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Operator
good afternoon my name is chloe and i will be your conference operator today at this time i would like to welcome everyone to the grinder q1 2024 earnings conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Thank you. I would now like to turn the conference over to Tolu Adiafe, Grinder's Head of Investor Relations. Please go ahead.
Lauren
Thank you, Moderator. Hello and welcome to the Grinder earnings call for the first quarter of 2024. Today's call will be led by Grindr's CEO, George Arison, and CFO, Lana Krantz. They will make a few brief remarks, and then we'll open it up for questions. Please note, Grindr released its shareholder letter this afternoon, and this is available on the SEC's website and Grindr's investor page at investors.grinder.com. Before we begin, I will remind everyone that during this call, we may discuss our outlook and future performance. These forward-looking statements may be preceded by words such as, we expect, we believe, we anticipate, or similar such statements. These statements are subject to risks and uncertainties, and their actual results could differ materially from the views expressed today. Some of these risks have been set forth in our earnings release and our periodic reports filed with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, are included in the earnings release we issued today, which has been posted on the investor relations page of Grindr's website and in Grindr's filings with the SEC. With that, I'll turn it over to George.
George
Thanks, Tobu, and hello, everyone. We reported outstanding revenue growth and strong adjusted EBITDA in the first quarter. User metrics and engagement were all healthy. Our overall Q1 performance reinforces our confidence in our full year outlook. I'm grateful to our team for their hard work on some significant product launches and to our users for engaging with these launches and providing us important feedback quickly to allow us to make improvements. In addition to the terrific results, we have hit the ground running on our 2024 strategic priorities. These priorities are focused not only on driving continued growth this year, but also on positioning Grindr for the long-term success of the global neighborhood in your pocket. We are pursuing that vision by focusing on, one, a robust set of products and features that focus on serving users of varying intents, two, a lean and nimble team with an exceptional performance through in culture, and three, a brand narrative that is true to the important role we play in the community. Looking first at product development, we currently have two new features in test right now in Rome, both of which are built with user intent in mind. Right now is a multi-phase product we're building in response to strong user demand that makes it faster and easier for users to connect. Phase one features are currently in test, with more expected to be launched later this and next year. Right now, we'll ultimately have additional robust features facilitating better user engagement and capabilities for more seamless, easy communication between users, both one-on-one and in groups. Chrome, referred to as Teleport in the past, targets the travel intention. This feature enables users to transport their profile into a different location that they will be traveling to, making the profile discoverable by users in that location. We're currently planning to start rolling it out more broadly in the second half of the year. During Q1, we also rolled out our new chat system, built with an entirely new architecture, which encompasses step change improvements in its critical user feature. This was a complex technical undertaking, and we're nearing the finish line in addressing bugs that have popped up in the initial launch period. The new chat moves storage of chat server-side, eliminating lost chats as a result of device changes. Fixing this was a top request from users for years. We are very excited to offer this significant UX upgrade to all users. New chat architecture will be the foundation of the several new intentionality-focused speed features we plan to roll out in the coming quarters. Turning to our team, we continue to build out our talent base and we increased the number of engineers on board by more than 50% in Q1. As we think about long-term growth, we are centering on a vision of Grindr as a global gayborhood new pocket. Physical gayborhoods are hubs for the gay community, long established in large cities where people can interact safely and comfortably with businesses, resources, bars, restaurants, and shops specifically catered to us. Over our 15-year history, Grindr has come to represent this concept in a digital way. We see this today in how the app is used for things like travel recommendations, health information, and making professional connections. We know our users want other types of connections, information, and services that will enhance their lives. Our vision of Grindr as a global neighborhood is about tapping into these desires. It will be a multi-year journey to achieve this vision, but we're excited about the potential to make Grindr an even more integral part of the community and to build an even greater business in the process. I'm excited about sharing the long-term product roadmap that underlines the capability vision with you and our investor day in June. Thanks again for joining. I now turn it over to Vanna to discuss the quarterly results in greater detail.
