Grindr Inc. M&A announcement

Please go ahead. Thank you, moderator.

Hello, and welcome to the Grindr investor call. Today's call will be led by Grindr's CEO, George Arison, and CFO, John North. They will make a few brief remarks, and then we will open it up for questions. Please note, Grindr released a shareholder letter this afternoon, and this is available on the SEC's website and Grindr's investor page at investors.grindr.com. Before we begin, I will remind everyone that during this call, we will discuss a proposed acquisition, including its expected timing, anticipated benefits, integration, and expected impact on our financial results. You should not rely on these or other forward-looking statements as predictions of future events. These forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially from the views expressed today.

Some of the risks that could cause our actual results to differ from views expressed in our forward-looking statements have been set forth in the shareholder letter and our periodic reports filed with the SEC. During today's call, we will also discuss both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures are included in the shareholder letter and press release we filed today, which has been posted on the investor relations page of Grindr's website and in Grindr's filings with the SEC. With that, I will turn it over to George.

Thank you, Joe, and hello, everyone. Today, we announced an agreement to acquire PurposeMed Inc., the parent company of Freddie, the leading Canadian telehealth provider of HIV prophylactic PrEP, a business that is rapidly expanding in the U.S. Our place at the center of gay life gives us an opportunity few companies have to build the global Gayborhood into a platform of businesses that serve gay men and strengthen one another. Today, we are taking our first giant leap towards that future. We believe this combination can ultimately create a healthcare business as large as, if not larger, than core Grindr today, and just as profitable. Three things matter here. First, this builds on the successful strategy we shared at Investor Day. Over the last four years, product improvements helped nearly double our paying user base. Premiumization is the next phase.

With clear success with lab pricing and EDGE, our AI native subscription tier, launching next. Freddie accelerates the third phase, expanding the Gayborhood into new businesses. Second, we are uniquely positioned to build this business. Approximately 400,000 U.S. Grindr users already indicate that they take PrEP of the total 650,000 to 700,000 currently active U.S. PrEP prescriptions. We estimate more than 2 million additional U.S. Grindr users should be on PrEP for their health and the health of men they meet. We can bring testing, care, and medication delivery into an app they already use for more than an hour a day. We can give existing PrEP patients more convenient access to medication and help others get started. Woodwork showed us that users trust Grindr with healthcare and that native experiences built into the app work best in driving user engagement.

Freddie brings the medical expertise, pharmacies, and operating infrastructure that would take years to build. Together, they become Grindr Health, with PrEP as its foundation. Third, healthcare makes the core business stronger. Patients will be able to pay a care with premium app benefits. As healthcare grows, we can reinvest in the app and the core experience. A better app improves engagement and retention, strengthens the network, and brings more users into healthcare. Every Grindr user benefits whether or not he uses Grindr Health. The Freddie team has built an extraordinary business with deep medical and operational know-how and very little outside capital. I want to congratulate them for their success today, and we at Grindr look forward to learning from them as we build together.

Alongside EDGE and future premium products, healthcare gives us multiple sources of strong, profitable growth while helping more gay men stay healthy and advancing the goal of ending the HIV epidemic in the U.S. Thank you to the Grindr team for making this milestone possible, for their exceptional execution, and to our shareholders for your continued support. Now to John, who will walk through the transaction and economics.

Thank you, George. We have agreed to acquire Freddie and its parent, PurposeMed, for $250 million up front, $190 million in cash and $60 million in stock. Up to $70 million in additional cash consideration is tied to performance targets. Both boards have approved the transaction, and we expect to close in the fourth quarter, subject to applicable closing conditions. Freddie serves 25,000 active patients and expects more than $80 million of revenue and more than $10 million in adjusted EBITDA for 2026. Its current margins reflect investment in the infrastructure for U.S. expansion. Let me take a minute to explain the economics. In the U.S., Freddie works with federally qualified community health clinics, which allows eligible providers to buy medications at discounted prices and use reimbursement proceeds to support care for patients in need. The drug pricing program does not rely on government funding.

It operates entirely among patients, health clinics, pharmacies, and drug companies. Freddie earns fees for ongoing telehealth and pharmacy services, supporting recurring revenue as patients stay in care and fill prescriptions. Eligible patients can receive care with little to no out-of-pocket cost. The combined telehealth and pharmacy model in the U.S. generates more than $400 in monthly revenue per active patient, over $4,800 for a full year of care. We have shared some perspective on the potential for the business in George's shareholder letter, but this can be a significant driver of our revenue at scale. We expect most growth to come from the U.S., where the model, when scaled, produces approximately twice the adjusted EBITDA margin of the Canadian business. In terms of near-term financial impact, the acquisition will be immaterial to our 2026 results.

We will provide our initial 2027 outlook for the combined company on our November earnings call with more detail on integration, rollout, and incremental investment. What we can share today is that we anticipate another year of robust growth in 2027, including accretive EBITDA contribution from Freddie inclusive of growth investment and fixed infrastructure cost. Our priorities are integrating care into Grindr, reaching more patients, and connecting the clinical and pharmacy operations with the app. While Freddie will be initially modestly dilutive to our EBITDA margin percentage, as patient volume grows, we expect operating leverage to improve healthcare margins toward levels comparable to core Grindr above 40%. Longer term, we see Freddie as offering an attractive return profile and a strong growth engine for the company. With that, we are ready to take your questions.

Thanks so much. Thanks for the question.