption Date, the remaining 575,086 warrants issued and outstanding were redeemed at a price of $0.10 per warrant for aggregate cash payment from the Company of $58. The public warrants were delisted from the New York Stock Exchange pursuant to a Form 25 filed on February 24, 2025.

Certain Labor Matters

In July 2023, the Communications Workers of America AFL-CIO (“CWA”) filed an election petition with the National Labor Relations Board (“NLRB”) seeking to hold a representation election for certain classifications of our employees. CWA subsequently filed several unfair labor practice charges against us with the NLRB, including a request for injunctive relief under Sec. 10(j) of the National Labor Relations Act. Regarding the election petition, the NLRB conducted a secret mail-ballot election and held partial vote counts in November and December 2023. As of the date of filing of this Quarterly Report, the NLRB has not completed tallying all the votes from the election as there are numerous outstanding challenged ballots. In addition, on November 1, 2024, the local regional office of NLRB issued a complaint on the unfair labor practice charges, and a hearing commenced in May 2025 and is currently ongoing. This complaint is the first step in the administrative process and is not a finding of any wrongdoing, nor is it a decision or ruling of the NLRB.

Consolidated Results for Three Months Ended June 30, 2025 and 2024

For the three months ended June 30, 2025 and 2024, we generated:

• Revenue of $104.2 million and $82.3 million, respectively. The increase for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was $21.9 million, or 26.6%.
• Net income of $16.6 million and net loss $22.4 million, respectively. The change for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was $39.0 million, or 174.1%. This resulted in a net income margin of 16.0% and net loss margin 27.2%, respectively.
• Adjusted EBITDA of $45.2 million and $36.9 million, respectively. The increase for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was $8.3 million, or 22.5%. This resulted in an Adjusted EBITDA margin of 43.4% and 44.9%, respectively. See “—Non-GAAP Financial Measures—Adjusted EBITDA” below for more details on the calculations and reconciliations.

Consolidated Results for Six Months Ended June 30, 2025 and 2024

For the six months ended June 30, 2025 and 2024, we generated:

• Revenue of $198.2 million and $157.7 million, respectively. The increase for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was $40.5 million, or 25.7%.
• Net income of $43.7 million and net loss of $31.8 million, respectively. The change for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was $75.5 million, or 237.4%. This resulted in a net income margin of 22.0% and net loss margin 20.2%, respectively.
• Adjusted EBITDA of $85.9 million and $68.6 million, respectively. The increase for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was $17.3 million, or 25.2%. This resulted in an Adjusted EBITDA margin of 43.3% and 43.5%, respectively. See “—Non-GAAP Financial Measures—Adjusted EBITDA” below for more details on the calculations and reconciliations.

Operating and Financial Metrics

(in thousands, except ARPPU and ARPU)

($ in thousands)

(1) See “—Non-GAAP Financial Measures” below for additional information and reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures.

• Average Paying Users. A Paying User is a user that has purchased or renewed a Grindr subscription and/or purchased a premium add-on on the Grindr platform. We calculate Average Paying Users by adding up the number of Paying Users in each day and then dividing that number by the number of days in the relevant measurement period. A Paying User who is both a subscriber and an add-on purchaser on the same day will be counted as one Paying User. Duplicate Paying Users may exist if the same individual holds more than one Grindr subscription during the same period. We are focused on building new products and improving on existing ones to drive payer conversion. We believe Average Paying Users is a useful metric for assessing the health of our business.
• Average MAUs. A Monthly Active User (“MAU”) is a unique device that demonstrates activity on the Grindr platform during any given calendar month. Activity on the platform is defined as opening the app, sending or receiving a chat, or viewing another person's profile. We exclude devices with linked profiles banned for spam. We calculate Average MAUs as a monthly average, by counting the total number of MAUs in each calendar month and then dividing by the number of months in the relevant period. We use Average MAUs to measure the number of active users on our platform on a monthly basis. We believe Average MAUs is a useful metric for assessing the health of our business and our growth in users.
• Average Paying User Penetration. We calculate Average Paying User Penetration by dividing Average Paying Users by our Average MAUs for any measurement period. We believe Average Paying User Penetration is a useful metric for assessing the overall health of our business.
• ARPPU. We calculate Average Direct Revenue Per Paid User (“ARPPU”) based on Direct Revenue in any measurement period, divided by Average Paying Users in such a period and then divided by the number of months in the period. We believe ARPPU is a useful metric for assessing the growth of our business and future revenue trends.
• ARPU. We calculate Average Total Revenue Per User (“ARPU”) based on total revenue in any measurement period, divided by our Average MAUs in such a period divided by the number of months in the period. We believe ARPU is a useful metric for assessing the growth of our business and future revenue trends.

Key Factors Affecting Our Performance

Our results of operations and financial condition have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.

Growth in User Base and Paying Users

We acquire new users through investments in generating brand awareness, as well as through word of mouth from existing users and others. We convert these users to Paying Users by offering premium features that maximize the probability of developing meaningful connections, improve the user experience, and provide more control over the experience. For the three months ended June 30, 2025 and 2024, our Average Paying Users were 1.2 million and 1.1 million, respectively, representing an increase of 16.0% period-over-period. We grow Paying Users by acquiring new users and converting new and existing users to purchasers of one of our subscription plans or our add-on offerings. As we scale and our community grows larger, we seek to facilitate more meaningful interactions as a result of the wider selection of potential connections. This in turn increases our product value and can increase conversion to one of our paid products. Our revenue growth depends on growth in Paying Users. While we believe we are in the early days of our opportunity, at some point we may face challenges increasing our Paying Users, including competition from alternative products and services and lower adoption of certain product features.