Teleport
Thank you, George, and hello, everyone. Grindr is firing on all cylinders as we start off the year. Q1 revenue grew 35% year-over-year to $75.3 million, and adjusted EBIT margin came in at 42%. Q1 revenue was driven by strong sales across all products, including the extra weekly subscription, which launched in mid 2023. Direct revenue increased 34% year over year to $64.4 million, and indirect revenue was up 43% year over year to $11 million, as we benefit from reinstated banner advertising from Q2 of 2023. To share a few key user metrics. Average monthly active users increased 7% over the prior year to 13.7 million. Average paying users in the quarter increased 17% over the prior year to 1 million, which brings payer penetration to 7.4% for the quarter. And our average direct revenue per paying user increased 15% over the prior year to $21.25 this quarter. Moving to expenses and profitability. Operating expenses excluding the cost of revenue were $36.5 million in Q1 of 2024, up 13% year-over-year. This reflects higher people costs driven by stock-based compensation and contractors, which was offset by lower depreciation. Adjusted EBITDA for Q1 of 2024 was $31.6 million, equating to a 42% adjusted EBITDA margin, up from $22 million a year ago, or 39% of revenue. Turning to our balance sheet, we paid down $25.8 million of debt, bringing our debt position to $315 million as of March 31, 2024, and ended the quarter with $21.5 million in cash and cash equivalents. Lastly, I'll touch on how we're thinking about our 2024 outlook. We are pleased with the strong start to the year, which increases our confidence in the outlook for revenue growth of at least 23% and adjusted EBITDA margin of at least 40% for the year. We set and update our annual guidance based on our most current views of the business and what we know to be achievable. Q1 year over year revenue growth was largely driven by user adoption of the extra weekly subscription, which was introduced in mid 2023. We are currently testing new products and are encouraged by their potential and are still accumulating data that will inform the timing of global launch and revenue forecasting. With that, I'll ask the operator to open up the line for questions.
Operator
At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. And we'll take our first question from Nick Jones with Citizens JMP. Your line is open.
Nick Jones
Great. Thanks for taking the questions. Maybe first, you know, increasing the engineer headcount by 50% sequentially and, you know, with right now in Rome products rolling out. Can you speak to how you think about, I guess, return on investment when you add engineers? You guys are a very product-driven company with a lot of enhancements to come. How do you think about kind of ratcheting up those hires and how we should be thinking about, I guess, the timeline or return on investment to those hires?
George
Thanks for being here, Nick, and great to talk to you. So I'll start and then I'll hand over to Vena. First, you know, we had way more engineers than we have on board today. at our peak in January of 2023. We're close to 225 people in total, and the big portion, nearly half of that was product and engineering team. As everyone knows, a lot of folks chose not to stay on Grindr with the culture change and cultural limitations that we wanted to make, which included coming back to the office, and so they chose to depart. And so we are, you know, at 129 people in total as of end of Q3, and so far from where we were at our peak. So the engineers that we're adding are not even bringing us close to where we were in the past. When I came to Grindr, my takeaway, and this is not just mine, I think a lot of folks who are here in leadership roles had the same feeling, is that we had opportunity to significantly increase productivity. We were not shipping as many things as we could have been shipping. And we, I think, achieved that in a pretty significant way both last year and are continuing to see pretty significant productivity improvements this year. Obviously, some of that has to do with, you know, kind of having clarity on what you want to achieve because I think engineers do really well when there's clarity around product vision and specifications. And some of it has to do with better management, which we're implementing across the whole org, right? That's something that you have to do as the company matures. As far as how we tend to think about product development, We are a very product-driven company, no question. And the way I think best product is built is through user perspective. So if you go to our operating principles on our website, you'll see that the first principle is user number one. And there's a very clear reason why, right? We try to learn from users what they want and then try to build that for them. Does not mean you don't come into the product with a hypothesis. You definitely do. But you start with the user in mind. Um, and we are fortunate that I use actually have told us a lot in terms of what they want. Um, they've been saying this for, for years that they want certain things built and Hey, when are you guys going to do that? Um, and we've been, I think very, um, deliberate in ensuring that we, um, build those things for them. What we normally do is kind of get that initial user perspective in terms of what they want, mock things up and design prototypes and put those in front of the user, uh, and, and collect feedback on that as well. make changes based on user feedback, and only then start actually building the product, at which point we have reasonably high confidence that something will work well. We try to build the most minimum viable product you can to address the user need that's in question, put that out into the market as quickly as possible, because the best test for something is actually having users work with or play with a product that you have out there and start collecting feedback. That's something we did, for example, last year with Rome, right? We put the first version of Rome out in the fall in a couple of countries with a select set of users, collected feedback, took that feedback in from the real product being live in market, and then made changes to it, and then put it out there again last quarter. So that's the general approach that we take to product development. We definitely have more to do than we have resources to do with in a pretty significant way. And that's why we said that we would expect that over a two-year period, we would build that up to at least the levels of total number of hires that we had, or total number of team members that we had in the beginning of 2023.
Teleport
And just to address, hey Nick, how are you? So we are thinking about our investments with respect to the overall envelope that we've set in terms of our guidance of 40%. So everything that we are talking about, you should expect that is already factored into the guidance that we've shared with you. And that really is the investment that we need to put into our business to continue the growth in the short and medium term. And so, yes, it sounds like a big change with respect to 50% increase in engineering headcount. But as you know, we were at 104 total FTEs at Q4, and now we're at 129. So still a relatively lean company for the amount of product that we have out there and our goals.
Nick Jones
Great. And maybe still staying on the theme of product rollout, there's a limited weekly rolled out globally in Q1. You mentioned the extra that was rolled out in 3Q last year. You know, payer penetration, you know, the percent of MAUs ticked up nicely in 1Q. Can you speak to kind of The product rollout has obviously helped attract more payers, but to the extent that users are having a better experience, is that also showing up in just maybe MAUs who aren't quite ready to pay? I guess, could you kind of walk through, as you roll these out, what is kind of the impact on payers, and I guess even further up the funnel on just overall usage of the platform?
Teleport
Nick, maybe I could just start. So we actually did not roll out the unlimited weekly. It is only in test. And so it's not fully rolled out globally. It's still in test. And so what you can imagine is that it only went out in April. And so this was the Q1 results that you're looking at. And the test part was still in March. And so I would say that we're very pleased with our growth rate in average paying users, which was 17%. We're pleased with the ARPU changes, which is really an output of getting more and more paying users. And the MAU continues to grow. I think you can see that we're up by 7% in terms of year over year. So we are having a steady drumbeat of bringing more and more monthly active users globally into the platform and increasing our average paying users through our build-out of the product roadmap. It's global, both domestic and international. And it's really a drumbeat of continuously tweaking our products and getting more users out there.
George
And I think to kind of what are the products that we're building and where are they going? So first of all, we have Invest Today coming up in June. And so I'm really excited to have everyone there. And I think we'll do a fairly detailed look into what the product roadmap is and what are the things that we will be launching. And how that interrelates to the growth that we're planning from the revenue perspective. So please stay tuned to that. And I'm really looking forward to telling everybody what we're going to be doing. That said, you know, the way we have been thinking about product development overall is both in creating products that will drive monetization and also building things for the entire user base, even if those users are not paying customers, because obviously they are very valuable users as well. you want our paying customers engaging with people who are not paying customers. And so you want both. From that perspective, for example, this quarter, this past quarter, we released a huge update to our chat system. It's a completely new architecture in our chat system, a very significant launch, the most challenging technical launch the company's done in nearly a decade. And that's obviously for everybody. Now, we do envision that With that architectural change, we will be actually able to launch new features inside our inbox that will be specific for paying customers and will be an opportunity to convert more people to become paying customers. So when we think about product development, we kind of think about it from both attracting new users to the product or maybe users who used to use the product before and are using it less now because they were not getting what they wanted from their product. That's an example of, for example, what dating features might do for us. as well as on the perspective of then taking those users or existing users and converting them to be paying customers.