Growth in ARPPU

We continually work to develop new monetization features and improve existing features in order to increase adoption of premium add-ons and our subscription programs. Many variables will impact our ARPPU, including paid product mix, the geographic location of Paying Users, and the revenue generated from subscription versus premium add-on revenue. Our pricing is in local currency and may vary between markets. As foreign currency exchange rates fluctuate, transactions carried out in foreign currencies other than the U.S. dollar could negatively impact revenue and distort year-over-year comparability of operating results. To the extent our ARPPU growth slows, our revenue growth will become increasingly dependent on our ability to increase our Average Paying Users.

Investing in Growth While Driving Long-Term Profitability

Key investment areas for us include continuing to expand and enhance our team as well as enhancing our platform and increasing the value we provide our users. Part of our efforts are focused on introducing new products, improving pricing and packaging, and localizing our products in international markets. We are also harnessing artificial intelligence and machine learning, which we refer to as AI/ML, along with prioritizing security and privacy, and improving matching capabilities for successful connections. As part of these ongoing efforts, we are building a full-stack foundation that we refer to as Grindr AI (“gAI”), consisting of a model layer, customer architecture layer, and a application layer, in order to deliver a differentiated, high impact user experience.

Attracting and Retaining Talent

Our business relies on our ability to attract and retain talent, including, but not limited to, engineers, data scientists, product designers and product managers. As of June 30, 2025, we had 146 employees globally, 143 of which were full-time employees. In 2025, we continue to expand and enhance our team with new employees and contractors. In doing so, we significantly grew the size of our engineering team, including the expansion of a dedicated contractor team in Colombia. We will continue to selectively supplement immediate capacity and product development needs with contractors, particularly in supporting our engineering function. By building a performance-driven culture, we want to unleash Grindr’s and each of our employees’ full potential. We intend to continue to focus on adding talent at a measured pace, especially in applied science, data engineering, and artificial intelligence and machine learning. We believe that many people want to work at a company committed to creating a world that is fair, equal, and just for the global LGBTQ community and that aligns with their personal values, and therefore our ability to recruit and retain talent is aided by our mission and brand reputation. We compete for talent within the technology industry.

Factors Affecting the Comparability of Our Results

Temporary variability and general advertising demand

Our ability to maintain consistently high advertiser demand for our platform can be affected by temporary trends in advertisers’ appetites to engage with our users or our brand. For example, events that result in temporary positive or negative publicity for our company (even if unfounded) may play a significant role in our advertisers’ desire to continue to advertise on our platform. Further, general economic conditions may lead to changes in advertising spending in general, which could have a significant impact on our results of operations. Such fluctuations in advertising demand are often unpredictable and likely temporary, but nevertheless could have a significant impact on the financial condition of our business.

Return-to-Office

In 2023, our leadership team announced a transition to a hybrid work model involving a multi-phase return-to-office plan (“RTO Plan”) beginning in the fall of 2023, which was largely completed by January 2024 and was fully concluded by April 30, 2025. Our hybrid work model requires employees to work two days per week in offices where their respective teams are based. The RTO Plan provided employees with a one-time relocation package to support relocation if necessary, or separation packages for employees who chose not to relocate or participate in our RTO Plan.

International market pricing and changes in foreign exchange rates

The Grindr platform has MAUs in over 190 countries and territories. Our international revenue represents 42.0% and 41.9% of total revenue for the three months ended June 30, 2025 and 2024, respectively. We vary our pricing to align with relative value to local purchasing power and competitors. Our international business typically earns revenue in local currencies. In addition, some of the platforms we work with utilize internally generated foreign exchange rates that may differ from other foreign exchange rates, which could impact our results of operations.

Key Components of Our Results of Operations

Revenue

We currently generate revenue from two revenue streams — direct revenue and indirect revenue. Direct revenue is revenue generated by our users who pay for subscriptions or premium add-ons to access premium features. Indirect revenue is generated by third parties who pay us to advertise to our users. As we continue to expand our revenue streams, we anticipate increasing monetization from premium add-ons and subscription offerings, contributing to an increase in direct revenue over time, and increasing our advertising inventory, contributing to an increase in indirect revenue over time.

Direct Revenue. Direct revenue is reported gross of distribution fees for subscriptions and premium add-ons as we are the primary party obligated in our transactions with customers, and we act as the principal. Our subscription revenue is generated through the sale of subscriptions that are currently offered or renewed in one-week, one-month, three-month, six-month and twelve-month periods. Customers pay in advance, primarily through mobile app stores, including Apple and Google Play, and, subject to certain conditions identified in the Company’s terms and conditions, generally all purchases are final and nonrefundable. Subscription revenues are recognized ratably over the term of the subscription. Premium add-on revenue is generated through the sale of an add-on feature on a pay-per-use, or a-la-carte, basis. Premium features are activated upon purchase and are available to use by the customer for a short duration, generally, within one day. Revenue from premium add-ons is recognized upon usage of the premium add-on. Direct revenue is recorded net of taxes, credits, and chargebacks.

Indirect Revenue. Indirect revenue primarily consists of revenue generated by third parties who pay us to advertise to our users. We provide advertisers with the opportunity to target and directly reach the GBTQ community, a group with significant global purchasing power and economic potential. We have attracted advertisers from a diverse array of industries, including healthcare, gaming, travel, entertainment, and consumer goods. We offer a diverse range of advertising opportunities to advertisers, such as in-app banners, full-screen interstitials, and other customized units, typically on a CPM basis. Revenue from advertising transactions with advertising service providers is recognized net of the amounts retained by the advertising service provider as we do not know and expect not to know the gross amount paid by advertisers.

Cost of revenue and operating expenses

Cost of revenue. Cost of revenue consists primarily of the distribution fees we pay to Apple and Google Play, infrastructure costs associated with supporting the Grindr platform, which stem largely from our use of Amazon Web Services, and costs associated with content moderation, which involve ensuring that users are complying with our community standards.

Selling, general and administrative expenses. Selling, general and administrative expenses consists primarily of compensation and other employee-related costs, professional fees, sales and marketing expenditures, and general and administrative expenses, including facilities, insurance, and information technology support. We plan to continue efforts to attract new users, retain existing users and increase monetization of both our new and existing users, which may result in increased sales and marketing expenses in future periods.

Product development expense. Product development expense consists primarily of employee-related and contractor costs for personnel engaged in the design, development, testing, and enhancement of product offerings, related technology, and related software costs.

Depreciation and Amortization. Depreciation is primarily related to computers, equipment, and leasehold improvements. Amortization is primarily related to capitalized software development costs and acquired definite-lived intangible assets (customer relationships, technology, etc.).

Other income (expense)

Interest expense, net. Interest expense, net consists of interest expense incurred in connection with our long-term debt and revolving credit facility net of interest earned on cash and cash equivalents including money market funds and U.S. treasury bills.

Other income (expense), net. Other income (expense), net consists of realized and unrealized exchange rate gains or losses.

Gain (loss) in fair value of warrant liability. Gain (loss) in fair value of warrant liability represents the change in fair value of our public and private warrants. As the private warrants are substantially similar to the public warrants, all of the warrants are remeasured from the publicly traded quotes from the active market. In February 2025, we completed the redemption of all outstanding public and private warrants.

Income tax provision

Income tax provision represents the income tax expense associated with our operations based on the tax laws of the jurisdictions in which we operate. Our effective tax rates will vary depending on changes in the valuation of our deferred tax assets and liabilities, fluctuations in permanent differences, and changes in tax laws.

Results of Operations

Three and Six Months Ended June 30, 2025 Compared to Three and Six Months Ended June 30, 2024

($ in thousands)

Revenue

Revenue for the three months ended June 30, 2025 and 2024, was $104.2 million and $82.3 million, respectively. The increase in revenue period-over-period was $21.9 million, or 26.6%.

For three months ended June 30, 2025 and 2024, direct revenue was $86.9 million and $69.9 million, respectively. The increase in direct revenue of $17.0 million, or 24.3%, was driven by the period-over-period increases in both ARPPU of $1.57 and Average Paying Users of 169 thousand. Period-over-period growth for revenue was driven by enhanced paywall optimizations and merchandising strategies, which strengthened subscription adoption across our XTRA and Unlimited tiers, and fueled continued demand for our premium add-ons. Weekly Unlimited was introduced late in the first quarter of 2024 and there is a continued period-over-period growth of our weekly XTRA subscription. We continue to strengthen our subscription offerings as we enhanced our Recommendations features and made further merchandising and paywall optimizations. Our shorter duration weekly products gave our users lower priced options for both XTRA and Unlimited subscriptions. ARPPU increased by 7.1%, or $1.57, to $23.65 for the three months ended June 30, 2025, from $22.08 for the three months ended June 30, 2024. Our ARPPU increased as a result of improved product mix, with higher revenue generated by subscription products with higher average monthly-equivalent price, such as weekly Unlimited. We expect ARPPU to fluctuate in the near-term as we continue to test different subscription options across different price points and focus on generating more Paying Users. For the three months ended June 30, 2025, Average Paying Users increased by 169 thousand, from 1.1 million for the three months ended June 30, 2024, to 1.2 million for the three months ended June 30, 2025.

For three months ended June 30, 2025 and 2024, indirect revenue was $17.3 million and $12.4 million, respectively. The increase in indirect revenue of $4.9 million, or 39.5%, was primarily driven by onboarding new third-party advertising partners and increased momentum in our international geographies.

Revenue from North America increased by $13.0 million, or 26.0%, for the three months ended June 30, 2025, to $63.2 million as compared to $50.1 million for the three months ended June 30, 2024. During this same period, revenue from Europe increased by $4.6 million, or 23.6%, to $24.4 million in the three months ended June 30, 2025, as compared to $19.7 million in the three months ended June 30, 2024. Revenue from the remainder of the world increased by

$4.2 million, or 33.4%, to $16.7 million in the three months ended June 30, 2025, as compared to $12.5 million in the three months ended June 30, 2024.

Revenue for the six months ended June 30, 2025 and 2024, was $198.2 million and $157.7 million, respectively. The increase in revenue period-over-period was $40.5 million, or 25.7%.