Nick Jones
Great. If I could sneak in one last question here and then I'll hop back in. Sure. You know, in a slide deck you guys put out earlier in the year, I think it was about 25% of MAUs are in the U.S. roughly, but your revenue in the U.S. is quite a bit higher than that. So could you speak to, I guess, your ability to monetize so well in the U.S. and maybe what it takes to kind of get similar monetization in some of the international markets or what the puts and takes are to monetization internationally versus in the U.S.? Or maybe I have this wrong and you could just help clarify.
Teleport
Thanks. Sounds good. Nick, yes, you're right. We have about a quarter, a third, you know, we're nicely global. in terms of our monthly active users with North America versus all the other regions. Absolutely true. From a revenue perspective, think of it of around 40% of our revenue is coming outside of North America. And so clearly that's giving you an indication that we are further along in terms of not only payer penetration, but obviously conversion as well in terms of North America versus the other regions. What you can also take from that is that we put out a product and we put it out globally. So we do a global launch, for instance, of the weeklies with some level of localization, but quite minimal. And I think that we are continually testing how our products are landing in certain international markets. And we will continue on our localization efforts to increase the conversion rates internationally. I would say that we're still early in that journey, but what's pretty comforting is that even with a global rollout, for instance, the extra weeklies, like you noted, they still perform very well globally.
George
And Nick, I just view all that as a massive opportunity, right? The fact that we are penetrating well in the U.S., but are still, I think, below our peers in the dating space. It's a great opportunity to continue increasing penetration in the US and the fact that, you know, rest of the world, Europe and Latin America, Asia are below North America in penetration. And he tells you that over time, you can drive that penetration to be higher as well. We've, um, you know, never really approached this business from regional perspective. And that's something we're just now starting to think about as, and then I mentioned from the localization perspective. Um, and I think that'll be really helpful. And there's also a factor of kind of cultural changes, right? US and Europe in particular, probably furthest along in acceptance of gay rights. And that makes it easier for people to be paying for a product like us. That change is happening very actively in Latin America. We were just in Argentina, sorry, in Brazil a few weeks ago. And, you know, the response to us being there and speaking was extremely positive. And so I think there's a ton of opportunity in Latin America from that perspective. And then in Asia, where probably the pace of change culturally is the slowest right now, you are still seeing some significant changes happen, right? Like Thailand is very actively working on passing marriage equality as a law. And so that's really positive as well. So I think we have a ton of opportunity to see peer penetration grow all over the world. Obviously, it's going to be a long journey, right? Because we have a lot of room to grow, but we plan to take advantage of that.
Nick Jones
Thanks, George. Thanks, Vanna.
Operator
And we'll move next to Andrew Maroc with Raymond James. Your line is open.
Andrew Maroc
Hi. Thanks again for taking my questions. Wanted to talk about the RightNow launch. Seems like a pretty interesting product and fairly differentiated in the marketplace. You talked about user feedback or user signals on intent that went into the development of of that product, can you maybe go a second level below and say, what was it among the user base that said, this is the product that we need to serve this unmet desire in our user base?
George
Absolutely. Happy to talk about that and good to talk to you, Andrew. So I think the way I would think about this is the following. When Grindr started out as a company in its earliest days, everyone who was on Grindr kind of thought of it as a right now product. That was kind of the reason you were there. Right. And, and, you know, obviously with both online and in some ways with going directly offline as well, which has been a huge differentiator of Grindr. I mean, I can tell you my own personal story, how I learned about Grindr where I was in a, in a bar with a bunch of my friends and, and one of them pulled out his iPhone. Um, and like, Hey, let me tell you about this cool app. I, I, um, I just discovered goes into Grindr and, you know, like 20 people in the bar were all on the app at the same time. So. And the right now mode was kind of there for everybody at that point. Now, over time, as the user base grew and obviously grew very, very quickly to much larger numbers, many other use cases came into the product. So we went from right now use case to people looking for dating, to people looking for friends, to people looking for social connections and even professional connections. looking for information and access to that information as related to travel or health, et cetera. And so not everybody is in the same mode of intentions in any given moment. And frankly, people can be in more than one mode of intentions at the same time, right? And so what we are hearing from users is it'd be great if we could have a way to know who is in the right now mode when we are talking to them. And we heard that loud and clear from users, and that's what we are building. Now, right now is not like what we launched so far is not the completed product. And by the way, when I say launched it, it's in test in one country, right? So that's kind of the phase what we are at right now. This is the first test of this. We are collecting user feedback and then take that feedback and then make changes to the feature and get it back out into users for testing purposes. So this is a multi-step process, but it's still phase one of what we want to do. What we've released is a toggle on your profile. that allows you to say you're in the right now mode. And then people are able to sort the grid based on who is in the right now mode. Over time, we see opportunity for a lot more features that are tied to that mode. It could be creating a many person chat facility or a room where people could be talking to each other who are all in that mode. It could be additional toggles on the profile. It might even be that the profile looks a little bit different if you're in the right now mode. So there's many different things that we are considering adding to this this broad product feature set and you know over time we think it'll be a pretty significant extension of the product i do want to say this second thing which is not related to right now per se but in terms of how we're thinking about the product right now it's kind of one mode and one end of the things that we're looking to add on the other end we're thinking about dating the same way right we want to extend the product to have a feature set for dating That's something also we've heard very actively from users. People are saying, we actually have a lot of success in finding long-term partners on Grindr. The numbers are very, very high and we're very excited about that. But it would be great if you had a feature set that allowed us to more easily connect with people who are in that mode, who actually want to be in a long-term relationship. And so given the fact that we have users who are already in a relationship on the app and are not looking for a relationship, for example, You know, that's a different segment of users versus the ones that might be actively looking for relationship. And so creating a segmentation for them to kind of be able to talk to people who are in the dating use case is another thing we very much want to do. So none of this is going to change the main grid. The main grid is going to stay as it is. That's like bread and butter of the business and we think is extremely valuable. But building out these extensions in two different directions, we think is a huge opportunity. And that's what we are working on today.
Andrew Maroc
Really appreciate the detail and looking forward to kind of future evolutions of that product. And then maybe a quick one for Vena, if I could. You mentioned the statement of banner ads driving that spike up in the pace of indirect revenue growth. I guess, should the 1Q results kind of be seen as the run rate going forward? And any other kind of detail as to the scale of moves that you recently made would be appreciated. Thank you.
Teleport
So, yes, Andrew, we are definitely off to a strong start this quarter across all of our business lines. And we did reintroduce that banner in the middle of 2023. So we are seeing the impact of it. What I'd suggest is that our advertising revenue is around 14% of our total revenue. And we can imagine that that composition of total revenue will stay around the same. So I think you should think about it in that manner.
Andrew Maroc
All right, I appreciate that, caller. Thanks.
Operator
We'll move next to John Blackledge with TD Cowan. Your line is open.
John Blackledge
Hi there. It's Logan on for John. Thanks for the question. I had two questions here. Firstly, revenue growth was strong once again in 1Q. How should we expect revenue growth to trend through the rest of the year as as you lap through the weeklies launch in 23, but also have new products launching alongside this new weekly unlimited tier?
Teleport
Yes, thanks. So we had definitely a strong year so far, and we're really looking forward to a full year of great, great revenue growth. As you know, we've guided to 23%, at least 23%. And that said, our philosophy and guidance is to inform the market based on things that we have visibility on. And right now, we are running tests across our subscription products, our a la carte offerings, and our advertising formats. All those tests are going well, and the results might impact our forecasts. And so, as we get more learnings back, it's still relatively early, and all of these tests will update the market. You might recall that last year, when we put out our guidance, We waited until we had the full impact of our testing with respect to understanding cannibalization, with respect to understanding sign-up growth, and then we started providing the updates to the market. So I think we prefer to keep our philosophy and really having clear line of sight.