For six months ended June 30, 2025 and 2024, direct revenue was $167.1 million and $134.3 million, respectively. The increase in direct revenue of $32.8 million, or 24.4%, was driven by the period-over-period increases in both ARPPU of $1.59 and Average Paying Users of 164 thousand. Period-over-period growth for revenue was driven by enhanced paywall optimizations and merchandising strategies, which strengthened subscription adoption across our XTRA and Unlimited tiers, and fueled continued demand for our premium add-ons. Weekly Unlimited was introduced late in the first quarter of 2024 and there is a continued period-over-period growth of our weekly XTRA subscription. We continue to strengthen our subscription offerings as we enhanced our Recommendations features and made further merchandising and paywall optimizations. ARPPU increased by 7.3%, or $1.59, to $23.26 for the six months ended June 30, 2025, from $21.67 for the six months ended June 30, 2024. Our ARPPU increased as a result of improved product mix, with higher revenue generated by subscription products with higher average monthly-equivalent price, such as weekly Unlimited. We expect ARPPU to fluctuate in the near-term as we continue to test different subscription options across different price points and focus on generating more Paying Users. For the six months ended June 30, 2025, Average Paying Users increased by 164 thousand, from 1.0 million for the six months ended June 30, 2024, to 1.2 million for the six months ended June 30, 2025.

For six months ended June 30, 2025 and 2024, indirect revenue was $31.1 million and $23.4 million, respectively. The increase in indirect revenue of $7.7 million, or 32.9%, was primarily driven by onboarding new third-party advertising partners and increased in momentum in our international geographies.

Revenue from North America increased by $25.3 million, or 26.5%, for the six months ended June 30, 2025, to $121.0 million as compared to $95.6 million for the six months ended June 30, 2024. During this same period, revenue from Europe increased by $7.7 million, or 20.3%, to $45.5 million in the six months ended June 30, 2025, as compared to $37.8 million in the six months ended June 30, 2024. Revenue from the remainder of the world increased by $7.4 million, or 30.7%, to $31.7 million in the six months ended June 30, 2025, as compared to $24.3 million in the six months ended June 30, 2024.

Cost of revenue

Cost of revenue for the three months ended June 30, 2025 and 2024, was $27.4 million and $21.0 million, respectively. The $6.4 million increase, or 30.5%, was primarily due to growth in distribution fees of $3.9 million (consistent with direct revenue growth), and increased infrastructure costs of $1.9 million.

Cost of revenue for the six months ended June 30, 2025 and 2024, was $52.0 million and $40.6 million, respectively. The $11.4 million increase, or 28.1%, was primarily due to growth in distribution fees of $7.5 million (consistent with direct revenue growth), and increased infrastructure costs of $2.9 million.

Selling, general and administrative expense

Selling, general and administrative expense for the three months ended June 30, 2025 and 2024, was $36.5 million and $24.8 million, respectively. The $11.7 million increase, or 47.2%, was primarily due to an increase in personnel related expenses of $6.2 million from the increased in stock-based compensation expense of $6.8 million. In addition, there was an increase of $2.6 million in professional, legal and contractors fees and an increase of $1.0 million in marketing expenses.

Selling, general and administrative expense for the six months ended June 30, 2025 and 2024, was $66.7 million and $51.4 million, respectively. The $15.3 million increase, or 29.8%, was primarily due to an increase in personnel related expenses of $10.7 million from the increased stock-based compensation expense of $9.1 million. In addition, there was an increase of $1.8 million in marketing expenses and an increase of $0.8 million in professional, legal and contractors fees.

Product development expense

Product development expense for the three months ended June 30, 2025 and 2024, was $12.9 million and $7.8 million, respectively. The $5.1 million increase, or 65.4%, was primarily due to an increase in contractor fees of $2.3 million to support the engineering function while we continue to scale our team and an increase in personnel related expenses of $2.7 million from the increased headcount, including an increase in stock-based compensation expense of $2.0 million.

Product development expense for the six months ended June 30, 2025 and 2024, was $23.2 million and $13.5 million, respectively. The $9.7 million increase, or 71.9%, was primarily due to an increase in contractor fees of $4.4 million to support the engineering function while we continue to scale our team and an increase in personnel related expenses of $5.5 million from the increased headcount, including an increase in stock-based compensation expense of $2.8 million.

Depreciation and amortization

Depreciation and amortization for the three months ended June 30, 2025 and 2024, was $3.1 million and $4.2 million, respectively. The $1.1 million decrease, or 26.2%, was primarily due to acquired intangibles amortization from an acquisition in June 2020. There was a $1.3 million decrease due to customer relationship intangibles that were amortized under an accelerated amortization schedule, with higher amounts expensed in 2024, customer relationship intangibles were fully amortized in June 2025.

Depreciation and amortization for the six months ended June 30, 2025 and 2024, was $6.5 million and $8.4 million, respectively. The $1.9 million decrease, or 22.6%, was primarily due to acquired intangibles amortization from an acquisition in June 2020. There was a $2.2 million decrease due to customer relationship intangibles that were amortized under an accelerated amortization schedule, with higher amounts expensed in 2024, customer relationship intangibles were fully amortized in June 2025.

Interest expense, net

Interest expense, net for the three months ended June 30, 2025 and 2024, was $3.6 million and $6.7 million, respectively. The $3.1 million decrease, or 46.3%, was primarily due to a decrease in interest expense of $1.4 million from lower debt balances and lower interest rates. Additionally, the decrease is due to an increase of interest income of $1.7 million primarily from an increased balance in our investment in U.S. treasury bills.

Interest expense, net for the six months ended June 30, 2025 and 2024, was $7.4 million and $13.9 million, respectively. The $6.5 million decrease, or 46.8%, was primarily due to a decrease in interest expense of $3.3 million from lower debt balances and lower interest rates. Additionally, the decrease is due to an increase of interest income of $3.1 million primarily from an increased balance in our investment in U.S. treasury bills.

Other income (expense), net

Other income (expense), net for the three months ended June 30, 2025 and 2024, was income of $0.5 million and expense of $0.2 million, respectively.

Other income (expense), net for the six months ended June 30, 2025 and 2024, was income of $0.7 million and expense of $0.3 million, respectively.

Gain (loss) in fair value of warrant liability

Gain (loss) in fair value of warrant liability represents the change in the fair value of our warrants between each reporting period or upon the exercise and redemption of our warrants. In February 2025, we completed the redemption of all outstanding warrants.

Income tax provision

Income tax provision for the three months ended June 30, 2025 and 2024, was $4.7 million and $5.0 million, respectively. The $0.3 million decrease, or 6.0%, was primarily due to the mark-to-market warrant liability adjustment, and Section 162(m) officer compensation.

Income tax provision for the six months ended June 30, 2025 and 2024, was $9.2 million and $7.6 million, respectively. The $1.6 million increase, or 21.1%, was primarily due to the mark-to-market warrant liability adjustment, Section 162(m) officer compensation, and the foreign derived intangible income deduction.

Our effective tax rates in fiscal 2025 and future periods may fluctuate, as a result of changes in actual results versus our estimates; or changes in tax laws, regulations, accounting principles, or interpretations thereof.

Net income (loss)

Net income (loss) for the three months ended June 30, 2025 and 2024, was a net income of $16.6 million and a net loss of $22.4 million, respectively. Net income (loss) changed by $39.0 million mainly due to a $21.9 million increase in revenue and $35.1 million change in the fair value change of warrant liability.

Net income (loss) for the six months ended June 30, 2025 and 2024, was a net income of $43.7 million and a net loss of $31.8 million, respectively. Net income (loss) changed by $75.5 million mainly due to a $40.5 million increase in revenue and $63.7 million change in the fair value change of warrant liability.

Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, and free cash flow conversion as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may differ from similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA adjusts for the impact of items that we do not consider indicative of the operational performance of our business. We define Adjusted EBITDA as net income (loss) excluding income tax provision; interest expense, net; depreciation and amortization; stock-based compensation expense; change in fair value of warrant liability; and severance expense, litigation-related costs, and other items, in each case, that are unrelated to our core ongoing business operations. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA for a period by revenue for the same period.

Our management uses these measures internally to evaluate the performance of our business and these measures are among of the primary metrics by which management and other employees are compensated. We exclude the above items as some are non-cash in nature and others may not be representative of normal operating results. While we believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for the related financial information prepared and presented in accordance with U.S. GAAP.

The following table presents the reconciliation of net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

($ in thousands)

(1) Litigation-related costs that are unrelated to our core ongoing business operations primarily represent external legal fees associated with outstanding litigation or regulatory matters outside of the ordinary course, such as fees incurred in connection with the potential Norwegian Data Protection Authority fine and CWA unionization.

(2) Severance expense relates to severance incurred for employees who elected not to relocate or participate in our RTO Plan and other severance arrangements.

(3) Change in fair value of warrant liability relates to the warrants that were remeasured upon exercise or redemption. In February 2025, we completed the redemption of all outstanding warrants.

Free Cash Flow and Free Cash Flow Conversion

Free cash flow is an indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after capitalized software development costs and purchases of property and equipment, that can be used to repay debt obligations and/or for strategic initiatives. We define free cash flow as net cash provided by operating activities less capitalized software development costs and purchases of property and equipment. Free cash flow conversion is calculated by dividing free cash flow for a period by Adjusted EBITDA for the same period. Free cash flow and free cash flow conversion do not represent our residual cash flow available for discretionary purposes and does not reflect our future contractual commitments.

The following table presents the reconciliation of net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2025 and 2024:

($ in thousands)

(1) Operating cash flow conversion represents net cash provided by operating activities as a percentage of net income (loss).

Liquidity and Capital Resources

Cash Flows for the Six Months Ended June 30, 2025 and 2024

The following table summarizes our total cash and cash equivalents, and cash flows:

($ in thousands)

Cash flows provided by operating activities

Net cash provided by operating activities are primarily dependent on our revenues affected by timing of receipts from subscription and advertising sales. It is also dependent on managing our operating expenses, such as salaries and employee-related costs, selling and marketing expenses, and other general and administrative expenses. We expect to maintain strong operating cash flows given our historical performance. We will continue to invest in the right resources to support longer term profitable growth. Our operating cash flows should continue to cover our operating and financing costs.

During the six months ended June 30, 2025, our operations provided $61.3 million of cash, which was primarily attributable to our net income of $43.7 million, adjusted for non-cash items, including $27.5 million in stock-based compensation and $6.5 million in depreciation and amortization, partially offset by $9.9 million gain in fair value of warrant liability, and the cash flow impact from a change in operating asset and liabilities of $8.4 million, primarily from

$4.0 million decrease in accrued expenses and other current liabilities due to timing of payments and $7.6 million increase in account receivables due to increase in direct revenue and indirect revenue during the year.

During the six months ended June 30, 2024, our operations provided $36.3 million of cash, which was primarily attributable to our net loss of $31.8 million, adjusted for non-cash items, which include $53.8 million in loss in fair value of warrant liability, stock-based compensation of $15.6 million, and $8.4 million in depreciation and amortization, partially offset by a decrease in net working capital of $9.3 million, primarily from $5.7 million increase in account receivables due to increase in direct revenue and indirect revenue during the year.