John Blackledge
Okay. And then just on marketing, marketing spend continues to be minimal for you. Could you just update us on your philosophy with respect to your marketing spend and also the results of the podcast and other brand marketing focuses for you guys right now?
George
Totally. So historically Grindr has marketed very little. Maybe in the early days they did a little bit more, then there was almost no marketing when we came in. And in some respects we were successful In spite of our marketing, then because of it, we were not telling our story very, very well. Grindr does awesome things for the community, for its users. And historically, even in recent history, kind of telling that story and that narrative around the brand was not a focus in product marketing as well. You know, when you go into our app, like we can do, and we will be doing a much better job in telling the narrative behind what the features are, how you use them, what benefits you get from them, et cetera. So there's a ton of opportunity on the marketing side. Last year, we brought on board a new leader for our marketing and communication efforts, who is a person named Tristan, who is a member of the community, has been an app user historically, has an incredibly good sense of the user. And also, you know, has worked closely in the United States and in Europe. So brings an international perspective to things as well, which we think is really valuable. And so with Tristan's leadership, I think we're significantly up leveling our marketing capabilities. A lot of that has already started to bear fruit. We spoke in the show a little bit about the podcast that we ran in the first few months. which had incredible response from users and became a thing in the community in a really positive way. And, you know, when you think about the total amount of money that that costs versus the engagement levels that you got from users, the ROI was extremely high. And so another thing we're thinking about that's going to start in the next, you know, few weeks in celebration of our 15th year anniversary, we are going to be launching a bus tour across the United States. This is a Grindr bus that's going to go to 10 different cities across the country and have these really major marketing moments for Grindr during the month of June. Obviously, June is Pride Month, and so there are big Pride events all around the country. And you can imagine Grindr is a very heavily used product during those events. And so, again, that is going to be a reasonable investment, but The ROI you're going to get from that, we believe from engagement with the users is going to be really, really significant. We had a little taste of that in Rio when we were there for to give a speech and then to do this fireside chat about the 50 year anniversary. And then we also had a kind of version of the bus. there the lines to get into it were you know completely unimaginable like i thought maybe you know 20 people would be in line when i was like you know tens or maybe even hundreds of people in line waiting to get in they had to call out security to manage the the crowd and so those are the kinds of things we are doing in brand to help tell our story really well and really control the brand narrative, right? Because for better or for the grander does attract a lot of attention, a lot more than other products. Um, and that attention is, it can be good if it's channeled in a positive way around the things that we do really well, but it can be damaging when people try to make things that are not a big deal into a much bigger deal. And so we want to be owning the brand narrative and helping you to understand and all stakeholders understand what a grander does and how does it serve us the community.
John Blackledge
Thanks.
Operator
And we'll move next to Rohit Kulkarni with Ross MKM. Your line is open.
Ross
Thank you. Nice call and well said everything. A couple questions, quick picture ones for you, George. How are you thinking about AI and like AI-driven use cases? You mentioned chats and your rebuild infrastructure. Maybe talk about kind of what use cases you think you could unlock even more and perhaps accompanying investments that you may have to do to make those use cases a reality. And yeah, then I have a couple of the follow-ups on the model too.