Cash flows used in investing activities

Net cash used in investing activities for the six months ended June 30, 2025, consisted primarily of additions to capitalized software of $1.2 million.

Net cash used in investing activities for the six months ended June 30, 2024, consisted primarily of additions to capitalized software of $2.5 million.

Cash flows provided by (used in) financing activities

Net cash provided by financing activities for the six months ended June 30, 2025, which was $1.9 million, was due to proceeds from the exercise of warrants of $314.1 million. We announced the redemption of all our outstanding warrants in January 2025, which resulted in a significant amount of our warrants being exercised prior to their redemption in February 2025. The proceeds from the exercise of warrants were offset by payments for the repurchases of common stock under our stock repurchase program of $290.7 million, principal payments of debt of $7.5 million, and payments to tax authorities for employee equity awards of $15.4 million.

Net cash used in financing activities for the six months ended June 30, 2024, was $45.5 million, which consisted primarily of consisted primarily of principal payments of debt of $43.3 million and payments to tax authorities for employee equity awards of $3.9 million.

Sources of Liquidity

Since our inception, we have financed our operations and capital expenditures primarily through cash flows generated by operations, borrowings under our credit facilities, and the sale of equity. To the extent existing cash, investments, and cash from operations are not sufficient to fund future activities, we may need to raise additional funds. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of additional indebtedness, such indebtedness may have rights that are senior to holders of our equity securities and could contain additional covenants that restrict operations, including our ability to raise additional capital. Any additional equity financing may be dilutive to existing stockholders. We may also enter into investment or acquisition transactions in the future, which could require us to seek additional equity financing, incur indebtedness, or use cash resources.

As noted above, in January 2025, we provided notice that we would redeem all of our outstanding warrants, which consisted of (i) 18,560,000 private placement warrants, (ii) 13,799,825 public warrants; (iii) 2,500,000 forward purchase warrants; and (iv) and 2,500,000 backstop warrants, on February 24, 2025. After we announced the redemption of the warrants and before the conclusion of the redemption notice period on February 24, 2025, an aggregate of 27,315,105 warrants were exercised for an aggregate of 27,315,105 shares of our common stock at an exercise price of $11.50 per share, for aggregate cash proceeds to us of $314.1 million. In addition, 9,469,634 warrants were exercised on a cashless basis in exchange for the issuance of 3,418,518 shares of our common stock.

As of June 30, 2025, we had cash and cash equivalents of $120.8 million. We believe that our cash and cash equivalents, cash flows generated by operations, and borrowings under our revolving credit facility will be sufficient to meet our working capital and capital expenditure needs for the next twelve months.

Senior Secured Credit Facility

See Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

In November 2023, we refinanced our existing credit facility with a $300.0 million term loan and $50.0 million revolving credit facility. We entered into a credit agreement with JPMorgan Chase Bank, N.A., as the administrative agent, and other lenders party thereto (the “2023 Credit Agreement”) that governs the term loan and revolving credit facility. We borrowed the full amount of the $300.0 million term loan and $44.4 million under the revolving credit facility upon closing of the new credit agreement and used the proceeds and cash on hand to repay in full all outstanding obligations under, and terminate, our prior credit agreement with Fortress Credit Corp. As of June 30, 2025, $274.5 million was outstanding under the term loan and $11.6 million was outstanding under the revolving credit facility. We have the option to request that lenders increase the amount available under the revolving credit facility by, or obtain incremental term loans of, up to $100.0 million, subject to the terms of the 2023 Credit Agreement and only if existing or new lenders choose to provide additional term or revolving commitments.

Our wholly owned subsidiary, Grindr Capital LLC, is the borrower under the 2023 Credit Agreement and all obligations of Grindr Capital LLC under the 2023 Credit Agreement are guaranteed by Grindr Inc. and, subject to certain limited exceptions, our wholly owned domestic subsidiaries and are secured by substantially all of the assets of Grindr Inc., Grindr Capital LLC, and the guarantor subsidiaries.

Borrowings under our the 2023 Credit Agreement (other than swingline loans) bear interest at a rate equal to either, at our option, (i) the highest of the Prime Rate (as defined in the 2023 Credit Agreement), the Federal Funds Rate (as defined in the 2023 Credit Agreement) plus 0.50%, or one-month Term SOFR (as defined in the 2023 Credit Agreement) plus 1.00% (the “Alternate Base Rate”); or (ii) Term SOFR, in each case, plus an applicable margin ranging from 2.75% to 3.25% with respect to Term SOFR borrowings and 1.75% to 2.25% with respect to Alternate Base Rate borrowings. The applicable margin will be based upon our total net consolidated leverage ratio. Swingline loans under the 2023 Credit Agreement bear interest at the Alternate Base Rate plus the applicable margin. We are also required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.375% to 0.50% per annum, depending on our total consolidated net leverage ratio.

The term loan will amortize on a quarterly basis at 1.25% of the aggregate principal amount outstanding as of the initial closing date of the 2023 Credit Agreement, until the final maturity date on November 28, 2028. The Senior Term Loan Facility may also be prepaid, in whole or in part, at any time and from time to time, without prepayment premiums. Any borrowings under the revolving credit facility may be repaid, in whole or in part, at any time and from time to time without any other premium or penalty, and any amounts repaid under the revolving credit facility may be reborrowed, in each case, until the maturity date on November 28, 2028.