George
Sure. Good to talk to you. It's a great question. And so bear with me as I answer it, because I have a lot of thoughts on this. So when we think about AI, both the user perspective, because of what we're doing for the user, and also how we run the company, and how we actually build product that's interrelated to that as well, right? Because the changes that are happening, thanks to general AI, in how code is written, for example, are incredible. I had a demo, for example, of a product this week, in which, you know, an AI synthetic computer is basically operating at the same level as you would expect a junior or senior year intern software engineer to operate. And that's pretty incredible, right, in terms of how much effectiveness it's going to add to an engineer's productivity. Now, we're not fully there yet, but we're heading in that direction. So, the way we tend to think of it is in the following way. Right now, we believe software, In general, software development and products themselves are in the same stage kind of that in early days of cell phones, we were in cell phones versus landlines. And you could go after and kind of do a lot more investment into landlines, right? Because that's what was present then as the main way of communication. Or you could say, hey, no, actually, I'm going to go invest in software, sorry, in cell phones. and build a cell phone driven environment first. For example, in places where there might not be good connectivity on landlines. And so that's the kind of decision we need to make as well as we think about building products. So when we think about dating, for example, what we, the way we're approaching this, hey, what is the AI first based dating product like, rather than what is popular today in dating? And do we try to replicate and mimic that in our application? Because again, we don't have dating features. I think the former is a much better approach because that's where everybody else is going to go. And so since we have an opportunity to build from scratch, let's build for that future rather than what might be working today. And that's how we tend to think about it. So where I think applications for AI are significant in our product, it's many threefold. One has to do with kind of communications, chatting, companionship, or support for the user, whether it's, you know, coaching or mental health in any direction. That kind of whole bucket of communications generative component I think is pretty significant, and there's a lot we can do there, and we're working on that. The second one is around matching and creating better connections between users, right? We have an incredible amount of information about our users. As you probably know, our users generated 121 billion chat messages last year. That's an incredible amount of information about what they like, what they don't like, what they're into, and using all that as a way to understand the user better. and potentially create good matches between users, we think is a huge opportunity. So that's the second kind of component. And then thirdly is application health or app quality, you know, trust and safety is another big component. And there we already actually doing a bunch of things using AI and we think we can improve. You know, as any application like us, a social media app or dating app, there is behavior that is not allowed. right, it's against our community guidelines or it is illegal, the more we can do to detect that type of behavior before it even happens or before anyone reports it and get it removed from the product and from the community, the better we are, right? Because that means we're creating a better experience for users. So actually using quite a bit of AI already, we have done, I think, a really good job in proactively finding bad behavior and getting it removed. to the point where user reports on illegal activity in the app or activity that's against our community guidelines has dropped 50% over the last three years. And that's because we're actually able to get ahead of it and get it off the app before it becomes a problem for anybody. And so that's the third bucket of where we think opportunity is significant over there.
Ross
Okay, okay, fantastic. I guess then a question on weeklies versus monthlies. I guess, just philosophically, how do you how do you think about the lifetime value of a customer who's coming in for the first time and opting in for a weekly or how does the funnel progression now that you probably have six to nine months worth of data has been and maybe talk through over a steady state, what proportion of your users you think are free versus weekly versus monthly?
Teleport
Thanks for the question, Rohit. Yes, we have been spending a lot of time now that we've got enough data to analyze our weekly and our monthly behavior. And as you know, we have increased our paying users we've increased payer penetration and we've increased our poo and so now it's time to look at ltv we can do a nice analysis of ltv for the year and i think there's one thing that i'd like to share with everyone with respect to our user behavior and that is that our app offers immediacy to our community and therefore the weekly proposition has really Maryann D' Follow that intent and user use case, and so we have not found the level of cannibalization that I might have expected with respect to weeklies and monthlies and in fact. Maryann D' A reactivation rate which we've been absolutely able to track now over the one year period is extremely healthy and so our ecosystem. has remained extremely healthy and more available to more users. And so the LTVs are relatively close. We don't provide that data publicly, but what I can tell you is there is a cohort or subset of our users that enjoy the weekly product and they tend to dip in and dip out. Yet we also have a different cohort of users that tend to stay in the product for longer. However, given the pricing, the LTVs are generally in the same zip code. So we are pleased with our overall ecosystem. However, you also might notice at times, weekends versus weekdays and things like that, that it can become a little choppier now, but overall, very healthy. Does that answer your question?
Ross
Yeah, absolutely. Thank you. Thank you for the call, Lauren. And again, looking forward to the Investor Day, hope to learn more about product and team. And good luck with that.
Lauren
Thank you very much.
Teleport
So just one quick correction, if there's no more questions. One, we actually did begin rolling out unlimited in February. It was fully rolled out in the quarter. And so I just wanted to make that correction.
George
Unlimited weekly.
Teleport
Unlimited weekly. Yes. Thank you, and I'll pass the line back to the operator now.
Operator
Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful evening.
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