Mandatory prepayments are required under the revolving credit facility when borrowings and letter of credit usage exceed the aggregate revolving commitments of all lenders. Mandatory prepayments are also required first, under the Senior Term Loan Facility, and then, under the Senior Revolving Facility in connection with (i) certain asset dispositions and casualty events, in each case, to the extent the proceeds of such dispositions or casualty events exceed certain individual and aggregate thresholds and are not reinvested, and (ii) unpermitted debt transactions. For the three and six months ended June 30, 2025, we were not required to make any mandatory repayments.

The 2023 Credit Agreement requires compliance with certain financial covenants including a maximum total net leverage ratio and minimum fixed charge coverage ratio. The 2023 Credit Agreement also contains customary restrictive covenants regarding indebtedness, liens, fundamental changes, investments, restricted payments, disposition of assets, transactions with affiliates, hedging transactions, certain prepayments of indebtedness, amendments to organizational documents, and sale and leaseback transactions. The 2023 Credit Agreement contains certain customary events of default. If an event of default has occurred and continues beyond any applicable cure period, all outstanding obligations under the 2023 Credit Agreement may be accelerated or the commitments may be terminated, amongst other remedies. Additionally, the lenders are not obligated to fund any new borrowing under the 2023 Credit Agreement while an event of default is continuing.

Uses of Cash

Our principal commitments have not materially changed from our Annual Report on Form 10-K for the year ended December 31, 2024, which consist of obligations under the 2023 Credit Agreement, operating leases for office space, and our payments for the use of cloud services. In addition, we are subject to pending legal proceedings from time to time, including a potential Norwegian Data Protection Authority fine. See Note 5, Note 6, and Note 14 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

In March 2025, our Board of Directors authorized a stock repurchase program to allow for the repurchase of up to $500 million of shares of our common stock for the period from March 7, 2025 to March 6, 2027. Our stock repurchase program does not obligate us to repurchase a minimum amount of shares. Under the program, shares of our common stock may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the six months ended June 30, 2025, we repurchased approximately 16.0 million shares for $294.1 million under the share repurchase program. See Note 8 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information. As of August 1, 2025, $174.7 million in aggregate value of shares of Grindr stock remains available under the share repurchase program.

Critical Accounting Policies and Estimates

We have based our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from our estimates.

There have been no material changes to our discussion of critical accounting estimates from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recently Issued and Adopted Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Interest Rate Risk

Interest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities due to movements in interest rates. Our exposure to market risk for changes in interest rates relates primarily to our 2023 Credit Agreement and to a lesser extent our cash, cash equivalents, and restricted cash.

As of June 30, 2025, we had debt outstanding under our 2023 Credit Agreement of $268.5 million, a hypothetical 100 basis point change in interest rates would result in approximately $1.5 million additional or lower pre-tax interest expense for the six months ended June 30, 2025.

As of June 30, 2025, our cash, cash equivalent, and restricted cash had a fair value of $121.4 million. Of that amount, a total $116.1 million was invested in money market funds and U.S. treasury bills. The primary purpose of these investments has been to preserve principal until the cash is required to, among other things, continue to invest in our business, pursue other strategic business activities, fund ongoing operations, repay our debt obligations and expand our business. Due to the nature of these instruments, we believe that we do not have any material exposure as a result of changes in interest rates. As of June 30, 2025, a hypothetical 100 basis point change in interest rates would not have a material effect on pre-tax interest income.

Foreign Currency Exchange Risk

We conduct business in certain foreign markets. As a result, we are exposed to foreign exchange risk related to certain currencies, primary the Euro and British Pound.

For the six months ended June 30, 2025 and 2024, international revenue accounted for 42.0% and 41.9% of our consolidated revenue, respectively. We have exposure to foreign currency exchange risk related to transactions carried out in a currency other than our functional currency, the U.S. dollar. As foreign currency exchange rates fluctuate, transactions carried out in foreign currencies other than the U.S. dollar could impact revenue and distort year-over-year comparability of operating results.

Historically, we have not hedged any foreign currency exposures. We have performed a sensitivity analysis as of June 30, 2025 and 2024. A hypothetical 10% change in Euro and British Pound, relative to the U.S. dollar, would have changed revenue by $2.4 million and $2.0 million for the six months ended June 30, 2025 and 2024, respectively, with all other variables held constant. This accounts for 2.3% and 2.4% of total revenue for the six months ended June 30, 2025 and 2024, respectively. Our continued international expansion increases our exposure to exchange rate fluctuations and as a result, such fluctuations could have a significant impact on our future results of operations.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are controls and other procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed with the objective of ensuring that such information required to be disclosed in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With the foregoing in mind, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2025, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes from the risk factors previously disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended.

We use artificial intelligence and machine learning in our products, services, and operations, which may result in operational and compliance challenges, legal liability, reputational concerns, cybersecurity risks, competitive risks, and regulatory concerns that could materially and adversely affect our business and results of operations.

We have adopted and are continuing to develop AI/ML technologies, processes, and algorithms—including generative AI—into our daily operations, including by deploying generative AI and machine learning into our products and services to identify and eliminate spam and bad actors, to provide new features, to improve user connections, and to streamline internal operations like customer support. This may result in adverse effects on our operations, legal liability exposure, reputation, and competitive dynamics. The use of AI/ML technologies and processes, including generative AI, at scale is relatively new, and may lead to challenges, concerns, and risks that are significant or that we may not be able to predict, especially if our use of these technologies in our products and services becomes more important to our operations over time.

AI/ML in our products and services may be difficult to deploy successfully due to operational issues inherent to the nature of such technologies. For example, AI algorithms use machine learning and predictive analytics that may be insufficient or of poor quality and reflect inherent biases and could lead to flawed, biased, and inaccurate results. Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/ML (including if a bad actor “poisons” the AI/ML with bad inputs or logic), the model could be biased and could lead to decisions that could bias certain individuals (or classes of individuals) and adversely impact their rights; employment; and ability to obtain certain pricing, products, services, or benefits. Deficient or inaccurate recommendations, forecasts, or analyses that generative AI applications assist in producing, including in certain of our offerings such as More Profiles, For You, and Discover, each of which leverages AI and ML to display profiles to users based on relevancy, could lead to customer rejection or skepticism of our products, impact our ability to attract and retain users, affect our reputation or brand, and negatively affect our financial results. Further, unauthorized use or misuse of generative AI by our staff or others may result in disclosure of confidential company and customer data, reputational harm, privacy law violations and legal liability. While we generally seek to obtain contractual commitments from the applicable providers that prohibit the use of our and our users' data to train or refine their large language models, we may not be able to implement technical measures to prevent such providers from doing so in contravention to their contractual obligations. Our use of AI/ML technologies and generative AI may also lead to novel and urgent cybersecurity risks, including the misuse or disclosure of personal data, which may adversely affect our operations and reputation.

We face significant competition in respect to AI-based products and services. If we are unable to provide enhancements and new features for our AI/ML products and services or to develop new products and services that achieve market acceptance and that keep pace with rapid technological developments and evolving industry standards, our business would be materially and adversely affected. The failure of our technology, products, or services to gain market acceptance due to more attractive offerings by our competitors or the introduction of new competitors to the market with new or innovative product offerings could significantly reduce our revenues; increase our operating costs; or otherwise materially and adversely affect our business, financial condition, results of operations and cash flows.

Moreover, the development and use of AI/ML, including generative AI, are subject to privacy and data security laws, as well as increasing regulatory, legal, and consumer scrutiny. Additionally, certain privacy laws extend rights to consumers (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our use of AI/ML. These obligations may make it harder for us to use AI/ML; lead to regulatory fines or penalties; result in additional compliance costs, regulatory investigations, and actions; require us to change our business practices, retrain our AI/ML, prevent or limit our use of AI/ML; or result in consumer or other lawsuits. For example, the Federal Trade Commission has required other companies to turn over (or disgorge) valuable insights or trainings generated through the use of AI/ML where they allege the company has violated privacy and consumer protection laws.

We are increasingly using AI/ML to enhance our products and services, including by training or tuning models using data collected through user interactions. These activities may expose us to regulatory, legal, and reputational risks, particularly with respect to the repurposing of personal data for AI/ML training. Identifying an appropriate legal basis and, where required, obtaining valid and informed consent for such processing presents significant compliance challenges across the multiple jurisdictions in which we operate. The complex interplay between data protection, consumer protection, and emerging AI regulatory frameworks introduces legal uncertainty and may require continuous reassessment of our practices. Furthermore, our data practices, particularly with respect to sensitive or special category data, in connection with user interactions and AI/ML have in the past attracted and may continue to attract scrutiny from consumer advocacy groups, regulatory authorities, and other stakeholders, and could result in reputational harm, enforcement actions, or litigation. In particular, there is a risk that such practices could give rise to regulatory actions, class action claims, or mass complaints alleging unfair, deceptive, or unlawful data processing.

Uncertainty in the legal and regulatory regime relating to AI/ML and emerging ethical issues surrounding the use of these technologies may require significant resources to modify and maintain business practices to comply with U.S. and non-U.S. laws, the nature of which cannot be determined at this time. Several jurisdictions around the globe, including Europe and certain U.S. states, have already proposed or enacted laws governing the use of AI/ML. For example, the European Union’s Artificial Intelligence Act (“AI Act”), which has an extraterritorial reach and bans AI applications that pose an unacceptable level of risk and establishes obligations for AI providers and organizations developing or deploying AI systems. The AI Act provides for fines of up to 35 million Euro or 7% of annual global revenue for violations of the prohibited AI restrictions, and fines of up to 15 million Euro or 3% of annual global revenue for violations of most other obligations. We expect other jurisdictions will adopt similar laws (e.g., Brazil). More restrictive legislation may render the use of AI/ML technologies challenging, and existing laws and regulations may apply to us or our vendors in new ways. We may experience challenges in adapting our operations and services to such legislation, if applicable.

We often rely not only on our own initiatives and innovations but also on third parties for the development of and access to new technologies related to, or that rely upon, AI/ML, and we therefore rely on development of a robust market for these new products and technologies. Failure to accurately predict or to respond effectively to developments in the AI/ML market may significantly impair our business. In addition, because our products and services are designed to operate with a variety of systems, infrastructures, and devices, we need to continuously modify and enhance our products and services to keep pace with changes in technologies related to, or that rely upon, generative AI created or provided by third parties. Any failure of our products and services to continue to operate effectively with third-party infrastructures and technologies could reduce the demand for our products and services, result in dissatisfaction of our customers, and materially and adversely affect our business.